Foreign investors with business in the agriculture sector are considering bringing claims against the U.S. government as some believe tariffs have violated international investment treaties that promise them fair treatment.<\/p>\n
International agriculture businesses with investments like distribution networks and subsidiaries in the U.S. are weathering tariffs, which have caused them to alter their business activities, renegotiate contracts with distributors and even threaten to price them out of the market, experts tell Fortune. In response to these produce tariffs, foreign investors are considering bringing claims against the U.S. under international investment treaties, which include a myriad of stipulations like fair and equitable treatment and protects against depriving investors from benefiting from their U.S.-based investments.\u00a0\u00a0<\/p>\n
Produce imports on goods largely grown outside the U.S., including bananas, blueberries and avocados, totaled more $33 billion<\/a> last year. Many large, internationally-based agriculture companies establish U.S. subsidiaries instead of selling directly to wholesalers, investing in machinery, workers, and a distribution network to sell its product. But tariffs have squeezed margins for these commodities, which has made U.S. portions of these ag businesses hard to sustain, Tiffany<\/a> Compr\u00e9s, founding partner and co-chair of international disputes at Pierson Ferdinand LLP, told Fortune.<\/p>\n \u201cFresh produce has had no tariffs since around the 90s,\u201d Compr\u00e9s said, adding that investments in a U.S. distribution network for fresh produce sellers were made under the expectation that tariffs would remain at zero. \u201cRight now you are imposing tariffs, and it\u2019s already a low margin business, so you\u2019re effectively destroying the ability of that business to function.\u201d<\/p>\n This is the claim that some foreign ag businesses are considering suing the U.S. government over, Compr\u00e9s, who represents some foreign agriculture investors, said.\u00a0<\/p>\n If foreign investors decide to follow through, they could begin the process by bringing a claim against the U.S. in an international arbitration tribunal, rather than a domestic court, alleging that tariffs violate the standards of treatment for investments outlined in international investment treaties. International investment treaty disputes are arbitrated under a third-party institution that employs attorneys who specialize in international law and have no particular ties to either party. None can be citizens of either country.<\/p>\n Although the USMCA agreement<\/a> currently excludes tariffs for goods from the country\u2019s largest trade partners in Mexico and Canada, imports from Latin American countries\u2014including bananas and coffee, which the U.S. relies on to meet consumer demand\u2014are facing steep tariffs, David Ortega<\/a>, a food economist and professor at Michigan State University\u2019s College of Agriculture & Natural Resources told Fortune.<\/p>\n \u201cBrazil is the largest producer of coffee. They\u2019re a major source of our coffee imports, and they\u2019re currently facing 50% tariffs,\u201d Ortega said. \u201cSo that\u2019s raising the cost of product, the cost of importing the coffee into the US, and having very significant impacts on roasters here, but also on producers in Brazil who no longer have tariff-or-duty-free access to the US market.\u201d<\/p>\n Though Brazil does not have an international investment treaty with the U.S., countries protected under the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR<\/a>) investment treaty like Guatemala<\/a> and Honduras<\/a>, which collectively export billions in produce to the U.S., may have a claim. Argentina and other countries under Bilateral Investment Treaties (BITs<\/a>) also have protections that may be violated by tariffs, Compr\u00e9s said.<\/p>\n Compr\u00e9s said her clients are waiting for the Supreme Court\u2019s ruling<\/a> on the legality of tariffs before bringing any claims, and even then they will need to determine if their case is strong enough to bring before a tribunal.<\/p>\n \u201cInvestors want to assess their damages,\u201d Compr\u00e9s said. \u201cThey need to determine if it really makes sense for them.\u201d<\/p>\n Compr\u00e9s pointed out that there is a five-year window to bring a claim, and that foreign investors will want to make sure they have their \u201cducks lined up.\u201d<\/p>\n \u201cI would be shocked if we didn\u2019t start to see (the claims) within the next five years,\u201d Compr\u00e9s said.<\/p>\n But, any potential claims under international investment treaties have an uphill battle.<\/p>\n