By Adriana Barrera
MEXICO CITY (Reuters) - Mexico has canceled existing sugar export permits to the United States in a dispute over the pace of shipments, according to a letter seen by Reuters, in a flare-up industry sources said could temporarily disrupt supplies.
The letter sent by Mexico's sugar chamber to mills on Monday partly blamed the situation on unfilled positions at the U.S. Department of Commerce, which it said has led to a "legalistic" interpretation of rules with no U.S. counterparts in place in Washington for Mexican officials to negotiate with. (For a graphic on U.S. sugar from Mexico click http://tmsnrt.rs/2lBl83e)
The cancellations are the latest dispute of a years-long trade row between Mexico - the United States' top foreign supplier of sugar - and its neighbor at a time when cane refiners are struggling with prices and tight supplies, U.S. industry sources said.
The development also comes as ties between the United States and Mexico have frayed under U.S. President Donald Trump, who took office in January and wants to recast the North American Free Trade agreement as he sees the trade deal skewed to favor Mexico.
Monday's letter made no mention of the political tensions between the two neighbors.
The permits were "suspended" to comply with accords with the United States because the export limit for the six months up to March 31 was reached ahead of time, said Juan Diaz Mazadiego, director of foreign trade at Mexico's Economy Ministry.
The move affected 54 permits from 23 mills, he told Reuters, albeit without specifying how much sugar it encompassed.
Existing permits would be reissued in April, the letter said.
Officials from Mexico's sugar chamber declined to comment, while a spokesman for the U.S. Department of Commerce did not respond immediately to a request for comment.
The letter described as "absurd" an interpretation by "low-level" U.S. Commerce Department officials of a clause in so-called suspension agreements.
The dispute centers on an interpretation of how the Mexican government issues export licenses to ensure supplies enter the United States at a regulated pace.
The U.S. sugar industry late last year pressed the Commerce Department to withdraw from a 2014 trade agreement that sets prices and quota for U.S. imports of Mexican sugar, unless the deal can be renegotiated.
U.S. sugar prices have soared since late last year when Washington said the 2014 deal that suspended large duties on sugar from Mexico after a trade investigation may not be working as intended.
The U.S. domestic raw sugar contract on ICE Futures U.S. settled at 31.71 cents per lb on Tuesday, the highest in nearly five years.
The license cancellation by Mexico adds to protracted marketplace uncertainty, said Richard Pasco, president of the Sweetener Users Association trade group.
"We need adequate supplies and the lack of resolution is a problem," he told Reuters in a phone interview on Tuesday.
(Writing by Natalie Schachar; Additional reporting by Chris Prentice in New York; Editing by Louise Heavens, G Crosse and Randy Fabi)