US cuts punitive tariffs for Vietnam, but China must pay through nose: Brazil also hit hard in...

The United States Department of Commerce (DOC) has set final recommended anti-dumping duties of up to 112.81% on shrimp from six countries it deems to have dumped shrimp on the US market.

China was hit the worst, with those maximum duties of 112.81%. The maximums were 67.8% for Brazil

But the ITC ruling doubtless won't be the end of the matter. DOC officials calculated the dumping duties by averaging the prices of shrimp imports they found below US market prices. But they ignored imports sold or above US prices, a practice known as "zeroing" them out.

Importers, foreign producers and many economists say that zeroing skews the numbers and can create the appearance of dumping where none exists. The World Trade Organization recently ruled against the United States in a case dealing with Canadian lumber because US officials used zeroing to calculate the duties.

Shortly before the DOC announced its final recommendations for tariffs on Thai shrimp, Thailand filed a similar WTO complaint against the United States, saying its shrimp tariffs should be ruled illegal on the same basis. Chances are that other countries, especially those hit by the highest proposed rates, will do likewise.

The punitive tariffs proposed for Vietnam Nov. 30 were far lower than those originally recommended in August, when the DOC first declared that the country was guilty of dumping shrimp, and Vietnam was relieved but still critical. There were warnings from China that the tariffs could ruin shrimp producers there.

Vietnam and China were targeted in the first round of punitive tariff recommendations Nov. 30, US officials said, because they have at least nominally socialist economies. On Dec. 20, the DOC recommended rates from 9.69% to 67.80% for Brazil, 2.35% to 4.48% for Ecuador, 5.02% to 13.42% for India, and 5.79% to 6.82% for Thailand.

Vietnam viewed the final DOC ruling as a slight victory. Vietnamese shrimp exports will get duties from 4.1% to 25.8%--down from the 14.9% to 92.8% recommended in a preliminary ruling in August. The US decision "reflects more closely the real shrimp production situation in Vietnam," the Vietnam Association of Seafood Exporters and Producers said in a prepared statement.

However, Vietnam still maintained that it did not dump the seafood on the US market, saying its shrimp can be sold at lower prices due to its favorable farming conditions, technology and cheap labor. Chu Van An, deputy head of Minh Phu Co. Ltd., Vietnam's largest shrimp exporter to the United States, welcomed the decision to reduce tariffs but said the duties would still be felt.

"With this tariff rate, our profit will be affected to some extent," he said. "But the Vietnamese shrimp farmers and American consumers will be hurt most." Both the government and other shrimp producers have maintained all along that Vietnam is in the shrimp business to make a profit, and that it would be self-defeating to export shrimp below cost.

Chinese shrimp farmers and exporters strongly opposed the US ruling, saying they aren't dumping shrimp, either. "If we sell at below-cost prices or prices lower than in the domestic market, we cannot make a profit," Jiang Mingkai, a manager from the Zhonglian Aquatic Product Co., told China Daily. The company exported 3,o00 tons of shrimp at a price of $5,000 a ton last year.

An official from the Chinese Shrimp Industry Alliance said earlier that Chinese shrimp producers were able to sell at prices far lower than American shrimp producers because they invested in modern technology for their shrimp farms and have lower labor costs. The ruling may threaten the livelihood of millions of Chinese shrimp farmers after the US door closes, he warned.

An association representing shrimp producers in Ecuador said they were happy the penalty tariffs were set far below the 104% to 207% tariff rates which U.S. shrimp producers had sought in their petition, given the importance of the US market.

"Hundreds of thousands of Ecuadoreans depend on the shrimp industry for their livelihoods," said Sandro Coglitore, president of Ecuador's National Chamber of Aquaculture. "Shrimp is Ecuador's third-largest export after oil and bananas, and we have supplied shrimp to the United States at fair and equitable prices for 30 years."

The anti-dumping case pits US shrimpers who harvest their product from the sea against farmers in six Asian and Latin American countries who raise shrimp in ponds. Together, the six countries exported about $2.67 billion worth of shrimp to the United States in 2003. In testimony before the ITC, opponents of the punitive tariffs included George Chamberlain, president of the Global Aquaculture Alliance (GAA) and the American Seafood Distributors Alliance (ASDA), a group of importers and restaurateurs.

Chamberlain testified the rising efficiency of shrimp farming is driving down costs and making farming more competitive than fishing. He said the current price squeeze experienced by US shrimpers was preceded by a similar situation in the early 1990s, but the effects of that price drop were delayed for nearly a decade by farm losses to viral infections. Shrimp-farming practices have since improved, but fishermen are no better prepared to respond than they were before.

The ASDA and its counsel Akin, Gump, Strauss, Hauer & Feld, LLP said that shrimp are not a commodity, but a differentiated product. US buyers preferentially select farmed imports over trawled domestic shrimp for such non-price reasons as quality, quantity, year-round supply, size consistency, and availability of cooked and value-added forms. Restaurateurs and retailers complained that quality domestic shrimp is sometimes hard to come by.

Bill Herzig, vice president of Darden Restaurants and a GAA board member, testified that Red Lobster, the largest US casual dining seafood chain, is willing to pay a premium to add domestic shrimp to its menus for shrimp cocktails, but has found it difficult to source enough volume that meets its specifications. Wal-Mart has successfully sold shrimp from Louisiana and Florida in its stores, but reportedly only one supplier could meet its standards. Russ Mentzer of King & Prince Seafood Corp. also described sourcing problems for product of sufficient quality to meet a Department of Defense contract.

Economist Chad Brown reported on analysis of economic factors that showed domestic and imported shrimp are not considered interchangeable. He said a survey showed that 60% of US importers either never or only sometimes purchase shrimp at the lowest price. A 1988 model indicated that most of the injury experienced by the domestic shrimp industry could be attributed to a reduction in demand as purchasers shifted their preference to imported shrimp for nonprice reasons.

The ITC was to make the really final decision on the anti-dumping duties on Jan. 31. Duties on individual countries go into effect if the ITC determines imports from that country have materially injured, or threaten to materially injure, US producers. The ITC held a hearing Dec. 1, but the tariffs are already having an impact even though they aren't officially in force yet.

In early August, following the DOC's preliminary decision, importers began paying cash deposits and bonds to cover the proposed duties. Since then, imported shrimp from the affected countries have dropped--while imports have risen from such non-targeted countries as Indonesia and Malaysia, said Wally Stevens, president of seafood distributor Slade Gorton Co., and head of a task force of importers, distributors and grocery chains opposing the tariffs.

Tariff opponents expressed disappointment that the tariffs were affirmed at all and said the decision will raise shrimp prices for consumers at restaurants and grocery stores in the USA--while doing nothing to help the domestic industry except through handouts of cash collected on imports. But US shrimpers hailed the DOC announcement as a victory.

"Vietnam's tariffs aren't as high as we'd have liked, but it confirms what we've been saying all along--that these countries have been illegally dumping shrimp on the US market," said Joey Rodriguez, a Bayou La Batre shrimper and boatbuilder, who is one of Alabama's two representatives on the Southern Shrimp Alliance (SSA).

"US shrimp fishermen and farmers use the most advanced technology and are very efficient producers of shrimp, but some of our trading partners have been cheating and causing US businesses to close and thousands of Americans to lose their jobs," said SSA President Eddie Gordon."

"We thank the Department of Commerce for enforcing the rules of free and fair trade, offsetting this illegal practice," Gordon continued. "US shrimpers look forward to competing with fairly trading countries and informing consumers of the health, environmental and other quality advantages of American shrimp versus imported, farm-raised shrimp."

It was the eight-state SSA which, in December 2003, filed the trade lawsuit seeking tariffs against six countries: China, Vietnam, Brazil, Ecuador, India and Thailand. The suit accused those countries of dumping shrimp on the US market, which meant selling it in America at prices much lower than they sell it in their own countries.

US food distributors contend that the penalty tariffs will drive up shrimp prices at restaurants and grocery stores. Prior to the suit, China and Vietnam supplied roughly half of the shrimp imported to the United States. Since the case was filed, imports from each country have dropped by more than 60%. Yet while critics of the tariffs predicted that consumers would pay up to 44% more for shrimp, this hasn't happened yet.

USA Shrimp Imports
By Country and Weight %

Thailand   27%
Indonesia   8%
Vietnam     9%
China      13%
Ecuador     9%
India       8%
Other      26%

Note: Table made from pie graph.

U.S. Imports of Frozen
Shrimps & Prawns, Jan. 1-Sept. 1

Pounds:               2004          2003       % Change


Peeled             190,308,939   196,176,279      -30%
Shell-on, 15s       33,872,562    33,701,858      0.5%
Shell-on, 15-20s    27,375,646    32,210,155    -15.0%
Shell-on, 21-25s    23,366,096    24,907,709     -6.2%
Shell-on, 26-30s    36,075,011    31,430,924     14.8%
Shell-on, 31-40s    60,792,307    59,181,217      2.7%
Shell-on, 41-50s    43,456,462    43,578,430     -0.3%
Shell-on, 51-60s    42,712,875    41,981,384      1.7%
Shell-on, 61-70s    31,526,069    31,053,493      1.5%
Shell-on, 70s       30,759,815    33,616,870     -8.5%
Shell-on Total     329,936,843   331,662,040     -0.5%
Total Shrimp       520,245,782   527,838,319     -1.4%