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August 15, 2013

United States

Washington DC—Seafood.com’s John Sackton Reports on Subsidy Case

 

John Sackton, editor and publisher of Seafood.com, an online, subscription-based, fisheries news service, has done some excellent reporting on the shrimp subsidy case that resulted in Ecuador being slapped with unexpectedly high duties on its shrimp exports to the United States.  Sackton travelled from his home in the state of Massachusetts to Washington DC to attend the Department of Commerce’s hearings on the subsidy case.  He then released timely videos on the progress of the hearings and posted detailed reports to his webpage on the effect the rulings might have on shrimp markets.

 

Here are just a few of his comments on the shrimp subsidy case:

 

In July 2013, the USA Commerce Department, with prodding from the Coalition of Gulf Shrimp Industries (COGSI), went through Ecuador’s documentation on the subsidy case with a fine-toothed comb.  Following are some of the reasons that Commerce raised Ecuador’s preliminary duties from zero to 11.68%.

 

First, in the preliminary ruling, Commerce did not consider subsidies for fresh shrimp as being subject to duties.  In the final ruling, it did include fresh shrimp.

 

In the preliminary ruling, Commerce did not find that the responding companies had bank loans from a state bank that could be below market interest.  In the final ruling, it found a subsidiary that did have such a loan and used that fact to argue that Ecuador’s documents could not be trusted.  This allowed Commerce to accept COGSI’s claim of using “adverse circumstances”.  [Shrimp News: I could not find a good definition of what “adverse circumstances” means in this case.]

 

Finally, in the preliminary ruling, the respondent companies listed their intertidal land leases as up to date on payments.  In the final ruling, Commerce said the respondents failed to include all of their leases, finding some without up to date documentation on lease payments.  So, again, Commerce used “adverse circumstances” to claim a land use subsidy.

 

Already some buyers are canceling Ecuadorian orders, or sellers are placing them on hold.

 

Ecuadorian shippers are furious with the USA and feel they have been victimized by politics.

 

Who will pay for this? The USA consumer and the seafood industry.  Prices for some sizes and types of shrimp will jump immediately, and due to shortages, those increases could be surprisingly large.  Other types of shrimp will just not be available.

 

USA shrimp consumption was already shrinking under the pressure of higher prices and product shortages caused by the EMS/AHPNS epidemic in Southeast Asia.  Now this problem has been exacerbated.

 

Thailand: The fact that Thailand is not subject to duties at all is less significant than the huge increase for Ecuador because the Thai duty rate was always going to be small and because Thailand is still experiencing production shortages, so there is little opportunity for USA buyers to increase purchases from Thailand.  In the future, as Thailand recovers its production potential, the fact that it does not have to pay subsidy duties will become more significant.

 

It really doesn’t matter if the USA International Trade Commission throws out the case in six weeks or not.  Between now and then, the damage will be done as Ecuador producers accelerate their sales in other markets, and USA buyers reduce purchases in the face of another big jump in prices.  The uncertainty created by Commerce’s rulings might be more damaging than the actual duties.

 

Source: Seafood.com (an online, subscription-based, fisheries news service).  Editor and Publisher, John Sackton (phone 1-781-861-1441, email jsackton@seafood.com).  Ecuador Ruling Throws Shrimp Market Into Turmoil.  John Sackton.  August 14, 2013.

 

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