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January 22, 2013
USA Shrimp Industry Seeks Relief from Subsidized Imports
On December 28, 2012, the Coalition of Gulf Shrimp Industries, a new organization, filed petitions with the USA Government seeking relief from subsidized shrimp imports from seven countries: China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam. The petitions seek the imposition of countervailing duties on their shrimp exports.
The Coalition of Gulf Shrimp Industries says USA producers struggle every day to compete with artificially low-priced imported shrimp that is heavily subsidized by foreign governments. Since 2009, shrimp producers in the seven countries have gained USA market share by aggressively undercutting domestic prices through the use of billions of dollars in assistance from their respective governments. Subsidized imports have suppressed and depressed domestic prices, eroded domestic sales, destroyed USA jobs and eliminated the operating margins of domestic producers.
The Coalition of Gulf Shrimp Industries says shrimp is a major export commodity in each of the seven countries and their governments have set specific growth and export targets for their domestic shrimp industries as part of their national economic development plans. To meet these targets, these foreign governments are spending billions of dollars on subsidies for their shrimp industries, including grants, investments, low interest loans, tax breaks, the provision of land, feed and export credits and guarantees. The petitions document over one hundred programs benefitting shrimp producers in these seven countries, including numerous export subsidies.
The Coalition of Gulf Shrimp Industries says in 2011 the seven countries exported over 984 million pounds of shrimp to the United States, worth nearly $4.3 billion and accounting for 85% of USA imports and over 75% of domestic consumption. If they accept the case, the USA International Trade Commission (ITC, an independent, bipartisan, quasi-judicial, federal agency of the United States) and the Department of Commerce (Subsidies Enforcement Office) will investigate the petitions, with final determinations expected in the second half of 2013.
The Coalition of Gulf Shrimp Industries was formed to support these petitions and to work for the long-term survival of the entire Gulf shrimp industry. The domestic producers supporting the petitions account for over 90% of domestic USA production, representing the industry in the Gulf Coast states of Alabama, Florida, Georgia, Louisiana, Mississippi and Texas.
The Coalition of Gulf Shrimp Industries’ fact sheet on shrimp subsidies makes the following points:
• The Coalition of Gulf Shrimp Industries says in 2011 the seven countries exported over 984 million pounds of shrimp to the United States, worth nearly $4.3 billion and accounting for 85% of USA imports and over 75% of domestic consumption.
• As shrimp imports drove down prices in 2012, the USA shrimp industry began to suffer operating losses.
• The petitions document more than $13.5 billion in government subsidies to the aquaculture and seafood processing industries in these countries, with the shrimp industry as the primary recipient.
• The Government of Thailand intervenes in the market to buy shrimp from farmers and provide that shrimp to processors at artificially low prices.
• The Indian government provides subsidies to reduce shrimp processors’ ocean freight costs, with an added subsidy specifically for exports to the USA.
• In China, the government is providing financing to build what it hopes will be the world’s largest shrimp processing and export platform.
• The Malaysian government is investing tens of millions of dollars to build vertically integrated shrimp farms and processing facilities to target world export markets.
Information: David Veal, Executive Director (email email@example.com, phone 1-228-806-9600) and Edward Hayes (Legal Counsel (email firstname.lastname@example.org, phone 1-504-717-9787), Coalition of Gulf Shrimp Industries, P.O. Box 8904 Biloxi, Mississippi 39535, USA (webpage http://www.gulfshrimpcoalition.com).
Vietnam Says It Does Not Subsidize Shrimp Exports
On December 30, 2012, Tran Thien Hai, Chairman of the Vietnam Seafood Exporters and Producers (VASEP), said the Vietnamese shrimp farming industry has operated on free market principles for years and does not receive any government subsidies! Hai said he was surprised by the Coalition of Gulf Shrimp Industries’ petition and that VASEP had already contacted its members and consulted its lawyers in case the International Trade Commission accepts the petitions. Information: Tran Thien Hai, 218 Road No.6, Zone A, An Phu An Khanh New Urban Area, District 2, HCMC, Vietnam (phone +84-8-62810430, fax 84 8-62810437, email email@example.com, web page http://www.eng.vasep.com.vn).
Analysis and Video by John Sackton, Editor of Seafood.com
Most of the members of the Coalition of Gulf Shrimp Industries are also members of the American Shrimp Processors Association, whose members received over $110 million as a result of the dumping action in the mid-2000s. Both groups have the same executive director and legal counsel. The petition has sparked alarm among other sectors of the Gulf shrimp industry, especially those representing shrimp fishermen.
The Coalition of Gulf Shrimp Industries claims to represent 90% of the shrimp industry, but excludes fishermen and some processors. Obviously, the smaller the pool of claimants, the greater the chance each claimant will get a meaningful payoff. ITC requires that the petition represent 90% of the shrimp industry, so challengers to the petitions may argue that the coalition does not represent 90% of the industry.
The Southern Shrimp Alliance, the group that brought the dumping case in the mid-2000s, has filed to appear at the hearings on the petitions. It may or may not be added to the Coalition and may challenge the standing of the processors to file the petition.
It is not clear, according to legal experts, whether the goal of the petition is to gain a monetary settlement, or to seek countervailing duties. Under current law, there is no way for the domestic industry to get cash payments directly from duties. However, there are plenty of ways that a well financed legal operation can add costs to importers, especially with tools gained in a new law strengthening Customs’ authority on bonds and other enforcement tools.
Eddie Hayes, legal counsel for the Coalition, told Seafood.com that the processors were not interested in a financial settlement. He said they would benefit from higher tariffs on imported shrimp, adding that if others in the industry wanted to join the petition and share the costs, the Coalition would welcome them.
During the last four years, the Gulf of Mexico has produced between 210 and 244 million pounds of headless shell-on shrimp, or about 0.7 pounds of headless shrimp per person in the USA. USA consumption is over 1.2 billion pounds. The petition seeks to increase the cost of 82% of the shrimp Americans consume through higher tariffs.
The bottom line: If the petition is successful, it is likely to result in less shrimp consumption in the USA—and less consumption of Gulf shrimp. With weaker demand comes lower prices, leading to a new equilibrium at lower volumes.
We think trying to increase domestic shrimp margins through trade actions is like trying to kill a fly with an rocket-propelled grenade. You may kill the fly, but you will cause a lot of collateral damage.
We will have to wait to see if the USA International Trade Commission and the USA Department of Commerce accept the petitions and begin an investigation.
If the new petitions are successful, duties would be based on the imputed value of the subsidies in each of the countries.
On January 3, 2013, John Sackton did a video report on the new petitions that ending with the following statement: “This thing is an unnecessary, unwelcomed, unhappy beginning for 2013, and we hope the Department of Commerce will put this thing to bed with a negative finding as soon as possible.” You can view Sackton’s six-minute video on YouTube.
Indian Seafood Exporters Oppose Countervailing Levy on Shrimp
The Seafood Exporters Association of India (SEAI) will be sending a professional team to the USA to discuss the issue on the imposition of countervailing duties on frozen warm water shrimps from India. Norbert Karikkassery, President of SEAI in Kerala, a state in southwest India, said, “We will be engaging USA-based lawyers to represent the Indian industry to appear before the United States Department of Commerce (DOC) to sort out the issue of countervailing duties.” Information: Norbert Karikkassery, The Seafood Exporters Association of India, Seafood House, Willingdon Island, Cochin – 682 003, Kerala, India (phone +91-484-2666572, fax +91-484-2667470, email firstname.lastname@example.org, webpage http://seai.in).
Questionnaire on the New Petitions Takes 40 Hours to Complete
On January 4, 2013, Seafood.com’s John Sackton, citing information from the Office of Budge and Management, reported in that it would take one person 40 hours to file out the questionnaire that the International Trade Commission sent to importers and exporters.
During the week of January 2-5, 2013, importers, processors and shrimp fishermen in the USA and exporters in producing countries received questionnaires on the subsidy issue. The questionnaires are due back by January 11, 2013. The importer’s questionnaire is a 36-pages long and asks that they report on all contracted and pending shipments of warm water shrimp for the next nine months from China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam—as well total contracts from all other countries. The questionnaire requests volume and value of imports from each country for the past three years (2009-2011).
The questionnaire also requests price information on four processed products:
71-90 count, raw, headless, peeled, tail-off, block shrimp
41-50 count, raw, headless, peeled, tail-off, block shrimp
10-15 count, raw, headless, shell-on, block shrimp
26-30 count, cooked, peeled and deveined, tail-on or tail-off, IQF shrimp
Price information is demanded for each quarter from January 2009 through September 2012. This has to be repeated for each country—and Mexico, even though Mexico is not part of the investigation.
The seven subject countries must supply export information for 2011 and 2012, with the same deadline of January 11, 2013. The foreign producer questionnaire asks about capacity, names of USA customers and the volume exported. The foreign producer questionnaire also asks for information on inventories and holding times.
Obviously, a lot the questionnaires will not be completed and returned. However, when forms are not returned, this allows the International Trade Commission to take the assertions made by the Coalition of Gulf Shrimp Industries at full value. The ITC does not have the resources to conduct a true analysis of the shrimp industry in such a short time. If information is not provided to them, they simply give full legal weight and authority to the assertions made in the petitions about pricing and injury.
On January 18, 2013, there will be a formal hearing in which the parties opposed to the countervailing duty and those supporting it will each be given one hour to make presentations. Other parties may give short information statements as well.
One of the primary differences between this action on subsidies and the earlier one on dumping is that the argument over whether a particular program constitutes an export subsidy is generally done on a government-to-government basis, rather than on an individual exporter or producer basis. Also individual companies can apply for exemptions from the subsidy duties by demonstrating to the International Trade Commission that they do not benefit and have not used any subsidies that were identified as actionable.
The International Trade Commission must make a preliminary determination on the petition by February 11, 2013.
How to Find the International Trade Commission Documents on Subsidies on Foreign Shrimp
The name of this new action is “Certain Frozen Warmwater Shrimp from the People's Republic of China, Ecuador, India, Indonesia, Malaysia, Thailand, and the Socialist Republic of Vietnam”.
Its Investigation Number is 701-491.
Unless you are an attorney, a high-level government employee or a large shrimp importer or exporter working on this action, I doubt very much if you will be interested in looking at the documents that have been filed so far. There are already thousands of pages on file, and I suspect there will be thousands more before it’s over. A lot of it is boring and repetitive and the files are cumbersome to work with.
Follow these instructions to find the documents on your computer:
2. On the left hand side of the page that appears, look for “Research Tools”, and under it look for three links “EDIS • Login • Register”. Since you are probably not registered, click on the “Register” link and register, which takes a several minutes and is a bit of a pain.
If you are already registered click on the “Login” link, and enter your “Username” and “Password” and then type the letters (not case sensitive) from the colorful window into the bottom field. Click on “Login”.
3. In the page that appears, click on the “Search” tab in the menu that runs across the top of the page.
4. In the page that appears, click on the “Advance Search” link that appears about half way down the page on the left side.
5. In the page that appears, enter “701-491” in the second field down, which is labeled “Investigation Number”.
6. Click on “Search” in the middle of the page near the top. Do not click on the “Search” tab at the very top of the page under the heading.
7. A list of all the nine documents in the file will open. Click on the Adobe Reader icon to open a document. The first file in that document will open. Be prepared, some of the files are huge PDFs and take a long time to open. Under the Adobe Reader icon in parenthesis, you will see the number of files in the document. Click on the paperclip icon if you want to see a list of all the files in the document. You can then open the files within the document one at a time.
8. You can get some idea of what’s in a document by reading the information in the “Doc Type” column just to the right of the Adobe Acrobat icon and by reading the “Doc Title” under the Adobe Acrobat icon.
Seafood.com Identifies the Companies That Filed the Subsidy Petitions
The USA shrimp companies that are part of the subsidy petition have not been publicly identified, but the following companies signed affidavits regarding their shrimp production and are assumed to be the petitioners.
Lafitte Frozen Foods, Louisiana
RA Lesso Brokerage, Mississippi
Dean Blanchard Seafood, Louisiana
Tammy’s Seafood, Inc., Louisiana
Graham Shrimp Co., Alabama
Pearl, Inc., (Indian Ridge Shrimp Co.), Louisiana
Fisherman’s Reef, Texas
Golden Gulf Coast Packing, Mississippi
M&M Shrimp, Biloxi Freezing Processing, Mississippi
Sea Pearl Seafood, Louisiana
Tidelands Seafood Co., Louisiana
Vincent Piazza & Sons, Louisiana
Gulf Pride Enterprises, Mississippi
Hi-Seas of Dulac, Louisiana
JBS Packing Co., Texas
Paul Piazza and Son, Louisiana
CF Gollott & Sons, Mississippi
Bayou Shrimp Processors, Louisiana
Dominick’s Seafood, Alabama
Carson & Co., Alabama
Gulf Fish, Louisiana
Ocean Springs Seafood Market, Mississippi
Gulf Island Shrimp and Seafood, Louisiana
Bluewater Shrimp Company, Louisiana
Gulf Crown Seafood Co., Louisiana
Woods Fisheries, Florida
Smith & Sons Seafood, Georgia
The International Trade Commission is likely to approve a preliminary investigation of foreign shrimp subsidies because it has consistently voted to shrimp trade actions and because a preliminary investigation will allow for the gathering of more information.
Subsidy investigations are very different from dumping investigations. In general, when subsidy investigations have been successful, the amount of the duty is far less than what is normally seen in dumping cases because each company is only assessed its proportion of the subsidy.
Subsidy suits are usually fought by governments, which have the opportunity to challenge any duties that are assigned to them. As a result, there are likely to be big differences from country to country. Some countries may be able to prove no subsidies and pay nothing, while others will have to pay high duties.
There is expected to be little impact on the overall shrimp market if the subsidy duties are imposed because USA shrimp imports will shift to countries that have to pay little or no duties. There could, however, be significant disruptions for companies in countries that are required to pay high duties.
The Coalition of Gulf Shrimp Industries’ list of subsidies appears to be weak, at least in the opinion of some of the defense attorneys. The International Trade Commission has already questioned some of the subsidies on the Coalition’s list and asking it to provide more proof.
Subsidy duties only apply when the subsidies are given to a particular industry, not when they are given to all industries. For example, if a government gives an export credit to all of its exporters, its shrimp exporters cannot be targeted for the subsidy.
The Southern Shrimp Alliance Joins the Subsidies Case
On February 11, 2013, the Ad Hoc Shrimp Industry Committee, which is the legal group formed by the Southern Shrimp Alliance to file the shrimp dumping case against the USA in the mid-2000s, filed papers with the USA International Trade Commission to join the Commission’s investigation of subsidies on foreign shrimp.
The Committee is comprised of 180 commercial fishing businesses, docks and shore-side facilities, shrimp processors and wholesalers, as well as seafood industry organizations from throughout the country.
The Coalition of Gulf Shrimp Industries, which initiated the subsidy action in December 2012, submitted a table to the USA Department of Commerce on January 9, 2013, that indicating its membership accounted for 97.76% of all frozen warm water shrimp processed in the United States. John Sackton, editor of Seafood.com, says, “This is impossible.” Quoting government documents, Sackton says, “One out of every two pounds of shrimp processed in the United States was processed by 29 companies in three states: Texas, Florida and California. The Coalition’s membership includes only one processor in Florida and two processors in Texas. It includes no processors in California. As such, the Coalition’s production figures do not include the shrimp processing of 26 of the 29 seafood processors in those three states. ....Its claim to represent virtually all domestic frozen warm water shrimp processing is inconsistent with [the government’s] reporting and, moreover, is inconsistent with the structure and composition of the domestic shrimp industry. By participating in the Commission’s investigation, the Ad Hoc Shrimp Industry Committee seeks to provide a more accurate portrayal of the industry and its constituent members.”
USA Department of Commerce Decides to Proceed with the Subsidy Case
Washington DC...Following a hearing on January 17, 2013, the Department of Commerce (DOC) decided to move forward with its investigation of subsidized shrimp imports from seven countries: China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam.
The time period covered by the investigation is 2011, over $4.2 billion worth of shrimp was imported from the seven countries.
DOC ruled that the Coalition of Gulf Shrimp Industries, which initialized the investigation, has the authority to bring the compliant because it represents 25% of domestic shrimp production. DOC ruled that the companies and workers involved represent more than 50% of the workers in the domestic frozen warm water shrimp industry.
Attorney Warren Connelly of Akin Gump said there were no surprises in the DOC ruling, but noted that Ecuador had the fewest subsidies listed and that DOC had already rejected two of them. “This does not bode well for the petitioners [the Coalition]”, he said, adding that the decision to call for additional comment on which products were covered by the investigation was standard procedure and will allow countries to exclude products that may have been unintentionally included in the petition.
DOC ruled that the products to be investigated are frozen warm water shrimp and fresh warm water shrimp. It accepted the petitioner’s argument that subsidies given to farmers for the production of fresh shrimp will be part of the investigation because they benefit from the export of frozen shrimp.
At this point, breaded shrimp and certain other processed shrimp remain outside the scope of the investigation, however, DOC invited comments about the scope of product coverage and indicated that it wants more time before making a final determination on the exact products covered.
DOC ruled that there was sufficient information to believe that possibly 119 out of 133 identified subsidy programs would be investigated. DOC also accepted the petitioner’s argument that they had lost money because of the foreign subsidies.
All of the governments involved had meetings with the DOC prior to the hearing on January 17, 2013. Many of them had challenged the standing of the petitioners, and denied that they were subsidizing their shrimp export industries.
The DOC announced it was going to examine the following programs:
Ecuador: 7 programs to be investigated, 2 programs rejected for not meeting the requirements of the investigation.
China: 25 programs to be investigated, 5 were rejected.
India: 21 programs to be investigated, 1 was rejected.
Malaysia: 16 programs to be investigated, 2 rejected.
Indonesia: 14 programs to be investigated. DOC will also look into allegations of debt forgiveness and loan guarantees at one large producer [most likely CP Prima], if this producer is selected as a respondent. 1 program was rejected.
Thailand: 12 programs to be investigated, 3 rejected.
International Trade Commission Decides to Proceed with Subsidy Case
In a totally expected development, the USA International Trade Commission voted to advance the subsidy investigation on warm water shrimp imports from China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam. The commission will issue a press release later today on its affirmative decision to go forward with a preliminary investigation.
The vote was 5-1, with Commissioner Pearson voting “no injury”. The vote was the same for all seven countries. There was no substantive discussion on this vote. Lawyers for the countries involved say that in a few weeks the ITC staff will release a report on its preliminary investigation, which will provide more detail on what data they found substantively convincing.
Attorney Matthew McConkey, with the law firm Mayer Brown, said, “Our belief is that Commissioner Pearson voted no injury because he believes that imported farmed shrimp and USA wild-caught shrimp do not substantively compete with each other.” He also commented that this vote should not be taken as any indication as to how the Department of Commerce may rule on the subsidy allegations.
The Companies That Must Respond to the Department of Commerce
The USA Department of Commerce (DOC) has named the companies in China, Ecuador, India, Indonesia, Malaysia, Thailand and Vietnam that must respond to charges of subsidized shrimp exports. In most cases, the companies represent the largest shrimp exporters in their respective countries. They will have to provide detailed financial information to make their case.
China: Zhangjiang Guolian Aquatic Products Co., Ltd.
Ecuador: Promarisco, S.A., and Sociedad Nacional de Galapagos, C.A. (SONGA)
India: Devi Fisheries Limited and Devi Sea Foods Limited
Indonesia: PT. Central Pertiwi Bahari and PT. First Marine Seafoods
Malaysia: One-East Marketing, Sdn., Bhd.,and Kian Huat Aquaculture, Sdn., Bhd.
Thailand: Marine Gold, Ltd., and Thai Union Frozen Products Public Co., Ltd.
Vietnam: Minh Qui Seafoods Co., Ltd. ( A division of Minh Phu Seafood), and Nha Trang Seaproduct Company
Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email email@example.com). Foreign Respondents Named in the Shrimp Countervailing Duty Case. John Sackton. February 19, 2013.
Sources: 1. Media Release. Coalition of Gulf Shrimp Industries Files Petitions for Relief from Subsidized Shrimp Imports. December 28, 2012. 2. Fact Sheet. Coalition of Gulf Shrimp Industries Fact Sheet on Shrimp Subsidy Petitions. Website visit on January 2, 2013. 3. Coalition of Gulf Shrimp Industries Webpage. Website visit on January 2, 2013. 4. VOV (the voice of Vietnam) Online. Vietnam Does Not Subsidize Shrimp Farming. December 31, 2012. 5. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email firstname.lastname@example.org). News Analysis/New Shrimp Countervailing Duty Petition Threatens More Instability in USA Shrimp Markets. John Sackton. January 2, 2013. 6. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email email@example.com). Video: Domestic Shrimp Industry Wastes $111 Million; Now Comes Back for More. John Sackton. January 3, 2013. 7. The Hindu Business Line. Seafood Exporters to Oppose USA Countervailing Levy on Shrimps. Sajeev Kumar (firstname.lastname@example.org). January 4, 2013. 8. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email email@example.com). First Deadlines for New Shrimp Tariff Fight Hit Importers Next Week, Questionnaire Takes 40 Hours. John Sackton. January 4, 2013. 9. The webpage of the International Trade Commission. EDIS—Who Should Register. Website visit on January 6, 2013. 10. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email firstname.lastname@example.org). Shrimp Countervailing Duty Case Likely to Go Ahead, But with Extremely Mixed Results. John Sackton. January 10, 2013. 11. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email email@example.com). Southern Shrimp Alliance Files to Participate in Countervailing Duty Petition; Casts Doubt on COGSI. John Sackton. January 14, 2013. 12. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email firstname.lastname@example.org). DOC Moves Ahead with Shrimp Countervailing Duty Investigation after Preliminary Hearing. John Sackton. January 21, 2013. 13. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email email@example.com). ITC Votes to Advance Shrimp Countervailing Duty Investigation, as Expected. John Sackton. February 7, 2013. 14. Seafood.com (an online, subscription-based, fisheries news service). Editor and Publisher, John Sackton (phone 1-781-861-1441, email firstname.lastname@example.org). Foreign Respondents Named in the Shrimp Countervailing Duty Case. John Sackton. February 19, 2013. 15. Bob Rosenberry, Shrimp News International, February 20, 2013.
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