Shrimp Industry Organizes to Fight the Threat of Anti

8/10/2019 Shrimp Industry Organizes to Fight the Threat of Anti

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The trouble had started much earlier than December 2003. On 26 February 2002,Reggie Dupre, a Louisiana state senator, alleged that tainted farm-raised Asian shrimpwas being diverted from Europe and dumped on the US market. Dupre was calling fora congressional investigation into food safety and unfair pricing, as local fishermenvoiced concern that imports had depressed the prices they got for the locally

harvested shrimp. By September 2002, shrimp industry representatives from eightsouthern states had got together to fight the case against imported shrimp fromcertain countries. ‘We stand a better chance of success when all s hrimp-producingstates come on board’, as George Barisich, president of the United CommercialFisherman’s Association, observed.

On 22 October 2002, representatives of the shrimp industry from the eight southernstates voted to form the Southern Shrimp Alliance to fight unfair competition fromimported farm-raised shrimp from certain countries. There was, however, a basicproblem. It was estimated that it might cost more than US$3 million in terms of legalexpenses to go for an anti-dumping petition.

There were also problems associated with divergent trade interests. Shrimp importersand distributors were afraid that a long-drawn-out battle would affect the supply ofimported shrimp and adversely affect their business. Wally Stevens, president of theAmerican Seafood Distributors Association, described how the salmon industry inMaine had filed an anti-dumping petition against Norway in 1990, hoping to stabilizeprices. Twelve years after winning and spending up to $10 million, salmon was sellingat half the price prevailing at the time of the beginning of the dispute. ‘This isdefinitely not the right way to go. It consumes an immense amount of money and isnot a long- term solution in terms of maintaining viability.’ In a statement in January2003, Stevens sa id that his organization, in support of ‘free and fair trade’, would

oppose any anti-dumping action by the SSA.In the meantime, countries threatened with the prospective action started reacting.Vietnam, one of the countries identified almost at the beginning of the SSA exercisesand also highly dependent on the US market for shrimp exports, was the first toprotest. Foreign Ministry spokeperson Phan Thuy Thanh said in a statement on 12September 2002 that ‘I can say with certainty that Vietnam has never d umped itsshrimp, and its shrimp have been sold at market prices.’ Thailand was anothercountry to lodge a protest. Kenneth Pierce, of Willkie Farr & Gallagher, representingthe Thai Frozen Foods Association, condemned the move to consider anti-dumpingact ion against Thai shrimp exports. ‘Thailand’s shrimps have never been dumped in

the United States, nor have they caused material damage to US shrimp’, he said in astatement on 25 November 2002. As evidence mounted of the SSA’s determination togo ahead with the petition on anti-dumping, other threatened countries also startedtaking preventive actions. Rokhmin Dahiri, the Indonesian Maritime and FisheriesMinister, denied allegations that the Indonesian government subsidized its shrimpfarmers. He said in a statement on 25 August 2003 that the price of shrimp on thedomestic market was much lower than the export price. The dumping charge wasbaseless and, therefore, the United States should exclude Indonesia from the



proposed anti-dumping investigations. The government of Bangladesh took similaraction, and Vietnam also started working out alliances. Nguyen Thi Hong Minh,Vietnamese Deputy Fisheries Minister, said in a statement on 4 August 2003 that theVietnamese shrimp businesses and their counterparts in south-east Asia, India andChina as well as US shrimp importers were considering measures including lobbying to

prevent a lawsuit.The Indian government and the Indian shrimp industry were aware of the threat. ArunJaitley, the then Minister for Commerce, made a statement in June 2003 after hisofficial visit to the United States: ‘We are anticipating an action against our shrimpexports because our share in the US market is on the rise.’ During the whole of 2003,the SSA went through the process of raising the required resources and trimming thenumber of countries against which dumping action was to be brought, as the cost ofthe legal battle increased with the number of countries. After a compromise with theMexican shrimp industry, the number of countries was ultimately brought down to six.

The main contentions of the petitioners were as follows. The six named countries accounted for 74% of shrimp imports in the US market.

Imports from the six countries increased from 466 million lb. in 2000 to 650million lb in 2002.

Import prices of the targeted countries had dropped by 28% in the previousthree years. The average unit value of the targeted countries in 2000 was$3.54; this had fallen to $2.55 in 2002, on a headless, shell-on equivalent basis.

The average dockside price for one count size of gulf shrimp dropped from$6.08 to $3.30 per pound from 2000 to 2002.

The United States was the most open market in the world. High tariff rates inother large importing countries provided a powerful incentive for exporters toincrease shrimp shipments to the United States. Likewise, the US market alsoserved as the market of last resort when shrimp shipments were denied entryto other markets such as the European Union due to the discovery ofunacceptable levels of contaminants.

III. The Indian shrimp industry and its response back to top

The first concrete signal that India might be included in the US industry’s anti -dumping petition was received by the Indian government in June 2003. That anti-dumping investigations against Indian shrimp imports might be initiated was hinted atduring bilateral talks when the then Commerce and Industry Minister Arun Jaitley had



met his counterpart in Washington at that time. The reason given was that India’sshrimp exports to the United States had been rising rapidly during the previous threeyears, from $255.93 million during 2000-1 to $299.05 million during 2002-3.

India’s marine products industry has been one of the major export success stories.

From an export base of just Rs. 450 million in 1971-2, it increased to Rs. 68,810million in 2002- 3. Shrimp is the mainstay of India’s marine product exports.

Japan has traditionally been the biggest export market for India’s marine products,followed by the United States, China and several EU countries. There was an over-dependence on the Japanese market, as shrimp is the major export item which Japanimports in huge volume. However, in the recent past, there has been a gradualdecline in the intake from Japan with an increasing absorption in the United States,as well as some other countries. The United States, traditionally a buyer of small-sized shrimp from India, has now started buying many other varieties, including blacktiger shrimp, resulting in its occupying the top slot in India’s export markets of marine

products, replacing Japan in 2002-3.Success in India’s shrimp export is directly attributable to the development of shrimpculture. Assisted by the Marine Products Export Development Authority (MPEDA),shrimp culture has developed as a major industry in several coastal states. It is mostlyan enterprise of small and medium farmers, and has led to the utilization of otherwiseunproductive areas in the coastal region, contributing to improvements in the socio-economic conditions of the rural poor in the shrimp farming areas. It has createddirect employment of about 300, 000 people and indirect employment to over 700,000.

The Indian government has played an important role in the promotion of marineproduct exports, including the development of shrimp farming. The MPEDA is agovernment-sponsored body whose mandate covers the development of the industryas a whole, including export promotion. It is under the administrative control of theDepartment of Commerce and is headed by a senior officer of the IndianAdministrative Service. Its governing council comprises senior officials of the centraland state governments as well as representatives of the marine products industry.

The Seafoods Exporters Association of India (SEAI) is the nodal body of the exporterscommunity and is represented on the MPEDA governing council. There is, therefore,close co-ordination between these two bodies which are primarily responsible for

organizing the shrimp industry’s as well as the government’s response to the US anti-dumping investigations.

After the statement of the Commerce Minister on the possible threat to Indian shrimpexports to the United States, these two bodies went into action. To explore thepossibilities of avoiding the anti-dumping action and, if necessary, to take legalaction, a delegation comprising senior members of the SEAI went to Washington inSeptember 2003, and after discussions in various quarters, decided to sign an



agreement with the law firm, Garvey Schubert and Barer, to be the counsel in theUnited States for the anti-dumping investigations. After returning to India, the SEAIinformed its members through a circular letter that ‘Ms Lisbeth Levinson, a partner inthe firm, will personally and exclusively handle our case. ’

Regarding the extremely damaging potential of the proposed anti-dumping action, theSEAI pointed out to its members that in July 2003 the United States had imposed anti-dumping duty ranging from 44% to 63% on catfish fillet imports from Vietnam whichwould remain in force for five years. There will be annual reviews to decide whetherthe duties need any adjustments upwards or downwards. The Association warned itsmembers that any such move against India’s shrimp exports would ring the death knellof the industry.

The Association also realized the importance of other related regulatory provisions forIndian shrimp exports to the United States. The SEAI informed its members that withintwenty days of filing the case, the United States could start imposing anti-dumping

duties which would be returned only if the Indian exporters won the case. Since thisanti-dumping duty would have to be paid by the US importers, the SEAI cautioned thatthey might stay away from India, and therefore the business would start to becomeaffected long before the case came to its final conclusion.

The game plan worked out by the MPEDA and the SEAI was comprehensive. It involvedapproaching the central government, developing contacts with counterpart bodies inother countries which might be named in the petition, and putting their house inorder, to raise resources.

By October 2003, the plan had started taking shape. In a statement on 8 October

2003, K. Jose Cyriac, the chairman of the MPEDA, said, ‘We are discussing the issueswith ot her countries which are likely to be labelled with dumping charges.’

The SEAI president, Abraham Tharakan, after describing the petition as extremelyunfair, said that in addition to calling for government support it would seek to co-operate with major exporting associations in Vietnam, Thailand and China and toforge an alliance among the Asian exporters. Some twenty-five Indian companiesexport to the United States, and the industry anticipated that the case might be filedagainst six or seven big players. However, the SEAI decided to fight the case from theplatform of the organization as a mark of solidarity.

‘We will back each indicted company’, said Ranjit Bhattacharye, secretary -general ofthe SEAI, whose management committee decided that it would def end the industry’sposition, meet the cost of the legal process and not leave the cost to be borne bythose Indian firms that might be selected for investigations.

The SEAI has estimated a total budgetary requirement of Rs. 70 million to fight thecase. Of this, SEAI would mobilize Rs. 40 million internally and the remaining Rs 30



million would be collected from its members, depending on the volume and value oftheir individual exports to the US market.

When the initiation decision came on 21 January 2004, both the organizations wereunhappy, but they were expecting it and were therefore ready to act. According to

the SEAI, ‘with over 75% of the US producers having signed the petition, proceedingwith the hearing was a fait accompli’.

Both Jose Cyriac and Abraham Tharakan left for the United States to take furtheraction to protect the interests of the Indian shrimp exporters.

The SEAI had worked out plans to contest the dumping allegations on various grounds.It put forward two major differences between the Indian and the US sea-caughtshrimp and offered reasons why Indian shrimp is cheaper.

First, there are specific variations between the shrimp caught off the south-west

coast of the United States and in Indian waters, so that prices are bound to bedifferen t. ‘The threat for the domestic shrimp farmer in the United States comesfrom China, Thailand, Indonesia and Ecuador. India’s shrimp exports arepredominantly of black tiger and scampi varieties which are not cultivated in theUnited States’, according to the president of SEAI.

Second, while fishing in the United States is a capital-intensive activity calling formajor investment, in India shrimp capture is carried out with a very low level ofcapital and requiring hardly any investment. This makes the cost of productionconsiderably lower in India compared with that for shrimp sea-caught off the UScoast.

Jose Cyriac observed, after the decision to initiate investigations, that the cost ofcultured and captured shrimp in India was far lower than that of shrimp caught andbought in the US market, enabling Indian exporters to compete with US shrimp inprice. Further, the petition filed before the US Department of Commerce had mixedup count and weight (shrimp is sold by size and the number of shrimp constituting 1kg), providing another avenue to contest the case.

When the ITC decision on the preliminary affirmative decision came on 17 February2004, the Indian shrimp industry termed it ‘discriminatory and unjust’. Tharakan ofthe SEAI said, ‘We are deeply disappointed and upset by the verdict.’ Asserting that

the Indian shrimp industry has not been resorting to dumping, he was confident ofultimate victory: ‘We have a strong case against US shrimpers. We are certain that we will win the case despite the setback.’ Tharakan said that there was no possibility ofthe United States succeeding in imposing an anti-dumping duty on Indian shrimp as itwas not sold below the cost price. On the contrary, it was sold to US importers at aprice higher than that for Japan and for other countries.



On receipt of the preliminary decision, Indian exporters who were mobilizing fundssaid that they would fight the case till the end. Jose Cyriac commented: ‘Thegovernment is unhappy with the US verdict. But it is only a preliminary finding. Wewill help the Indian exporters fight the case in the United States.’

The government itself came out with a statement on 18 February 2004, when S. N.Menon, special secretary in the Department of Commerce, sa id, ‘We will fight it out.We are all geared up to fight the case and the industry has already hired lawyers forthis.’ Menon observed that India had a strong case as India was exporting mainly ‘tigershrimps which are not found there and that too, in unpr ocessed form’. Noting that80% of shrimp consumption in the United States is met through imports, Menon saidthat unprocessed Indian shrimps generated about 1 million jobs in the US foodprocessing industry, therefore, any action against Indian shrimp would adverselyaffect the US food processing sector. The SEAI and its members were getting ready forthe next set of actions. After the preliminary positive determination by the ITC, thenext step was for the Department of Commerce (ITA) to prove whether there had

been dumping and at what level. As part of that exercise, a few leading firms wouldbe selected from each country and detailed questionnaires would be sent to them.

According to Sandu Joseph, the secretary of the SEAI, a team of US DOC officialswould visit Kerala, a major shrimp producing state, in June or early July. ‘They willvisit our shrimp farming factories and verify our accounting practices. Our factoriesand accounts are open. We want to prove that we are not producing and exportingcheap sh rimp to the United States.’

Joseph also referred to the support the Association could mobilize in the UnitedStates. The SEAI had been receiving ‘favourable support’ from a group of US

congressmen to fight the anti-dumping investigations. Joseph said that more than adozen members of the Congress had written to US Commerce Secretary Donald Evans,asking him to use fair and reasonable procedures in the investigative process.

While the industry and the SEAI, as well as the Indian government, are fairly confidentof the strength of their case, the biggest problem being faced by the shrimp exportersis the uncertainty caused by the anti-dumping investigations.

After the announcement of the preliminary ITC determination, Sandu Josephcommented that ‘We have been badly affected. There is no shrimp export happeningto the US now.’ He said that Indian shrimp exporters had not received any export

order from the United States since 17 February 2004.

By April 2004 there was widespread concern among the exporters, growers and otherstakeholders. Shrimp exports to the United States had come almost to a standstill dueto the uncertainty regarding the contingent applicability and incidence of the anti-dumping duty.



According to Joseph Zavier, general secretary of the Kerala Boat Owners Association,with almost insignificant exports to the United States since February the shrimp catchhad been reduced by 40-45%. The price per kilogramme of white shrimps, Rs. 280 afew months previously, had crashed to Rs. 100 in April, while the price perkilogramme of another variety of prawn had fallen from Rs. 80 to Rs. 40.

In Tamil Nadu and Andhra Pradesh, two large southern states, shrimp farming is donein large barren areas converted into farms. Mohammad Nayeem, once a prosperousshrimp farmer in Andhra Pradesh, is now a broken man. He owns 100 acres of shrimpfarm and used to sell the products at a price of Rs. 450-600 per kilogramme, but afterthe ITC decision the price had crashed to Rs. 220, while the cost of production wasRs. 250.

In Kerala, shrimp farming is mostly done in paddy fields, converted into shrimp farms,on the fringes of backwaters. According to Rajan P. Mambaly who is one of those whohas given his land under lease for shrimp farming, the duty, if imposed, will hit him

and the farmers hard, as the net price to the growers would come down to the extentof the anti-dumping duty.

The preliminary determination came on 28 July 2004. In a media briefing on 29 July2004 the chairman of the MPEDA observed, ‘We are not happy with the preliminarydetermination of the duty rates. The final determination would be on 16 December2004 and we will fight the case further and try to bring it down to zero level.’

The investigation has now moved into the final determination stage. As part of theprocedure, DOC officials visited India in August-September 2004 for onsite verificationof the information and data submitted by the mandatory respondents during the

preliminary phase of the investigations.

WTO-related issues back to top

India’s shrimp export to the United States came under difficulties before, when theUnited States banned the import of captured shrimp from certain countries, includingIndia, in 1976. It was on the ground that trawling for shrimp by mechanized meanshad been adversely affecting certain varieties of sea turtles. The dispute on the USban on the import of shrimp caught without using turtle extruder devices during

harvesting was taken to the WTO Dispute Settlement system by the affectedcountries, including India. The WTO ruled against the United States and asked it tomake the regime WTO- compatible. However, since that had not yet happened, India’sexports to the United States of aqua-culture shrimp and shrimp caught by non-mechanized means were being made on the basis of certification by the MPEDA, asrequired under the law.

http://www.wto.org/english/res_e/booksp_e/casestudies_e/case17_e.htm#top





The trade lobbyists in the United States, such as the Consuming Industries TradeAction Coalition (CITAC), the Seafood Distributors Association and others which wereagainst the imposition of anti-dumping duties on imported shrimp, have raised theissue of the Continued Dumping or Subsidy Offset Act 2000, popularly known as theByrd Amendment. They want the Act to be repealed or modified to make it WTO-

compatible.Under the Amendment, the US government distributes the anti-dumping and anti-subsidy duties to the US firms that brought forward the cases.

The Act was perceived to violate WTO rules by several countries. Eleven members ofthe WTO (Australia, Brazil, Canada, Chile, India, Indonesia, Japan, South Korea,Mexico, Thailand and the EU) requested the establishment of a Panel, while six others(Argentina, Costa Rica, Hong Kong, China, Israel and Norway) joined as third parties,supporting the complainants.

On 16 September 2002, the Panel Report recommended the repeal of the ByrdAmendment, as it was held to be a WTO-incompatible response to dumping andsubsidization. Offset payments constitute a remedy, in addition to the imposition ofan anti-dumping or anti-subsidy duty and this is not envisioned under the WTO rules.Following a US appeal in October 2002, the Appellate Body in its report in January2003 confirmed the Panel’s central finding that the Byr d Amendment is WTO-inconsistent.

The deadline for the US to bring the Byrd Amendment into WTO conformity expired on27 December 2003. As a consequence, the EU has requested the WTO to authorizeretaliatory measures in January 2004. The issue is currently before the WTO and the

United States has, as yet, taken no action towards ensuring WTO compliance.However, at the meeting of the WTO Negotiating Group on Rules (26-28 April 2004),the United States said that it was ‘beyond question that countries have the sovereignright to distribute government revenues as they deem appropriate’, but added thatthe United States intended to implement the Byrd Amendment ruling.

IV. Lessons learnt back to top

The crisis caused by the anti-dumping petition of the Ad Hoc Group has been so farhandled competently. The two nodal agencies, one a government body (the MPEDA)and the other a private trade body (the SEAI) have co-ordinated their approaches.One reason for this of course is that the SEAI is represented in the management of theMPEDA. Several visits by the representatives of those two bodies to Washington atcritical points also helped to bring an understanding of the nature of the problem andhow to face it. This resulted in the selection and appointment of the legal counsel, asearly as September 2003. The importance of co-ordinated action by the threatened






partners, even those outside India, was appreciated and was worked on by the traderepresentatives with their counterparts in several Asian countries included in thepetition.

Another achievement has been the speedy resolution of the issue of financing. The

fact that the Association decided to bear more than 50% of the total costs from itsinternal resources and the rest from the contribution of members according to thevalue of their respective exports was critical. Equally critical has been thegovernment’s steadfast support for the shrimp industry.

But what remains unaddressed is the issue which is in fact generic and thereforeaffects all cases, including the shrimp case. Anti-dumping cases take a long time to befinally decided. During this period, trade is affected because importers are risk-avoiders and will, therefore, be likely to shift to new sources of supply until theuncertainty is resolved. Industry people pointed out that an anti-dumping case wasinitiated against Indian leather goods in South Africa two years ago. Although the case

was ultimately settled i n India’s favour, the market was lost to India, because of theuncertainty caused by the transitional decisions.

There is, therefore, a huge human element in such cases where the products originatein small and medium-sized enterprise sectors, and a large number of poor andmarginal farmers, artisans or unskilled or semi-skilled labour are engaged in theproduction of such goods. As of now, there is no institutional mechanism, in the formof a safety net, to take care of this problem. The Indian shrimp industry is one wherethe problem is acute because of the way in which it is organized. As observed earlier,the industry is fragmented and dominated by small fishermen and farmers.Uncertainty for any reason create risks which they are not equipped to bear. This case

has highlighted the need for the government to look at this issue. Since the Indiangovernment has already indicated its decision to fight an adverse judgment, the needis more acute.

The shrimp industry in India had always focused on one or two major markets forgrowth. Previously it was Japan and during the last few years, it has been the UnitedStates. It has now learnt the importance of diversification. A. J. Tharakan, the SEAIpresident, has said that they are exploring alternative markets to make up for the lossof the lucrative US market. ‘But it will be a long drawn -out process. It is not easy toestablish your presence.’

This is why it is important to start early — a lesson the industry appears to havelearned from this experience.

Documents

Shrimp Industry Organizes to Fight the Threat of Anti