Casualties mount in shrimp trade war, but us consumers are not among them: importers suffer, along with producers and exporters from countries hit with anti-dumping duties. The price of shrimp sold in some US retail markets is now as inexpensive as chicken.
Long gone are those good old days of yesteryear, when shrimp was a completely duty-free commodity, and simple supply and demand economics ruled in a marketplace that sourced approximately 75% of its requirements (a billion pounds' worth) from abroad. Life is a lot more complicated now, and the American appetite for imported shrimp has increased to 1.3 billion pounds--amounting to 85% of total consumption.
For the third year running the vagaries of "anti-dumping law" formulation, arcane calculation of dumping margins by by the US Commerce Department, and the disorder it has wreaked upon shrimp importers, was the main focus of the Boston Seafood Show's Annual Shrimp Forum on March 13. And for the second year in a row, Nussbaum, chairman and ceo of West Newton, Massachusetts-based International Marketing Specialists (IMS), articulated the shrinking importing community's business difficulties with sharp wit and a spirited sense of gallows humor that was all too serious.
"The duty was established to protect domestic producers and the market has gone down--not up. This year, when domestic producers had their biggest production in years, I couldn't find an attorney willing to take my case to bring a dumping case against them for bringing down the US market by dropping prices," lamented Nussbaum. "I just don't get it."
There was no shortage of top-flight legal talent available to argue before the US International Trade Commission (ITC) in 2004 that producers from six countries were selling shrimp at prices below the cost of production, and that establishment of anti-dumping duties was needed to protect the struggling domestic industry. The ITC agreed several years ago, by a vote of 6-0, that lower-priced, farm-raised shrimp from China, Vietnam, Thailand, Brazil, Ecuador and India was hurting US shrimp fishermen and processors. Implementation of anti-dumping duties by the US Commerce Department soon followed. In addition, the US Bureau of Customs and Border Protection acted to guarantee availability of cash to pay parties determined to have been injured commercially by exports from companies based in the half-dozen nations deemed to have "dumped" shrimp onto the US market at prices below those charged consumers or further processors in the country of origin. This was done by requiring importers to continuously post bonds equivalent to estimated duties on an entire year's worth of imports, which is extremely costly.
"Make no mistake about it, this is a massive trade war, and it is going to be looked at and analyzed for 10 years," said Michael Cone, a Shrimp Forum panelist and attorney with New York- and Washington-based Neville Peterson LLP, a firm specializing in international trade regulations. "Everybody is losing. People are getting out of the business of importing. They are purchasing on a landed duty-paid basis. The exporters are delivering it and paying the duties, and that's it."
Cone went on to say that this is ultimately bad for Customs and the US Treasury. "They might get that bond, but they're not going to get to attach assets," he commented. "We know of people who have been caught in trans-shipment, and they live very well in Vietnam--where Customs can't go after them. It's very sad what's happening. Nobody wants the domestic importers to lose out to people who are selling on an LDP (landed duty paid) basis."
Urging importers to perform due dilligence, the attorney noted that a numer of companies have received notice from Customs that they are suspected of having received transshipments of shrimp product from Indonesia that originated in China, where the anti-dumping duty averages 112.81%.
"If offered a low price, grab your wallet and run for the nearest door, because it could well be a transshipped product," he warned. "If hit with a penalty action, you need to take it very seriously."
Morton Nussbaum elicited laughter from members of the panel and audience when he suggested that a Green Card program is needed for shrimp imports.
"I want to find out if there's a way to determine if shrimp has traveled around the world," he stated. "Scientists say that all human life began in Africa. Maybe all shrimp life began in Thailand."
The IMS chairman, a seafood business veteran, said that his company does all the due dilligence that it can. However, this may not be enough.
"If we do everything that is required, and someone takes a load of shrimp from China and ships it to Indonesia where it is mixed into his own production, and Customs suspects it, we have to pay the duty," he commented. "So, no matter what we do, unless we station our own people overseas, it doesn't matter. We still have to pay the duty, though the penalty may be waived."
Cone replied: "That's correct. With the right attorney, you won't have to pay the penalty. It's always been that way."
Nussbaum pointed out that profit margins for importers "are getting squeezed as we get pushed and pushed ... Our margins are shrinking ever year. The number of distributors is going down. It's not that there are fewer companies left making more money ... The guys who are left are making less money. Something is wrong here."
Shrimp farmers are feeling the squeeze too, as global supplies--most of which is produced in Southeast Asia--has reached 2.8 million metric tons.
"Producers in the Western Hemisphere are having a difficult time now being able to produce at a price that allows them to stay in business," said panel member William More, director and vice president of the Aquaculture Certification Council, which is based in Kirkland, Washington.
"With rising costs and profits for the producer going down, it has reached a point where I think if prices continue to be flat, which is the projection, you will see a lot of producers go out of business," added More. "And you will see a lot more consolidation than in past years."
Illustrating just how cheap Pacific whites (Peneaus vannamei) have become in the United States retail market, Steve Hedlund, moderator of the Forum, remarked: "It's amazing, shrimp prices are as inexpensive as chicken today."
Nussbaum could not resist the opportunity to let that statement pass without comment.
"I think the chicken people are going to sue us, because we are taking away their business," he joked. "People are switching from chicken to shrimp because of low prices!"
On the positive side of the ledger, suppliers are fetching higher prices for black tiger (Peneaus monodon) shrimp, which has prompted producers in Thailand to gear up output of that species.
RELATED ARTICLE: IMS launches new DelicaSea brand along with legal sea foods retail packs.
West Newton, Massachusetts, USA-based frozen seafood supplier International Marketing Specialists (IMS) has launched DelicaSea, a line of consumer shrimp and squid products. The brand will initially include 15 shrimp items and one squid product, ranging from peeled and cleaned tail-on cooked black tigers and easy-peel shell-on whites, to cleaned calamari.
"DelicaSea is positioned as a premium line of both raw and cooked frozen shrimp and squid products for the foodservice and retail categories," said Morton Nussbaum, chairman and ceo of IMS. In addition to DelicaSea, IMS has introduced three new retail packs under the Legal Sea Foods restaurant chain brand name: Gourmet Breaded Butterfly Shrimp, Jumbo Cocktail Shrimp, and Cooked Salad Shrimp. Each features farm-raised product sourced from Thailand.
Legal Sea Foods, a restaurant and oyster bar business with roots in Boston dating back to 1950, operates 30 outlets in the Eastern United States extending from the New England region to Florida. The second-generation family enterprise is run by Roger Berkowitz.
JOHN M. SAULNIER
QFFI Chief Editor & Publisher