Rising shrimp exports require responsibility

Vietnamese shrimp is among the most-favoured agricultural products in overseas markets. However, with increasing exports also come more complications as domestic producers must comply with high standards set forth  by foreign importers and their governments to avoid trade remedies.

 In the first nine months of 2020, shrimp exports totalled $2.7 billion, up 10.5 per cent on-year. Photo: Le Toan/VIR

General director of Minh Phu Seafood Co., Ltd., Le Van Quang, last week met with the press to talk about the anti-dumping decision applied to the shrimp exports of its daughter company MSeafood Corporation.

Shrimp exports of Minh Phu and MSeafood to the United States will be subject to an anti-dumping tax of 10 per cent, equivalent to that of Indian shrimp exported to the US, as the country’s Customs and Border Protection (CBP) concluded mid-October after eight months of investigation.

The case was initiated after the Ad Hoc Shrimp Trade Enforcement Committee submitted its allegations in July 2019. On October 13, the CBP announced that there was enough evidence that MSeafood violated US trade law.

The agency concluded that MSeafood “imported Indian-origin frozen shrimp that was transshipped, and the country of origin claimed as Vietnam.” Because of this transshipment, anti-dumping duties that otherwise would have been owed on certain frozen warmwater shrimp from India were not paid to the US government. 

Nguyen Xuan Cuong - Minister of Agriculture and Rural Development

In 2020, shrimp export turnover may reach $3.7 billion, up 9.8 per cent compared to 2019. However, many forecasts show that Vietnam’s shrimp industry will face hurdles along the way. Thus, our ministry has coordinated with localities to actively build strategies to maintain the industry’s growth momentum.

The ministry has directed localities to implement solutions to form a high-quality and sustainable production chain that is suitable for international food and safety standards.

In the long term, the ministry will further work with localities to promote domestic shrimp in foreign markets sustainably. However, the participating parties should make every effort to use their advantages and attach importance to production links in each region and locality.

Subjective business

Minh Phu, the largest shrimp producer and processor in Vietnam, argued in a statement from October 22 that the CBP based its conclusion on “unfavourable facts”, and that “the agency did not send anyone to Vietnam for field inspections. Instead, the CBP evaluated the case based on a traceability system, which is inconsistent with the standards and systems of Minh Phu.”

According to Quang, the analysis and traceability method that the company is applying has been approved by the National Oceanic and Atmospheric Administration and is based on the US’ Seafood Import Monitoring Program.

Nonetheless, the CBP concluded “that the evidence indicated that Indian shrimp was co-mingled with Vietnamese-origin shrimp and that Minh Phu’s internal production system did not permit reliable tracing of what happened to Indian shrimp from its purchase to its ultimate sale.” The CBP also noted that Minh Phu’s characterisations of its processes stood in stark contrast to the descriptions provided by the company to the US Department of Commerce, as reported by the Southern Shrimp Alliance.

In August 2019, Minh Phu had to sell off a 35.1-per-cent stake to Japanese investor Mitsui, because the company could not sell its products to the US and was consequently struggling throughout the season.

Minh Phu’s revenue dropped 21 per cent in the first nine months of 2020, reaching VND6.6 trillion ($287 million) while profit amounted to VND408 billion ($17.7 million), down 15.7 per cent.

Currently, the company’s lawyer is working with the US authorities, Quang said, to actively provide data and prove that the company has not used shrimp from India. As the US is Minh Phu’s largest export market, with sales accounting for 38 per cent in 2019, Quang hopes that his company can find a way around the anti-dumping tax when exporting shrimp to this market.

In the 13-year history of participating in anti-dumping lawsuits against Vietnamese shrimp in the US, the 13th administrative review round of the Vietnam Association of Seafood Exporters and Producers has exceeded the expectations of Vietnamese shrimp exporters.

Regarding the results, the organisation’s general secretary Truong Dinh Hoe said that domestic shrimp enterprises export goods to the US at fair and competitive prices, and that there has been no known occurrence of dumping to make illegal profits in the international market.

Hoe also argued that local seafood enterprises are “hardened” as they participated in many international trade lawsuits, thus handling those cases better than businesses of most other industries.

However this time, Minh Phu – an enterprise that was already subject to anti-dumping taxes from the US in 2012 and 2013 – showed that trade protection cases for Vietnam’s exports are not a remnant from the past yet. In fact, many businesses are still subject to trade remedies.

Defensive measures

In addition to legal regulations issued by the US government, Vietnamese shrimps that enter this market are also subject to voluntary standards set by several influential non-governmental organisations. For example, the Global Aquaculture Alliance has developed Codes of Practice for Responsible Shrimp Farming to strengthen producers’ responsibility for food safety and environmental protection.

The US is a major export market for Vietnamese shrimp, but the consequences of anti-dumping taxes are decreasing the number of shrimp exporters to this market.

Ngo Minh Hien, general director of Namcan Seaproducts Import Export JSC, said that while tariffs are not a concern, the most worrying part of the business is the technical barriers applied depending on the conditions and needs of the importers.

Some experts recommend that the US government should apply compensation measures in their calculations as goods that are sold at a higher price could offset those sold at lower prices. However, from the US’ point of view, high-priced imported goods have nothing to do with low-priced ones – all imported goods sold at low prices are considered dumping.

“The US has tended to use more trade remedies since the pandemic began and economies slowed down,” Le Sy Giang, CEO of GH Consults LLC, told VIR.

Data from the Ministry of Industry and Trade’s Trade Remedies Authority of Vietnam (TRAV) shows that the number of trade remedies involving Vietnamese goods is increasing rapidly in recent years. While 2019 only recorded 16 new cases, the first nine months of 2020 saw 32 such cases.

Giang, who used to be head of the TRAV found that the US Department of Commerce is investigating stricter since Minh Phu’s case in 2012. “I know that the US agencies now require businesses to provide twice the number of related documents compared to before,” Giang claimed.

According to Giang, the US encourages importers to negotiate fixed prices for certain volumes of goods with foreign exporters – a solution that is more extensive than the rules of the World Trade Organization (WTO) – and stands in the context of an increasing number of US trade defence investigations.

The main goal of US trade remedies is to limit competition to protect domestic production.

Nguyen Thi Thu Trang, director of the WTO and International Trade Center under the Vietnam Chamber of Commerce and Industry said, “The US’ trade protection is not arbitrary as the country has to comply with mandatory principles and procedures outlined in relevant WTO agreements.”

Nevertheless, trade remedy investigations cause many difficulties for Vietnamese exporters as the review process can take at least a year. During this time, businesses must participate in consecutive price reviews, making it impossible for them to define competitive long-term strategies.

This, according to Trang, is the main reason why such investigations should be avoided by local exporters. However, she also explained, “It is still possible to get rid of the anti-dumping tax if the business achieves a negligible margin in three consecutive reviews by the US, even after the initial investigation has ended and tax been imposed.” VIR