China has experienced a surge in Russian seafood entering the country recently, and is reprocessing and selling much of it to markets that have banned Russian seafood imports, including the U.S.
Bilateral seafood trade between China and Russia rose 80 percent in the first quarter of 2023, according to Robin Wang, head of seafood marketing agency SMH International in Shanghai. Overall, Sino-Russian trade rose 38.7 percent year-over-year in Q1.
“[This is happening] because of the good relationship between China and Russia,” Wang said.
Though there's an import ban in the U.S. on Russian seafood products, there’s no such explicit ban for reprocessed goods, a loophole that many companies are exploiting, according to Nick Ovchinnikov, CEO of U.S.-based Lotus Seafoods.
“E.U. import authorities have been requiring raw material certificates of origin for many years, [but] U.S. Customs and Border Protection have never implemented it and remain on the blind side of the actual origin of many species being imported into the U.S,” he said.
Ovchinnikov said he believes American authorities have been turning a blind eye to Chinese-processed Russian seafood, a claim he previously made about Russian seafood entering the U.S. after being reprocessed in the Netherlands and South Korea.
“The battered-and-breaded fish manufacturers, largely dependent on the supply of Russian pollock, will most likely keep using this loophole. That must be regulated,” Ovchinnikov said. “We must stop supporting Russian aggression with American taxpayer dollars. It is a manageable task that requires additional origin verification procedures and more strict control of Chinese suppliers, with potential serious consequences for the ones using Russian-origin products as raw material for the finished products delivered to the U.S.”
The Stimson Center, a nonprofit, nonpartisan Washington, D.C., U.S.A.-based think-tank focused on ocean security, climate security, and wildlife protection, recently highlighted the limitations of the U.S. Department of Agriculture’s (USDA) Country of Origin Labeling (COOL) requirements and the Seafood Import Monitoring Program (SIMP), noting how each could be improved to enhance transparency of Russian sourcing.
Deborah B. Stern, a lawyer at Sandler, Travis & Rosenberg, a U.S.-based customs- and trade-focused law firm, said it may seem to directly contradict the import ban, but there’s nothing illegal about importing Chinese-processed Russian seafood into the U.S.
Pointing to the substantial transformation test set in a 1988 Court of International Trade decision on Koru North America v. United States – where the court determined headed and gutted fish processed into “quick-frozen” fillets constituted a substantial transformation – Stern said if the seafood processing in China results in a “substantial transformation” of Russian-origin fish, the product imported into the U.S. is no longer considered Russian seafood.
“A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character, or use different from that possessed by the article prior to processing,” Stern told SeafoodSource.
Import/export companies have tried to exploit processes like these in years past, to mixed results.
Stern said those opposed to American purchases of Russian-origin seafood could lobby for changes in the law.
“The [Biden] administration or Congress could modify the ban to cover fish products sourced from Russia if there is sufficient political will and/or other justification to do so,” she said.
Despite a strained political relationship, U.S. seafood suppliers are finding an increasingly welcome market in China. China has upped its purchases of U.S. seafood in an effort “aimed at ‘enriching the supply of domestic aquatic products’ and boosting the stability of the seafood industry and supply chains,” according to Wang, quoting an official Chinese government statement.
In terms of trade with the U.S., there was a 1,282-percent increase in shipment of live and fresh crab from Alaska to China in Q1 2023, and exports of frozen salmon chum jumped 541 percent year-over-year. Shipments of frozen Alaska pollock rose by 4 percent, and shipments of frozen cod rose by 57 percent.
“Much of the low-volume, high-value, live crab exports to China have dropped off in recent years because of the pandemic, but these numbers indicate demand may be returning,” said Simon Marks, a research analyst at McKinley Research Group LLC, which conducts research on Alaskan seafood exports.
China’s effort to widen its portfolio of seafood suppliers isn’t limited to the U.S. Chinese customs officials recently dropped bans related to violations of Covid protocols on 20 seafood firms from countries including Brazil, Indonesia, Malaysia, Pakistan, and Spain as a means of opening up further supply lines.
China’s currency has weakened in recent weeks amid signs of a wider slowdown due to a faltering real estate market and a local government debt crisis. But Wang said weaker U.S. seafood demand due to stockpiling and inflation created an opening for China to secure additional global supply, citing a study by market research agency NIQ China that found Chinese consumers are less sensitive to the prices of daily health products like fresh vegetables, meat, and dairy products.
“The seafood price [has] remained stable overall. With the economy getting better in China, the price for seafood will grow steadily,” he said.
Jerry Knecht, the head of seafood trading firm North Atlantic Inc., which was sold to Slade Gorton in 2021, said he sees China maturing its efforts to own or control its growing seafood supply chain.
“The Chinese have upped their game to secure strategic supply as their seafood demand continues to recover,” Knecht said.
Photo courtesy of Lotus Seafood
