The U.S. Department of Commerce (DOC) is planning to hit shrimp exporters in Ecuador, India, and Vietnam with higher countervailing duties once it posts its preliminary determinations to the Federal Register.
The DOC released its preliminary determinations on 26 March, finding the three countries, as well as individual companies in those countries, benefited from subsidies that gave them an unfair advantage in the U.S. market between 1 January and 31 December 2022.
As a result of the findings, shrimp exports from the three countries to the U.S. will be hit with a minimum countervailing duty once the findings are posted to the Federal Register, and certain companies will face either higher or lower rates depending on the DOC’s findings – which it will finalize in September.
Based on the preliminary determination, Ecuador is facing a 7.55 percent countervailing duty on all shrimp exports to the U.S. On a company level, Sociedad Nacional de Galapagos is facing a 1.69 percent rate, and Industrial Pesquera Santa Priscila is facing a duty of 13.41 percent.
India is facing an overall countervailing duty rate of 4.36 percent. By company, Devi Sea Foods is facing a slightly higher 4.72 percent rate, and Sandhya Aqua Exports, Neeli Sea Foods, Vijay Aqua Processors, and Neeli Aqua Farms are facing a rate of 3.89 percent.
Vietnam was given the lowest duty rate of 2.84 percent, and Soc Trang Seafood Joint Stock Company in particular is also facing a rate of 2.84 percent. However, one company, Thong Thuan Company, is facing a countervailing duty of 196.4 percent, which the DOC said is “based on adverse facts available.”
The fourth country that was investigated, Indonesia, was found to have subsidy rates below the amount requiring countervailing duties, the DOC said.
The preliminary determination is not final, and the department will not make its final determination until 5 August 2024. Subsequently, the International Trade Commission (ITC) must make its own final determination on 19 September before an order may or may not be issued on 26 September. An order will only take place, the DOC said, if both the department and the ITC find that the shrimp industries of the three countries received subsidies from their governments.
Once the preliminary determinations are published to the Federal Register, importers will be required to place cash deposits equal to the rates determined by the DOC for up to four months with U.S. Customs and Border Protection.
Based on historical data, if the duties stand, the countries' industries will be paying significantly more to export shrimp to the U.S.
Ecuador, for example, was estimated by the DOC to have sent over USD 1.4 billion (EUR 1.3 billion) in shrimp products to the U.S. in 2022. If all those exports were hit with just the proposed countervailing duty rate, that represents over USD 100 million (EUR 92.4 million) in additional duties – not including the higher 13.41 percent rate Santa Priscila is facing.
The new countervailing duties are only just one part of the DOC’s investigations; the department is also performing an antidumping duty investigation to determine whether the named countries are selling shrimp in the U.S. for less than they sell shrimp in their domestic markets.
The DOC launched its investigation into whether the shrimp industries of the four countries were being subsidized at the behest of trade petitions filed by the American Shrimp Processors Association (ASPA) in October 2023. The ASPA claimed that government subsidies paid to shrimp processors and farmers in Ecuador, India, Indonesia, and Vietnam were giving those companies an unfair advantage against U.S. wild-caught shrimp.
"These petitions are necessary due to continued unfair trade practices causing significant market distortions and price depression in the United States,” ASPA Trade Counselors Elizabeth Drake and Eddy Hayes said in a statement at the time. “If successful, antidumping and countervailing duty orders will result in tariffs that offset the dumping and subsidies undertaken by foreign companies and foreign governments. This should bring a measure of market correction and badly needed relief to the entire domestic shrimp industry."
The new preliminary countervailing determinations were made for different reasons in different countries, per documents uploaded by the DOC to U.S. trade repository database ACCESS.
Vietnam’s subsidy rate was determined based on exchange rates and four different government programs benefiting the industry: income tax preferences for enterprises in certain special zones, import duty exemptions for imports used to produce exported goods, import duty exemptions on equipment and machinery, and reduced rents for encouraged industries.
For Ecuadorian shrimp producers, government subsidies come in multiple forms, per the DOC. One of the subsidies the DOC claims its farming industry benefited from was related to land holdings, with the government of Ecuador reportedly granting land concessions for land in bay and beach areas to Santa Priscila, Produmar, and Naturisa, for which the three companies had to pay an annual fee. Based on benchmarks from the DOC, Ecuador partially subsidized shrimp farmers via rental prices for the land, with a net subsidy rate of 0.6 percent for Santa Priscila.
One of the largest subsidy sources, per the DOC, was tax incentives for priority sectors under Ecuador’s 2010 Organic Production Code. The program allows taxpayers exemptions from corporate income taxes through the installation and deployment of a qualifying investment in a “productive” asset. According to the DOC, Santa Priscila claimed benefits under the program and, based on the amount of benefit the company was receiving, a countervailable subsidy of 11.08 percent.
Industry experts have predicted for months the DOC review could cause disruption to the shrimp sector, including Omarsa CEO Sandro Coglitore.
“This will be the biggest threat in the U.S. market in 2024,” Coglitore said at the 2024 Global Seafood Market Conference in January.
