A plan gaining momentum in the United States Congress to create a tax on imported goods is being opposed by portions of the seafood industry that fear it could result in higher costs and prices.
The border adjustment provision is being pushed by Republicans in the U.S. House of Representatives, who have been encouraged by President Donald Trump’s calls for renationalization and regrowth of U.S. industry. Advocates see the tax a means to encourage businesses to retain and grow jobs and production inside the U.S. However, for the U.S. seafood industry and other commodity-based trades, the difficulty of replacing overseas product with domestically produced goods is a difficult – if not impossible – task.
In an article that appeared in the Wall Street Journal on 28 February, Fortune Fish and Gourmet President and CEO Sean O’Scannlain, said taxing the USD 100 million (EUR 95 million) he spends annually on importing food, including more than 65,000 pounds of farmed salmon Fortune Fish imports weekly from Chile, Canada and Norway, would force him to pass costs onto his customers.
“It’s crazy, absolutely crazy,” O’Scannlain told the WSJ. “Politically, it is a bad idea for Congress to have to defend increasing the average consumer’s food costs by a couple thousand dollars a year.”
According to the National Retail Federation, a trade group representing U.S. retailers, the border adjustment tax could cost the average family USD 1,700 (EUR 1,617) in its first year, with costs decreasing if a subsequent currency adjustment occurs as predicted by economic theory.
“While economic theory suggests that trade flow of imports and exports would balance out over the long run due to offsetting exchange rate and price adjustments, there is no consensus as to the degree or the timing of these adjustment,” the NRF said in a press release. “In the near term, consumers would be left to pick up the significant tab while hoping that the economic theory proves out.”
The seafood industry could be hit particularly hard by the border adjustment tax, as the U.S. imports more than 80 percent – and up to 90 percent – of the fish, shellfish and other marine products it consumes. Even if the country could make up the difference with aquaculture and other method of increasing its domestic catch, building that infrastructure would take years and significant regulatory changes, O’Scannlain told the WSJ.
O’Scannlain said if the border adjustment tax plan is approved, the cost of a salmon fillet Fortune Fish currently sells to its customers for USD 8.95 (EUR 8.52) to USD 11.25 (EUR 10.70) to make up for the price of the new tax. As a result, he would like to see an exemption for food imports. Otherwise, Fortune Fish stands to see a loss of revenue of up to USD 50 million (EUR 47.6 million) annually as the predicted higher cost of seafood takes a hit on consumption levels.
However, several Republican representatives, including U.S. Rep. Kenny Marchant (R-Texas) and U.S. Rep. Peter Roskam (R-Illinois) said they aren’t operating in “carveout mode.”
“It puts some pretty big holes in the revenue side of it” to offer exemptions, Marchant said. “If you fought that hard for the concept, you wouldn’t want to turn around and just completely gut it with exceptions.”
U.S. Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee, said he is considering the time necessary for the U.S. economy to adjust to the new system as it gets deeper into the process of writing the rules governing the border adjustment tax.
The National Fisheries Institute, the trade group representating the U.S. seafood industry, opposes the border adjustment tax, according to Gavin Gibbons, the organization's vice president for communication.
"We oppose it across the board," he said. "There's been discussion about carveouts for food, but here’s the problem with that: once you start to do that, it undercuts the entire effort of the tax, which we think is a misdirected effort to begin with."
O’Scannlain said if the tax is applied to seafood, it will end up costing American consumers.
“The cost will have to be rammed through all the way to the consumer level,” he said. “It’s real money. I just hope Congress knows what a dramatic effect and in a bad way this will have on an average American.”
