Vietnamese exporters fear losing the valuable US pangasius market
A contentious new law in the United States that tightens inspection rules for catfish is striking fear into the heart of the Vietnamese pangasius industry.
Pangasius exporters in Vietnam are now desperately worried about not being able to meet the United States Department of Agriculture’s (USDA’s) new inspection rules for catfish, which came into effect in March. In fact, they worry they could lose the valuable U.S. market altogether.
Under the new rules, pangasius is now recognized as a catfish species by the U.S. Food and Drug Administration (FDA), despite its previous ruling to the contrary. Its new categorization qualifies it for additional inspections, which will increase the expense and difficulty of importing it to the U.S.
Of course, the Vietnamese exporters may be worrying unnecessarily. The catfish rule doesn’t become mandatory until August 2017 – there is an 18-month transitional implementation period – and the U.S. Senate recently voted to scrap the new inspection program altogether because it was deemed wasteful and unnecessary.
However, the Senate’s decision still needs the approval of the U.S. House of Representatives and President Barack Obama’s signature to become law.
The U.S. is the leading export market for Vietnamese pangasius, accounting for more than 20 percent of overseas sales. These sales earned USD 318 million (EUR 283 million) in 2015.
Truong Dinh Hoe, general secretary of the Vietnamese Association of Seafood Exporters and Producers (VASEP), said that while the U.S.D.A. is already responsible for the food safety of imported pangasius, the new rule will require equivalency to U.S. standards for production, processing and export.
The stiffer requirements would create a huge financial burden for Vietnamese exporters – if it is even possible for the Vietnamese to meet them – as there are huge differences between rearing, transporting and processing catfish in the U.S. compared with Vietnam.
U.S. catfish are farmed in southern U.S. states including Mississippi, Alabama and Louisiana. They are grown in specially constructed shallow ponds which are filled with well water and fed with expensive extruded feed made from grain.
In Vietnam, pangasius are also grown in ponds, but these are supplied continuously with treated water from the Mekong River. They are fed a less expensive diet manufactured mostly from soybeans.
Catfish harvested in the U.S. are transported to the processing plants live onboard trucks equipped with aerated water tanks. In Vietnam, they are transported live, but in well boats and not in aerated water.
Processing plants in the U.S. are, in general, better equipped than in Vietnam, although there are Vietnamese factories which are state-of-the-art, such as those of Vinh Hoan, which is the leading supplier of pangasius to the U.S. market.
Nguyen Ngo Vi Tam, CEO of Vinh Hoan Corporation, said Vinh Hoan was one of a handful of pioneering Vietnamese companies which applied an integrated production chain ranging from breeding, farming, processing and export.
Only three Vietnamese companies export pangasius to the U.S., according to Tam, with Vinh Hoan accounting for 45 percent of the market share.
Many – both inside and outside of Vietnam – accuse the United States of an underhanded campaign of protectionism, arguing the U.S.D.A. inspection program is simply an “official” means of protecting the domestic channel catfish industry by complicating the import process.
If this is the case, the protectionism is short-sighted, as U.S. catfish farms generally cannot fulfill domestic demand. The U.S. market for catfish is said to require up to 500,000 metric tons of product, whereas the domestic industry can only supply about 70,000 tons of catfish fillets.
The value of Vietnamese pangasius exports to the U.S. has been declining over the past five years, according to VASEP. It jumped from USD 358 million (EUR 319 million) in 2012 to USD 380 million (EUR 338 million) in 2013, but has since dropped to USD 318 million (EUR 283 million) in 2015.
This decline in export value was not caused by U.S. regulations, Vo Hung Dung, vice chairman and general secretary of the Vietnam Pangasius Association, admitted, but was “due to our own internal problems.”
Vietnamese authorities have recognized for years that merely aiming to supply cheaper product, with little regard for quality, is not the way to build a sustainable and expanding industry. But they have failed to act.
Dung has called for a package of technical support from the U.S. This would be to upgrade the quality of Vietnamese pangasius from farming and transport to processing and export. He said that forcing an upgrade in quality would provide an effective marketing tool. Vietnamese pangasius would no longer be in the “lower segments” of the fish trade so its export value would improve, he said.
To me, it seems a bit rich for the Vietnamese pangasius industry to be asking the U.S. for help to upgrade the quality of its products so as to enable it to charge more for them, especially given the uphill battle Vietnamese catfish imports are already facing in the U.S.