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Presentation by: Edward T. Hayes, Esq. Leake & Andersson LLP Imports of Certain Frozen Warmwater Shrimp: An Update on Current Issues for the Industry January.

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Presentation on theme: "Presentation by: Edward T. Hayes, Esq. Leake & Andersson LLP Imports of Certain Frozen Warmwater Shrimp: An Update on Current Issues for the Industry January."— Presentation transcript:

1 Presentation by: Edward T. Hayes, Esq. Leake & Andersson LLP Imports of Certain Frozen Warmwater Shrimp: An Update on Current Issues for the Industry January 6, 2010

2 2 Overview ► Background on antidumping orders on shrimp from six countries ► Evasion and circumvention of the orders ► Shrimp CDSOA (“Byrd”) distributions ► Facts and Myths about Thailand order ► Shrimp sunset review ► ASPA’s commitment to the industry

3 3 I. Background ► In 2005, antidumping orders were imposed on imports of frozen shrimp from six countries: Brazil, China, Ecuador, India, Thailand and Vietnam ► From 2003 (the year before duties were provisionally imposed), to 2008, combined imports from all subject countries fell by 13% ► Though imports from Thailand have remained significant, they would likely have risen much more without the orders in place

4 4 I. Background ► Since preliminary duties were imposed in August of 2004, overall volume of subject imports has remained at or below the 2003 peak in almost every year (2006 anomaly largely attributed to hurricanes) ► Antidumping Orders have successfully maintained import levels (2008 saw the lowest import levels since 2004)

5 5 I. Background ► Meanwhile, imports of frozen shrimp from countries not subject to the orders have increased dramatically

6 6 I. Background 2003 Share of Volume

7 7 I. Background 2008 Share of Volume

8 8 I. Background ► Under the orders, the average unit values of subject imports ($/kg) have increased modestly, or declined slightly

9 9 II. Evasion and Circumvention ► Importers and foreign producers routinely evade or circumvent orders. ► Challenges that often occur once an order is in place include:  Transshipment  Failure to Collect Duties Owed (China)  Shift to Exports of products not covered by the order.

10 10 II. Evasion and Circumvention ► Transshipment is the shipping of subject product from a country subject to the order to the U.S. through a third country to avoid paying antidumping duties ► Most of the increase in U.S. shrimp imports from nonsubject countries has been from Bangladesh, Indonesia, and Malaysia ► These same three countries were also receiving growing exports from their neighbors in subject countries: China, India, and Thailand ► Customs has been able to identify and address some transshipment. In 2008, it recovered $2.5 million in duties due on shrimp from China transshipped through Indonesia.

11 11 II. Evasion and Circumvention 2006200720082009 Brazil$362,182.87 $ 81,253.13 $553,412.840 China$241,099.08$14,381,694.19$38,400,687.230 Ecuador$471,733.46$2,717.12$104,258.530 India$6,342,653.870$3,023,064.29$418,425.60 Thailand$2,682,242.94$22,238.22$326,940.600 Vietnam$1,038,391.23$342,900.95$68,234.140 ► The issue of uncollected duties is not a serious problem in the shrimp orders with the exception of China. Congress can strengthen the new shipper review law to help Customs collect monies owed.

12 12 II. Evasion and Circumvention ► Some subject countries, particularly China, shifted to shipments of nonsubject products, such as breaded shrimp, after the orders went into effect.

13 13 III. CDSOA ► Dumping has continued under each of the orders and the duties collected have been important to the continued operation of many producers. ► The Continued Dumping and Subsidy Offset Act (“CDSOA”) requires duties collected on all entries prior to Oct. 1, 2007 to be distributed to the domestic industry ► CDSOA was enacted effective 2001—2 years before the shrimp investigations began

14 14 III. CDSOA ► Nearly $172 million has been distributed to the domestic shrimp industry under CDSOA since 2006 ► Another $14 million in duties has been collected but withheld from distribution for the time being due to pending litigation regarding CDSOA and other disputes with Customs

15 15 III. CDSOA ► As of Oct. 1, 2009, the total remaining in shrimp clearing accounts and potentially available for future CDSOA distributions to the industry was $188 million ► Once administrative reviews and litigation over entries subject to CDSOA conclude, final duties will be assessed and distributed to the industry

16 16 III. CDSOA ► CDSOA distributions are made to those domestic producers of the like product that supported the initial petition and that have “qualifying expenditures” as defined by law ► The intent of the law is to compensate producers in accordance with their qualifying expenditures, not simply because they are part of the industry or supported the petition

17 17 III. CDSOA ► Some domestic producers that did not support the original petitions have sued, claiming the CDSOA support requirement is unconstitutional  These suits have been stayed pending the outcome of a lead CDSOA constitutional case  In the lead CDSOA case, the U.S. Court of Appeals for the Federal Circuit recently rejected these constitutional claims, upholding the law’s support requirement See SKF-USA v. US, 2008-1005  While a petition for certiorari may be filed with the Supreme Court, the court has the discretion to accept or reject any such petition.  Any suggestion that US affiliates of Chinese companies like Singleton or Tampa are receiving Byrd funds is completely false  Any suggestion that ASPA is somehow responsible for these companies making claims is completely false  ASPA’s DC counsel are the attorneys that succesfully defeated this claim in Court

18 18 III. CDSOA ► (c) Qualifying expenditures. Qualifying expenditures which may be offset by a distribution of assessed antidumping duties must fall within the categories described in paragraphs (c)(1) through (c)(10) of this section.  (1) Manufacturing facilities;  (2) Equipment;  (3) Research and development;  (4) Personnel training;  (5) Acquisition of technology;  (6) Health care benefits for employees paid for by the employer;  (7) Pension benefits for employees paid for by the employer;  (8) Environmental equipment, training, or technology;  (9) Acquisition of raw materials and other inputs; and  (10) Working capital or other funds needed to maintain production. 19 Code of Federal Regulations 159.61 (c)

19 19 III. CDSOA ► All domestic industry processors of natural products incur greater qualifying expenditures than harvesters based upon the letter of the law ► Law provides greater compensation for those industry sectors with capital investments in manufacturing facilities, personnel, healthcare costs, working capital and lines of credit needed to continue production ► ASPA did not draft the law and had no input into the law, which applies the same way to all industries, including lumber, catfish, steel, etc.

20 20 IV. Facts on the Thai Order ► Thailand is the top exporter of shrimp to the U.S., accounting for 33% of all imports in 2008 (Vietnam-9%, China-5%, India-3%, Brazil-0%) ► While imports from Thailand grew by 35% from 2003 to 2008, they likely would have grown much more without the order ► Imports from countries not subject to the order jumped 61% during the period

21 21 IV. Facts on the Thai Order ► The Department of Commerce has found consistent dumping from Thailand since 2005 ► While the order was revoked for two companies effective January 2009, it remains in place for the vast majority of imports ► Thailand has not had the same problem with uncollected duties as China – on average over 99% of the duties owed have been collected

22 22 IV. Facts on the Thai Order Category of Duties Subject to CDSOA? AmountNotes Amounts already distributed Yes - already distributed $75 million Amounts withheld from distribution Yes $6 million Will be distributed when pending Customs matters are resolved Clearing account balance Yes $117 million The actual amount available for distribution will depend on the final assessment rate, pending the outcome of litigation Duties owed under bond YesUnknown $500 million in imports entered under bond between the preliminary and final determinations – these amounts are in addition to the clearing account balance Duties on entries after Oct. 1, 2007 NoUnknown Customs reported $62 million in duty deposits on entries from Thailand in fiscal year 2008; possibly similar amounts for fiscal year 2009

23 23 IV. Facts on the Thai Order ► Clearing Account Balance:  $117 million is only an estimate of amounts that will finally be owed by importers  Amount ultimately assessed may be higher or lower, depending upon outcome of on-going litigation  The courts have upheld Commerce margins in a number of cases; one case which would result in revocation for a single producer has been appealed (Thai-I-Mei)  Rubicon Group’s revocation was after CDSOA repealed so no effect on amount available for distribution

24 24 IV. Facts on the Thai Order ► Entries Under Bond:  Any duties collected on entries made under bond from Aug. 4, 2004 – Jan. 31, 2005 will be in addition to the clearing account amounts  Nearly $500 million in imports entered during the period, subject to an average assessment rate over 5%  Unknown how much of these imports are already liquidated and duties assessed have been distributed  Amount ultimately assessed may be higher or lower, depending on outcome of litigation; capped by the bonding amount.

25 25 IV. Facts on the Thai Order ► Duties on Entries Not Subject to CDSOA:  Duties are still collected on entries after Oct. 1, 2007, but are not distributed under CDSOA  Instead, they go to the U.S. Treasury  Customs reports $62 million in deposits was collected in fiscal year 2008 – amount collected in 2009 is unknown at present but likely similar to 2008 ► Thai group estimates total amount in Treasury close to $120 million (money would go back to Thais under proposed settlement)  Revenue to government from duties could be tracked to justify funding for federal programs to assist the industry

26 26 IV. Myths versus Facts on the Thai Order

27 27 IV. Myths versus Facts on the Thai Order ► Myths  If no settlement, only $60 million available to industry ► Facts  $117,674,180.50 for distribution as of 10/1/2009  Reduction possible due to certain appeals (Thai-I-Mei) estimated at perhaps 15%  Proposed settlement would refund approximately $120 million from US Treasury to Thai exporters  If no settlement, approximately $230 million (not $60 million) potentially available to the domestic shrimp industry

28 28 IV. Myths versus Facts on the Thai Order ► Myths  Under proposed settlement, funds would distributed to states and industry organizations ► Facts  ASPA has been directly involved and there is NO plan on how to distribute funds  Highly unlikely that any money would be distributed directly to individual fishermen or processors because of constitutional problems  State governments cannot discriminate when making payments so money is likely to go to marketing, etc.  ASPA proposes to use the Thai funds in Treasury for marketing

29 29 IV. Myths versus Facts on the Thai Order ► Myths  If no settlement, CDSOA funds will be tied up for 5 years ► Facts  Appeals of all relevant Thai decisions are already underway and ASPA is actively prosecuting those appeals

30 30 IV. Myths versus Facts on the Thai Order ► Myths  ASPA is responsible for allowing importers of foreign shrimp to obtain Byrd distributions ► Fact  ASPA’s DC attorneys are counsel of record in the lead case seeking to prohibit importers from claiming distributions. See SKF v. USA, 08-1005 (2/19/09)  Our counsel prevailed at the Court of Appeals and only a US Supreme Court reversal will change outcome and allow importers to claim Byrd funds

31 31 IV. Myths versus Facts on the Thai Order

32 32 IV. Myths versus Facts on the Thai Order ► Facts:  SSA obtained $18 million in settlements and spent approximately $6.5 million in legal fees from 2006-2008  Assuming same pace for 2009, organization running out of money and needs income to survive  SSA has not spent any money assisting Louisiana fishermen in wake of devastating hurricanes

33 33 IV. Myths versus Facts on the Thai Order ► Thailand settlement has been in negotiations since February, 2007 when shrimp prices were high ► Revocation of Thailand order will have devastating impact on domestic shrimp market ► Thailand reduced production and capacity by 20% in 2009 and is now forecast to increase production by 5% each year through 2012 ► 2010 production is predicted to be at record levels with excess capacity waiting to flood the market in anticipation of settlement

34 34 IV. Thai Production

35 35 IV. Thai Production

36 36 IV. Thai Production

37 37 IV. Thai Production

38 38 IV. Other Thai Issues ► Thailand is producing shrimp with forced labor and child labor ► United States is prohibited from importing goods made with forced labor or the worst forms of child labor See 19 U.S.C. 1307 ► Prohibition is not automatic but through work with Customs an import ban is possible ► ASPA is committed to working with federal delegation to implement ban

39 39 IV. Other Thai Issues

40 40 IV. Other Thai Issues ► Thailand has joined with China, Indonesia and Vietnam to cooperate in eliminating tariffs on shrimp ► Together these three countries account for 80% of world’s farmed shrimp ► As shown later, if Order on Thailand is revoked, unlikely to sustain orders on other countries at sunset review ► Thai settlement means our market will face influx of imports not only from Thailand, but also China, Indonesia and Vietnam who are working closely with Thailand

41 41 IV. Other Thai Issues

42 42 V. Sunset Review ► The statute requires the Department of Commerce and International Trade Commission to review an order every five years to determine: Whether revocation of the antidumping duty order, or termination of a suspended investigation, would be likely to lead to continuation or recurrence of dumping and of material injury? 19 U.S.C. § Sec. 1675 (c)(1) 19 U.S.C. § Sec. 1675 (c)(1) ► The sunset review on the shrimp orders has commenced effective January 4, 2010 (75 Federal Register 103) ► Where affirmative decisions are made, the anti-dumping orders will remain in place, correcting unfair foreign trading practices and leveling the playing field for the U.S. shrimp industry for five more years. ► However, if a negative determination is made, one or more of the orders would be revoked and imports would enter the US without paying punitive antidumping tariffs

43 43 V. Sunset Review ► A sunset review typically takes 12 – 18 months to complete; the shrimp sunset will run from January 2010 to possibly mid-2011 ► Import volumes are critical component and if Thailand is removed through settlement, very unlikely that remaining orders would stay in place because of low volume from other countries ► To defend the orders, the domestic industry must participate actively both at the Department of Commerce and the International Trade Commission ► Southern Shrimp Alliance has not committed to defending the orders

44 44 V. Sunset Review ► Active participation includes:  Gathering and reporting industry data regarding production and employment, prices, and financial performance  Analyzing trade patterns and developments in foreign industries (both subject and nonsubject) including capacity, production, exports, and pricing  Reviewing and rebutting factual information submitted by foreign producers and importers seeking revocation of the orders  Researching and writing legal briefs and rebuttal briefs  Working with agency staff to review issues, and possibly arranging site visits  Testifying at a public hearing at the International Trade Commission, and responding to Commissioner questions

45 45 VI. ASPA’s Commitment to the Industry ► ASPA rejects SSA & Thai request for settlement of order  Thai Union contacted ASPA to negotiate a direct deal  ASPA could have negotiated a deal for itself but long- term benefit of industry is more important than settlement ► ASPA begins direct lobbying efforts to seek distribution of Thai money in US treasury to industry  Working closely with LA and MS state and federal representatives to re-direct funds entering general treasury to industry with primary focus on benefitting shrimp harvesters

46 46 VI. ASPA’s Commitment to the Industry ► ASPA commits to import ban of certain shrimp  Working with state and federal representatives to implement ban on shrimp from any country using forced or child labor ► ASPA commits to implementation of strict safety standards  Working with state and federal representatives to impose standards similar to those in EU ► ASPA commits to fighting transshipment  Working with state and federal representatives to strengthen enforcement mechanisms and increase penalties ► ASPA commits significant monetary investment in funding legal battle to defend orders at Sunset Review  Sunset review initiated January 4, 2010 and legal battle will likely last 12-18 months

47 47 VI. ASPA’s Commitment to the Industry ► ASPA supports efforts of Shrimp Task Force  Certification: ASPA fully supports efforts to develop a certification program to increase market price for domestic, wild-caught shrimp  Labeling: ASPA fully supports efforts to ensure proper labeling of domestic shrimp and full prosecution of violators  Standards: ASPA fully supports efforts to develop uniform food standards for additives and preservatives  Safety: ASPA fully supports efforts to develop stronger food safety laws (like EU) and increase inspection of imported shrimp for banned substances and reduce harmful imports

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