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The US Department of Commerce (DoC) has imposed a 5.91 per cent countervailing duty (CVD) on Indian shrimp. On Wednesday, DoC released the preliminary duty rates of CVD to seven exporting countries. The final rates will be released in August.
According to the DoC release, China will attract duty at the rate of 5.76 per cent, Ecuador will have 0.39 per cent de minimis (which means no duty is collected) and Thailand 2.09 per cent. DoC imposed 6.07 per cent duty on Vietnam and 0.81 per cent (de minimis) on Indonesia.
The Malaysian shrimp export sector will be hit the most as it attracts a duty of 62.74 per cent. While this is likely to be scrutinised and relaxed in the final determination phase, if it stands, it would eliminate Malaysia as a major supplier of shrimp to the US market.
In 2012, Malaysia exported about 50 million pounds of shrimp to the US, which is less than five per cent of the total US imports.
DoC had started CVD investigation against India and six other countries in December 2012 following a petition filed by the Coalition of Gulf Shrimp Industries, a local shrimp producers organisation.
DoC's initial inquiry found 21 subsidy programmes extended to seafood exporters in India need further investigation. The US International Trade Commission will conduct a detailed inquiry.
According to DoC, the various subsidy and export assistance programmes of India are harmful to the local shrimp industry. The list of such programmes include Duty Entitlement Pass Book Scheme, tax and duty incentives under special economic zones and under the export-oriented units, duty incentives under the Export Promotion Capital Goods Scheme, export financing, export credit insurance, subsidised loans to the marine products industry, Development of Inland Fisheries and Aquaculture Scheme, assistance from the National Fisheries Development Board and 13 subsidy/assistance schemes of the Marine Products Export Development Authority (MPEDA).
Twenty-five such subsidy schemes of China, seven of Ecuador, 14 of Indonesia, 16 of Malaysia, 12 of Thailand and 20 programmes of Vietnam have also attracted detailed CVD investigation.
In February 2013, the International Trade Commission panel had determined that the US shrimp industry was hit by imports from these countries.
The US consumption of shrimp in 2011 was 1.3 billion pounds of which 87.6 per cent were through imports. In 2011, US imported shrimp products worth $4.3 billion from these countries, which is 86 per cent of the total value of shrimp imported that year.
'Harmful to India'
CVD imposition will be harmful to the Indian export industry and this will weaken the country's position in the US market, according to leading Kochi based exporters.
Already, the European Union imposes various duties between 2.8 per cent and 4.5 per cent. "High rate of CVD will seriously affect our exports to the US. Also, if they decide to execute bonds for exports, it will further weaken our position," an exporter told Business Standard. This will be a severe blow to the industry, which is reeling under crisis due to global economic turmoil and production cost escalation, he added.
According to Ravi Reddy, president, Seafood Exporters Association of India, this would badly affect not only the export sector, but also the producers. As the export cost increases, the industry will go for price reduction at the producers' level. So this will seriously affect the fishing sector, especially the aquaculture sector. Due to various reasons, catches from the sea had slowed down during the last five to six months, so cost of procurement of raw material has increased heavily, he added.
"This will definitely affect our exports to the US; naturally, this will enhance our cost on exports. 5.91 per cent CVD means the average per kg cost of export will increase by Rs 17 to Rs 30 as the dollar appreciated heavily," said a leading Kochi-based exporter. "Let's look forward to the final determination, which is slated in August," he added.
Indonesia and Thailand are expected to benefit from the South East Asia region as they attract lower duty. Indonesia is now at an advantageous position as it attracts nil duty. This varied duty structure will also impact India's export prospects, said experts.
The rise in prices of diesel, which is used to power fishing boats, has added to the overall costs.
The US is the largest importer of Indian seafood items on value terms. The industry is now struggling hard due to the drop in exports to other major markets such as the European Union, Japan, South East Asia and China. During the April-September period of 2012-13, the US imported 45,540 tonnes valued at Rs 1,947 crore, registering a growth of 11.42 per cent in value terms. The US is the only country which recorded a growth in export during that period, according to the data of MPEDA.
Shrimp is one of the largest export items from India, accounting for 50 per cent of the total value realisation. It accounts for 22 per cent of the total volume of exports. India gets 17.94 per cent of the total export revenue from the US market alone. Almost 65 per cent of India's export to the US is shrimp.
Earlier in 2005, the US had imposed anti-dumping duty on shrimp at a rate of 11.17 per cent, which caused steep fall in exports. This was based on a petition filed by Southern Shrimp Alliance, a shrimp producers' organisation. Over 280 exporters were exporting shrimp to the US during that period, which came down to 68 in 2009. Later, Washington dropped the duty to de-minimis.
