New US Customs Ruling Threatens Vietnam Shrimp Industry

New US Customs Ruling Threatens Vietnam Shrimp Industry

Vietnam's shrimp producers and farmers are likely to face bankruptcy as shrimp exports to the American market, as well as shrimp prices, are dropping substantially following a new US customs requirement over bonds.

Since March this year, the US Customs and Border Protection (CBP) has told American importers of shrimp, which are subject to anti-dumping duties, have to pay extremely large bonds, determining the amount of bond by multiplying the anti-dumping tax rate by an importer’s value of shrimp imports subject to penalty duties during the previous year.

American importers have then told Vietnamese shrimp exporters to pay the bonds, which can reach US$20 million a year for each exporter. "That's why shrimp prices have fallen rapidly during the last period," said the Vietnam Association of Seafood Exporters and Producers (VASEP).

"The door to the American market has been shut to Vietnamese shrimp," said Nguyen Van Kich, chairman of VASEP’s Shrimp Committee. Millions of people working in the industry now do not know what to do next, he said.

US customs has been working on this policy very carefully since the start of the shrimp anti-dumping case as it knew the policy would be a big blow to shrimp importers, said a lawyer from White & Case law firm.

There are only two scenarios that can happen to ease the problem, said Mr. Kich. The first is that the two governments talk to try and solve the problem.  The second is that American importers and customers voice their protests, he said.

But, a large number of American shrimp importers are planning to buy shrimp from other countries that are not involved in the shrimp anti-dumping case.  According to US media, several importers want to file a lawsuit against CBP as its policy would lead them to bankruptcy.

CBP’s move will destroy not only seafood industries in countries like Vietnam, but also the US shrimp import system, said trade experts.

In related news, Vietnam's new shrimp harvest is coming in two months time. However, the volume of shrimp in stock is still quite large. The door for Vietnam’s shrimp to enter the US market becomes smaller as it has set up another barrier.

Prawn prices in several localities in the Cuu Long River Delta have fallen by VND20,000– 30,000 per kg, the highest level for years. "Shrimp prices will further plummet. Not only shrimp growers are suffering from losses but also exporters. The volume of shrimp in stock is still very large," said Nguyen Van Kich, Director of Cafetex Vietnam.

Businesses complain that since bond requirements came into effect in March 2005, export of shrimp to the US market has nearly ceased. Several exporters, which had shrimp export turnover of tens of millions of USD to the US market, cannot export any lots of shrimp to this market now.

Do Ngoc Quy, Director of Kim Anh Co. said his firm plans to reduce buying and narrow production if the situation does not get better. This company annually exported 30 per cent of its shrimp export volume to the US market. However, such figures will probably not be reached this year.

The company is pushing up export to other markets including Japan, South Korea, Middl East, etc but shrimp prices there are under impacts of changes in the US market.

“The door for shrimp to get into the US market is very narrow now. The situation is now worse than ever before,” said Kich. Tens of millions of US dollars of bond might be lost and US importers refuse to pay this amount. The risk, of course, comes to Vietnamese exporters.

Based on Vietnam’s export turnover of shrimp to the US market last year, which totaled US$400 million, Vietnamese exporters will have to pay an amount of US$20 million per year. On the other hand, the sum that they have to deposit for three years before the revision is a huge amount of US$60 million.

An exporter said the problem would only be settled when one of the two Governments or US customers responds to bond requirements. Most Vietnamese exporters are not financially strong enough to deposit bonds and export of shrimp to the US market in the coming time seems unfeasible.

Enterprises said there is other reasons leading to falls in shrimp prices. There is a large volume of shrimp already stockpiled in the US. It is the same in Vietnam. Moreover, shrimp supplies in the Mekong River Delta have become more plentiful. "Reduction in shrimp prices is inevitable. If the market for shrimp is not improved, Vietnamese shrimp growers will be burdened", worriedly an exporter.

• Youth, Vneconomy