The U.S. International Trade Commission (ITC) has now released the reasons for the agency’s final determination that the domestic shrimp industry was not materially injured or threatened with material injury by reason of subsidized imports.
With the support of four of the six Commissioners of the ITC, the agency found that increases in the volume and market share of subsidized imports was not significant, “particularly in light of the domestic industry’s market share during the period of investigation.” Thus, while it was true that subsidized imports had increased their presence in the U.S. market, this had not stopped the domestic shrimp industry from also increasing its market share over the same time period. The ITC also found that prices for both subsidized imports and domestic shrimp increased and that the evidence on the record before the agency was mixed as to whether imports were being sold at lower prices than domestic shrimp. Accordingly, the ITC found that the volume of subsidized imports did not depress prices or prevent price increases for domestic shrimp to a significant degree.
In determining whether the domestic industry was injured by subsidized imports, the ITC accepted the arguments made by the Petitioner, the Coalition of Gulf Shrimp Industries (COGSI), that income from BP Oil Spill payments and Continued Dumping and Subsidy Offset Act (CDSOA) distributions should not be considered as part of the operating income of U.S. processors. Nevertheless, the Commissioners recognized that “a relatively large share of the total increase in 2012 [sales, general, and administrative] expenses” – which increased from $40.5 million in 2010 and $44.7 million in 2011 to $60.9 million in 2012 – “from a funding perspective, was acknowledged by domestic producers to be related to the availability of BP Oil Spill payments.” Thus, while COGSI argued that monies obtained from the BP Oil Spill and CDSOA should not be considered in evaluating the overall health of the domestic shrimp processing sector, individual processors were simultaneously reporting increases in their operating expenses that were related to that additional income.
Looking across the evidence, the majority of the Commissioners recognized that the financial performance of the domestic shrimp processors had declined, but still found that subsidized imports did not have a significant adverse impact on the domestic industry. In terms of the potential threat of material injury, the Commissioners found that there was no evidence indicating that subsidized imports and domestic shrimp would stop gaining market share at the expense of fairly-traded imports in the imminent future and further found that it was likely that prices for domestic shrimp would continue to rise in the imminent future.
Although the agency’s negative determination did not have unanimous support from all six Commissioners, all six Commissioners unanimously declined to accept COGSI’s arguments seeking to limit the domestic shrimp industry only to U.S. shrimp processors. Noting that the U.S. Department of Commerce had confirmed that onboard brine-frozen shrimp was included in the scope of the investigations, every one of the Commissioners agreed that it was appropriate for the ITC to exercise its discretion to also include fresh shrimp in its definition of the domestic like product. Based on the record before the agency, all six Commissioners determined that the domestic shrimp industry was comprised of all domestic producers of fresh and frozen shrimp, inclusive of shrimp fishermen, farmers, and processors. By maintaining the same definition of the domestic shrimp industry as used in the successful antidumping duty cases brought in 2003, the agency rejected arguments by COGSI that domestic producers could be excluded from the domestic industry based on the whims of a petitioning party.
Five of the six Commissioners further rejected the arguments from U.S. importers and foreign exporters asserting that competition between imported shrimp and domestic shrimp was attenuated such that these products were sold in largely separate markets. According to U.S. importers, the attenuation of competition substantially mitigated the adverse impact of unfairly traded imports on the market for domestic shrimp. While these five Commissioners conceded that imported and domestic shrimp were not perfectly substitutable, the ITC observed that “we do not perceive significant differences in availability or product range among the domestically produced and [imported] products” and that imports and domestic shrimp compete against each other for sales in the U.S. market.
This finding is particularly significant in light of the ITC’s negative determination. Although the importing community has continually argued that imports cannot meaningfully impact the market for domestic shrimp, these claims run counter to objective evidence and have been repeatedly rejected by impartial observers. In determining not to award trade relief to the domestic shrimp industry, the ITC resoundingly rejected the fiction that imports can have no significant impact on the domestic shrimp industry. Yet, despite the abject failure to ever prove the claim of attenuated competition, it continues to be peddled as an excuse for not addressing and countering unfair trade practices.
Review the USITC’s final determination, “Frozen Warmwater Shrimp from China, Ecuador, India, Malaysia, and Vietnam,” Inv. Nos. 701-TA-491-493, 495, and 497 (Final), Publication 4429 (October 2013) here: http://www.shrimpalliance.com/wp-content/uploads/2013/10/Pub-4429-Frozen-Warmwater-Shrimp.pdf