Presentation by

1
Imports of Certain Frozen Warmwater Shrimp An
Update on Current Issues for the Industry

• Presentation by
• Edward T. Hayes, Esq.
• Leake Andersson LLP

January 6, 2010
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
• ASPAs commitment to the industry

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
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
I. Background

• Meanwhile, imports of frozen shrimp from
  countries not subject to the orders have
  increased dramatically

6
I. Background2003 Share of Volume
7
I. Background2008 Share of Volume
8
I. Background

• Under the orders, the average unit values of
  subject imports (/kg) have increased modestly,
  or declined slightly

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
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
II. Evasion and Circumvention

• 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.

2006 2007 2008 2009
Brazil 362,182.87 81,253.13 553,412.84 0
China 241,099.08 14,381,694.19 38,400,687.23 0
Ecuador 471,733.46 2,717.12 104,258.53 0
India 6,342,653.87 0 3,023,064.29 418,425.60
Thailand 2,682,242.94 22,238.22 326,940.60 0
Vietnam 1,038,391.23 342,900.95 68,234.14 0
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
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 20012 years before
  the shrimp investigations began

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
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
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
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 laws
  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
• ASPAs DC counsel are the attorneys that
  succesfully defeated this claim in Court

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
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
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
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
IV. Facts on the Thai Order
Category of Duties Subject to CDSOA? Amount Notes
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 Yes Unknown 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 No Unknown Customs reported 62 million in duty deposits on entries from Thailand in fiscal year 2008 possibly similar amounts for fiscal year 2009
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 Groups revocation was after CDSOA
  repealed so no effect on amount available for
  distribution

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
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
IV. Myths versus Facts on the Thai Order
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
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
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
IV. Myths versus Facts on the Thai Order

• Myths
• ASPA is responsible for allowing importers of
  foreign shrimp to obtain Byrd distributions

• Fact
• ASPAs 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
IV. Myths versus Facts on the Thai Order
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
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
IV. Thai Production
35
IV. Thai Production
36
IV. Thai Production
37
IV. Thai Production
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
IV. Other Thai Issues
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
  worlds 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
IV. Other Thai Issues
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)
• 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
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
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
VI. ASPAs 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
VI. ASPAs 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
VI. ASPAs 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