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Vietnamese pangasius industry – ups, and downs

Thursday, March 28, 2013, 12:30 GMT+7

Vietnamese enterprises have undergone eight administrative reviews since being imposed with an anti-dumping tax for the first time in 2003.

Vietnam began to export catfish to the US market in 1996. Vietnamese catfish fillets have gradually become popular with the appetite of American consumers due to good quality, low prices and a similar taste to native catfish.

Locally, with constant improvement in catfish farming and processing from the application of advanced farming techniques, the Vietnamese pangasius  industry is producing more products at lower prices, serving the needs of exports.

In 2001, Vietnam signed a bilateral trade agreement with the U.S. that saw the seafood import duty reduced to 0 percent.

Since then pangasius exports from Vietnam to the US have continually increased, from 59 tons in 1996 to 3,191 tons in 2000 and 103,000 tons in 2012. The market share of Vietnamese pangasius exports in the US market increased from 5.2 percent in 1996 to 85.4 percent in 2000 and 95.9 percent in 2012.

Notably, the volume and value of pangasius exports to the US is growing stronger even though the reputation of Vietnamese catfish is constantly denigrated in the mass media abroad, an anti-dumping duty was levied in 2003, and they have been considered for annual administrative reviews on dumping ever since.

The presence of Vietnamese pangasius in the US market has helped the profit margin of US catfish producers plummet, and these companies have in turn accused Vietnamese enterprises of dumping.

In 2002, the Catfish Farmers of America (CFA) filed an anti-dumping lawsuit against Vietnamese pangasius producers and exporters to the US International Trade Commission (ITC) and the US Department of Commerce (DOC).

In 2003, the DOC ruled that Vietnamese pangasius exporters were dumping and imposed the tariffs, and promulgated a regulation asking Vietnamese exporters not to label ‘catfish’ on the package of the products as they are not grouped in the 'catfish 2' category.

Because it does not recognize Vietnam as a country with a market economy, DOC selected a different country with a market economy and similar economic conditions to Vietnam when determining what level to set the tax at.

In the first administrative review, a number of countries, such as Bangladesh, India, Indonesia, Pakistan, and the Philippines were picked, but Bangladesh was finally chosen as the most suitable choice.

With very similar economic conditions, the production cost in Bangladesh is not much different from Vietnam. As a result, the anti-dumping tax rate through each review period is relatively low, even 0, and has become increasingly more favorable to Vietnamese enterprises.

Notably, during this time, the CFA repeatedly asked DOC to change the country for reference, as the DOC’s preliminary tax rates were often much higher than the final result.

During this time, as the anti-dumping tariffs were given in the preliminary administrative review (POR), Vietnamese enterprises had sufficient time to appeal and provide evidence to win their case, forcing DOC to change its decisions in favor of Vietnam.

However, during the latest POR8, the DOC's preliminary decision was to choose Bangladesh as the reference country. Therefore, local businesses thought that the tax rate would be very low and virtually unchanged from POR7.

But in the final decision, the DOC chose Indonesia instead of  Bangladesh, making the anti-dumping duties increase on average from $0.19 to $1.34 per kg for Vietnamese defendants involved in the  case, and $2.11 per kg for other businesses.

According to the Vietnamese Association of Seafood Exporters and Processors (VASEP), when the DOC sent questionnaires out, Bangladesh did not answer. This forced DOC to choose Indonesia as the country of reference.

However, according to Truong Dinh Hoe, VASEP chairman, in the seven previous administrative reviews, Bangladesh also did not answer reply to the DOC.

A setback - yes, but failure - no

In fact, DOC official procedures for the case are very clear, and are publicized so that all related sides can oversee the process, said a US expert in the field at a seminar held last week in Ho Chi Minh City.

“DOC said publicly that it had to find a country among the pangasius-growing and exporting countries that that make the subject merchandise or something very comparable to subject merchandise ,” said Matthew McConkey – a partner at Mayer Brown Washington DC, at the event co-organized by the branch of the Mayer Brown JSM law firm in Vietnam and the Vietnam Chamber of Commerce and Industry (VCCI).

In this case, there are only a few countries in the world that can produce pangasius or something similar, including the US, Vietnam, Bangladesh, Indonesia, and India, he said at the "Dealing with Trade Remedy Cases and Protection Against Injurious Imports" seminar.

For the next step, DOC said it would have to choose a country that is economically comparable to Vietnam to calculate surrogate values. This narrows the group down to only three countries: the Philippines, Bangladesh, and Indonesia.

Then DOC would decide which is the appropriate selling price with the cost of production based on surrogate values which represent very broad market averages of the inputs in those countries .

In the pangasius case, the cost of live fish makes up 80 percent of production costs of fish fillets. So DOC chose Bangladesh for the last seven years since the country has the most comprehensive data collected from the largest pangasius farms in the country, which is published by the Bangladesh government. 

But in the last review, Bangladesh did not collect and publish the data. As a result, DOC had to turn to Indonesia as a standardized substitute.

“It is a terrible decision for the Vietnamese pangasius industry and will create many problems for the industry in the next 12 months, but hopefully we can fix it after that and move on,” McConkey said.

“But it is an official legal process that DOC and the US government have gone through and is revealed to all law firms.”

“The DOC and the US government have always picked Bangladesh over the last seven years and given Vietnamese exporters almost a zero tax rate, much to the chagrin of US catfish farmers and traders who have been screaming for seven years.”

“Don’t just take this one decision and think that this is a case that we will not participate in because we are going to lose, as we have won it seven years in a row. So we have to stand and fight that decision, and hope that we can change it in a year.”

Overall, it is a setback, but we need to move forward so we can fix it in the future, he added.

Thoai Tran

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