Catfish farmers win major increase in pangasius duties, litigation, market turmoil to follow

In March of 2012, the final determination was for a duty rate of 3 cents per kg. The huge year to year change in the determination came about due to Commerce selecting Indonesia as a surrogate country to determine costs, rather than Bangladesh, which had been used for the past five years.

This has been a goal of the Catfish Farmers of America, who supported by many members of Congress from the Gulf states, have been pushing the Commerce Dept. to punish Vietnamese catfish exporters with higher rates.

The primary argument put forward by the Congressional allies has been that US acreage devoted to catfish has shrunk dramatically, from 164,000 in 2007 to 83,020 in 2012. This is largely the result of record high prices for corn and soybeans, and farmers deciding to switch to a higher value crop.

Mike Gorton, Chairman of Slade Gorton and Co., puts it this way in a note to customers:

A large percentage of the decline in acreage devoted to catfish farming can be attributed to those farmers changing over to more profitable products such as soybeans and corn. This is what generally will happen in a free economy when prices for alternative species or crops become more profitable.

He also detailed how domestic catfish has priced itself out of the market compared to alternatives.

'The domestic catfish industry pushed their prices in 2011 to over $4 per lb., a good reason for the trade to look for alternatives, not only from pangasius /swai producers but from wild whitefish producers of cod, haddock, flounder, etc.as well as from farmed tilapia fillets.'

'Remember that years ago the domestic catfish producers successfully prevented the Vietnamese from selling the pangasius as catfish while they continued to disparage the quality of their pangasius fillets. It turns out however that the consuming public found pangasuis/swai to be a much more attractive and appetizing product than catfish as well. Other whitefish products also became better values than domestic catfish so the catfish prices had to take a tumble from their high levels.'

'Catfish sales at over $4.00 per pound would have declined in a weak economy (year 2011) without any pangasius in the marketplace due to catfishs declining value compared to other whitefish species, especially tilapia.

So the Catfish industry attempted to solve their market problem politically, rather than to make a more appealing or competitive fish product.

Congressional supporters of domestic catfish met with the Under Secretary of the Dept. of Commerce the week before the decision, and trumpeted the result to their constituents before it was officially published.

However, the US economy does not operate in a vacuum, and the Vietnamese have reacted strongly.

First, Vietnam may sue the US over the arbitrary nature of this decision, which raised duties from around 3 cents per kg. to 77 cents overnight. Because the whole exercise is filled with judgement calls as to what constitutes a surrogate country, the issue is ripe for litigation. The Dept. of Commerce will have to justify why it changed course after being satisfied with Bangladesh for over eight years.

Dao Tran Nhan, head of the Vietnam Trade Office in the US, said the DOCs decision was strongly impacted by groups of US catfish farmers and processors, particularly the Catfish Farmers of America, that lobbied the DOC to select Indonesia instead of Bangladesh in tax calculations.

The US conducts an annual administrative review against Vietnamese exports under its anti-dumping lawsuits. Nhan suggested that Vietnamese businesses and lawyers gather sufficient evidence before the US issues its 9^th preliminary determination scheduled for September 2013 as well as the final determination in March 2014.

The US has a high demand for frozen Tra fish fillet imports. The upshot is that there will be winners and losers among Vietnamese companies, and some US importers and distributors will be hit with sharply higher costs for product imported between August 1, 2011, and July 31, 2012. This will further accelerate the loss of jobs among US direct importers and distributors, as most will now require that their Vietnamese trading partners establish offices and act as the importer of record, if they have not done so already.

Secondly it will open up markets for other whitefish competitors, such as tilapia, cod and pollock, at a time when cod supplies are surging.

What it will not do is help domestic catfish farmers, who with the exception of the direct payments made to CFA, cannot force consumers to pay higher prices for products when there is plenty of market competition and substitutes.

It is unfortunate to see that costs of doing normal business in the US can be so heavily impacted by politicians who have no more respect for the operation of free markets than the most corrupt third world dictator. The US loses out the more it becomes known as a pay to play country for foreign exporters, even while objecting when our own exporters are put in that position.