VN Sues US for Catfish Restriction

Blogs - Vietnam: May 25, 2018

Measures imposed by the United States are threatening Vietnam’s booming fishing industry and as a result, the southeast Asian country has filed a lawsuit at the World Trade Organization.

Vietnam is challenging an import tax on Vietnamese catfish the US imposed to raise the price of fish. US trade authorities have accused Vietnam of “dumping”, or selling catfish at an excessively low price. The tax Vietnam is challenging is necessary to raise the price to a normal valuation, US trade authorities argued when the Department of Commerce won the right to impose the fee in 2003.

This event marks the third time Vietnam has challenged a US trade tax against Vietnamese catfish at the the WTO. Vietnamese trade authorities are no amateurs to delivering legal action against trade opponents at the WTO; Vietnam previously twice challenged similar catfish taxes from the US.

Vietnam’s exports of fish fillets to the US have increased from US$100 million in 2007 to over US$520 million in 2016, making Vietnam the US’s third-largest supplier following Chile and China.

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In 2017, Vietnam’s catfish exports increased overall but its sales to the US have declined slightly as the foreign nation’s stiffer import demands have been enacted. Catfish sales to the US were down 10 percent from the year prior.

The US was Vietnam’s top import market for Vietnamese fish, consuming 23 percent of exports, until last year when Europe took first place. The change has come partially as a result of these anti-dumping measures, as well as other means that don’t involve export duties.

Vietnam Net reported that Europe was becoming an unreliable customer because of a misinformation campaign in several countries that slandered Vietnam’s fish. In January 2017, a media outlet in Madrid ran a news report purporting to show that Vietnamese fish were being bred in substandard conditions and even being fed the carcasses of other fish. Similar coverage has appeared in Italy, Germany and France as well. Organisations of catfish farmers have cried foul play accusing envious European producers and their more expensive fish of spreading the false information.

However, Vietnamese fisheries have no shortage of demand. China is quickly becoming a top importer of Vietnam catfish. In 2016, the country purchased US$420 million worth of the nation’s catfish, up nearly 40 percent from the year prior.

Stiffer US Regulations

Last year, the US passed the Farm Bill. As part of the measure, inspections now fall to the stricter regulatory body of the United States Department of Agriculture rather than the US Food and Drug Administration, which had previously been responsible.

As of September 2017, the USDA has reclassified the fish. Among other restrictions, it requires catfish production companies to use treated water instead of river water when transporting fish to processing factories via boat. In addition, water used during different phases of transportation would need to be collected and treated after the fish are delivered to a factory.

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These fishing and transportation regulations are next to impossible for Vietnamese companies to accomplish and the changes required to meet them would prove monumentally costly.

The law subjects all of Vietnam’s catfish exports to examination by the USDA’s Food Safety and Inspection Service. The Vietnam Pangasius Association maintains that the new regulations prevent the industry from maintaining the growth it has achieved over the last decade.

If the WTO rules in Vietnam’s favour, retaliatory trade tariffs could be imposed against the US as a means of compensation for the financial losses suffered by the fishing industry. US agricultural exports would likely be targeted.

John Connelly, President of the National Fisheries Institute (NFI), said that this “should come as little surprise to those familiar with the decade-old history of this duplicative and wasteful program.”

“The program is now poised to negatively impact significant US agricultural exports to Vietnam. Cotton, wheat and other grains, pork, soybeans, beef, poultry, eggs and fruit, may end up in the cross hairs of retaliatory tariffs.”

“Farmers from Texas to Oregon and California to Georgia, who export tens of millions of dollars’ worth of their harvest to Vietnam annually, could become collateral damage in a campaign waged by catfish lobbyists to regulate their seafood competition out of the market”, Connelly continued.

The US is no stranger to the kind of litigation being enacted by Vietnam. In a 2015 lawsuit brought against the US by Canada and Mexico, the WTO ruled that meat-labelling requirements imposed by the US violated international agreements and were deemed an unlawful trade barrier. Congress responded by repealing the unfair regulations. US farmers and ranchers would have been harmed by tariff retaliations and loss of access to the markets in those countries.

A Banner Year

Vietnam’s catfish currently sells for around VND30,000 per kilogram in domestic sales. Farmers selling for these prices are making around VND4,000 to 6,000 per kilo of fish meat.

In general, the values of domestic catfish sales go down toward the end of the year because the year’s contracts are typically fulfilled by this time. However, an increased interest in catfish has created a persistent demand that remained unfulfilled through the end of the year.

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Concurrently, water space allotted to catfish production has also increased. In 2017, the area dedicated to catfish farming in the Mekong Delta expanded 3.1 percent. This was a factor that led to a 5.4 percent increase in catfish production, 1.3 million tonnes.