Kochi: The second annual review of the anti-dumping duty on shrimp exports to the US is under way and the industry expects the rate of duty to come down by about 2-3% from the present level of 10.54%.
The US department of commerce will consider only the top exporters for the review, because of the lower prices at which they sell shrimp to the US, compared with other countries. This is because lower prices implies “dumping”. The average of the duties paid by the top exporters will then be used as a benchmark for fixing the amount to be levied on the rest of the industry.
During the last annual review, of 2006 (the preliminary results were announced last month), the three sample companies considered for fixing the industry-wide duty were Hindustan Lever Ltd (24.52%), Falcon Marine (11.09%) and Liberty (4.03%). Based on this, the duty on other exporters was fixed at 10.54%. Hindustan Lever changed its name to Hindustan Unilever Ltd in February 2007.
The sample firms are termed mandatory respondents.
The industry was apprehensive that the commerce department would opt for random sampling this time, adversely affecting the duty structure.
However, with the department considering the three top exporters for fixing the benchmark, the actual duty could come down as Devi Seafoods, which paid a duty of 4.93%, is set to replace Hindustan Unilever Ltd.
Kuruvalla Thomas, director of the Marine Products Export Development Authority (MPEDA) under the commerce ministry, said that it had been a major demand of the authority that only the top companies be taken as samples. It has been the department of commerce’s practice to have three companies as mandatory respondents. In a representation to the US authorities, MPEDA has said the department should go by the list of exporters to the US provided by MPEDA.
“Due to the large number of requests for administrative review and the department’s experience regarding the resulting administrative burden to review each company…the department is exercising its authority to limit the number of respondents…In selecting the respondents, the department intends to select the largest exporter/producer by US sales/export volume,” the department of commerce has said.
According to Devi Seafoods managing director P. Bramhandam, things look favourable for India, “though it is too early to make any predictions”.
Following the 2005 review, the anti-dumping duty rose marginally from 10.17% to 10.54%. This is because of the rise in duty on Hindustan Unilever Ltd—from 15.36% to 24.52%. Afsal Khader of the Liberty Group feels the situation is favourable for India. “The duty should fall this time,” he says.
The exporters hope that the department of commerce will shift from the zeroing method to the average sale price method for calculating the duty.
Under the zeroing method, sales above a fixed price are ignored or treated as zero and those below the level are considered for calculating anti-dumping margins. This leads to inflated duties. For example, sales above a fixed price of, say, $50 a kg, is not taken into account for calculating margins. But sales below $50 are treated as dumping and the difference is considered when calculating the margins.
The World Trade Organization (WTO) panel recently ruled against the practice of “zeroing methodology” for calculating anti-dumping duties on shrimp, following Ecuador’s plea that this method was in contravention of international trade practices. Ecuador, along with India, China, Vietnam, Brazil and Thailand face dumping duties on shrimp exports.
In the “absence of arguments from the responding party (the US) to the contrary,” the panel decided to rule in favour of Ecuador. “We therefore determine that the US department of commerce, by using ‘zeroing’ in calculating the margins of dumping…has acted inconsistently with the US’ obligations to the Anti-Dumping Agreement. It has nullified or impaired benefits accruing to Ecuador under that agreement,” the WTO panel ruled.