US shrimp import bonds unfair: WTO

US shrimp import bonds unfair: WTO

Kochi: In a verdict that could prompt more Indian shrimp exporters to seek markets in the US, the World Trade Organization’s (WTO) disputes panel ruled that the US practice of collecting cash deposits in the form of bonds from Indian shrimp exporters to the US is against international trade practices.

The panel also ruled in favour of Thailand, which opposed the US practice of “zeroing" for calculating anti-dumping duty—an issue India is also expected to take up with WTO soon.

There are 75 Indian traders exporting shrimp to the US. Indian exports to the US in 2006-07 fell to $297.08 million (Rs1167.5 crore) from $372.62 million in the previous year. According to the WTO panel, the bond requirement is inconsistent with the anti-dumping rules under which the duty for India was fixed at 10.17% on shrimp sold to the US, says Elias Sait, secretary general of the Seafood Exporters Association of India.

The association has been fighting the case on behalf of the Indian government at WTO. After the first annual review of the duty, for the period between August 2004 and January 2006, the duty was brought down to 7.22% in September.

India had challenged the imposition of customs bonds, calculated at 100% of the duty payable on total exports. The bond, a cash guarantee collected against any further rise in the anti-dumping duty, comes over and above the duty, making shipments unattractive to exporters.

In 2004, the US first imposed the anti-dumping duty on Indian shrimp exporters on the charge that India was selling shrimp in the US market at a price lower than what other countries were paying. Every year, the US decides on the “fair value" of shrimps and the anti-dumping duty is imposed when it is sold below the fair value. The price at which shrimps are sold in other countries are considered to determine the fair value.

With the abolition of bonds, Indian shrimp exporters to the US will have to pay only 7.22% duty. Apart from the bonds, the exporters were subjected to additional expenses, such as processing fees to the bonding agency. Now, exporters will be free from the additional bill.

The association was expecting a favourable verdict because during the earlier WTO hearings in June and August, there was little resistance from the US representatives. Following the verdict, more players will enter the US market, Sait says. “The verdict in favour of Thailand against the US practice of ‘zeroing’ is a shot in the arm for India, coming after WTO ruled in favour of Ecuador in a similar case early this year. We are readying ourselves to challenge this practice too at WTO."

Commerce and industry minister Kamal Nath recently told Mint that India had a fit case to take up at WTO. A top official in the ministry, on condition of anonymity, says discussions have begun with lawyers on the ‘zeroing’ issue, too, and the matter will be taken up with WTO soon.