Vietnamese shrimp exporters struggle with US bonds

Under an anti-dumping order by US Customs and Border Protection (CBP), American companies hoping to import Vietnamese shrimp must pay a high bond that act as deposits. Previously, the minimum amount for any bond was only US$50,000. But the total amount in 2005 could reach US$20mil with the rate at 4.58% times the $420mil in Vietnamese shrimp exports to the country.

American importers would be refunded the amount if a duty review in August 2007 by the US Department of Commerce (DOC) detects no more dumping. In all likelihood, however, that bond would be lost and distributed to US shrimp processors under the Byrd Amendment.

At the moment, only a few big US importers continue to buy shrimp cost & freight (CFR) from Vietnam. The majority of others have stopped buying CFR and have required Vietnamese exporters to sell shrimp delivered duty paid (DDP), which places maximum obligations on exporters, including the payments of all duties.

Under DDP, US importers do not import directly and Vietnamese exporters are thus compelled to register themselves as "importers on record." As a result, the risk of duty revision in the future will be effectively shifted to Vietnamese suppliers.

Some other importers require Vietnam to share the bond equally, 50-50.

Recently, the State Bank of Vietnam (SBV) stood surety for the Minh Phu exporting company, who has a subsidiary company in the US. SBV issued an L/C for Minh Phu and required a US bank to reissue that L/C in the US and to work with the surety company (insurance company authorized by US Treasury Department to write customs bonds) appointed by US Customs.

But ironically, the surety refused to issue bonds to the Vietnamese exporter, preferring the US importer, who still avoided buying the bonds.

The Vietnamese Government has requested SBV to continue to stand surety for exporters and will consider a provision that allows firms to sell shrimps to the US on credit.

In the meantime, the Ministry of Fisheries is requiring relevant parties to hurry the preparation for a duty review in 2007. US importers will appoint lawyers to supervise this procedure in Vietnam.

Most importantly, negotiations on the shrimp case and the bond requirement will be included in PM Phan Van Khai’s scheduled visit to the US June 21st.

In order to avoid bonds being calculated according to 2004’s high import figures, some regular US importers may set up a new company and then register with the US Customs a specific level of import value for 2005, rendering bonds more affordable to Vietnamese exporters.

Vietnamese shrimpers’ worries are growing as the door to the US market is closing just as the harvest season is closing.

However, Fisheries Minister Ta Quang Ngoc stressed that the Government will instruct firms to make sure funds and storage are sufficient to purchase as much of the catch as possible.

In the initial stage, statistics on farming areas, expected outputs and cold warehouses, including such custom warehouses overseas as in Bremen, Germany, will be collected.

The Government will require banks to grant more credit at softer rates and for longer terms to shrimp processing firms to enable them to buy more. But is that really a should-do when Vietnamese firms, to avoid being subject to anti-dumping and countervailing duties, have to prove their independence from the government?

Last year, shrimp and catfish accounted for as much as 50% ($1.5bil) of fisheries exports. The same outlook is not likely this year, as a large number of American shrimp importers are planning to buy from other countries that are not involved to the anti-dumping case.

Shrimp exports to the US have plunged as a result. The following export decreases, based on corresponding numbers from one year ago, are provided by the Department of Finance and Planning (Ministry of Fisheries):

Facing obstacles in the US, Vietnamese firms have been switching to other markets such as the EU, to which exports for the first four months increased 143%. Exports to China and Hong Kong increased 21% and shipments to Japan increased 8.5%.

Still, the effect of the US lawsuit definitely has affected these markets, driving shrimp prices down. Last year, one kilogram of Vietnam’s 16-20 black tiger shrimp never sold in Japan for less than $11.5. But this year that figure has dropped 14-15%, to $10 and the downtrend is expected to continue at least through the coming harvest.

Farmers, as a result, receive thinner profits. In Soc Trang Province, suppliers receive VND90,000 ($5.7) for a kilo of large shrimp at about 30 shrimp per kilo.

Other pressure for Vietnamese shrimp comes from India, where the harvest comes earlier and where prices are often lower.

Minister Ngoc said Vietnam is enhancing marketing programs in the EU and Japanese markets to increase its market share.

It is also ceaselessly searching for new markets such as Eastern Europe, Russia, South Africa and the Middle East fearing too much concentration on sensitive markets like the EU, where the likelihood of trade barriers is high, could bring another anti-dumping case.

Vietnam will also seek to expand its distribution channels for its shrimp exports.

VNEconomy