US-China Crawfish Dispute





I. Identification

1. The Issue

In the fall of 1996, U.S. domestic crawfish producers filed a petition with the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) under the U.S. antidumping law with respect to imports of crawfish from China. On August 29, 1997, the ITC ruled that the Chinese were in fact dumping crawfish in the U.S. by selling below the fair market value in the host country. This opened the way for the imposition of tariffs ranging from 91% to 200%.

However, was only the beginning of the case as Louisiana Agriculture officials accused China of mislabeling crawfish imports as "Product of Singapore" to avoid the tariff. This action took place in January of 1998, and further complicated things. These actions were then followed by a series of lawsuits on the part Louisiana Department of Agriculture and the importers of Chinese crawfish. Therefore, this case study will examine not only the events leading up to the initial ruling, but the complex series of legal maneuvers that each side as employed since that time.

2. Description

In order to make sense of this case, the description will be divided into two sub-sections. The first will attempt to put this case in context by describing the events surrounding the initial petition, the temporary tariff imposed by the ITC, several counter-arguments, and the final decision by the ITC and the DOC. The second will examine the accusations of product mislabeling and disease problems that have kept this case in the news. While cultural items are mentioned, they are dealt with in greater detail in section 25.

Background

When Chinese crawfish first arrived on Louisiana shores in noticeable quantities in 1991, "people laughed." (1) Most thought that cultural influences and lower quality would prevent the imports from growing in popularity and for a time this was the case. However, "over time people tried it... [and] it was good enough, for $2 a pound."(2) So much so that by 1996 the Chinese crawfish were making up somewhere between 70%-80% of the market and the domestic product was increasingly threatened. This eventually led to a preliminary investigation by the ITC at the request of the U.S. House of Representatives, Committee on Ways and Means. This investigation was barely two months old when domestic crawfish producers (Crawfish Processors' Alliance) filed a petition with the ITC and DOC, thus terminating the preliminary investigation.(3)

The petition to the ITC and DOC was submitted in September, 1996 and accused the Chinese of dumping (selling below fair market value) crawfish on the U.S. market. In such an investigation there are essentially two issues that must be decided. First, is dumping actually taking place, and second, if it is, to what extent is it injuring the domestic product. Approximately six months after the filing of the petition the U.S. decided that dumping was in fact taking place and causing harm to the domestic producers. At that time a temporary tariff was imposed that basically doubled the price of crawfish tails until the extent of the damage could determined more precisely.(4)

While this was clearly a victory for domestic producers, it is less clear whether or not this is also a victory for the domestic consumer. While the majority of public sentiment (as found in print media) is supportive of domestic producers, a number of writers have pointed out the other side of this issue. One particular writer, Donald J. Boudreaux, makes a strong statement when he says, "Many domestic crawfish suppliers are ... trying to suck the wealth from consumers."(5) He disputes the Crawfish Processors' Alliance's (CPA) claims of an attempted monopoly and future price increases by pointing out that a number of countries are currently engaged in exporting crawfish while still others posses the capacity to. In his opinion this insures that U.S. crawfish consumers "would continue dining on competitively supplied crawfish," if left alone.(6)

Another subject that is broached by Mr. Boudreaux is that of the differences in economies. This is significant because in order to prove dumping, the U.S. must prove the Chinese are selling crawfish below fair market value at home. However, the Chinese don't generally eat crawfish and as one expert puts it, "If there is no fair market value at home, then you're into a kind of little Never Never Land."(7) To overcome this the attorneys for the CPA had to embark on a complicated economic analysis which substituted hypothetical crawfish production in what they deemed to be comparable countries. Mr. Boudreaux argues that this inflates the production costs of the Chinese and thus contributes to the "illusion" that the Chinese sell their product at well below cost.

"Relief is finally on the way for our Louisiana crawfish farmers,...
After a long fought battle our farmers will finally be put back on
a level playing field. No longer will we have to ask the question,
'Are they real Louisiana crawfish'? And more importantly, our
Louisiana crawfish farmers won't have to ask the question,
'Can I stay in business'?"--Senator John Breaux

Despite the assertions of Senator Breaux in August of 1997, the U.S.-China trade dispute involving crawfish has remained in the news. While this case may at first glance appear to be relatively simple and unimportant, deeper investigation yields a much different conclusion. This case is in reality a complicated story full of twists and turns with implications ranging from fair trade standards to traditional ways of l at low prices because Chinese crawfish producers have low costs."(8)

Another aspect to this that is seldom discussed is the impact this case may eventually have on U.S. domestic seafood exporters. During the same period of dramatic growth in Chinese crawfish imports, U.S. seafood exporters have quadrupled their sales in China. These sales increased from $19 million in 1992, to $79 million in 1996, in part due to the support given them by the Chinese Ministry Agriculture and the China Council for the Promotion of International Trade, Agricultural Sub-Council.(9) Similarly, part of the problem that domestic crawfish producers have is their export practices. According to Elton Bernard (an importer of Chinese crawfish) Louisianians export many of their biggest crawfish to Sweden and other countries where they can get a better price. He goes on to say that, "They should not complain, then, when they are on the other side of the trade table."(10)

Despite these potential impacts, the ITC found in favor of the domestic producers in August of 1997and imposed tariffs from 91% to 200%, depending on the importer. This was hailed by Louisianan politicians as a great victory and a leveling of the playing field. While this ruling did in fact end the formal phase of the process, it in no way ended the controversy. Some, such as Karl Turner (of the Louisiana Seafood Promotion and Marketing Board), have cautioned against undue optimism while at the same time applauding the decision. According to Mr. Karl, the decision may ultimately harm the domestic producers it was designed to protect. This is because, "We live now in a world market, and we're not going to be able to keep these walls up very long ... That product (Chinese crawfish) isn't going away, and we're going to meet it in other markets."(11)

Additional Developments

Subsequent to the ITC's August ruling, a number of events have served to keep this issue in the news. The first of these occurred the month after the ruling when a "shipment of Chinese crawfish tails was kept out of Sweden because it was contaminated with the bacterium that causes cholera."(12) Since it was not cleared how this happened, Louisiana Agricultural Commissioner Bob Odom reacted by sending samples of Chinese crawfish that had been shipped to the U.S. to labs in Louisiana for testing. While it was eventually determined that none of the shipments to the U.S. were contaminated, it did keep the issue in the headlines and set the stage for the later labeling controversy.

In January of 1998 Mr. Odom once again made headlines by seizing crawfish that were labeled "Product of Singapore." Mr. Odom apparently became suspicious when the new product started showing up and sent one of his deputies to Singapore to investigate. When the deputy was unable to find signs of crawfish being grown or processed in Singapore, they concluded the product had been mislabeled. Approximately 1.3 million pounds of "Singapore crawfish" had been imported into the U.S. since July of 1997 (the same time the temporary tariff was imposed) and state officials estimated that about 60% of it, or 790,000 pounds, went to Louisiana. (13) However, U.S. importers contested this move by suing Louisiana's Department of Agriculture and Forestry as well as Mr. Odom.

In February of 1998 First Coast Meat and Seafood (a importer of Chinese crawfish) filed suit against the department and Mr. Odom and asked for a temporary restraining order that would halt all department actions. However, the restraining order was denied by a District Judge and Mr. Odom's office allowed to proceed with the seizures. Attorneys for First Coast argued that the seizures were unconstitutional because the product was taken without a hearing. "Louisiana officials countered that the crawfish wasn't 'seized,' but merely was barred from being sold until the facts could be established about the product's origins."(14) Attorneys for the state of Louisiana also argued that First Coast has no right to sue because they don't own the crawfish. This action was still being decided as of the writing of this paper.

3. Related Cases

Related Cases

Key Words

Habitat = TEMPerate
Industry = FOOD
Trade Measure = CVD

4. Draft Author:

Bradley O. Martsching, May, 1998

II. Legal Clusters

5. Discourse and Status:

[DIS]agreement and [COMP]lete

Although the ruling by the ITC in August of 1997 completed the initial action and imposed a tariff (from 91% to 200%), recent events have served to keep this case in the media. This is a result of the recent allegations of Chinese mislabeling. Officials in the Louisiana Department of Agriculture are alleging that in order to avoid the tariff, Chinese exporters have changed their labels to "Product of Singapore." However, they claim that no crawfish are grown or processed on the island of Singapore. The Louisiana Agriculture Commissioner, Bob Odom, is blunt in stating that, "The port of Singapore is being used as a trans-shipment point in a lame effort to evade the federal tariff." (15)

6. Forum and Scope:

United States of America and [UNILAT]eral

7. Decision Breadth:

2 (USA and China)

8. Legal Standing:

LAW

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: North America [NAMER]

b. Geographic Site: East North America [ENAMER]

c. Geographic Impact: United States of America [USA]

10. Sub-National Factors:

No

11. Type of Habitat:

[TEMP]erate

IV. Trade Clusters

12. Type of Measure:

Countervailing duty/anti-dumping duty [CVDAD]

For more on the process of anti-dumping litigation, see China-Louisiana Crawfish Dispute, also Section 12. For an even more detailed account go directly to the library of the U.S. firm which handled the case, Ablondi, Foster, Sobin, and Davidow, p.c.

13. Direct v. Indirect Impacts:

[DIR]ect

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: Yes (Crawfish)

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: Yes (Species Loss Sea)

15. Trade Product Identification:

Product Type: Freshwater crawfish, frozen, edible (DOC)

This case involves finished products as, "Nearly all the [imported] Chinese crawfish is peeled tail meat, frozen, in one-pound plastic bags."(16)

16. Economic Data

Louisiana typically "harvests $56 million worth of crawfish a year, creating an industry with a $140 million impact."(17) According to the Louisiana State University Agricultural Center, over 7,000 jobs are linked to the industry with 3,000 threatened by the imports.

17. Impact of Trade Restriction:

LOW in respect to environmental impact but high in other respects.

Cost: $8.6 million/year (in 1996)(18)
Coverage: 100%
Price Effect: 91% to 200% depending on individual importers
Competitive Effect: 100%(+) In most cases the domestic product is now cheaper

18. Industry Sector:

[FOOD]

19. Exporters and Importers:

Case Exporter: China
Case Importer: United States of America

While the United States remains the world's leading exporter, both countries export a large quantity of crawfish. While imports of crawfish from China increased a reported 350% between 1993 and 1995 (19) to a high of 10 million pounds, in 1996 imports dropped to roughly 9 million pounds. Consequently, from 1994 to 1996 U. S. producers saw their domestic sales decrease from 2 million pounds to 1.25 million pounds. (20)

V. Environment Clusters

20. Environmental Problem Type:

Species Loss Sea

21. Name, Type, and Diversity of Species

Name: Crawfish (Procambus Clarkii)
Type: Fresh water
Diversity: Crustacean

22. Resource Impact and Effect:

Impact: [LOW]
Effect: [PROD]uction

23. Urgency of Problem:

Urgency (Years to Extinction): N/A
Lifetime of Species: 3-4 years

24. Substitutes:

N/A

VI. Other Factors

25. Culture:

Yes

"There is something un-Louisianian about using crawfish
tails peeled and packaged in China. But there is also something
un-American about paying more than twice as much for
crawfish tails peeled and packaged here at home when cheaper
ones are available."
--From Our Views,
The Advocate

Perhaps no one sentiment expresses the dichotomy of this case as well as this. While some of the local inhabitants such as Dwight Landreneau feels that the imports, "strike at our culture, our food and our jobs," (21) others like Michael Gonzalez assert that the case is simply a form of price collusion made legal.(22) For Mr. Landreneau, the issue goes beyond the purely legalistic aspects of the dispute and focuses on the only way of life that many in the industry have ever known. For example, he points out that the majority of producers are not major corporations, but individual families whose livelihood depends on crawfish.

For a more detailed examination of this section see Cajun, Crawfish, and China and China-Louisiana Crawfish Dispute.

26. Trans-Boundary Issues:

Yes

27. Rights:

No

28. Relevant Literature

Endnotes

(1)See Donna St. George, "Crawfish Wars: Cajun Country Vs. China," in The New York Times, May 7, 1997.

(2)Ibid.

(3)See International Trade Commission, "Termination of Investigation," Federal Department and Agency Documents, Federal Document Clearing House, Inc., October 11, 1996.

(4)See Alan Sayre, "China Crawfish are being dumped into US," in Journal of Commerce, March 24, 1997, p. 6B.

(5)See Donald J. Boudreaux, "Chinese Crawfish 'Dumping' good for U.S. Consumer," in The Times-Picayune, November 15, 1996, p. B7.

(6)Ibid.

(7)See Katy Read, "Red Menance," in The Times-Picayune, September 1, 1996, p. A1.

(8)Donald J. Boudreaux.

(9)See Henry Lin, "Trade Shows Link U.S. Seafood Exproters to Chinese Customers," in AgExporter, U.S. Department of Agriculture, September 1997, No. 9, Vol. 9; p. 18.

(10)See Donna St. George.

(11)See Bruce Schultz, "U.S. Hikes Tariffs on Chinese Crawfish," in The Advocate, July 26, 1997, p. 3B1B.

(12)See Angela Simoneaux, "La. Testing Chinese Crawfish for Cholera," in The Advocate, September 13, 1997, p. 3B1B.

(13)See Sherry Sapp, "Top Ag Official Orders Seizure of Crawfish," in The Advocate, January 27, 1998, p. 1A.

(14)See Sherry Sapp, "Importer argues La. official had no right to bar sales of crawfish," in The Advocate, March 6, 1998, p. 2B.

(15)See Jack Wardlaw, "Crawfish Labels a Cover," in The Times-Picayune, January 27, 1998, p. A1.

(16)See Donna St. George.

(17)See Katy Read.

(18)See Christopher Baughman, "Judge Denies Firm's Injunction Request," in The Advocate, March 17, 1998, p. 11A.

(19)See Alan Sayre, p. 6B.

(20)See Bruce Schultz.

(21)See Donna St. George.

(21)See Michael Gonzalez, "Steamed over Crawfish Dumping Fight," abstract in Asian Wall Street Journal, September 1, 1997, Section A; p. 15.

Sources

Baughman, Christopher. "Judge Denies Firm's Injunction Request." The Advocate. March 17, 1998. p. 11A.

Boudreaux, Donald J. "Chinese Crawfish 'Dumping' good for U.S. Consumer." The Times-Picayune. November 15, 1996. p. B7.

Gonzalez, Michael. "Steamed over Crawfish Dumping Fight." Abstract in Asian Wall Street Journal, September 1, 1997, Section A; p. 15.

International Trade Commission. "Termination of Investigation." Federal Department and Agency Documents, Federal Document Clearing House, Inc. October 11, 1996.

Lin, Henry. "Trade Shows Link U.S. Seafood Exproters to Chinese Customers." AgExporter, U.S. Department of Agriculture. September, 1997. No. 9, Vol. 9; p. 18.

Read, Katy. "Red Menance." The Times-Picayune September 1, 1996. p. A1.

Sapp, Sherry. "Top Ag Official Orders Seizure of Crawfish." The Advocate. January 27, 1998. p. 1A.

Sapp, Sherry. "Importer argues La. official had no right to bar sales of crawfish." The Advocate. March 6, 1998. p. 2B.

Sayre, Alan. "China Crawfish are being dumped into US." Journal of Commerce. March 24, 1997, p. 6B.

Schultz, Bruce. "U.S. Hikes Tariffs on Chinese Crawfish," The Advocate. July 26, 1997, p. 3B1B.

Simoneaux, Angela. "La. Testing Chinese Crawfish for Cholera." The Advocate. September 13, 1997, p. 3B1B.

St. George, Donna. "Crawfish Wars: Cajun Country Vs. China." The New York Times. May 7, 1997.

Wardlaw, Jack. "Crawfish Labels a Cover," The Times-Picayune. January 27, 1998, p. A1.


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