Cablegate: Small Indian Shrimp Exporters Settle With

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RR RUEHBI RUEHCI
DE RUEHCG #1497/01 1941148
ZNR UUUUU ZZH
R 131148Z JUL 06
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 8998
INFO RUEHNE/AMEMBASSY NEW DELHI 1804
RUEHBI/AMCONSUL MUMBAI 4806
RUEHCI/AMCONSUL CALCUTTA 0553
RUEHLM/AMEMBASSY COLOMBO 1235
RUEHBR/AMEMBASSY BRASILIA 0023
RUEHQT/AMEMBASSY QUITO 0025
RUEHHI/AMEMBASSY HANOI 0041
RUEHBJ/AMEMBASSY BEIJING 0182
RUEHBK/AMEMBASSY BANGKOK 2285

UNCLAS SECTION 01 OF 02 CHENNAI 001497

SIPDIS

SENSITIVE

SIPDIS

USDOC FOR MAC/ANESA/OSA/LDROKER/ASTERN
USTR FOR SOUTH ASIA - AWILLIS/BSTILLMAN/JROSENBAUM

E.O. 12958: N/A
TAGS: ETRD PGOV EFIS EIND IN CE BR EC TH CH VM
SUBJECT: SMALL INDIAN SHRIMP EXPORTERS SETTLE WITH
SOUTHERN SHRIMP ALLIANCE

REF: (A)05 CHENNAI 0121, (B)O4 CHENNAI 0944

1. (SBU) SUMMARY: 24 Indian shrimp exporters have reached
agreement with the Southern Shrimp Alliance (SSA) to
remove their names from the Department of Commerce's
review list for imposition of dumping duties. This
continues the trend that began in May when exporters from
Thailand, Vietnam and Ecuador began making agreements
with SSA. Fears about the sampling method to be used for
selection of companies to be part of the review process
and the possibility of the imposition of penalty duties
for non-response by relatively anonymous trader-exporters
forced manufacture exporters to settle. Four large
manufacture exporters who account for 64 percent of
Indian exports refused to settle with SSA, however. With
the withdrawal of the 24 exporters from the review,
Indian industry sources believe the Department of
Commerce will be forced to continue to use the
traditional "largest by volume" methodology in its review
rather than the "sampling" approach which they fear. END
SUMMARY

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24 INDIAN COMPANIES OPT FOR SETTLEMENT
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2. (SBU) 24 Indian shrimp exporters effectively removed
themselves from the Department of Commerce review list
for imposition of dumping duties by entering into
settlements with the Southern Shrimp Alliance (SSA) (Refs
A and B). These companies form part of a list of 60
companies identified by the Department of Commerce for
review. According to Elias Sait, Secretary General,
Seafood Exporters Association of India (SEAI), about 20
companies on that list were trader-exporters, i.e.
companies that do not have their own processing
facilities as contrasted with manufacture exporters who
perform their own processing. Sait said that these
companies do not have permanent addresses and have not
responded to Department of Commerce queries.
Accordingly, they were assessed penalty duties of over
100%. SEAI fears that should one of these companies be
selected in the sample used by the Department of
Commerce, the duty level might rise further above the
currently high levels. Sait told Post that in a DVC with
Department of Commerce officials held on June 10, 2006
verbal assurances were given that the companies which are
assigned penalty duties would be kept out of the sample.
No written guarantee was provided, however, and Sait told
Post that lack of confidence on that issue forced the 24
to settle.

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LARGE EXPORTERS REFUSE TO SETTLE
--------------------------------

3. (SBU) Four of the largest Indian shrimp manufacturers,
Hindustan Lever Limited, Liberty Group, Falcon Marine
Exports and ITC Limited, decided against settling with
SSA. These companies account for 64 percent of the
shrimp exported to the U.S. from India. According to the
trade advisor to SEAI, these companies declined to settle
because they feel that a sampling approach by the
Department of Commerce is a near certainty in the next
review which will take place in 2008. They believe that
the current review must now be completed using a "largest
by volume" approach because so few companies remain to be
reviewed. The largest by volume method offers them the
best chance of achieving a reduction in their duty rates
from the current 15.36 percent in the case of HLL and
10.17 percent in the case of the other three companies.

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SETTLEMENT HELPS SSA MEET ITS LEGAL COSTS
-----------------------------------------

4. (SBU) The inability of the SSA to pay expensive legal
costs associated with the case was another reason that

CHENNAI 00001497 002 OF 002

they encouraged settlements, according to SEAI. SEAI's
Elias Sait told Post that Hurricane Katrina decimated the
shrimp fleets in the Gulf of Mexico, diminishing SSA's
ability to collect fees from member companies. Sait says
that Dewey Ballantine, legal counsel for SSA, drafted an
agreement for each of the companies listed in the review
document. According to Sait, Ballantine demanded a
$10,000 payment from each exporting company merely to
enter into negotiations on removal from the list.
Ballantine explained that the $10,000 fee was to meet
legal costs.

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SETTLEMENTS MAY MAKE DEVI SEAFOODS A MAJOR PLAYER
--------------------------------------------- ----

5. (SBU) COMMENT: The recent round of settlements might
well turn Devi Seafoods, formerly an also-ran among
Indian exporters, into a major player. Devi has a 4.94
percent duty compared with the 10.17 percent rate that
many other exporters face. The SEAI trade advisor told
Post that exporters might now route their exports through
Devi to derive the benefits of the company's lower duty.
This approach, he believes, could hurt U.S. importers in
the long run. END COMMENT

6. (U) This message was coordinated with Embassy New
Delhi.

HOPPER

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