'Govt Hand-Holding Needed': Seafood Export Chief As India Risks Losing Export Edge To US

Among the industries that could be hit by US president’s Donald Trump’s tariffs is India’s seafood industry. India is among the top five seafood exporting nations in the world and its biggest customer is the United States.

Representatives of the industry are already in touch with the government and are looking to them for solutions, said Pawan Kumar, the president of the Seafood Exporters Association.

Given much of India’s Rs 60,000 crore industry exports to the US, if the tariffs are not reduced, businesses would be affected.

More than half of Indian seafood exports go to the United States. Hence the industry makes for a good case study of what smaller enterprises are going through right now particularly in the export space

The current 25% tariff now on Indian exports will make life very tough for Indian exporters of seafood divided between the western and eastern coasts of India.

“The total tariff and duties together will end up paying about 35% today. Of course, we have one more rider which comes with the tariffs, that is the penalty. We are not sure how the penalty is going to come out in the future, as and when it is levied,” Kumar told The Core report.

Ecuador is India’s nearest competitor when it comes to seafood imports to the US, and some players could definitely switch. While retail buyers cannot afford to pass on the price increase to its customers, bigger buyers like Walmart have some cushioning.

“Ecuador, which is our biggest competitor, will pay about 19% today, and we are somewhere close to 33%, 34% now,” Kumar said.

The industry's troubles are symptomatic of what exporters in general are grappling with today, regardless of what product they're exporting and what could sometimes work in their favour.

Many of these exporters have decades-long relationships with their importer counterparts in countries like the US, and that obviously helps in times like this.

Kumar also delved into the details of the sectors in the US that import seafood from India, what are the kinds of seafood that are exported, where they come from and what the next few months will look like.

Edited Excerpts:

What were the last three months like when tariffs started rising?

The seafood exports out of India are close to about seven and a half billion dollars, of which the US is notably the biggest market, where we export close to about three billion dollars, and we export to about 70 countries across the world, including the US. When you talk about the product categorisation, shrimp is the topmost, which occupies almost 40% of the total exports, and then you have the sea cod material, which is fish and other cephalopods (squid octopus etc), and the sea cod shrimp, that occupies, when you talk about terms of volume, it is 60%.

Cultured shrimp comes from the east coast of India, and fish and other categories go out of the west coast and the southern coast of India. Pomfrets and cuttlefish, squids, mackerels and a lot of other varieties of fish are exported to various countries. The US is the biggest market for shrimp.

If we were to build on shrimp specifically, how have things been in the last three months vis-a-vis competitive pressure from other markets, given that you're already facing a 10% duty into the US?

In shrimp, when you're specifically exporting to US, we have three kinds of duties and tariffs. One is the anti-dumping duty, which has been there for almost 20 years now, and the second one is the countervailing duty, which came in last year, and the third one is the new tariff, which has been in effect since April 2, and which was revised again last week.

These are the three kinds of duties and tariffs which we pay. The anti-dumping duty is roughly around 4.5%. It is 1.35%, but it's likely to go up to 4.5%, and the countervailing duty is about 5.7%, and now the tariff is about 25%.

So what would the total impact be? You're saying is it going to be 25 plus 5.8 plus 4.5, or is it a subset of 25?

The total tariff and duties together will end up paying about 35% today. Of course, we have one more rider which comes with the tariffs, that is the penalty. We are not sure how the penalty is going to come out in the future, as and when it is levied.

Would other countries also pay the same anti-dumping and countervailing duties?

Not exactly. The nearest competitor is Ecuador, which pays anti-dumping duty of about only 4%, and they don't have countervailing duties, and the tariffs are about 15%. So Ecuador, which is our biggest competitor, will pay about 19% today, and we are somewhere close to 33%, 34% now.

You're saying both countervailing duty as well as anti-dumping duty have been in force even before these new April 2 tariffs came into force?

Yes, you're correct.

Okay, if I were to now come to how things would have been in the last few months, I mean, can you tell us a little about how negotiations have been progressing? Because I spoke to you a few months ago, and you were saying people were working it out. But how are things now? What I mean is between, let's say, importers in the US and exporters in India.

See, initially, when a 26% tariff was announced on April 2 there was some sort of a disturbance, and then eventually it was brought down to a baseline tariff of about 10%. Somehow, we could convince the buyers, and the 10% tariff got absorbed between the buyer and the seller, and we made sure it doesn't impact the farmer. But having said that, business went on smoothly.

If you see, from mid-April, May, June were quite okay. As we came close to the July 9 deadline, that is where the problem started, because a lot of things were clear that, you know, there's going to be an additional tariff on India, because the trade deal didn't happen as per the deadline, which was on the 9th of July. And post July 9 also, the US government was announcing tariffs on other countries, except India.

They, I think, waited for about three weeks. All those three weeks were a little bit uncertain, but still we continued with our shipments. Not in a big way, but you know, they were going.

But when the tariff was announced towards the end of July — 25% was something which came in as a shocker for us.

And I don't know if you can share figures of, let's say, a kilo of a certain product from the point it leaves India, and it reaches a store in the US. What is the sort of price movement, and how much of that could be shared?

And at this point, who will have to absorb more of that price, as opposed to maybe not absorbing it earlier, as you were saying?

I'll give you a small example. Let us say, the unit price of a product which is moving out of India is somewhere around $3.60 to $3.70 a pound without the tariffs. But this $3.60 or $3.70 includes the anti-dumping and the countervailing duties, which are already in place. So when the new tariff came up, 10% was mounted on them in April, and the buyer could absorb it to a larger extent. And then slowly, when we came to this 25%, which was announced last month, now we are not clear on how this 25% has to be absorbed, because it is too early. It has only been three or four days since this has come in.

The presidential order was only given on Friday, if I'm right. Now the dialogue between the buyer and seller should start anytime now to see how this can be absorbed, and how this can be readjusted in the pricing, or where it has to be readjusted as something, you know, which we are still discussing with various stakeholders, that is, the importer and the farmer here, both.

You mentioned Ecuador, which obviously has a geographical advantage, because it's on the same continent. Now, do people who buy, the importers, or for that matter, the consumers, do they care about where it's (seafood) coming from?

I'll answer that question in a different way. When you look at the US market, there are three different segments. One is the retail segment like Walmart, Kroger's, Safeway or Target — all the big people.

Two are food services, that is, a big restaurant chain that buys a lot of shrimp from various parts of the world. And the third, what we call street sales. Street sales, you know, the importers, they buy, sell a few hundred cases here, there, and they distribute locally.

When you look at the food service and retail outlets, they place long-term orders. Some people buy for three months, some buy for six months, and some ask for a yearly contract. So I think that more or less answers your questions.

The first impact will be at the street sales level, because they're all spot buyers. They buy for today, that is the area which gets affected first. Because they cannot pass on those duties or whatever the increase in prices to their end consumer that easily.

When it comes to the retail and food services, they probably have a better cushion. They were able to absorb the 10% quite fast. Now this 25% is something we have to see how we absorb between the retail and the food services.

Who's the biggest in these three, between Walmart, Kroger, versus restaurants, versus street sales?

I think Walmart is the biggest, if my memory is right. Then comes your food services, like your Sysco and then you have your Costco, which buys a lot of volume from India. But by far, I feel Walmart is the biggest.

You're saying that big stores would be the biggest customers of Indian shrimp at this point?

Yes. For them to shift their products from India to some other destination, like Walmart, it's not easy for them to ship their purchases, divert them into other countries. The reason is very simple.

When you're selling to Walmart and any of the retail outlets or the food service people, there are a lot of approvals which have to be done in the process, right from the farm level, till the factory level, you know, your hatcheries, the feed mills, your factories, all these have to be approved.

So getting the same kind of approval process in the other countries, see, it's not impossible, but it might take a shift immediately. The immediate impact will be on the the street sales, and then it will be followed by others.

And I guess supply chains act as a moat of sorts, because obviously, if you've built a supply chain over the years, including all these factors that you pointed out, it's not easy to replicate or replace. And both the importer and the exporter would work together to try and see how much they can continue.

You know, you talked about products that are already out, as in produce that's already seaborne, heading towards the US. So, is it clear at this point what the duty impact there will be?

Maybe a few hundred containers could be affected, but largely the product which is on water may not be affected because they've probably given a breather for products which are reaching US shores before the end of September or early October, will not get into the tariff, provided they're on water by the August 7.

Right. Last question, Pawan. So what are you looking out for now?

One is, of course, the government part, which we don't know. Many exporters are hoping that there will be some reduction, rationalisation of these duties.

But what else are you looking out for?

We did have a series of meetings with the Ministry of Commerce. One thing we have told them is, you know, we understand and we support the government that India first, come what may, has to protect our country's interest. And as the exporters association, we are with the government.

We all understand and we all respect the fact that India's interests have to be protected in the international market. There's no two ways about it. Having said that, there will be certain situations which were created out of the tariffs and other things.

We need to find a solution slowly so that the trade at large is not impacted. So we gave a few suggestions to the government to have a look at those solutions and say if you can do a little bit of hand-holding in such a way that we can tide over the crisis. We do understand it's not going to be a long-term issue.

It will be short-term. And I'm sure the government is also actively working towards finding a solution to the deadlock in the trade negotiations. I think the delegation is coming towards the end of the month.

We are hoping that we find a solution to the existing situation.