Chinese Crawfish vs. Louisiana Crawfish

Crawfish–and seafood in general–has played a significant role in Louisiana’s culture, economy, and cuisine ever since the beginning.  The first ever recorded commercial crawfish harvest in the US was in Louisiana in 1880.  Over 125 years later, crawfish farming in Louisiana is still thriving, but that is not to say that the growth did not come without it’s challenges.  In the late 1990s, commercial farming and export of Chinese crawfish caused an extreme amount of controversy due to the predatory pricing strategy that was in place when they moved into the US market.  Controversy revolving around import/export tariffs and duties that the federal and state officials are still dealing with today.

Crawfish Farming History

As mentioned, the 1st recorded commercial crawfish harvest in the US was in 1880, taking place in the Atchafalaya basin. That year the harvest amounted to 23,400 pounds.  The early pioneers in this industry only harvested wild crawfish that were available in certain parts of Louisiana’s unique natural habitat.  Years later, in the 1930’s, there was a report published that supported different techniques for more consistent harvests.  These recommendations revolved around flooding fallow rice plots during the non-farming season, creating a perfect ecosystem for the crustaceans.  This method was further studied in 1950, when the state budget allocated $10,000 to conduct additional tests on the viability of crawfish farming in small ponds.  By 2000, the acreage for crawfish farming in LA reached roughly 120,000 acres or 187 square miles (Greater New Orleans land area is 169 sq. miles).  According to the latest data available, Louisiana is producing roughly 85-95% of total US production, with 60% of that coming from farmed-raised crawfish and the other 40% from wild crawfish.

Chinese crawfishChina first regarded these crawfish as an invasive species and pest.  But in the early 1990’s, China followed suit after it saw the market opportunity in the US, specifically Louisiana.  With China having similar agriculture features, they began to use the same flooding techniques mentioned above.  Jiangsu province, the major producing state in china, currently accounts for 95% of China’s domestic production.  In 1990, there is only documentation of 2 processing plants and by 1995 there was documentation of 50 plants.  This shows how committed the Chinese were to the commercialization of crawfish farming and processing.

Fight for Market Share

China gained market share rather quickly in the early 90s, which ended up grabbing everyone’s attention in the industry.  Only two years after China’s first export into the US, estimates show they exported half a million pounds of crawfish related products (majority crawfish tails) in 1993. Two years later in 1995, China exported 2.8 million pounds of crawfish products.  The rapid growth in the US/Louisiana market was largely contributable to the pricing strategy, with their product priced at half of the US market prices.  Some estimations state that between 1993 and 1996, the Louisiana crawfish farmers market share value was reduced from 13.5 MM to 4.9 MM, cutting some 4000-part time jobs that accounted for to 360,000 man hours.

This pressure compelled the Louisiana business people to form an organization to lobby this issue.  The “Crawfish Processors Alliance” was able to convince the Louisiana State government to appropriate $350,000 to the organization as well as necessary legal professionals.  In 1996, the group went to Washington DC to submit a petition, pushing for relief under Section 201 of the Trade Act of 1974 as well as the Less Than Fair Value (LTFV) code under the Trade Act of 1930.  Some claims stated that the imports jumped by 250% from 1993 and 1996, swallowing 70% of the US market and damaging the domestic companies farming for crawfish.

Anti-Dumping Process and Resolution

This case was qualified under the LTFV petition and further evaluation confirmed the fact that Chinese crawfish were being unlawfully imported into the Unites States.  For a certain trade activity to qualify as dumping, the classification must come from one of two possible conditions/criteria.  The first criteria is that there must be evidence that the imported product has hurt the domestic industry greatly.  The 2nd criteria is that the product itself sells for less in the market being exported to than the domestic market. A typical dumping investigation starts with the submission of a petition to the US International Trade Commission (US ITC).  After the US ITC qualifies that these imports are affecting/injuring a specific industry then, the Department of Commerce (DOC) conducts an investigation regarding the pricing of individual companies that are major players in the exporting of that certain product.  The case is then finally passed back the US ITC to make the final decision.  To constitute fair value, the ITC calculated what price to considered normal versus the current export value price.  If the normal price is above the export value price, then the activity is considered to be in violation of dumping.  At the time of the case, China was not a member of the WTO and viewed as a “non-market economy”.  Because of this, certain “Looney Toon assumptions” were used as a proxy.  The data used came from various places as they attempted to substitute these costs with neighboring countries and activities.  For example, the farming/sourcing figures came from the costs to farm a certain species of fish in India.  The transport costs also came from an Indian trucking report. Another figure mentioned was the overseas shipping costs, which came from costs associated with whole crawfish being shipped from Portugal.  This caused a lot of controversy but inevitably got passed.

 The sanctions were put in place, tariffs ranging from 85- 202% depending on what company was doing the exporting as well as the quantity.  These tariffs more than doubled the price of most frozen crawfish exports, aligning the prices with the domestic (US) industry average.

Current Situation – Conclusion

Although the anti-dumping laws are in place, there have been various cases of companies evading these customs laws.  It seems that these regulations will never completely stop the anti-dumping issues related to the crawfish exports, but only make it more difficult.  One of the main avoidance techniques was use other countries as a pass-through country to evade the high tariffs.  Situations that the US saw this was in Singapore, Spain, and other countries.  Another tactic was to create a whole new entity, this loophole allowed these corporations to avoid the payment of bonds that were issued at port of destination.  In 2000, there was a move towards posting of cash deposits rather than posting a bond.   Even more recently, February 2016, a trade bill the senate approved contained stronger language allowing for easier investigation of these foreign cargo shipments.  The law would establish a special unit within customs to better facilitate efforts across other governmental bodies to prevent and investigate these issues.  But, the legal process in place is still a lengthy to prosecute these violations, making it years later before the US government is able to collect on overdue tariffs from these corporations.  There has been an estimated 2.3B in uncollected custom duties over the past 20 years, largely from crawfish, shrimp, meat, honey, and steel.  Although the government is collecting some of these unpaid duties, it is a small percentage.  As far as a local Louisianan, the best contribution you can make is continue to promote local to help out your neighborhood crawfish farmer.

Robert John
MBA Candidate, Tulane University