VZCZCXRO4386
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0767 1870135
ZNR UUUUU ZZH
R 060135Z JUL 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6225
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0966
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS GUANGZHOU 000767 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO PASS USTR 
PACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV ECIN CH
SUBJECT: CAUGHT IN THE MIDDLE: CHINESE AQUACULTURE COMPANY AFFECTED 
BY RECENT FOOD SAFETY ISSUES 
 
(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY.  NOT FOR RELEASE OUTSIDE U.S. GOVERNMENT CHANNELS.  NOT 
FOR INTERNET PUBLICATION. 
 
¶1. (U) SUMMARY:  A LARGE GUANGDONG SHRIMP EXPORTER EXPECTS ITS 
REVENUES TO FALL BY 40 PERCENT FOLLOWING THE RECENT FDA ANNOUNCEMENT 
TO DETAIN SHRIMP AND OTHER SEAFOOD FROM CHINA.  THE FDA MEASURE, AS 
WELL AS BAD PRESS FROM OTHER FOOD SAFETY SCANDALS, IS ACCELERATING A 
TREND TOWARD NON-U.S. EXPORT MARKETS AND THE DOMESTIC MARKET.  END 
SUMMARY 
 
A MAJOR SHRIMP EXPORTER 
----------------------- 
 
¶2. (U) IN 2004, GUANGDONG EXPORTED USD 100 MILLION IN SHRIMP TO THE 
UNITED STATES.  ECONOFF RECENTLY VISITED ZHANJIANG EVERGREEN AQUATIC 
PRODUCT SCIENCE AND TECHNOLOGY CO., LOCATED IN SOUTHERN GUANGDONG, 
ABOUT A FOUR HOUR-PLUS DRIVE FROM GUANGZHOU.  THE COMPANY EMPLOYS 
6000 WORKERS AT THREE DIFFERENT SITES. 
 
¶3. (U) EVERGREEN IS UNIQUE AMONG CHINESE COMPANIES INVOLVED IN 
AQUACULTURE WITH ITS VERTICAL INTEGRATION; IT RETAINS CONTROL OF THE 
ENTIRE PRODUCTION PROCESS FROM THE IMPORTATION OF SHRIMP EGGS FOR 
BREEDING TO THE RAISING OF SEAFOOD IN AQUACULTURE FARMS AND 
PROCESSING AND EXPORTATION.  IN 2006, EVERGREEN EXPORTED OVER 6000 
TONS OF TILAPIA AND SHRIMP TO THE UNITED STATES, WORTH APPROXIMATELY 
USD 30 MILLION.  MAJOR BUYERS OF THE COMPANY'S SEAFOOD INCLUDE 
WAL-MART AND FOOD LION. 
 
¶4. (U) EVERGREEN HAS BEEN CERTIFIED BY THE FDA WHICH REGULARLY 
INSPECTS EVERGREEN'S FACILITIES.  ECONOFF WAS EXTREMELY IMPRESSED 
WITH THE NUMEROUS MEASURES THE COMPANY TAKES TO PREVENT FOOD 
CONTAMINATION, INCLUDING WEARING STERILIZED GARMENTS, WASHING HANDS 
AND FEET IN A BLEACH AND WATER SOLUTION, AND CONSTANT CLEANING OF 
EQUIPMENT AND FACILITIES. 
 
¶5. (U) EVERGREEN ALSO HEAVILY INVESTS IN RESEARCH AND DEVELOPMENT. 
IT SPONSORS A MARINE BREEDING SEED BASE WHERE RESEARCHERS AND 
STUDENTS FROM A VARIETY OF UNIVERSITIES IN GUANGDONG STUDY 
AQUACULTURE AND SHRIMP BREEDING. 
 
IMPACT OF THE RECENT FDA MEASURES 
--------------------------------- 
 
¶6. (U) PRIOR TO THE FDA BLOCKAGE, THE COMPANY WAS ALREADY 
EXPERIENCING A 20 PERCENT DECREASE IN REVENUE DUE TO MEASURSE TAKEN 
EARLIER BY USFDA AND NEGATIVE PRESS REGARDING THE SAFETY OF CHINESE 
FOOD PRODUCTS.  THE COMPANY FACED AN INCREASE IN THE FREQUENCY OF 
INSPECTIONS AND A REDUCTION IN ORDERS.  AFTER THE MOST RECENT 
ANNOUNCEMENT BY THE FDA, THE COMPANY ADMITTED THAT THE DECREASE WILL 
MOST LIKELY DOUBLE TO 40 PERCENT. 
 
¶7. (U) EVERGREEN APPEARED CONFIDENT THAT THE COMPANY WILL BE ABLE TO 
DELIVER ITS PRODUCT TO ITS CUSTOMERS, BUT REMAINED UNSURE OF HOW TO 
SATISFY THE FDA.  THE COMPANY STATED THAT IT WAS SHIFTING MORE OF 
ITS EXPORTS TO JAPAN IN ORDER TO OFFSET THE DROP IN EXPORTS TO THE 
US.  THE COMPANY WAS ALSO CONCERNED OF POSSIBLE LOSS OF U.S. SALES 
AND MARKET SHARE TO COMPETITORS FROM BRAZIL AND VIETNAM. 
 
GOLDBERG