VZCZCXRO3305
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #3211/01 2981131
ZNR UUUUU ZZH
O 241131Z OCT 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4822
INFO RUCNASE/ASEAN MEMBER COLLECTIVE IMMEDIATE
RUEHNE/AMEMBASSY NEW DELHI IMMEDIATE 5314
RUEHCHI/AMCONSUL CHIANG MAI IMMEDIATE 5754
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC IMMEDIATE
RUEHGV/USMISSION GENEVA IMMEDIATE 2072
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RHFJUSC/CUSTOMS WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 04 BANGKOK 003211 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EAP/EP, EEB/TPP/MTA 
STATE PASS TO USTR (WEISEL/BISBEE) 
COMMERCE FOR EAP/MAC/OKSA (KELLY/PHO) 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON EFIS ETRD WTO TH
SUBJECT: SHRIMP: THAI GOVERNMENT AND INDUSTRY CAUTIOUS 
ABOUT PROPOSED ANTI-DUMPING SETTLEMENT 
 
REF: A. E-MAIL 10/16/2008 FULLERTON/BISBEE/KELLY/KOCH 
     ¶B. BANGKOK 2999 (CONCERNS ABOUT CONTINUOUS BONDS) 
     ¶C. 06 BANGKOK 3425 (THAI SHRIMPERS MAKE PAYOFFS) 
     ¶D. 06 BANGKOK 1428 (THAI SHRIMPERS PROTEST 
        CONTINUOUS BONDS) 
     ¶E. 05 BANGKOK 7523 (THAIS TAKE US TO WTO) 
     ¶F. 05 BANGKOK 6693 (THAIS PRESS TO LIFT US SHRIMP 
        TARIFFS) 
     ¶G. 05 BANGKOK 4311 (BOND REQUIREMENTS ADVERSELY 
        AFFECT SHRIMP EXPORTERS) 
 
BANGKOK 00003211  001.2 OF 004 
 
 
¶1.  This message is Sensitive But Unclassified (SBU) and is 
not intended for use outside the U.S. Government. 
 
¶2. (SBU) Summary: Thailand continues to be anxious about the 
USG's implementation of the August 1 World Trade Organization 
(WTO) Appellate Body decision on anti-dumping duties and 
continuous bonds placed on warmwater shrimp imports from 
Thailand.  The Thai shrimp industry, which has been 
considering a private settlement with the U.S. industry on 
the anti-dumping order, now views the WTO ruling as another 
potential -- and possibly better -- avenue to resolve the 
exporters' concerns about the continued use of 100 percent 
bonds and the liquidation of past anti-dumping duties.  Thai 
shrimp industry representatives tell us that in the proposed 
agreement with U.S. industry several key issues -- most 
importantly, the amount of the monetary settlement -- remain 
unresolved.  The Thai Ministry of Commerce, while aware of 
the ongoing industry settlement discussions, continues to 
push for immediate USG compliance with the WTO decision and 
stresses that any implementation schedule that stretches 
beyond February 2009 will be unacceptable to Thailand.  End 
Summary. 
 
¶3. (U) Background: According to this Embassy's understanding, 
in 2003, representatives of the U.S. shrimp industry became 
increasingly concerned about what they believed to be unfair 
pricing practices for warmwater shrimp exported from six 
countries, including Thailand.  These elements of the U.S. 
shrimp industry filed anti-dumping petitions with the 
International Trade Commission on December 31, 2003.  After 
the completion of a dumping investigation, the Department of 
Commerce ordered anti-dumping duties be imposed on shrimp 
imports from these six countries.  The duties for Thailand 
currently range from 2.44 percent to 57.64 percent. 
 
¶4. (SBU) In addition to the anti-dumping measures, U.S. 
Customs and Border Protection (CBP) imposed an additional 
bond requirement that the importers of record post a secured, 
continuous bond for the full value of the previous year's 
anti-dumping duties.  Previously, importers were required to 
maintain a minimum bond valued at 10 percent of the duties, 
taxes, and fees paid in the previous year.  Thailand and 
India challenged the U.S. at the WTO on both the anti-dumping 
duties, as well as the use of continuous bonds.  The WTO 
initial and appellate review panels found that the CBP's 
additional bond directive breached the WTO Anti-Dumping 
Agreement, as the additional bonds did not constitute 
"reasonable security."  The WTO also ruled against the 
Department of Commerce's use of "zeroing," a method used to 
calculate anti-dumping duties.  (Note: Zeroing means that 
when sales prices in the U.S. are higher than market values 
in the exporting country, and no dumping has taken place, the 
Department of Commerce "zeroes" (eliminates) these sales out, 
rather than averaging them into (and thereby lowering) the 
dumping calculations.  End Note.) In September 2008, the USG 
asked for a "reasonable period of time" to comply with the 
WTO decision.  Meanwhile, the Thai export shrimp industry has 
been in negotiations with elements of the U.S. shrimp 
industry since 2006 on a private settlement to reduce (and 
eventually eliminate) the anti-dumping duties and the 
continuous bond requirements as well.  End Background. 
 
Thai Industry Cautious About Settlement 
--------------------------------------- 
 
¶5. (SBU) The Thai export shrimp industry, represented by the 
Thai Frozen Foods Association (TFFA), has been in 
negotiations with the Southern Shrimp Alliance (SSA), a U.S. 
 
BANGKOK 00003211  002.2 OF 004 
 
 
trade association representing shrimp fisherman and 
processors throughout the southern United States, in hopes of 
eliminating the anti-dumping duties on warmwater shrimp from 
Thailand, and until such time that the duties are eliminated, 
reduce the rate of the continuous bond requirement.  Earlier 
this year, SSA and TFFA, Thailand's largest seafood 
processing trade association, reached an "agreement in 
principle" in which the U.S. industry would support the 
removal of the anti-dumping order on shrimp from Thailand, as 
well as the termination of the continuous bond requirements 
by U.S. Customs and Border Protection -- in exchange for the 
Thai industry's compliance with U.S. food safety and labor 
laws and a monetary settlement from the Thai exporters to 
provide "adjustment assistance" to the U.S. industry. 
 
¶6. (SBU) Dr. Panisuan Jamnarnwej (please protect), a senior 
advisor and director at TFFA, conveyed caution rather than 
optimism about the proposed "agreement in principle" with the 
U.S. industry, in a conversation with Econoff on October 16. 
He emphasized that neither SSA or TFFA have agreed on the 
most critical component of a settlement -- the amount of the 
payment from the Thai shrimp industry to the U.S. domestic 
industry.  Dr. Panisuan, who is also the Chairman and Chief 
Executive Officer of Pakfood Public Company, one of the 
largest Thai exporters of shrimp to the United States, told 
us that the suggested settlement figures still vary widely 
between the two sides. 
 
¶7. (SBU) Panisuan stated that SSA has been forward-looking 
when calculating how much a settlement is worth, attempting 
to determine how much the settlement would save the Thai 
exporters in the future, assuming the continuous bonds remain 
in place.  The TFFA members, on the other hand, are 
calculating the proposed settlement's value based on the 
liquidation of previous continuous bonds and anti-dumping 
refunds from US Customs on overpaid duties.  TFFA initially 
discussed a settlement rate of approximately $60 million, 
according to Panisuan.  However, since the anti-dumping 
duties were reduced by nearly one-half after the Department 
of Commerce's second administrative review, the projected 
value of a settlement to TFFA proportionally decreased as 
well.  When the anti-dumping rates were higher, Panisuan 
noted that a majority of TFFA member companies had supported 
the $60 million figure; however, the revised anti-dumping 
rates, as well as the recent WTO appellate body decision, 
weakened the consensus among TFFA members.  Panisuan added," 
Why should we pay the SSA when we can just wait for the 
Department of Commerce to take action on the WTO ruling?" 
 
¶8. (SBU) Panisuan added that the TFFA executives were also 
surprised to learn that SSA had already approached the USG 
about the "agreement in principle."  He said that TFFA had 
hoped the two sides would first agree on the settlement price 
tag before approaching their respective governments about the 
deal.  Panisuan also expressed concerns that SSA does not 
represent a majority of the U.S. industry and that any 
agreement reached with SSA would be at risk without support 
of other U.S. industry groups, most notably the Louisiana 
Shrimp Alliance.  (Note: Panisuan also mentioned a third 
group of American shrimp processors that is interested in 
SSA's proposed agreement, potentially increasing U.S. 
industry's ultimate needs for adjustment assistance. End 
Note.) 
 
Government Not Opposed - But Not Advocating Either 
--------------------------------------------- ----- 
 
¶9. (SBU) Duangporn Rodphaya, Deputy Director-General of the 
Department of Foreign Trade at the Ministry of Commerce, told 
Econoff on October 16 that the Thai government's primary 
concern remains the USG's implementation of the WTO ruling, 
not the proposed private settlement between the two industry 
associations.  Duangporn acknowledged the Ministry of 
Commerce's limited familiarity with the specifics of the 
negotiations between the Southern Shrimp Alliance and the 
Thai Frozen Foods Association but said that the Department of 
Foreign Trade recently wrote to the Thai Frozen Foods 
Association to obtain more details on the proposed settlement 
and to determine how such an agreement may affect USG 
 
BANGKOK 00003211  003.2 OF 004 
 
 
implementation of the WTO ruling.  The Association has not 
yet responded. 
 
¶10. (SBU) Deputy Director-General Duangporn emphasized the 
importance of the USG compliance with the WTO ruling on 
continuous bonds and the use of zeroing.  She stressed that 
any proposed "reasonable period of time" by the USG that 
stretches beyond February 2009 will be unacceptable to the 
Thai Government.  Duangporn emphasized, as had the 
Director-General on October 2 (ref B), that Thailand would 
have no choice but to return to the WTO to seek immediate 
arbitration if the USG does not comply with the WTO decision 
as soon as possible. 
 
¶11. (SBU) When informally asked about her impressions of the 
proposed industry anti-dumping settlement, Duangporn added 
that she believed the current global financial crisis could 
affect the private settlement discussions.  She expressed 
some skepticism that the Thai shrimp industry would be 
willing to pay tens of millions of dollars for a settlement 
when the effects of the U.S. financial crisis on the Thai 
export market remain unknown.  Most Thai and foreign 
economists in Bangkok predict that the next year, at least, 
will be tough for Thai exporters in all sectors. 
 
Settlement Complications 
------------------------ 
 
¶12. (SBU) Thai industry sources told us that the history of 
the issue also makes Thai companies hesitant to rush to a 
settlement. Prior to the Department of Commerce's first 
administrative review of the anti-dumping duties in 2006, 
many individual member companies of TFFA agreed to 
confidential settlements with SSA, exchanging a portion of 
their export revenues (reportedly between one and two 
percent) for US industry assurances that the Thai companies 
would be removed from the review process and that 
anti-dumping duties would not be raised in the future (ref 
C).  During the Department of Commerce's first administrative 
review, the overall anti-dumping rate was lowered for the 
Thai exporters who had reached a settlement with SSA. 
Because of the successful reduction, nearly all of TFFA's 
member companies were then willing to negotiate additional 
settlements prior to the Department of Commerce's next 
administrative review. 
 
¶13. (SBU) According to TFFA contacts, during the period 
between the first and second administrative reviews, 
attorneys from SSA approached executives at TFFA about an 
industry-wide agreement and settlement to withdraw the 
anti-dumping order entirely, rather than negotiating 
individual settlements.  However, unexpectedly, another U.S. 
industry group, the Louisiana Shrimp Alliance (LSA), 
separately resubmitted the complete list of 147 Thai shrimp 
exporters for administrative review.  With multiple US 
industry associations involved, Thai shrimp exporters became 
increasingly concerned that any exclusive agreement or 
settlement reached with the SSA could be ineffectual if LSA 
continued to seek anti-dumping duties on Thai shrimp. 
 
¶14. (SBU) Following the second administrative review, the 
Department of Commerce again lowered the average anti-dumping 
rate for the major Thai exporters.  Dr. Panisuan at TFFA 
suggested that this second rate reduction significantly 
decreased the incentive for TFFA member companies to settle 
with SSA.  While the Thai exporters would prefer that the 
anti-dumping duties not be imposed at all, the revised rates 
are more acceptable to TFFA's members, and therefore, the 
exporters are now less willing to pay for a settlement. 
Panisuan also added that the ongoing appeals of earlier 
Department of Commerce anti-dumping determinations by several 
Thai companies (Thai I-Mei Frozen Foods, Rubicon Group, Thai 
Union) complicates the private settlement discussions with 
SSA, too, as these companies are less willing to negotiate 
until their individual appeals have been finalized at the 
U.S. International Trade Court. 
 
Comment 
------- 
 
BANGKOK 00003211  004.2 OF 004 
 
 
 
¶15. (SBU) The August 1 WTO Appellate Body decision added a 
new layer of complexity to the anti-dumping settlement 
discussions between the US and Thai shrimp industries.  Both 
government and business now believe that any private 
settlement or agreement cannot be made in a vacuum, without 
regard for the WTO ruling.  Our Thai government and shrimp 
industry contacts seem less than optimistic about the private 
settlement option.  The Thai appear prepared to wait to see 
how the USG handles the WTO Appellate Body decision on 
zeroing and continuous bonds before moving forward with a 
privately-negotiated settlement. 
 
JOHN