Tariffs throw wrench into seafood supply chain

  • Display cases full of Alaska seafood stand in the retail shop of Snug Harbor Seafoods on Sept. 4 in Kenai. The trade conflict with China is catching Alaska seafood producers in the middle with tariffs on their fish going both to and from China. (Photo/Elizabeth Earl/For the Journal)

KENAI — Many seafood processors, fishermen and support businesses have been watching with increasing dismay as the trade war between U.S. and China heats up and impacts billions of dollars in trade.

In March, President Donald Trump’s administration announced its intention to levy tariffs against China in connection with “unfair” trade practices, including theft of intellectual property. When the first round of tariffs on Chinese products were announced, the seafood industry hoped to escape the list of impacted items.

That hope faded when a host of seafood products were included on the list of proposed retaliatory tariffs from the Chinese government. Then Office of the U.S. Trade Representative proposed another set of tariffs, including seafood products, at 10 percent in July. Then that number was upped to 25 percent in August.

In a hearing hosted by the Office of the U.S. Trade Representative Aug. 20–24, Bob DeHaan of the National Fisheries Institute said the tariffs will effectively punish American fishermen for Chinese intellectual property theft, which has nothing to do with them. Of the $2.7 billion in proposed tariffs on seafood, more than $95 million came from Alaskan fishermen.

“In many cases such as the iconic Bristol Bay salmon run that just concluded this year, the fishermen are family-owned enterprises who sell their catch to seafood companies for processing, distribution and sale around the world,” he said. “How punishing these harvesters and these businesses for in effect buying American will convince China to respect its obligations regarding intellectual property rights and technology transfers is difficult to fathom.”

Taking advantage of a growing consumer market and the country’s geographic position between Alaska and Europe, many seafood companies have been working to establish trade relations of their own with China.

A number of seafood companies, including Copper River Seafoods, went along on a recent trade mission headed by Gov. Bill Walker to build relationships with Chinese businesses and government. The Alaska Seafood Marketing Institute has been working to expand its international markets for the last 20 years, with a branch office in Shanghai, said Hannah Lindoff, the director of ASMI’s international marketing program.

The marketing agency, which promotes Alaska’s wild seafood as a brand worldwide, has been following the tariff developments and providing regular updates with concerns about the far-reaching impacts of tariffs on the international supply chain. A major part of that is because much of Alaska’s seafood that is shipped to China is eventually re-shipped elsewhere — in that case, the only thing that happens in China is reprocessing.

“Europe is still a major market for us,” she said. “It makes a lot of sense to go through where processors are already established.”

A lot of processing still happens in Alaska. However, the reprocessing side in China and other international markets makes sense because of the better access to markets with frozen fillets — demand for fillets has replaced the demand for canned salmon over the years, Lindoff said.

ASMI and other organizations have been working on building the domestic consumption market is China, as opposed to just re-exporting seafood from there, Lindoff said.

In America, price is still king, and in Europe, people are more used to eating salmon and paying more for it, but in China the consumers are still getting used to eating salmon.

Wild Alaska seafood is only a drop in the bucket of the international salmon supply — roughly 2 percent — and so ASMI markets it as a luxury, healthy alternative to farmed salmon, which commands a higher price.

The tariffs on the U.S. side with product coming back from China after reprocessing would hit American consumers, pushing up prices. However, it would also lead to interruptions in the supply chain, which could also push up costs as companies reshuffle. DeHaan explained in his testimony that the tariffs could destabilize the year-round supply chain and cost jobs in the middle and tail ends of the supply chain.

“Forced to abandon China sourcing, these companies in many instances will have no choice but to drop that product line or select a third country substitute, which itself will require significant cost and expense and time,” he said. “The existing supply chains in seafood as in any other sector can take many years to build, refine and perfect. Modifying them is neither simple nor inexpensive.”

Sen. Dan Sullivan testified to the committee against the seafood tariffs as well, asking the administration to remove the seafood items.

“The vast, vast, vast, vast majority of this product is American,” he said. “It is an American product. And yet we’re going to penalize this with almost a billion dollars of value of tariffs on our own products by our own people. I don’t think that’s what the president or his team has intended.”

Lindoff said ASMI intends to continue its international operations for now, assessing the situation as it evolves.

Elizabeth Earl can be reached at [email protected].

Updated: 
09/05/2018 - 11:24am

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