Seafood Industry facing Double Tax Threats, each could cripple your company, your margin of profit – CFSI is opposing both ill-advised plans
Members, you are facing two very important tax matters at the state and federal level.
State tax threat.
The first is a landing tax increase proposed by Governor Jerry Brown who called upon the legislature to increase landing taxes 13-fold (1300%) and higher to fund his Department of Fish Wildlife that has been charging the commercial industry account without telling the industry! When you have 50 minutes, please watch the video on the first Budget sub-committee on the tax proposal and CFSI Executive Director Rob Ross’ initial comments to the committee. You will also see tremendous opposition to the tax proposal from members of the sub-committee including Senator Mike McGuire and Jim Nielsen, two of four sub-committee members.
Landing taxes are applied to all fish landed in California that are purchase from licensed commercial fishermen.
Members please stand ready to weigh in with legislators from your area at the appropriate time. We will also have targets for you to call so stay tuned.
For the wall tax on products from Mexico…
President Trump proposes 20% tax on all products from Mexico
Proposed US tax on Mexican imports would jeopardize $600m-plus seafood trade
A proposed duty on Mexican imports into the US risks to heavily penalize shrimp, tilapia, grouper and tuna exports unless their brand is as widely recognized as Corona beer, sources told Undercurrent News.
Between January and December 2016, Mexican exported a total of 74,880 metric tons to the US, for a total of $517.8 million, down 6% year-on-year in value but up 4% in volume.
In the same period, Mexico imported from the US a total of 58,584t for a total value of $111.9m.
During his first week in command, the new US president, Donald Trump, proposed the introduction of a 20% tax on all imports from Mexico, after ordering the construction of a border wall to divide the two countries, which led the Mexican president Enrique Pena Nieto to cancel a planned visit to the US, the New York Times reported.
Free trade exists between Mexico, the US and Canada under the North American Free-Trade Agreement (NAFTA), a trade deal which has been much maligned by Trump.
Mexico sells America more goods than visa versa, with the difference totaling $58 billion in 2015. “That is enough, thinks Mr Trump, to justify rewriting the NAFTA, which allows goods to flow across the Rio Grande free of tariffs,” the Economist reported.
“With a duty of that magnitude, Mexico farmed shrimp will disappear from US market place, product will go to internal market, Europe and China/Asia,” one source told Undercurrent.
“The wild product might be able to continue as it is a very special niche,” he added.
Brazilian economist and fish industry analyst, Dario Chemerinski, stressed that exporters with strong brands will not want to lose business, so they will adapt, while commodity exporters will search alternative markets -such as Canada, Asia, Western Europe and others- should the 20% tax apply.
“The impact [of the new duty, if imposed] in Mexico will be felt,” Chemerinski said.
Mexico, which currently has a free trade agreement with the US, exports to America seafood products with a 0% duty.
Free entry gave Mexican tuna an advantage compared with other central American products, such as Ecuadorian products that are taxed over 26-30% to enter the US market, another source pointed out.
Ecuador exports over 60% of its tuna products to Europe, while less than 2% to the US, because of the high duties that are imposed on Ecuadorian products.
Mexican exports to the US a wide range of elaborated products with added value, i.e. ready boxes of tuna with salad, while it imports cheaper less sophisticated products from other origins into its local market, particularly from Asia, one of the sources pointed out.
Mexico is the fastest growing Latin American market in terms of pro-capita tuna cans consumption, according to the research commissioned by one tuna company. Its inhabitants currently consume an average of 4 cans per year, compared with an average of 13 in Ecuador, according to the research.
Mexico had a population of 122.3 million in 2013, while Ecuador had 15.74m inhabitants.
Currently in Mexico there are 711 aquaculture farms, according to recent figures from the national commission for aquaculture and fisheries of Mexico, Conapesca. TIlapia is one of the main products, it said.
Meanwhile, the Mexican ministry of economy said that, if trade relations with the United States become more rigid, Mexico will seek other suppliers for meat and agro-fish products, i.e. Brazil and Argentina, Industria Alimenticia reported.
Last year, Mexican shrimp exports totaled 23,138t, 5% up in volume y-o-y, while tilapia exports totaled 3,090t, down 19% in volume y-o-y.
Grouper exports in the period were relatively stable in volume at 3,140t, while tuna exports increased 20% y-o-y to 7,139t.