Shrimp buyer told to repay $1.2 million
Published 11:09 pm Saturday, October 6, 2007
Dean Blanchard doesn’t remember what the weather was like the day he picked up the certified letter at the post office, or very much else other than the uneasy feeling in the pit of his stomach.
“I was sick. I was in shock,” the 48-year-old shrimp buyer said, recalling how he learned that the federal government told him he owed $1.2 million in tariff money that must be immediately returned.
The U.S. Customs and Border Protection found that foreign shrimp was being dumped into the U.S. market illegally. The finding followed a landmark trade action brought by fishermen and processors from eight states in 2004, spearheaded by lawyers for the Southern Shrimp Alliance.
Blanchard was one of many who later applied for and received financial relief, or a payout, from the U.S. government, but he has since been told that he doesn’t qualify for any payouts because of the kind of dock he uses.
The money sought by U.S. Customs and Border Protection does not involve taxpayer dollars, but tariffs paid by overseas exporters.
“I had a hard time driving away from that post office. It just blindsided me. I kept reading it over and over again and I couldn’t believe what it was saying,” he said.
Blanchard applied for relief from the effects of low-priced imports on the U.S. market, but other business owners who also make a living in the Gulf Coast shrimp industry weren’t surprised by what happened to him and said docks such as his don’t qualify for payouts.
To collect relief, one must be either a fisherman who catches wild shrimp or a processor who peels and packs them, they said.
According to federal authorities, Blanchard is a dock owner and not a processor.
Whether Blanchard must pay out the $1.2 million, as well as $8,000 in interest for each month the bills are unpaid, depends on what happens with an appeal his attorney has already requested.
If Blanchard pays the money back, it would be redistributed among others in the shrimp industry.
When announcements of tariff awards were made last year, Shrimp Alliance officials got together with U.S. Customs, which collects the tariffs, and pointed out what they saw as potential errors or fraud in claims for payouts.
Two Florida fish houses notified the federal government immediately after they were overpaid because of an extra zero added to their check. Questions arose and have not yet been settled about whether the New Orleans-based Vietnamese American Commercial Fishermen’s Union properly received tariff payouts.
Paperwork issues resulted in authorities demanding portions of payouts back from some processors that have already been paid.
Blanchard is balking because authorities never warned him there was a problem after auditing his claim, he said. He also continues to question the definitions for eligibility defined by the International Trade Commission, whose decisions govern how payouts are processed.
If federal authorities deny his appeal, Blanchard said he will likely close his business.
Grand Isle Mayor David Camardelle said such a decision would injure the barrier island community as a whole.
“This would have a devastating effect on our community,” Camardelle said in a Friday telephone interview.
“We get 18-wheelers come off here 24-hours a day when the brown shrimp are running, and Dean Blanchard Seafood is one of the two leading shrimp buyers. Dean Blanchard lost everything because of Hurricane Katrina and he tried different ways to come back and put his business together. He used this money to put himself back in business and to help fishermen get their vessels back.”
Camardelle is already in the process of contacting federal representatives like Sen. Mary Landrieu to see if anything can be done to help Blanchard.
Interviews with trade attorneys and shrimp industry representatives indicate that Blanchard’s fortune will rest on how the U.S. International Trade Commission’s definition of a shrimp processor, or, to be more precise, “an affected U.S. producer,” are defined by the Customs Service.
John Williams, president of Southern Shrimp Alliance and a Florida boat and shrimp dock owner, put in claims for his boats, but not for his dock operation.
The question of whether a dock or any other packing and selling business could qualify, Williams said, is whether they “substantially added value” to the shrimp. In his case, he said, fresh shrimp were moved from boats to the dock, and then on to outlets that purchased them, with no appreciable change to the shrimp. Therefore the dock operation, in his opinion, did not qualify because there was no appreciable change to the shrimp, and no substantial increase in its value.
Traditionally, businesses considered processors use peeling machines to remove the shell from the shrimp and freeze shrimp, according to many in the industry. The ITC, in its ruling defining affected domestic producers, made note that specialized equipment is used in processing.
Blanchard believes he qualifies for payouts because his shrimp is substantially changed.
Blanchard said his product is substantially changed because he has crews removing heads from shrimp after he buys them. According to shrimp industry sources, removing the head leaves about 67 percent of the shrimp intact. Some note, however, that the price paid for the heads off shrimp tends to be higher.
Blanchard said he uses specialized equipment, a machine that sucks the shrimp out of the holds of vessels he buys from. The sucker, he said, loosens up the heads to make them easier for removal. Outlets he does business with that want their shrimp head-on ask that he not use the sucking machine.
“How can they say that’s not specialized equipment,” he said.
In its findings on the shrimp trade cases, the ITC said, “processing activities such as grading, machine peeling and deveining, all constitute domestic production.”
Blanchard maintains as well that the requirement by the state of Louisiana that he have a shrimp packing plant license is further proof that he is a processor.
Blanchard’s machinery, his attorney wrote in the appeal letter, indeed has specialized purposes.
Blanchard’s claim to being a processor was rejected by the American Shrimp Processors Association because he doesn’t use a peeling machine. He said the volume of water he needs to operate such a machine is cost-prohibitive on Grande Isle.
Even so, Andrew Blanchard, the Processors Association president — no relation to Dean Blanchard — said that the definition of a processor overall can be a bit iffy.
“We assume as American shrimp processors that we know who is processing shrimp and who isn’t, we know that amongst ourselves,” said Andrew Blanchard, owner of the Triple T and Indian Ridge shrimp companies in Chauvin.
“We know you are processing if you’ve got a peeling machine. That was a particular definition in the scope of that lawsuit. The difference between a boat and a processor was clearly identified so far as I know.”