of the shrimp which are imported into the United States enter in a processed form (mostly frozen), the domestic shrimp-fishing industry can be said to be producing an article directly competitive with the imported processed shrimp within the meaning of the definition of "directly competitive with" set forth in section 601 (5) of the Trade Act (quoted above). The second group of domestic facilities, which constitutes a second domestic industry, is the shrimp-processing industry. This second industry is composed of the facilities devoted to the freezing, canning, and breading of shrimp. 1/ This industry produces articles "like" and "directly competitive with" the imported shrimp within the meaning of the "like or directly competitive with" definition of the Finance Committee Report quoted above. Thus, domestic frozen shrimp is "like" imported frozen shrimp, domestic canned shrimp is "directly competitive with" imported canned shrimp, and so forth. There are good reasons for finding two industries in the instant investigation. Shrimp fishermen generally do not own or control shrimpprocessing facilities, and shrimp processors generally do not own shrimp boats. 2/ Facilities used and skills employed in the fishing and 1/ In some cases it is possible in a practical sense to carve out two or more industries from among processors. See, for example, Asparagus: Report to the President on Investigation No. TA-201-4 USITC Publication 755, 1976, pp. 7-8, in which an asparagus-freezing industry and an asparagus-canning industry were found. Such a carving out is not practical with respect to shrimp processors because of the tendency of many processors, especially those on the west coast, to perform two or more processing operations in the same facility and to compile financial data on a plant basis rather than by type of processing operation, and because of a lack of data broken down in the necessary way. 2/ Cf. Mushrooms: Report to the President on Investigation No. TA-201-10. ., USITC Publication 761, 1976, pp. 7-8, in which one domestic industry consisting of facilities devoted to the growing and canning of mushrooms was found, partly because about half of the domestic canners of mushrooms grew some or all of the mushrooms used in their canning operations. processing industries are very much different. Further, marketing procedures are substantially different, with fishermen selling most of their catches to processors, and processors selling primarily to retailers and restaurants. Finally, many processors, especially breaders, import shrimp (primarily in the frozen state), but fishermen do not import shrimp. Shrimp-fishing industry As stated above, we have found that increased imports of shrimp are not "a substantial cause" of serious injury, or the threat thereof, to the domestic shrimp-fishing industry. Since the Trade Act requires that all three of the criteria set forth in section 201 must be satisfied for there to be an affirmative determination (the three criteria are set forth in footnote 1 of p. 18, supra) and since we have found that the third criterion, the "substantial cause" criterion, is not satisfied, we will limit our discussion below to the reasons why this criterion is not satisfied. Section 201(b) (4) of the Trade Act defines the term "substantial cause" to mean "a cause which is important and not less than any other cause." Thus, a dual test must be satisfied: a cause must be both "important" and "not less than any other cause." Further, section 201(b) (2) provides that the Commission, in making its determinations, shall take into account all economic factors which it considers relevant, including (but not limited to)- (C) with respect to substantial cause, an increase in imports (either actual or relative to domestic production) and a decline in the proportion of the domestic market supplied by domestic producers. 1/ The Finance Committee Report explained (p. 120) the term "substantial cause" and described the decision-making procedure with respect to it which the Commission should follow in this way: The Committee recognizes that "weighing" causes in a dynamic economy is not always possible. It is not After considering all of the relevant economic factors, we find that increased imports, even if an important cause of serious injury or the threat thereof, are a less important cause than at least one other cause. Hence, we find that the "substantial cause" criterion is not satisfied. Perhaps the primary manifestation of any injury being suffered by the shrimp-fishing industry was the result of its inability 1/ A more detailed analysis of the meaning of the term "substantial cause" can be found in Wrapper Tobacco: Report to the President on Investigation No. TA-201-3 USITC Publication 746, 1975, PP. 4-7. in 1973 and 1974 to pass along sharply higher costs of production. Diesel-fuel prices doubled and, in some cases, tripled between 1973 and early 1974. Shrimp fishing is a fuel-intensive business--not only may the trawlers have to travel several hundred miles or more to the shrimping grounds, but the trawlers must drag large nets in the course of catching the shrimp. Information before the Commission indicated that costs such as fuel, ice, and packing as a percentage of sales increased from 37 percent in 1971 to 46 percent in 1974 before declining to 32 percent in 1975. Labor, insurance, and boat-maintenance costs also rose rapidly. For example, salaries and wages as a percentage of sales rose steadily from 28 percent in 1971 to 32 percent in 1975. While costs of production were increasing rapidly, prices (ex vessel) paid to shrimp fishermen were not increasing proportionately. Prices began trending upward in 1971 after having been relatively steady since 1968, turned sharply upward in mid-1972, and reached historic peaks in mid-to-late 1973. In 1974, prices fell dramatically to 1968-69 levels before rising to a new historic peak in August 1975. Indexes of U.S. ex-vessel prices (1967-100) rose from 104.6 in November 1970 to 230.6 in November 1973, fell to 132.6 in December 1974, and then rose to 232.9 in August 1975. The cause of the inability to pass along production-cost increases in 1973 and 1974 is attributable to various factors, including the level of imports. However, at least one of these factors was more important in this respect than imports. A principal cause of the rapid fluctuation in prices during 1973 and 1974 appears to have been the excessive inventorying of shrimp beginning in the third quarter of 1972 and the unloading of these inventories in mid-1973 and much of 1974. During 1973, U.S. imports of shrimp decreased by 27 million pounds, or by about 12 percent, from the 1972 level. Shrimp is perishable over time, even when frozen or otherwise prepared or preserved, and much of the inventory had to be liquidated. The reductions in inventories which took place between mid-1973 and the end of 1974, occurring as they did during a period of considerable uncertainty as to the future of demand, had a serious depressing effect on the prices of newly landed shrimp. 1/ The trend in the ratio of imports to consumption, which as indicated above is one factor which the statute directs the Commission to examine with respect to the question of substantial cause, remained relatively constant for shrimp during the period 1968-75. The ratio was 55 percent in 1968 and rose irregularly to 58 percent in 1972 before declining, again irregularly, to 52 percent in 1975. Thus, it is clear that imports are not taking over an increasing share of the domestic shrimp market. Further, during several years when the ratio of imports to consumption was actually higher than in the period 1973-75, there is no evidence that the domestic industry was being injured in the terms of the statute. This indicates that other factors probably 1/ In addition to the effect of changes in inventories, factors such as changes in domestic landings, prices of substitute goods, and marketing costs contribute to changes in ex-vessel prices. |