Time will tell whether the U.S. geoduck clam industry can absorb this new tariff and whether our company will survive.
On any given day, about 90 percent of farmed and wild geoduck clams are exported to China. The United States government recently placed tariffs on some Chinese imports into the U.S. The Chinese retaliated by placing a 25 percent tariff on selected U.S. seafood exports to China, including geoduck clams. To remain competitive, Washington state geoduck clam farmers, as well as Washington state harvesters of wild geoduck clams, will be forced to reduce prices 30 to 40 percent. This will have a direct impact on jobs, employee compensation and benefits, and the long term viability of the U.S. geoduck industry.
In our farm operation, harvested clams are transported to our shop and transferred to our distributor. This is where we calculate our sales price. The distributor takes the product to their plant for packaging to China. They add their handling and packaging costs, land and air transport costs, and a small profit to our sales price to arrive at a “landed” price in China — before Chinese taxes are imposed.
A key point here is that the tariff is placed on the pretax “landed” price, not the price the farmer or harvester earns at their farm or dock in the U.S. The Chinese take the pretax “landed” price, multiply it by the current 7 percent tariff, then by the current 10 percent value added tax, and then by the new 25 percent tariff. The cumulative effect of taxes on top of taxes is an overall tax rate just shy of 50 percent. In essence, the tariff is placed on top of all the packaging, labor and transportation costs to get the product to China as well as the current Chinese taxes.
Someone has to pay this new tax, and it won’t be our U.S. distributor, as their costs are fixed. Nor will Chinese importers, distributors or wholesalers, Chinese restaurants or Chinese consumers pay the tax.
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To remain competitive with Canadian, North Korean and Mexican geoduck clams that are not experiencing this tariff/tax increase, as well as remaining competitive with substitute products like Australian rock lobster, Canadian lobster and spiny lobster from across the world that are also not experiencing new tariffs, the U.S.- based geoduck clam industry will have to lower prices by 30 to 40 percent.
The first geoduck clam price reductions occurred July 2 when the Lower Elwha Klallam Tribe and Tulalip Tribes earned about 40 percent less for their product than they received the day before.
With taxes on U.S. produced geoduck clams approaching 50 percent, it remains uncertain how long the $100 million-plus U.S. geoduck clam industry can remain competitive. At risk are the rural-based jobs of a couple hundred shellfish workers and farmers, hundreds of native tribal and independent harvesters, as well as many businesses and farms.
A 30 to 40 percent price reduction in your main product would be hard for any business or farm to absorb. We will do our best to survive by cutting back on planting, curtailing growth and cutting employee compensation. Time will tell whether the U.S. geoduck clam industry can absorb this new tariff and whether our company will survive.