GENEVA (Reuters) - U.S. measures targeting cheap imports of shrimp from India and Thailand are illegal, the World Trade Organisation (WTO) ruled on Friday, in the latest setback to Washington's efforts to tackle unfairly priced imports.

A WTO dispute settlement panel said a requirement by the United States on India and Thailand to post bonds to cover full anti-dumping duties on imports of shrimp violated trade rules.

The panel, confirming preliminary rulings from October, also backed a Thai complaint against a controversial U.S. method of calculating anti-dumping duties, known as zeroing, which has come increasingly under attack at the WTO.

The panel found the application of the bond to cover the full duties was inconsistent with anti-dumping rules, as was the U.S. use of zeroing to calculate anti-dumping margins.

"We therefore recommend that the United States bring its measures into conformity with its obligations under the Anti-Dumping Agreement," it said in reports on the cases.

U.S. Customs introduced a requirement in 2004 that exporters subject to paying anti-dumping duties had to post a bond covering the full amount if there was a risk of default.

Previously affected countries had to post a bond equivalent to only 10 percent of the duties.

India and Thailand argued the requirement to post the full amount was an excessive financial burden on exporters paying the anti-dumping duties.

WTO rules allow a country to levy duties on goods that are "dumped", or imported at a price below what they are sold for in the exporting country, if that hurts competitors in the importing country.

But there is much controversy about how such anti-dumping duties are calculated and implemented.

The full bond requirement was illegal because WTO rules do not allow an importer to counter dumping with specific measures besides anti-dumping duties.

Washington called the findings of the panel "mixed."

"The panel rejected many of Thailand and India's claims that an additional bonding requirement is "as such" inconsistent with U.S. obligations under the WTO Anti-dumping Agreement," said Gretchen Hamel, a spokeswoman for Trade Representative Susan Schwab.

EXPORTERS

The case affects Thai seafood exporters such as Thai Union Frozen Products (TUF), Charoen Pokphand Foods and Seafresh Industry.

It will also interest a range of Indian companies including Avanti Feeds, Uniroyal Marine Exports, Waterbase and unlisted exporters Devi Seafoods and Falcon Marine Exports. Thailand is by far the biggest supplier of shrimp to the United States.

According to the U.S. National Marine Fisheries Service, the United States imported $3.9 billion of shrimp in 2007, down from $4.1 billion in 2006.

In the biggest single category, peeled frozen shrimp, accounting for one third of the total, Thailand was the biggest supplier, with nearly one third of that type, followed by Vietnam, Indonesia and India.

Thai exported shrimp end up on the shelves of U.S. retailers such as Wal-Mart Stores (nyse: WMT - news - people ).

Total Thai shrimp exports rose about 10 percent in volume terms to 360,000 tonnes in 2007, but in cash terms fell to about 78 billion baht ($1.99 billion) from 84 billion in 2006 because of the strong baht and falling shrimp prices. The Thai shrimp association expects about 60 percent of this year's exports to go to the United States.

Last year another ruling from the WTO forced the United States to lift anti-dumping duties on shrimp from Ecuador.

(Additional reporting by Himangshu Watts in Mumbai, Viparat Jantraprapaweth in Bangkok and Missy Ryan in Washington; Editing by Marguerita Choy)

02.29.08, 12:57 PM ET

By Jonathan Lynn

Source: reuters