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May 6, 2020 TO: ASMI Board of Directors FROM: Hannah Lindoff, Senior Director of Global Marketing & Strategy RE: International Program Report

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May 6, 2020 TO: ASMI Board of Directors FROM: Hannah Lindoff, Senior Director of Global Marketing & Strategy RE: International Program Report DATE: May 6, 2020 TO: ASMI Board of Directors FROM: Hannah Lindoff, Senior Director of Global Marketing & Strategy RE: International Program Report The international program received a Market Access Program (MAP) funding award of $4,453,652 for FY21. The FY 2021 international program spend plan also includes $1,540,000 in Agricultural Trade Promotion Program (ATP) funds and $2,495,000 in matching funds, for a total budget of $8,488,652 to conduct marketing programs in nine regional programs across the globe. Included in this budget are ATP funds specifically set aside to fund activities managed by the technical program, communications program, and sustainability program. This budget reflects the broad diversification strategy that ASMI international embarked upon with the advent of ATP funding in 2019. The budget also reflects a five year spend plan for ATP. Although official confirmation is pending, we have received un-official confirmation that our proposal to extend ATP across five years rather than three has been approved. With the outbreak of a novel coronavirus first detected in China in December 2019, the ASMI international program began to deal with the effects of COVID-19 at the beginning of 2020. Shipments to China had already slowed substantially due to the ongoing tariff situation, but the extension of the Lunar New Year and extended shutdowns in processing facilities and ports sent ripple effects throughout the global supply chain and as early as late January, ASMI saw its first cancelled events. In February, ASMI welcomed the first ever millennial in-bound mission to Alaska, bringing buyers from the “next generation” to Seattle and Kodiak. Alice Ottoson-McKeen and Alysha Guthrie hosted the mission, which included buyers from the Netherlands, Germany, France, Ukraine, and Mexico, along with two US participants. While we had planned to welcome a participant from Hong Kong, the US travel ban barred his travel. Sales have already been reported, qualified trade leads gathered, and ASMI noted an emphasis on sustainability from all participants. On February 29th, Nicole Stangeland and Hannah Lindoff, along with five industry members, embarked on the ATP funded trade mission to Peru. The mission visited three processing facilities in the north of Peru, all of which eagerly welcomed the group, noting that their operations suffer from a roughly 30% reduction in productivity due to lack of local supply. The mission also arranged one on one meetings in Piura and Lima and extensively focused on regulatory issues. The US Ambassador to Peru and the president of the Peru Association of Industry (and former Vice President of Peru) attended the ASMI reception and pledged their commitment to working with the proper agencies to overcome regulatory hurdles in order to open the Peruvian processing sector for Alaska seafood. While the trip was rated by one participant as “The best mission I’ve been on in 15 years,” and in almost every sense exceeded expectations, it was overshadowed by news from the home front of the spreading COVID-19 outbreak, the postponement of the Boston show and a growing sense of unease. All participants returned safely to their homes on March 7th. A follow up trip from NOAA has been postponed, however, when the situation normalizes we anticipate progress. The list of events cancelled or postponed continues to grow, with the Seafood Expo Global (SEG) taking the lead spot as the most important and expensive ASMI event to enter the murky area of postponement. The Foreign Agricultural 1 ASMI International Programs Service (FAS) will allow ASMI to carry forward unspent MAP funds to the year FY 21. Thus, FY 21 may benefit from a potential surge in funding. However, if an event, such as a trade show, takes place twice in FY21, due to postponement from FY 20, the MAP funds that ASMI international spends on the show would not be a true surge in funding, but rather a wash, due to the costs simply moving from one FY to another. However, if said show cancels or ASMI does not attend due to an unsuitable date, the international program will then have the extra MAP funds to spend in FY21. Trade shows are only one example of the many unknowns in regards to unspent FY 20 MAP funds moving into FY 21, but we can assume that a notable amount of MAP funds will move from FY20 to FY21. In order to best allocate carry-forward MAP funds into FY21, the international program has asked the IMC to attend four online “check-in” sessions throughout the spring and summer, beginning April 21st, which would have been the first day of SEG. During these sessions, the committee and the OMRs will discuss market situations and needs. Through this correspondence, ASMI international will determine our strategy, looking for the most effective use of carry-over MAP funds. The international program proposes to provide a “supplementary budget report” to the IMC and BOD in late August when final MAP numbers are available and clearer pictures of market situations may materialize. A slight thawing of trade relations offers a glimmer of hope for an even playing field in years to come. Alaska product has successfully entered the China market through the new exclusion process. While imperfect, we can hope this small step is a harbinger of better trade relations to come. CANCELLED/POSTPONED MARKETING ACTIVITIES Activity Region Original Date Status Foodex trade show Japan March 10-12, 2020 Canceled Shibuya & Omotesando Women's Run Japan March 22, 2020 Canceled Chef Training Seminar Shenzhen China February 1, 2020 Postponed Chef Training Seminar Dalian China February 1, 2020 Postponed Chef Training Seminar Hangzhou China February 1, 2020 Postponed FHA Food and Beverage show SE Asia, Singapore March 31 - April 2, 2020 Postponed Thaifex Anuga trade show SE Asia, Thailand May 26-31, 2020 Postponed SIAL Show China May 13-15, 2020 Postponed Boston Seafood show, Mentaiko Booth Japan March 15-17, 2020 postponed APAS Brazil May 18-21, 2020 Postponed Salon de Gourmets SEU March 30-April 2 Postponed Alimentaria SEU April 20-23, 2020 Postponed Guinervau in-house trade show SEU March 16, 2020 Postponed Alaska Seafood Reception at US Ambassador SEU March 18, 2020 Postponed Alaska Seafood Reception Madrid SEU March 19, 2020 Postponed Young Chefs Competition SEU April 20, 2020 Postponed Princes Sainsbury Promo NEU April 20, 2020 Postponed Seafood Expo Global WEU April 21 – 23, 2020 Postponed Ethic Ocean Chef Contest WEU March 20 – June 30, 2020 Postponed ASMI International Program Report, Spring 2020 | 2 China Thiriet Promotion WEU March 15 – April 2020 Canceled Vici Surimi Roadshow WEU March 1, 2020 Postponed World Food Poland CEU April 21 – 23, 2020 Postponed GastroVision CEU March 12 – 16, 2020 Postponed Transgourmet Inbound Mission CEU July 13 – 17, 2020 Canceled CHINA MARKET UPDATE • China will lower import tariffs on products ranging from frozen pork and avocados to semiconductors this year, but tariffs for surging seafood imports will stay the same. This year, China will implement temporary import tariffs, which are lower than the most-favored-nation tariffs (MFN), on more than 850 products. By comparison, 706 products were taxed at temporary rates in 2019. For 18 seafood products on the temporary tariff list this year, all will continue to benefit from lower rates with no changes. Other past revisions -- such as earlier in 2018 and in late 2017 -- included lowering tariffs for some frozen shrimp products from 5% to 2%, as well as on imports of frozen salmon. Tariffs on US shrimp broodstock and fishmeal were lifted in September of 2019, however, as part of the first batch of tariff exemptions implemented by China. This spells only temporary relief but the text-only agreement of phase one of a trade deal suggests things are moving in a positive direction. • A Chinese company founded by an entrepreneur from China's oil and gas sector has launched what it says is the country's first privately financed pilot offshore salmon farm, which launched a 16 by 8 meter cage from a shipyard to test Atlantic salmon farming in the Yellow China Sea in Weihai, Shandong province in December. The pilot project is part of Neptune Blue Ocean Development’s plan to produce up to 20,000 metric tons of Atlantic salmon annually in the Yellow China Sea at offshore farms. Given rising demand for seafood, coupled with the swine flu which limited pork supply by 20% this year, China has been trying to prove it can farm salmon in its own waters. This trend provides more evidence of a greater shift toward the promotion and support of seafood consumption. • For now, fresh Atlantic salmon fillets served sashimi style account for the bulk of the 100,000 metric tons of China's imports, versus only about 20,000 in frozen imports. China’s Atlantic salmon import industry is starting to show signs of a slowdown. Major e-commerce retailers such as JD.com and Alibaba Group have muscled smaller distributors out of the market as they struggled with high packaging costs and the lack of dedicated cold chain storage. Overall, seafood e-commerce slowed to a growth of 22.9% and 398 million orders or CNY 16.9 billion, versus an increase of over 30% the year before. About a third of that was fresh seafood deliveries, and most of the biggest growth gains are now coming from smaller Tier III and IV cities, with the larger cities showing signs of maturity. Now, China should see slower levels of growth in these large cities, as the smaller areas will be the ones experiencing rapid growth. • Pollock block prices are set to stabilize in 2020 after three years of price increases.
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