Japanese Meat Seller Hogtied in Red Tape : Trade: Bureaucrats say they’re holding up sales of U.S. beef in vending machines because of concerns about health.
An extraordinary scheme to bypass Japan’s inefficient distribution system by selling inexpensive American beef from coin-operated vending machines appears to be headed for the bureaucratic Deepfreeze.
Haruhiko Saito, a meat-selling entrepreneur in this seaport famous for prime “Kobe beef,” announced with considerable fanfare early last month a plan to import seasoned beef from a San Diego meatpacker and sell it from specially designed vending machines.
But local health authorities refused to give Saito a permit to sell his packets of frozen sirloin and sliced sukiyaki beef. Warning that there is no precedent for vending-machine meat sales, they have requested guidance from the Health and Welfare Ministry in Tokyo, where an official said the matter is under study.
In the ritualized parlance of Japan’s powerful bureaucracy, “under study” is often a euphemism for “no.” At the very least, it means months and sometimes years of deliberation.
Saito suspects that a cartel of trading companies and meat distributors, with a vested interest in controlling beef imports, is behind the red tape delay. He said his lawyers are preparing to file a complaint with the Fair Trade Commission, the agency that enforces Japan’s anti-monopoly law.
“We can’t help but feel that the people who have colluded for years on beef imports are now using the question of health standards to hogtie us,” Saito said. “They don’t want us to get a head start before the market is fully liberalized next April.”
To settle a long simmering U.S.-Japan trade dispute, Japan agreed to replace its quota system for beef imports with a 70% tariff, to be lowered in phases over several years. Saito had hoped to take advantage of the first stage of the liberalization, which began April 1 with quotas being lifted for seasoned or marinated beef.
Despite the 70% tariff, Saito figured he could sell imported beef at nearly half the cost of comparable domestic beef, if he eliminated the middlemen between him and the consumer. His price for seasoned sirloin is about $11 a pound.
Saito, 53, whose father founded a company distributing Kobe beef in 1935, struck out on his own 17 years ago with a plan to import American beef offal, or waste parts, which were not restricted by quotas. Visiting the United States in 1973, Saito said he watched Reggie Jackson hit a home run when the Oakland A’s were playing in Yankee Stadium and was inspired to name his new enterprise “Jackson Co.”
Earlier this year, Jackson Co. signed a deal with Hamilton Meat Co. of San Diego, which will prepare and package meat specially for the Japanese market. The Kobe-based joint venture, Hamilton Japan, was poised to install 1,000 vending machines by December at gasoline stations, railroad stations, hospitals and convenience stores across Japan. Projected sales for the first year were $7.9 million.
The strategy was to establish distribution channels before the quotas are lifted for all imported beef in April, 1991. In three years, annual sales would reach $66 million, said Naoki Sakai, Hamilton Japan’s vice president.
But only one vending machine has been delivered from the factory. It stands empty outside Hamilton Japan’s small office, which is festooned with red, white and blue banners and decorated with a huge poster depicting a slab of American beef. The machine bears the slogan: “Kobe beef, raised in America.”
“Japanese consumers have the false impression that American beef is as tough as sandals,” Saito said. “We aim to correct that.”
Saito said he has taken every precaution to make his product safe. The machines are equipped with an emergency device that stops operation if the temperature inside rises above minus 4 degrees Fahrenheit.
“Why is it they can grant permits for vending machines to sell ice cream and box lunches, and not frozen meat?” he asked. “The meat is going to be cooked and prepared before anybody eats it, which will pose far less of a health problem than food that goes directly into peoples’ mouths. Something is very strange with their logic.”
Nobuhiro Furumatsu, an official in Kobe’s public health department, said Hamilton Japan did not apply for a health permit until after it announced its vending machine scheme in a media blitz. City officials were perplexed, having never heard of meat being sold in a machine. After receiving complaints from more conventional meat sellers, they decided to turn the matter over to the central government in Tokyo.
“We’ve been contacted by representatives of the local beef industry asking that we ensure that health standards are strictly enforced,” Furumatsu said.
How to monitor health standards in unmanned vending machines is a vexing problem, said Shunsaku Minami, an official in charge of studying the matter at the Health and Welfare Ministry’s dairy and meat hygiene department.
“Up until now, there has always been somebody at the place of sale to oversee the conditions under which the meat is sold. We need to find out how hygienic standards are going to be kept under control,” Minami said. “I’m afraid I can’t tell you how long this will take.”
Once the ministry drafts guidelines granting permits for meat sales in vending machines, Hamilton Japan will need to apply for separate meat retailing permits in each municipality where it intends to install the devices, Minami said.
Saito said he believes that a group of trading firms that once made up the Beef Importers’ Council are secretly lobbying against his plan. Last July, the Fair Trade Commission branded the council an illegal cartel and ordered it to disband. The commission ruled that the council had colluded to rig bids on sales contracts with the quasi-governmental Livestock Industry Promotion Corp. but imposed no penalties.