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Though Not Triggered this Quarter, Japan’s Frozen Beef Import Safeguard Still a Concern

Media speculation has surfaced in recent weeks about a possible increase in Japan’s beef import duties. The concerns were – and still are – legitimate, though no changes in these duty rates will come for at least another three months. In this article, we take a closer look at Japan’s import safeguard mechanisms for beef and pork and how they could affect U.S. exports to this critical market.

Following the Feb. 1 regulatory change that made beef from U.S. cattle less than 30 months of age (up from the previous 21 months) eligible for Japan, exports of U.S. beef to Japan have increased significantly. While this increase in export activity has been a great development for the U.S. industry, it did raise the possibility that Japan’s import safeguard mechanism might be triggered – specifically, the safeguard on frozen beef imports for the April 1- June 30 quarter. If this had happened, Japan’s duty on frozen beef imports would have increased from the current 38.5 percent to the upper limit of 50 percent that Japan has agreed to in the WTO.

Key points regarding this safeguard include:
  • The safeguard is triggered when imports during the quarter exceed the year-ago volume by more than 17 percent. For the quarter ending June 30, frozen beef imports totaled 77,775 mt – an increase of 8 percent over the same period in 2012. Had this total reached approximately 83,267 mt, the higher tariff rate would have been triggered and stayed in effect until the current Japanese fiscal year ends on March 31, 2014.
  • The safeguard applies to muscle cuts only – offal items, including hanging tenders and outside skirts which fall outside of Japan’s definition of muscle cuts, are not included in the calculations.
  • The totals used to calculate this safeguard include imports from all beef suppliers, with the exception of imports from Mexico and Chile that fall under specific tariff rate quotas.
  • The next safeguard trigger calculation will be for the quarter ending Sept. 30, with results available near the end of October.

A similar, separate safeguard exists for chilled beef imports, but this is a less-immediate concern for the industry. Since 2006, Japan has utilized 2002 and 2003 as the base import years for the chilled safeguard, recognizing the negative impact of BSE-related restrictions on imports of chilled beef. Frozen beef imports have surpassed pre-BSE levels, but chilled imports are still recovering. For the April 1-June 30 quarter, the actual import volume (59,812 mt) fell well short of the safeguard trigger of 74,339 mt.

Japan also has a safeguard in place for imported chilled and frozen pork muscle cuts, which is triggered when imports during a particular quarter exceed the average quarterly volume over the past three years by more than 19 percent. When this safeguard is triggered, Japan can increase the imported pork gate price from 524 yen/kg to 653 yen/kg, (roughly $2.38 per pound to $2.96 per pound). This safeguard has been triggered in the past – including in the early 2000s – when Japan was seeing large year-over-year increases in pork imports. But in the current environment, triggering the pork safeguard is unlikely. For the quarter ending June 30, the safeguard trigger was 222,289 mt while actual imports totaled 163,620 mt.

A common question regarding Japan’s safeguard system is, “If a safeguard is triggered by an increase in U.S. exports, does everyone’s duty rate increase – or just ours?”

If a safeguard is triggered, the duty rate increases on all imports except for those specific exceptions noted above for Mexico and Chile. So from a parity standpoint, the higher duty would have the same impact on – for example – Australian and New Zealand beef as it would on beef imported from the United States. But this would still be a negative event for the U.S. industry, given that the 38.5 percent duty rate is already quite high. Raising this duty to 50 percent – especially during a period in which the yen has been weak – would only increase an already-significant burden on Japanese consumers.

Japan’s import safeguards are likely to be a topic of discussion in the Trans-Pacific Partnership (TPP) talks, now that Japan has joined the negotiations. But for now they are a reality that Japan’s beef and pork importers and suppliers must live with, and an issue that USMEF will continue to monitor closely.