August 20, 2002

Given Japan's methodology for imposing beef safeguards and the reduction in Japanese beef imports since late in 2001, any safeguard action on beef imports appears extremely unlikely in the near term, says a new USDA report. However, those same factors point toward Japan having to evaluate the appropriateness of imposing a beef safeguard by mid-2003 as Japan's beef imports move back to traditional levels.

There was considerable recent speculation of a safeguard action by Japan on beef imports coming on the heels of the recent re-imposition of safeguard duties for pork.

In late 2001, Japan's beef market was dealt a serious blow when several cases of bovine spongiform encephalopathy (BSE) were detected in domestic dairy cattle. Actions by Japanese officials did not calm consumer fears and beef consumption fell sharply, as much as 50% percent, taking import demand down with it. Beef consumption has steadily regained lost ground and has reportedly returned to near year-earlier levels.

Japan's monthly import volumes, however, remain below those of recent years. As beef supplies in storage, primarily frozen beef, are worked down to meet rebounding consumption, monthly import volumes are expected to return to near traditional levels.

Unlike the safeguard system for pork, which is based on the total of all pork and pork product imports, Japan maintains two separate import safeguard systems for beef, one for fresh/chilled imports and another for frozen beef imports. As is the case of pork, cumulative, quarterly import volumes during the April-March Japan fiscal year are measured against a calculated safeguard level volume to determine if import volumes in the period under review exceed the safeguard level.

When current year, quarterly period imports of either product exceed the comparable prior year's volume by 17%, the government of Japan may apply a higher tariff rate until at least the end of the current Fiscal Year. If the government takes such an action, beef import tariffs would rise from the current 38% rate to a 50% rate.

Japanese beef imports for the first quarter of their April - March 2002-03 fiscal year were 54,328 tons of fresh/chilled beef and 57,811 tons for frozen beef. These volumes were sharply below the first quarter import triggers, 107,947 tons for fresh/chilled beef and 109,129 tons for frozen beef.

Given this slow start to cumulative totals, it is extremely unlikely that import volumes in the next quarters of the current Japanese fiscal year will trigger safeguards. But these low first quarter import volumes (the lowest first quarter volumes since at least 1993) establish the starting points for setting next years trigger levels.

The trigger for April -June cumulative fresh/chilled beef imports will be 63,564 tons, that for frozen beef will be 67,639 tons. With beef consumption approaching pre-BSE detection levels, it is difficult to imagine beef import volumes in Japan's 2003-04 fiscal year not exceeding trigger levels as early as during the first quarter (April - June, 2003.)

For frozen beef, a return to traditional pre-2002 monthly import volumes could result in reaching the trigger level in just the first two months of the first quarter. Even in the unlikely event that a first-quarter action could be avoided, the cumulative nature of the safeguard mechanism will in all likelihood trigger action in the following quarter.

The entire report is on the Internet at http://www.fas.usda.gov/dlp/IATRs/2002/japbeef.pdf.