Term Paper: Exporting Spirits to Japan: Politically

Pages: 8 (2217 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Economics  ·  Buy This Paper

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[. . .] 4

Of the companies represented, 25.4 billion yen consist of beer, while 1.4 billion yen is a local confection, Shochu. The remaining 5.2 billion yen are a combination of spirits, wine and beer, the category that would describe the import under consideration, whiskey.

Company Name

Food Sales ($ Bil)

Main Product

Asahi Breweries

Beer

Kirin Breweries

Beer

Suntory

Spirits, Wine, Beer

Sapporo Breweries

Beer

Takara Shuzo

Shochu

SUM (ABOVE) 32

EXPORTING OUTLOOK

In 1996, the European Commission complained to the World Trade Organization that Japanese liquor taxes discriminated against alcohol importers. At the time of the complaint, the tariffs on alcohol imports were levied as follows:

Shochu A (25o): Yen 6,228

Shochu B (25o): Yen 4,084

Whisky (40o): Yen 24,558

Brandy (40o): Yen 24,558

Spirits (38o): Yen 9,927 (gin, rum, vodka)

Liqueurs (40o): Yen 8,219

Japan's taxation structure on liquor had been challenged previously in 1987 by a General Agreement on Tariffs and Trade (GATT) disputes panel, with modifications made in 1989 and 1984, yet taxes continued to be levied at an inordinate rate until the WTO decision in 1996. Although the WTO findings were initiated by the European Commission, they would later also pertain to the United States and Canada. In a press release issued in December of 1997 by the Distilled Spirits Council of the United States (DISCUS), the WTO ruling determined that Japan had to eliminate its discriminatory tax structure by February of 1998, a timeframe of fifteen months. The new structure was estimated to save the United States $95 million annually.

U.S. exports to Japan average $90 million annually, with Japan being the second largest market for U.S. distilled spirits products. The United States, therefore, has a significant stake in the financial consequences of exporting alcoholic beverages to Japan. The leading export is bourbon, which is favored by young Japanese businessmen. It is estimated that the elimination of tax discrimination (a 58% decrease in liquor tax on bourbon alone) will allow the U.S. To double its share of the Japanese market. Japan also agreed to eliminate tariffs on all brown spirits (including whisky and brandy) and on vodka, rum, liqueurs, and gin by April 1, 2002. The following table describes the changes that Japan agreed to make:

(Rates in yen per kilolitre per degree of alcohol)

30 Sep. 1997

Oct. 1997

May 1998

Oct. 1998

Whiskies

Spirits

(e.g. rum, gin, vodka)

Liqueurs

Shochu A Shochu B

Source: U.S. Trade Representative, Office of the President, Washington, D.C., USTR Press Releases, http://www.ustr.gov

The complete text of the U.S.-Japan Agreement on Distilled Spirits is available from the Trade Compliance Center's web site at http://199.88.185.106/tcc/data/commerce_html/TCC_Documents/JapanAgreementonDistilledSpirits.html.

While domestic producers are able to satisfy specialty markets, large chain restaurants and supermarkets will not be able to acquire large volumes through domestic suppliers. The regulatory and economic environment is poised to support growth in U.S. exports of whiskey and distilled spirits. With supermarkets obtaining liquor licenses, tariffs being reduced or eliminated, and the Japanese economy improving, the outlook is positive for this growing market. The United States has the advantage of being able to be cost competitive while being able to supply large quantities of quality product in a consistent manner.

Useful tips for exporters include:

Present "meishi," or business cards at each new introduction. Personal information should be contained in Japanese on the back.

Note that in Japanse, "hai" (yes) may be meant to say "I understand," not "I agree."

Use metric measurements.

Refer to the USDA FAIRS (Food and Agriculture Import Regulations and Standards) Report for Japan for information on laws, labeling, packaging, procedures and regulations, available at www.atojapan.org/market.html.

Tariff rates in Japan are calculated on a CIF basis. Note that Japan adds a 5% consumption tax to all imports.

Provide a list of product ingredients to Japanese buyers. U.S. approval may differ from Japanese approval.

Double check any remaining questions with the Agricultural Affairs Office in the U.S. Embassy, Tokyo at:

Works Cited

APEC 1995 Osaka Official Information, Background to and Outline of Economic Measures." The Ministry of Foreign Affairs, Japan. http://www.mofa.go.jp/policy/economy/apec/1995/issue/info6.html

Japan Export Issues."American Express Small Business Resources. http://home3.americanexpress.com/smallbusiness/resources/expanding/global/reports/11135020.shtml

Ostrom, Douglas. "U.S.-Japan Trade Relations: Bilateral vs. Multilateral Options." Japan Economic Institute of America Report. No. 43. November 14,… [END OF PREVIEW]

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