Zhang Lian has 270 tons of frozen Brazilian beef on a ship steaming toward Shanghai that he may not be able to get through customs when the vessel arrives next month.
Zhang’s Shanghai Yadongsheng Import-Export Ltd. trades $200 million of meat annually, part of the global supply chain that keeps China fed. China’s decision to halt imports of Brazil’s meat until authorities are sure it’s safe has left Zhang with some worried customers.
"It’s a bad situation,” said Zhang, an import manager at Shanghai Yadongsheng, which is called ADP Shanghai in English. “We’re telling customers who ordered those containers to be patient. We are advising new customers to avoid ordering Brazilian beef for the foreseeable future."
Brazil is the world’s largest beef and chicken exporter, accounting for almost a fifth of global exports and its investigation into the possibility that some of that food is tainted has hit importers, shippers, food processors and customers around the world.
Zhang’s company has 10 containers of the meat on the high seas in a Hamburg Sud Group container ship that is due to arrive in Shanghai by the end of April. The meat is destined for supermarkets and restaurants, but if the situation isn’t resolved in time, it will have to be destroyed.
The crisis arose after Brazilian authorities announced on March 17 they’re investigating evidence food producers bribed government officials to approve the sale of spoiled meat. Prosecutors said some sausages and cold cuts contained animal parts such as pig heads, and that there were cases where cardboard was added to meat products or acid used to mask the smell of tainted meat.
It takes a month or more for meat from Brazil to reach Asian ports, so cargoes already loaded are now in limbo. China, including Hong Kong, is the biggest export market for Brazilian meat, buying about a third of the $5.5 billion of beef shipped from Latin America’s largest economy last year, according to the meat exporters group Abiec.
Hong Kong said on Tuesday that it has also temporarily suspended the import of frozen, chilled and poultry meat from Brazil. The city is a major transshipment point for meat and other goods into China.
Cofco Meat Holdings Ltd., a listed unit of China’s state-run food giant, received news of the ban on Sunday and called its supplier in Brazil on Monday. Cofco told the supplier not to ship the Chinese company’s order, said Li, a woman in the company’s beef import division who only gave her family name. She said they don’t have any containers stranded at sea.
She said they’re not canceling the order until it is clear how long the dispute will last. She said the government communicated that it is currently investigating the situation and that nothing wrong has been found yet. Cofco Meat sold 107,200 tons of imported frozen meat in 2015.
Zhang said a government order told his company that from March 19, China customs should stop accepting all Brazilian meat imports for inspection, and cargoes already accepted for inspection should not be opened. Importers can choose to leave refrigerated containers plugged in at the port until further notice.
In Brazil, the nation’s biggest meatpackers are trying to limit damage from the probes. Food giants JBS SA and BRF SA took out full-page newspaper ads and paid for prime-time television spots to reassure local consumers that their meat is safe.
Police Chief Maurício Moscardi Grillo said Friday that two JBS executives and three at BRF were being probed. Court documents subsequently showed one JBS and four BRF employees as being under investigation. JBS said neither it nor its executives are the subject of allegations about the violation of food-safety or product-quality standards, and that the probe is focused on the federal meat inspectors.
“While one JBS employee who works at one of our processing plants has been included in the investigation, allegedly due to his relationship with federal inspectors, he is not an executive and does not play a strategic role in our company." Cameron Bruett, a JBS spokesman, said in a statement. "JBS is not accused of selling tainted or rotten meat, no JBS products or JBS brands were associated with the product tampering reported by the media and no actions have been taken against JBS executives or managers.
Brazil’s President Michel Temer tried to reassure export customers by hosting an all-you-can-eat steak dinner on Sunday for ambassadors of major buyers. The Chinese envoy sat next to him at the restaurant.
But food scares are easier to start than stop, especially in China, which has a history of scandals over tainted food. Sun Art Retail Group Ltd., China’s largest hypermarket operator with 400 outlets, said it has already removed Brazilian meat products from shelves. In Hong Kong, AS Watson Group’s PARKnSHOP chain of supermarkets, one of the largest in the territory with 300 outlets, said on Wednesday that it has also removed products from shelves and offering refunds or exchanges to customers.
Brazilian meat may not be so easy for customers to identify. One importer, whose suppliers include JBS, said Brazilian beef tends to be about 10 percent to 20 percent cheaper than other imports, so is mostly sold to factories for food processing. The fresh steaks sold in supermarkets and restaurants are generally not from Brazil, he said.
In a downtown supermarket in Shanghai, the imported fresh beef offered comes from Australia, New Zealand, Spain and Canada. Those countries stand to benefit from Chinese demand if the ban on Brazilian meat isn’t swiftly resolved.
Zhang said ADP Shanghai has a limited amount of time for the ban to be lifted or it may be left with a spoiled cargo. If the cargo is blocked by customs, it could be stuck in a special bonded warehouse for cold storage, with the supplier racking up fees that could end up costing more than the meat.
Chilled meat needs to get from meatpacker to consumer in about 70 days and meat shipped from Brazil uses more than half that time at sea, according to Asian shippers. Inspection times at the receiving port are usually four or five days, but can take two weeks for a thorough examination. Agricultural products that do not pass customs inspections are typically burned at the port, the shippers said.