How I Learned to Stop Worrying and Love the License
It’s not true.
I am hating the process to get Kamui Whisky licensed to distill legally in Japan. It’s death by a thousand cuts. All the bureaucracy, all the nonsensical rules that are the occasional bane for a foreigner living in Japan, have come out in full during this process.
It’s hundreds of pages:
Where do I begin with the frustrations? I could probably write a whole newsletter ranting about the idiosyncrasies of getting a distillation license in Japan.
We had planned to submit the application at the beginning of last December. Over the prior year we had been in touch with the overseeing tax office, the authority that issues the license, to ask questions and build a relationship.
But the relationship started on the wrong foot.
Word had gotten out amongst journalists that we were starting a craft whisky distillery in Rishiri. When I say word had gotten out, it shouldn’t have been a surprise to me, I had talked about the idea on NHK Radio, Japan’s national tv and radio entity, on a program that has millions of listeners. Nevertheless, I was surprised at the interest the idea was generating amongst journalists. Journalists had never come flocking to other startup ideas I’d announced publicly, but for whisky, Kamui, the local office in Rishiri-cho was fielding frequent requests for an interview.
I declined them all. For quite a while. But the rush to get the scoop drove some journalists to keep calling. I finally relented. I said okay to the Hokkaido Shinbun, and agreed to a joint interview with Hono-san, Rishiri-cho’s mayor. It was published in Dec 2019. That was cool. The local team kindly bought us a few copies, made some clippings. I thought it was the end of things.
Fast forward a few months, we called the tax office to ask questions about the distilling license process. We were met with an ominous, “Oh, we’ve been waiting for you”. They had read the piece in the Hokkaido paper, heard about our grand plans, knew our timeline, and wondered directly to us, “After reading the paper, we were surprised that you hadn’t discussed with us about the licensing.” Oops. Not a good start.
Over the next 6 months, we set about, in the Japanese way of things, trying to build a good relationship with the tax office. We’d regularly call and ask questions, and update them on our progress. The small “license team”, led by Michi, a gem of a man, a super talented business planner, all flew up to meet the tax officials in person. The idea was to fully go the Japanese way and build trust step-by-step, even if the steps we took were time consuming and seemingly unneeded.
The official hauled three huge spiral notebooks to the meeting. Throughout the discussion he would sift through the pages referencing all the detailed tax and licensing rules. There was a desire to be precise. On the other said of the table, we were trying to sell the dream, our plan to create jobs, to build a meaningful business that would benefit the local area. And by the end, we thought that it had went well, This was despite our two toddlers having taken off their shirts, their shoes and socks, and one got all the way down to his diaper, and ran around the quiet tax office throwing around pieces of clothing. We still thought we were building a relationship of trust. The official walked us all the way to the main entrance, during which we’d even managed to extract a couple of subdued smiles and a bit of a chuckle.
We flew back to Tokyo.
We then kept up with the intermittent calls as we chipped away at the mountain of requirements.
The preparations seemed to be endless. Always something else to get ready. In order not to let thing drag on, we set ourselves a deadline of early December 2020 to submit the application. As the day approached it was a flurry of activity for Michi and I. We went through the checklist multiple times, painstakingly making sure we’d prepared everything. We arranged a meetup to go through everything in person, and review that we were ready. We felt we were, and were excited for the trip we’d booked to fly back up to Hokkaido the next week to submit the application in person. There was no requirement, or particular need to do so, but we thought a personal delivery, a personal appeal, might help smooth the approval process.
As corona cases were on the rise in the city we had to travel to, we wondered if it was a good idea to go. To be prudent, Michi called the official to check what they thought. The response was curt, “I can’t stop you. We will meet you, but it is not necessary to come.” After a bit of clarification, just as Michi was about to say, “Thanks” and end the call, the official continued, “And by the way, are you a registered official of the company?” Michi, “No.”1 “Then don’t call back. I can’t speak with you about the license, only an officer of the company, or a specialist lawyer.”
I’m the only registered official of the company in Japan at the moment. And with my language skills, my lack of ability to deliver nuance, I wouldn’t be a good person to handle the delicate minutiae of the application with serious officials.
So we had to go and find this specialist lawyer. And, of course, we were frustrated. We cancelled our flights, ate the loss, and spent quite a few sessions nurturing our wounded pride.
This is probably why there is not quite a craft spirits boom yet in Japan.
The barrier to entry is too difficult.
Many spirit startups “borrow” a license from an existing sake or shochu distillery, borrowing the still, and the expert, and make their own brand using someone else’s facilities. Another way people get around the licensing process is to buy a bankrupt, older sake maker (sake and spirits need different licenses, but many sake makers had both) who had a license at a distressed price.
Whether it is comes from a pure startup spirit, naivety, or a deep masochistic tendency we are trying to get a license from scratch.
I’ve learned only a few people have done it. From their stories, I’ve heard it was similarly frustrating, taking a lot more time than they’d expected. But they were all Japanese. Being a foreigner, I can multiply their level of difficulty by 3.
This is why we will be only the 8th whisky distillery in Japan.
Another one of the quirks about the distillation license, is that the license to distill is attached to the land, not to the company. This must be a holdover from the Edo era when the licensing processes were likely created.
What that meant for us is that we can’t go with our original plan to age our barrels in the gyms of unused middle schools. Remember that middle school we were offered to buy?
We were planning to use the gym to house hundreds of barrels.
There was another unused school further down the coast. We were thinking to use that too. Both of these abandoned schools were great, meaningful spaces with a backstory, available at a superbly attractive price. But, no, scrap that.
It was only late in our preparations that we were told about this land-specific rule - that as soon as a barrel leaves our land taxes are applied, we would need another license that covers the school gym. We were told it would be “complicated”, in that Japanese understated way of really telling us not to do it.
Our land is beautiful, but it is not so big.
We had to scramble and figure something else out.
We thought about buying the land across the street. That way we could have some continuity to the facility. It would also make the movement of barrels easier operationally. It’s just across the street right? But no, even going 10 steps across a public road, means we’ve left the land that was granted the distillation license. Not possible.
After many more iterations our architect is developing a workable plan. But, it’s finding these detailed rules out so late, not all at once, learning the nuances of what is possible and not, in small, excruciatingly infrequent drips, like a faucet that isn’t completely turned off, not getting all the information at once in a free flow, has been painful.
My frustration threshold has been breached.
Another one of the forms requires us to list up all the equipment we’ll use in the process. Straightforward enough. From the large (stills) to the small (thermometers, computers, refrigerators). We had that all ready to go, nicely, and thoroughly done. But once again, right when we hoped to officially submit the application, we were told we needed more. We need official quotes, and contracts from vendors.
For example, we need to show a contract for the kei-truck we plan to buy, even though we have no plans to buy one for months. Where do you get that? Do we have a quote for the brooms? What computers will we use? How about the refrigerator? Does the quote have the stamp, to make it official?
For every piece of equipment on the list.
After months of rigorous work polishing every part of the business plan, each application page filled out in just the right way, learning that I had to go back and get contracts and quotes for such small pieces of equipment, dozens and dozens of them, even for equipment that we didn’t need to buy yet, has sent the hand of my frustration meter firmly, angrily back in to the red.
Anyone have a quote for yeast?
That’s the current one I’m trying to pin down. And, of course, there are more requirements: I need to get letters of commitment that we will always have access to the supply.
In this age of constant change, in this internet age when you can source nearly anything from behind a computer with just a few minutes of work, it seems deeply incongruous that we need long-terms letters of commitment from specific farms2, cooperages, vendors, etc…
Thank you all for the counseling session!
I’ve been able to get some frustrations off my chest.
There are sure to be many, many more aggravations during this licensing process. They might just find their way in to a future newsletter. But now I’m feeling guilty. I’m having too much fun writing this article. I need to get back to the pain of filling out very detailed forms, to learn to love this license, ride it in to the glorious sunset.
He’s part of the startup project team, waiting until the business is fully launched to potentially make things more official.
Another clue as to when these licensing laws were created; in a different era when supplies of grain were inconsistent and unreliable.