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The China Trader - Julian Sobin interviews with Murray Berger and Bob Boulogne
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The China Trader - Julian Sobin interviews with Murray Berger and Bob Boulogne
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The original documents are located in Box 373, folder "The China Trader - Julian Sobin
interviews with Murray Berger and Bob Boulogne" of the U.S. - China Business Council
Records at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 373 of The U.S. - China Business Council Records at the Gerald Berger R. Ford Presidential Library
I am Julian Sobin here in New York with Murray Berger of SEabrook
Foods, Carnation.
AUG 1 9 1977
Well, Carnation is one of our divisions.
Does that mean Sarnation milk?
Carnation Sea Foods we're a trademark licensee of the Carnation Milk
Company and we've had the rights to use the carnation label fbr over
20 years on Seafoods.
The Carnation label that we all know.
That's right.
Like Carnation condensed mild.
That's it.
Isn't that interesting. Someone once told me that Carnation milk
was the best cheapest, whole, protein whole food available to the
Vietnemese during the war, for example.
Well that's the way the Carnation people feel about it. It was and
its great value and also great protein.
As-a matter of fact the guy, a gentlemen, a Chinese genelemen who
used to live in Boston, Massachuseets I think told me some years
ago that he was the sole agent for Vietnam during part of the war
and lived in Saigon. His name was Albert Lee.
oh, I know Albert very well. I met him on my first trip to China
And I said to him, how do you prove that it was all these things
and I remembered he opened his shirt and he showed me an enormous
hunk of jade that he wore around his neck and he told me this was
FORD
all his wealth.
In the jade.
GERALD 8 LIBRARY
He showed it to me in Canton, Chima and all his wealth reaped in the
harvest of the Vietemenese war.
It's surprisin about jade that the Chinese wear around, or on a
chain, how they feel that the warmth of their soul is in that jade
and for jade, I've been told that it has to have a soapy feeling and
it changes a bit, the feeling changes as their personaloity changes.
It cleanses them?
I would hope.
Maybe. I think it corrupts them in some ways, Doesn't it. It's
fascinating. So what, well Seabrook Foods and then you sold Seabrook
Foods,
We sold the company to Spring Mills in 1973 and we now are a division
of Spring Mills.
Spring Mills became ** one of the largest cotton textile mills
Synehetics, polyester, the largest sheet producer in the United States,
to my knowledge.
Only the name Spring Maid, I guess that's probably the name most American
people know.
That's their brand name. That's right.
They're ***** sjeets and pillowcases.
Pillowcases and they're also in comforters.
I remember Colonel Springs flamboyent advertisement which I alwars
was told he devised bimself.
He did, he was the advertising agency for those ads and they were
probably the first riske ads, the first ads that got people wondering.
I thin the first one was a buck well spent on a Spring Maid sheet and
FORD
it showed and Indian laying on the sheet.
GERALD'R
LEGARA
Pretty provocative for penthouse these days.
They wouldn't mean much today, but 25 years ago it really
on shure. They were pretty avant garde. How come you. What a curious
marriage. Textile business and the food, business.
Well, they weee looking for a business that would give them a better
return on investment and they did a lot of investigating of all in-
dustries and they got down to the food business and then investigating
the food business they came down to two firms, one in the more or
less, the novelty or speciality field, snack field, I guess that's
the best way to describe it, and Seabrook in the frozen food field
and we won and we were very pleased to sell our business to them be-
cause they're fine, fine people.
I know they are. Do you have any real
with them?
Yes, we find that merchandising food is the same as merchandising
textiles, it works and we have gained a lot of knowledge from them
in better planning.
Have they done business in China, Marty?
Yes, I, on my 2nd, no, I guess it may be 3rd trip, I've been there
8 times, I bought the first gray goods to come into the United States
for Springs. The purchase was made for them and since that time they
have been dealing in gray goods and soap products.
But they do that themselves now or they send their own people.
Yes, but everytime I go to China I do represent them and I'm either
with one of their representatives from the textile or by myself,
Are you viewed as the current expert? I'm not being facious now of
the group, let us say.
I don't know how much expert I am, but I would say that when a question
comes up regarding trade with China, I am consulted.
I think you're pretty expert. I always remember from you, you attended
FORD
the very first fair attended by Americans.
That's right.
a IBRARY QERALO
In the spring of 1972 and I remember how impressed I was of the fact
Berger -4-
that you were really the largest, you were the food buyer weren't
you.
Well, we* were the, I would believe at that time and I know we were
the first American food company to be invited to attend the Fair and
I made the first food purchase which happeded to be shrimp.
Frozen shrimp.
That's right. Famous product and you are famous for it. You made
it famous, I guess.
It's been a long, long way back, I guess if you figure 3 years back
is a long way.
It's a long way in Chira trade and a relationship isn't it.
It's strange.
You're an old friend arent you, Murray.
I feel that I am, yes because I respect the Chinese and their methods
of doing business. I remember the first trip coming back on the train
from Canton, Quantow to Hong Kong, you and I sat next to each other.
I remember it too.
And you were telling me about your visit to Peking.
That's right I had just come from Peking. You came with Louis Klar
of Fortune Magazine.
That is correct.
GERAID
I remember is very well.
And he wrote up our stay in China.
I didn't admire his article very much but I remember him writing it
up. In any case, well be that as it may, there's a lot of water over
the dam. Is the Chinese business a significant part of your business.
No, it isn't in dollars and cents or profit it is not significant but
Berger -5-
it is important.
And you as the head of the company to go to China, that's not
too burdensome, tol demanding on your time.
No, I don't find it's been too burdensome. I've been averaging
two trips a year. I don't just go to China when I make these trips.
I'mvisiting other countries in the far east. As a matter of fact,
I just finished a five week trip which encompassed Australia, Seylon,
Singapore, Phillapines, Korea, Hong, Kong, of course, Japan and then
China. So China was a part of it and I like to make it a part of
it because something draws you back to China.
I know it does. What got you there the first time, do you remember.
You mean how did I get to Chiaa.
How did you get there and what drew you to it, to want to go there?
Well, I started getting interested in China actually 4 to 5 years
before we had any form of detente with China, that is before President
Nixon made his first visit. What drew me to China was their coast
line and the reason I am in primarily the seafood industry as part
of our food business, that's the business that I began in and merged
into Seabrook and
Although there was something that preceeded Seabrook.
on yes, I had started, no not family, I had started a business in
1956 where by taking the remnants of a company that had gone into
bankrupcy I inherited the Carnation label which I had talked aboutory
before and we began a company called Oceans of the World.
GERALD
Oceans of the World.
That's right and we began developing the Carnation label and competing
against the major brands in the United States and then in 1969 I came,
actually 68, I came to a crowsroads as to what to do with the business
whether to go public or merge and I found a company on the American
excahnge called at the time, Seaman Brothers, which was an old line
wholesale grocer that also owned two frozen food companies in the
vegetable business and my way to go public was to merge my company
into them,
An alread public company
And 1 then became the president of Seabrook Foods which we changed
the name to Seabrook Foods.
So you really kind of took them over. Is that it?
Well," I wouldn't use that as the statement. Lᵇt's say we got
together; I became the leading stockholder. I had the most stock
and we went from there to grow from a forty two million dollar a
year company to a ninety five million dollar a year company when
we sold our business to Springs and so thats how we gotz there.
How big are you now?
About a hundred and twenty five. million dollars out of Springs
550 million dollars. We're a part of it.
How are you faring with the big company?
I like it. Well, I enjoy the people I work with. They are good
solid people as I mentioned before
don't
Is that partly because they know anything about your business
No, they have learned about our business. They have an interest
in our business.
FORE GERALD
Are they putting money into your business.
No, no as far as interfering very, very I won't even say at all because
we cooperate. It's a form of cooperating and when you do things that
way
I've had a similar experience there.
Berger -7-
I'm aware
That I'm familiar with.
Sure. One thing I do find of the need to worry ** about financing
which was always a big part.
But you care just as much I bet you even though
on surely. I don't have to spend the time with the banks.
I see what you mean.
Or being involved with the stock market. Its given me more time
to get into management of my business and less into finances which
is good buy you asked
Are you a division or a subsidiary of what
We are a divisionof Spring Mills. Getting to 6hina, about 1968,69,
I started taking an interest in China because we were in need of raw
product which is primarily shrimp, thats when we had, before we even
merged with Seabrook and I realized that China had to be one of the
lærgest producers of fish and seafoods in the world because of their
coastline. Then through further investigation, I found that they were
the largest producer of fish and seafood in the worl.
Is that right?
Actually most of it was consumed by, at that time, 800 million people,
FORD
I guess what is it, 900 million today.
Wbo*knows. Something like that.
I began, I also felt that we would have to begin* doing some business
with China something would have to happen, you just can't ignore 800
million people, so I got involved with the Canadian govenrment. By
involved I mean asked them what they were doing for their businesses
as far as dealing with China and they sent me loads of information
on how to deal with China and I studied the information.
berger -89
Even as an American. You had no business in Canada.
No, the only thing I wanted to do.
They're not so generous sometimes, the Canadians.
Well, I find. We deal in Canada so maybe I find it a different
situation We have plants in Canada from which we
Oh you have roots in Canada
Business
Yes
That's what I asked. O,K.
And I found out that there was a way that you had to write to the
Chinese to receive an invitation to the Canton Fair whihc at that
time it appeared was the only way to trade with China so I followed
the instructions that the Canadians were giving their businessmen and
I was fortunate, I have a very lovely Chinese decretary and she speaks
Mandarin and writes it. I guess something was on my side **** so she
we did, we started corresponding lets say in Chinese, sent them all the
information about our company and no reply.
When was this 71.
No I started in about 68.
GERALD 040.
on shis was very early.
Yes. And I had stated in my first letter that I realized that they
were not admitting Americans to China but I felt the time would come
when there would be an open door for both the Chinese coming here and
we going there and I said consider me and know about my company now
and then every six months I updated the letter and kept them aware of
my progress and then on April 1st, and that's April Foold Day, isnt' it,
Sure.
19, I guess it must be 73, or 72, I was sitting in my office, I'm sure
Berger -9-
I'm sure it was a Monday and I got a cable and it said, you, your
honorable self, is invited to the Canton Fair. Now I thought for
certain that this was a practical joke because a lot of my friends
and my busine SS associates knew what I had been doing 80 I just
didn't want to be fooled and I got my secretary in and I said now
you trace this cable just back from whence it came and it did come
from Peking and
It might have been a better story if that had been a joke that cable
and the next day, and then you forgot all about it, the next day there
came a real cable. That's a better way to tell the story.
That's right. But it turned out to be the real thing and then the
turmoil began because I had gotten the invitation on the 1st of April,
the fair was from the 15th to May 5th and then I had to ge+. the state
department's approval and details which was given to me in the fact
that China was not, was on my passport, as a no-no, I had to get that
deleated.
You mean Taiwan.
No, China,
China was on your passport. Of course, the block caid that you couldn'
visit the People's Republic of China. Yes.
And I had to get the shots and I was fortunate, I met a gentlemen who
had been doing business in Hong Kong representing the Macy Company and
he was kind enough, he was the vice president of Macy's to give me
some direction
You mei him in Hong Kong/
No, I had learned about him in New York. He had
FORD a LIBRARY QERAID
Twis is Al Altiers.
No, it was not Al. It was, the name is going to come to me and T
Berger -10-
can't think of it right off but I should because he'llh shoot me.
A Chinese,
No, an American, vice president of their international business but
I met people in Hong Kong through him and my, I guess the most in-
teresting thing was the day I went to catch that train, that first
train ride
To the border
That's right.
Anyway, yyou've been there 8 times now.
That's right.
How many times to Peking?
Newver to Peking.
Oh, you've never been to Peking.
I've been invited a numbe r of times, I haven't, it seems surprising
to say thins but I have newer/
But you've been represented in Peking
Yes, oh yes, definitely
I want to talk to you a little moreaboutthat.
Yes, but I must say purposely I haven't gone to Peking because I
havent had the time. As I mentioned earlier my trip to China is
part of an overall trip to the Far East and I'm on a bit of a schedule
and you know what Peking takes.
You cant just run an and out. I'mean you're offending them if you do that
Thats right
GERAID
18491
Quite right, I think when time allows
Well anyway, I am going to have the luxury of going, I'm sure I will.
Of course, you will. Anyway Hurray, you've been 8 fairs now and you
B rger -11-
done business at every one of them.
Thats right.
Food product. Always buying from the Chinase.
That's right.
You've never sold them anything.
No.
And therefore you're a very desirable guest because that is what
the Canton Fair is all about. They want to sell to you, don't they.
And you must be an importmt buyer, what other kinds of products do
you buy besides forzen shrimp.
Well, besides the shrimp, we buy rabbit and that's on a regular
basis. Frozen rabbit.
Stop at rabbit for just a moment. I really was unaware of the fact
that rabbit, imported into the United States. I really never knew that.
Yes.
Well, we never ate rabbit in this country until I went to China and
discovered that rabbit was a big deal.
whil, rabbit is not a large selling product in the United States but it
is one that has been on the finer restaurant menus for 04 for years and
also throughtout the *** midwest and the southeast, southwest, you have
the consumer büying rabbit.
And is it called rabbit.
Yes
IDEALO F RORD JOHARA
In a can or what
No, its forzen, in the frozen form, its all eviserated the same as
poultry is evisertated and very high quality, I must state that.
Do the Chinese have high quality in general
Berger -12-
I say in general, I calssify their products of being of high
quality.
What else do you buy besides riabbit and shrimp.
on in the past I have purchased frozen vegetables which we tried
which as of this date we have to be giving them mere help in regard
to, well in meeting our standards, let's put it that way, meeting
our standards. I purchased tobacco, the first cigar tobacco to be
imported to the United States. I did that for another firm/ They
had asked me to do that IN service for them.
Do they have a good quality tobacco?
Yes.
But they have also bought tobacco here, haven't they?
Well cigarette tobacco.
This is different. You bought broad leaffed for cigars.
I bought the cigar tobacco
Wrapper for tobacco or something
That's right. and they have purchased the cigarette tobacco
From Nosth Carolina
Yes, I believe
Isn't that interesting
And they're tobaccos of high quality. The problem there is the fact
that they do not have prefered nation treatment and the tariff is too
great, the duty is too great.
Right, I see, As against where would we get broad leafed tobacco.
Ch, Ceylon is an area.
Turkey?
GERALD
I believe Turkey, the Phillipines,
But not Cuba
berger
Not as yet.
Not as yet.
C
One day we will trade also with Cuba.
Is that going to be a business of yours.
I hope so. We are communicating with Cuba right at this time.
Can we suggest that you got into that business because fof Cyina
You weren't in the tobacco business before or were you.
I'm not in the tobacco business now.
I know but even now you may try to look for tobacco in Cuba and this
place and that place but you didn't do it before you got involved with chi
No, let me ***** clarify that Cuba, again, I am thinking about
seafoods. I only did that as a service to a company that asked me
to represent them and they did find the quality of the tobacco very
high.
Is frozen shrimp your big busire SS from China.
From China that is the number one item
And do they sell exclusively to you.
No, unfortunately they don't. We wish they did.
Y:u have tried have you.
We have. We've tried to discuss the matter. We are, I believe, I know
to be a fact, the largest buyer, the most consistent buyer and again
patience is what you need when you deal in China and I feel that being
consistent and being a regular buyer through good and bad times, high
markets, low markets, also when there are problems not running away from
nesponsibility, they will appreciate this type of dealing and we will
one day be rewarded. I think they will reward us.
FORD
Find a way to reward you.
BRARY
Thats right.
weig-r.-14-
Have they sold frozen shrimp to many other prople, do you think?
Yes, to a number of other suppliers, customers on an in and out
basis
Have people ***** bought it because they've speculated in it in that
you've done it and they're not really in the business.
That is basically what is is. They sea that we have developed - you
see "re advertise a product. People know us for Chinese shrimp and
we are not in the sense just traders,
Do the Chinese damage themselves because shey sell to others. Some-
times people who are unskilled and who do a disservice on the market
palce with their shrimp, lets.say.
I would say deficately it's a disservice to the Chinese because they
don't take on the responsibility that you have to have They you are
developing a line of products. They use these products as just a
quick buck situation and were not involved that way. we are merchandisers
on a long
Your ********* marketers as opposed THE to opportunistic traders
I think you've hit that right on the head, That's the way
Is rabbit a regular consistent business too?
Yes, on a regular basis. This is not Large quanities between 100 and
150 thousand poinds of rabbit a year but it is steady. They can depend
on it., Rabbit today is not, no it sells for less than $1.00 a poùnd.
How much does shrimp dell for roughly?
Shrimp today, is in the, depending on the size, it will go anywhere
FORD
from $1.50 up to $4.00 per pound, depending on the size. But that
isnt too expensive
GERALD
RALD
No, I guess when you think of the price of lobster, it isn't very
expensive.
Berger -15-
No, in comparison to lobster and when you figure what skills it
takes to catch a pound of shrimp and how much energy, that's gasoline
or desile to catch a poiund of shrimp. I always compare to if you
want to compare something, a pound of shrimpnto a pound of chocolate.,
People don't realize it when they buy a small candy bar, that by the
pound that's over $3.50.
Cot you.
Sp shrimp isn't too bad and it is delicious.
Good promotion. Murray, the Chinese method of freezing the shrimp,
is that relevant? Do they know really what they're doing.
Yes. They have the modern technology.
Did they have it when you first got there? Or did you help them.
We helped them develop their methods of freezing. We did everything
we could to help them in grading shrimp and processing shrimp. Again
that is one of the knowledges that we have that we must impart to
them and we have helped them. We help every country that we deal
with in the world.
Does that me an that when you went to the C nton Fair that the Chinese
a
not only negogiators, commercial negogiators, but technicians and
you discussed the nature of freezing the shrimp and preparing it
and so forth and guided them to the right way.
Julian, we went even further. We would send them information from
our Food and Drug Administration, from our Dept. of Fisheries, re-
garding the proper way of handling product, to do everything pessible
to have them on par with any other country in the world that exported FORD
to the United States.
and
And they appreciate this don't they?
I'm sure they appreciate this. Their appreciation tu me is that
they followed instructions or suggestious and they are doing a fine
job
With a right reward. So you really now have a regular business in
Thinese focdstuffs, chiefly shrimp and rabbit for example and therefore
this is a dependable source cf supply fir you and there are other
people who have made it a depondable scurce too but not in the
quanities or the vclume tha you are consistently that you have
dose it with
No, I think we have been probably the only company that regularly
imports.
Do you buy between Fairs toc?
Yes, and that we do via the telex and it isn't too difficult. As
a matter of fact probably the time is going to come when we von't
have to attend 2 fairs a year - it will be down to 1 fair and we
can do a lot, even more business on the telex.
Sure. By the way what corporation are we talking about now?
What Chinese corporation?
This is the Foodstuffs Corporation.
It's called what.
oh, you mean the whole.
National Cereal and Oils an Foodscuffs Corporation, I've forgotten
the exact technical terms, I think its just called cereal and oils,
isn't it.
Yes, Interaational cereal and oils Import and export corporation.
STrange they use the name export, I mean corporation, isn't it.
Well, that's very interesting. It was once explained to me by the
Berger -17-
Chinese that the Chinese character that translates into the word
corporation has a meaning not only of commerce but has also a
meaning of taking on social responsibility and the name corporation
came from that used by the East India Company which had offices
all ofer the far east in which took on civic responsibility when
it did business which also spills over in the area of the respect
the Chinese have for the British and the fact that English is the
language in China even in places where we all don't visit and so
forth and all this was intermingled and inexplictedly interwoven
in some way and corporation comes out of this web in some way or
another. You really must explore that.
We have to. That's quite interesting because I wondered how with
two different idealogies **** we are similiar in that our corporation
means growth here and corporation there also is
Meaning its very special to them but also it would have the same kind
of meaning to us if it were explained to us. Anyway what about all
these problems we hear about with FDA and so forth. Not just a
specific problem which you may have had but in general. Did you
woryy about FDA problems when you first bought foodstuffs?
Yes, no question that's the reason you have to insure your product
against food rejection. ****
Were you able to insure at the very beginning?
GERALD 8 FORD LIBRARA
Yes.
Before you had really had any experience with them?
Right at the beginning because the Chinese had been shipping shrimp
to Europe for many years and to Canada and with great experience
And therefore indurance companies already knew
Lboyds of London knew very mluch about them. They had very lettle
Berger -18-
problem regarding their quality. And therefore we were able to
get insurance on their product coming to the United States. There
had been some shipments where there had been difficulty. Their
standards initially did not meet our food and drug requirements
and this resulted in rejection.
Did the food and drug ever lenient because it was the beginning of
new trade?
No. And we don't expect leniency from them. I must make that statement
They did not treat China any differently than they dreat any other
nation that we deal with and they are protecting the American public.
It didn't harrass the Chinese. It didn't discriminate against them?
No, not whatsoever
Which I sometimes think the Chinese think they do.
I can definitely say to you that our food and drug has been fair in
all the dealings with all nations. If a product is good, it is passed.
If there is a health hazard, it is not passed.
I fault the Chinese for all their criticism of what they claim is
harrassment by the FDA. In my business, the chemical business, they
really seem to claim this that it's burdensome and aimed in their
direction to harrass them or something like that which I think is
incredible because I have pointed out repedly to the Chinese as surely
you have that its in the interest of the American public that it is
without discrimination and they treat averybody the same and its for
FORD
a
x
my health purpose and yours and Americans and so forth. In any case
there's been a lot of talk about the problem of importing foodstuffs BRAID
both from a labeling standpoint and from a how you freeze things. For
example does the FDA want to know how its frozen.
Berger -19-
No, they're not concerned with the method. They are only concerned
with the result and it has to meet our standards which means that
it has to be low in bacteria, it has to be handled correctly so
that there are no impurities, there can be no decomposition.
And transported correctly.
Naturally. It has to be transported in refrigerated
And the Chinese are responsible for that transportation, aren't they?
Yes.
They trans ship it too.
Well in most cases today, again this is one of the disadvantages
of not having direct relations with China and that is that certain
of the shipments have to be trans shipped via sHong Knong.
We've learned.
Excuse me, for just correcting something. I think that you mean in
the absence of normalization.
Normalization not direct
I'm glad you mentioned that. What
we have found now is that when a product gets to sHong Kong we have
inspectors there that check the product, check the vessel, and do
everything we can to cooperate with the Chinese to get it here in
A-1 condition.
Could lyou reject it there ** Are you part of CYF or CNF?
No, we buy our products now 2 ways. CNF, The United States, and also
if CIF Hongkong because we now are selling our product throughout actually
FORD
Europe.
on, some of it you don't take to the United States.
& BRARY OF
Thats right. We sell it to Europe or we'll sell it to other parts
of Asia.
If you say you sell it to Europe will the Chinese ship direclty to
Berger 20-
Europe for you.
No, not they will just sellthe product to us in Hong Kong and its
our determination as to what we want to do with it.
Does that mean they are hiding from the fact that you are selling
it in Europe?
No, not whatsoever. It just means that
That you haven't decided yet where its going.
That's exactly what it is. We don't, we don't know what areas will
bring the best price or where the best market is of this particular
situation.
Is this something you buy forward? How many months **** advance do
you buy?
We purchase shrimp on the average of 3 to 5 months ahead od delivery.
It's a great crap game.
I bet you it is. Thats very. you have to make it your business.
That's a nice deterrent for us to stay out of. A business I assure
you I would be terrified of it. But anyway when it comes to the
United States it comes in foreign flag vessels or American flag
vessels from Hong Kong.
That is right. Mainly. There have been some direct shipments on
Japanese vessels from China but very few, very infrequent.
But then the goods are refrigerated as it would be for skipment to
anywhere where in the world from wherever. And then t'e goods get
here and if there is going to be rejection it always takes place on
arrival at the dock
Not at the dock. It goes into a régrigerated warehouse.
DERALD R 184817 FORD
Nothing can be shipped directly from the dock to a customer then.
04 yes, you can ship it direct to a customer but the customer must
hold it in his warehouse until Food and Drug clears the shipment,
Solit could even be inland.
oh, yes it could be shippedanywhere in the United States but it
cannot be utilized or shipped out to a consumer until it has been
inspected and passed
And is that a strict inspection.
Yes.
And what happens if there is rejection.
If ther is refection you have choice. You have one choice which is
drastic, destroy the merchandise. Second choice, ship the merchandise
back to the original shipper. Third choice, sell the merchansise out-
side the United States.
And whose choices are these. The insurance companies?
That can be the insurarce company or the owner of the goods or the
shipped. It can be his choice too.
If you've rejected the goods, you've rejected them to the insurer,
the insurance conpany let us say to whom you've subregated ownership
or whatever.
Yes, but we have a responsibility and that responsibility is to be
of help to not only the insurance company but also to the shipper, to
see that they receive the most value for the product.
FORD
R
Right. That the loss is mitigated in so far as possible.
BERALD
And keeping it to a minimum.
Right. It's clear. So give us an example if you don't mind, Murry,
about what hapeens in the case of rejection of Chinese goods. That
must be a complicated situation.
Well, we've had product rejected. It's been reinspected.
Berger -22-
Reinspected by.
By our inspectors and found that there was a definite reason for
the rejection.
You mean the FDA has rejected it
And then we inspect it
You've inspected it and you've found what, you've confirmed what
the FDA has found.
We confirm that the product was at that point decomposed.
Have you ever argued withthe FDA
No, because we have found them to be correct.
Always.
That is right.
FORD
So then you both agree that the goods are decomposed.
That is right.
And thats the fault of the shipper now, is it. Or what.
We feel at that time it was the fault of the producer. We check back
and we found that the vessels on which the product had been delivered
were the temperature had been maintained correctly the product had
been handled correctly, and by the way, frozen product it can easily
be determined if it has been poortiv handled because you can see it in
the condition of the cases. So then
If refrigeration failed on the way over or something like that you can
see that.
You yould see wet water marks on the cases, the cases would be dented.
because it is corrugated and crushed so our next step was to bring
this to the matter of the insurance company and they assumed libility.
We than determined where the responsibility was and we made it known to
in this particular case, the corporation that had in Peking made
the shipment. And we lodged a claim.
You lodged a claim.
Oh, yes.
Now Seabrook lodged the claim.
We laodged the claim for the insurance company, that's right.
Is that because the Chinese took the position that they didn't do
business withthe insurance company.
That is right. andn they didn't. They did business with us.
Their point is they did business with Seaboook.
And also it become s, first of all, our next responsibility was to
keep the claim to a minimum so after inspecting the product we found
that although it was rejected not all the product was decomposed, actual
only a small percentage which only, you only need a small percentage
to have the rejection BO we then found a customer outside the United
States who was willing to pay a lewer price for the product but willing
to regrade the product and remove the decomposed shrimp before they
were placed on the market.
Which you would not be permittdd to do here.
We could do it, yes, but we've found it would be just as economical
to send it outside the country where the labor is cheaper or lower
price labor. It gets too expensive here to do it. So here we kept
the loss to a minimum.
So on behalf of the insurance company you helped to mitigate their
loss by finding somebody outside the United States.
R FORD
And we kept the loss to a minimum
For the Chinese
For the insurance company and for all parties concerned.
Berger -24-
What happened to the final decomposed stuff that mobody took?
That was dumped.
With the permission of theChinese?
With our permission and acur insurance companies permission. It
couldn't be eaten. Anything that was decomposed was not edible.
Then what happened. Then the insurance company claims against the
Chinese?
They claimed against the Chinese.
Then what happened?
Then I got involved and made a trip to China and discussed the matter
and we ***** amicably settled our problems.
0.4.
You went on behalf 6f the insurance company.
Yes.
In a way to discuss some compromise of the problem with the Chinese
Well, I went more than just on behalf of the insurance company.
You did this with the Canton Fair?
No, this was a separate trip.
But not to Peking.
"ot to Peking. This was to Canton where I spent 10 days between faxrs
and I spent 10 days of straight negogiating and discussing.
They came from Peking
And met you in Canton
They met me in Canton. They were kind Enough to do it because there
agian m.y time was limited and they were nice enoughto meet me in Canton
because it was a shorter trip, this was befor they had the direct be
service to
GERACO
IBRARY
to Peking
-25- Berger
And I, you asked the question did this on the behalf of insurance
company. Well, yes, I did it on their behalf, I did it on our.
behalf because we had put so much time and effort into developing
trade. I didn't want it to be destroyed because of one mistake.
You did it on behalf of your friendship with the Chinese
That's right
So all parties
All parties were concerned
Sure they were in the matter. And by the way this is a good method
of trading with an understanding of the other fellow's problems and
he of **** yours.
We are back. We settled our problem and to everybody's satisfaction
and we are continuing to trade. We didn't miss a Fair.
Where did you negogiate between Fairs. In the Hotel.
In the Tung Fang. Yes, and by the way it's much nicer between Fiars.
We had a great time.
I've never been to the Tung Fair between fairs. I've been to Peking.
I've got to tell you a quick story if I can.
Please do.
I like to smoke cigars. Especially when I am negogiating and they
are pacifiers and on this trip I brought a box of cigars and by the
third day, I'm out of cigars. Well I had smoked some in Hong Kong
and this was pretty tough
Pretty tough. Yea, I bet.
0801 & IBRARY GERAID
Well, it was fun but it was a long day. This wasn't like the Fair
day. We start at 9 in the morning and would finish up at 7, 8 o/clock
at night.
Berger -26-
Just negogiaying this one matter.
Thats' right and at the end of the 3rd day I was with my associate
who is Hannot Hoose, I think you know Harnot and not finer companion
could you have on a trip like this- great international attorney
and I said to Harnet, "I'm going home." He says, "What do you mean
you're going home?" I said I'm out of cigars. Well he took me
serious because as times I like to put him on and he said you can't
go home. Now we weee also with another Chinese friend of mine from
Hong Kong who got very concerned that I was leaving at the end of
the third day. This was Y Y Wong was with us and they're trying to
placate me and said well we are going to get you cigard. Well, they
*** looked around and they could only find the small cigarette type
of cigar.
Figarello.
So, it so happened the next day was a Sunday so Harnet said let's take
a walk and we took a walk all through the streets of Canton and I know
you've done that and it's very pleasant on a Sunday.
It sure is.
And yet I'm still a bit uptight and they think I'm serious about leaving
Monday and we're walking past the storefronts and you know how little
stores, little shope, everything out in the open, and we see some
children buying some candy and I don't know what made me stop and look
into the cabinet and there I saw the most beautiful Cuban cigars in
tubes, silver tubes.
Amazing.
GERATO P FORD VIBRARA
I couldn't believe it.
A candy store, a candy shop if you like with an open front in Canton
In Canton, China and I said to Harnet do you speak Chinese, now find
Berger -27-
out if that is really true or is that strictly, maybe it is for
show. So he spoke Chinese and asked the question and they were
60¢ American, I guess RNB's that would be equilizant to $1.20
and I took one to start because I was still suspîcious that these
could have been there for years. I couldn't believe who would be
smoking 60¢ American Cuban cigars and I'll be darn they were the
finest cigars. I rushed back.
Fresh, too.
Fresh as can be. I rushed back bought the whole box.
How do you account for that?
I got is feeling they didn't want me to go home.
This really may, they're corny enough and wild west and pioneer
enough tc have just planted them there, who knows? They've gone
to the airport and collected people at the ********** point in the
negogiation what was failing It the moment they were setting foot
on the plane to turn around. Let me ask you another question. That's
a great story. What about Great Wall Cigars?
Well, they are very small and they are good cigars but they are very
small and I happen to like the larger cigar
Fantastic and these, these Sit the spot and they carried me through
the next 7 days.
Fantastic.
They were marvelous
GERALD LIBRARY A PORO
"hat's marvelous
Now I went back on this last rip, I couldn't find them.
Did you go to the same shop?
Same shop
Berger
He told me he sold out.
That's fantastic.
We really think they joined a barter with Cuba. That they took in
cigars but again I must say.
But why in a candy shop? That's not for kids.
Who would be spending 60¢ though in China based on
And this was not a shop for foreigners ar Europeans
No
This was just a shop for Chinese
Anyway, in your negogiations were they tough in the settlement?
Let me say that they are very fine negogiators and we, it took us
twn days of understanding each other and we solded our problems very
amicabye, that is the term I use.
That's all you want to say about it, that's fine. Anyway your business
goes on and your'e doing very nicely and all is well. I'm pþeased
to hear that. 1 so you are going to keep returning.
I hope so as long as I have my health.
And you do it yourself.
Yes, I have
Do you enjoy the culture and all the other references besides the
bus ine SS there.
I do. I have become a collector of jade and I enjoy going back to find
out whats new in the jade world.
R FORD TBRAP
Has Mrs. Berger been there too.
Yes, she has been there twice and we had the pleasure the last time bf
having dinner with your wife and it was quite enjoyable.
That's wonderful. I am delighted. Well, I hope you come to Boston
to visit one of these days. Thanks a million, Muray.
Berger -29-
I thank you, Julian.
And I hope we'll see more of one another.
Thank you.
GERAID A FORD LIBRARY
WJ 8/13
Boulogne -1-
Sobin:
I am Julian Sobin sitting in New York with Bob Boulogne of
J. C. Penney, one of the largest retailer organizations in
the country, if not the world. Bob, what is your title in
J. C. Penney?
Boulogne: I am Director of International Buying, which encompasses all
the buying across the world which we do on a direct basis.
Sobin:
How much international buying does the company do that you
are responsible for?
Boulogne: Well, our sales in imported merchandise are about 10% and we
do 7 1/2 billion dollars worth of sales so we're talking about
big figures.
Sobin:
That's a company by itself, a big, big company.
Boulogne: Yes, it is. It is handled through a corporation subsidiary of
which I am Executive Vice President.
Sobin:
I see, I see. But you are the Chief Operating Officer, really,
of that business I judge.
Boulogne: That's right.
Sobin:
Do you have a lot of people buying who work for you?
Boulogne: Actually we run a subsidiary that is more a service type or-
ganization because we really rely on our domestic buyers to
buy categories of merchandise which is the only viable way;
you cannot have a different team buying imported merchandise;
it has to mesh in.
Sobin:
How do you rank as a retail organization in the country?
GERALD
FORD LIBRARY
Boulogne -2-
Boulogne: We are the second largest.
Sobin:
Who is the largest?
Boulogne: Sears does about 11 1/2 billion dollars and we are second with
7 1/2.
Sobin:
How many stores do you have?
Boulogne: We have about 1600 stores plus a very large catalogue operation,
plus a large chain of drug stores and a smaller treasury div-
ision which is sort of a discount. The drugstore chain is
called Thrift Drug.
Sobin:
Has this been your career, J. C. Penney?
Boulogne: Pretty much. I will be finishing my 24th year soon.
Sobin:
Bob, how did you get involved in the China business?
Boulogne: Well, we, of course, had been listening and reading about some
of the Americans that were going in after the first Nixon visit
and it was obvious from my point of view and eventually our
company's point of view that market had to be a fascinating
one with immense potential and we started pursuing various
ways and I tal ked to a few people; I went to some seminars,
some sponsored by, I think, management.
Sobin:
AMA?
Boulogne: AMA. I tried to contact the Canadian embassy, you know, did
the whole bit.
Sobin:
That we all went through.
Boulogne: And really the break-through came when the US China Council
FORD
was formulated and we received an invitation to participate
GERALD R
LIBRARY
and I recommended to the company, it join the Council.
Boulogne -3-
Sobin:
That was the spring of 173.
Boulogne: That was the spring of 173, Then, furthermore, the Council,
when they arranged that first group tour that was sponsored
by the CCPIT realized after they formulated their list that
there were no importers in the group and.
Sobin:
No consumer merchandisers?
Boulogne: No consumer merchandise importers and they went through the
list of people who had already joined and they saw the J. C.
Penney name and decided that really they should do something
about it. They appointed our chairman as director of the
Council and, of course, after that we received an invitation
right away.
Sobin:
That was your launch pad. So when did you first go to China?
In the autumn or so of '73?
Boulogne: That was in the fall of 173.
Sobin:
And you have been there what, five or six times?
GERALO R FORD LIBRABA
Boulogne: Five times now. I missed one Fair.
Sobin:
And you are likely to go to each Fair and bring somebody?
Boułogne: Well, I'm going to try to phase out personally because I
cannot spend that much time but I am trying to phase out
and try to get our Far East Regional Manager in Hong Kong
to take most of the brunt of it.
Sobin:
In a routine way but will you always have somebody from here
sort of overseeing it and seeing its potential.
Boulogne: I think I will try to go there at least once a year. I think
the personal relationship is very important with the Chinese
Boulogne -4-
have
and we've already had that and we want to continue it.
Sobin:
Have you ever been to Peking?
Boulogne: Yes, oh, yes.
Sobin:
You have.
Boulogne: Twice.
Sobin:
For business reasons?
Boulogne: Yes.
Sobin:
Has that been of more benefit to you than just going to the
Fair?
Boulogne: oh, absolutely. We really didn't get to know the Chinese until
we went to Peking.
Sobin:
What's getting to know them do for you?
Boulogne: Well, I think it gives us more of an awareness of the tremendous
problems that we are faced with in conducting business. The
Fair is more superficial for the average fair goer and at
first there is a great deal of euphoria about going to the
Fair and you think there are a lot of things that can be done
but I think when you visit Peking and spend time, which you just
never have at the Fair, and you can meet with them without
the pressures of the Fair.
Sobin:
Without the competition of a lot of other buyers.
Boulogne: And the buyers crowding you out, you begin to understand how
different their ways of doing business are and really it is a
very tough market and a very difficult enterprise.
Sobin:
Is it fair to say that in Peking you get a private negotiations? FORD
ve their
& LIBRARY OFRALD
Boulogne -5-
Boulogne: Yes, you have their full attention and they have yours.
Sobin:
And the attention that you get is from, I take it, from
the Light Industrial Corporations.
Boulogne: No, no actually. We really have decided of our own, that we
would specialize in the textile field in hhe Chinese market
because we just are unable to cover the entire field of products
from China. By concentrating on textiles we can do a better
job.
Sobin:
So you are excluding yourselves from other products, or what?
Boulogne: We are not excluding ourselves but we have made no major effort
to get them to know us in that area.
Sobin:
Isn't that interesting. It's a very logical step for us. First
Bowlaqne
of all we are the largest retailers of apparel in probably
the world, certainly in the United States. Penney's has been
known for their textiles selling apparel while Sears, you
know, is more in the hard line area.
Sobin:
Right.
OERALD R FORD LIBRARY
Boulogne: Now, of course, they are trying to get into apparel in a
big way and we are trying to get into hard lines but really
that is our home.
Sobin:
Do you think that's a major thrust of export potential from
China to the United States in the apparel field?
Boulogne: In consumer goods I don't think there is any question in my
mind, that's where it is.
Sobin:
Rather than Light Industrial products.
Poulogne: Light Industrial, there are some exciting spots but there's
Boulogne -6-
much more development that has to be done in the Light In-
dustrial areas. They just don't have the sophistication
in designing and finishing of metals, and in the sophisti-
cation of packaging anything that has to do with electrical
machinery or appliances. They have too much catch un to do
at this point.
Sobin:
Do you have a serious import duty problem on the apparel
and textile products you buy from China?
Boulogne:
Yes, it's a very serious step to overcome.
Sobin:
How do you overcome it?
Boulogne: Well, we've overcome it simply because of the somewhat really
unfair scheduling of the duty rates that have been promulgated
over the years by our customs and treasury.
Sobin:
No, I meant overcoming it from the standpoint of the Chinese
respond to that problem and therefore give you prices go that
you can compete.
Boulogne: Yes, but I was trying to point out something else for reasons
that are probably today not logical; there are differences
in the cotton duties vs. synthetic duties and in the synthetic
duties, for example, the Chinese are penalized very, very
heavily and in the cotton area where the duties are much lower
the.
Sobin:
The problem is not as serious?
Boulogne:
The problem is not as serious.
Sobin:
You mean if the base is lower?
Boulogne: So we are skirting that problem somewhat by concentrating on
the cotton field.
Sobin:
Cotton is rationed in China, isn't it?
GERALD R FORD VIBRARY
Boulogne -7-
Boulogne: Yes, it is. In fact we have been told that.
Sobin:
Cotton goods.
Boulogne: That they are really trying to save their cotton goods for
exports and trying to infiltrate the apparel, their own
apparel industry with some synthetic yarns.
Sobin:
Do you buy cotton gray goods too or only finished?
Boulogne: Yes, we have been buying cotton gray goods also.
Sobin:
And you are having them finished here then?
Boulogne: Yes.
Sobin:
Are they a major supplier yet of cotton gray goods?
Boulogne: Yes, I think on certain constructions today they are a very
major factor and of course you have been hearing the clamor
of all the mills people who are the ones that are doing the
importing and that amuses me somewhat.
Sobin:
What you're suggesting is that some of those very people and
mills are themselves large buyers of cotton goods from China
and elsewhere.
Boulogne: Not only large, but they are the largest buyers and they are
the ones that really have created the problem and to my know-
ledge the reason the goods are being purchased and being so
successful in this country is because there is a shortage of
this type of construction and our own mills could not produce
the kind of quantities that are being bought.
Sobin:
So what are they unhappy about?
Boulogne: Well, I think they are anticipating what is going to happen
and possibly on the next go around.
Sobin:
Especially if we grant MFN.
GERALD R 1188481 FORD
Boulogne: If we grant them that and if.
Sobin;
Will that make a lot of difference?
Boulogne: Oh, yes, it would make a big difference. Oh, absolutely. But
Boulogne -8-
then if we grant them that I think the quotas will come hand
and hand.
Sobin:
Voluntary quotas.
Boulogne: Voluntary quotas. And I think there are probably some justified
reasons for the apparel industry and our textile mills to be
very concerned about what could happen if China made a concen-
trated effort to come into this market, but to this point it's
still a very small amount; it's insignificant.
Sobin:
Do you really think that granting Most Favored Nation treatment
would really increas imports so dramatically?
Boulogne: It would not increase them dramatically in the very near future.
No, it would not because China is suffering from shortages of
yarns and fibers, production, and it is not possible for them to
overcome these overnight so I don't see that as an immediate
problem but it certainly could be in five, six, eight years.
Sobin:
Haven't you ever had the experience I've had in my business
where the kind of currency is devalued overseas and the supplier
raised the prices to reflect the difference because the balance
is maintained usually and the Chinese are probably shipping as
much as they can do right now, do you think that's so?
Boulogne: I think that's a very fair assumption and certainly they are
subsidizing to some extent the prices that they are quoting
to the United States. We have an organization which belongs
to Penneys that is located in Belgium, were the second largest
GERATO A FORD LIBRARY
retailers in Belgium, and I have gone into the Fair with our
Belgium buyers and we, side-by-side, have been buying the same
article and been quoted different prices so we know this to
be a fact.
Sobin:
Do you think if you quoted different prices side-by-side with
Boulogne -9-
an American competitor?
Boulogne: I think that probably could happen. It hasn't happened to me.
Sobin;
I used to think that the Chinese quoted the same price to all,
at least to people of the same country but I've already dis-
covered that they don't necessarily quote the same prices in
the same country. From the standpoint of fairness the Chinese
often told me and sort of hammered into me the fact that they
would always construct prices on goods that I buy so that a
competitor in another country wouldn't be able to afford the
ocean freight and the import duty if he brought it to his
country and tried to ship here to compete with me. That's
long gone.
Boulogne: Long gone.
Sobin:
Well, the year before last I discovered I could buy goods the
Chinese were still shipping to me on long contracts. I could
buy from Japan, for example, and from countries in Europe at
lower prices than my own contract even after they took the goods
to their country now to reship them all over again, warehouses
and so on.
Boulogne: Another area which I think is one that perhaps indicates that
they are businessmen first and you know, theoreticians later,
but they are giving exclusives to several buyers and it gets
very confusing because the exclusives sometimes are very hard
to define and I just found out that several other people are
GERAID R FORD LIBRARY
buying flannel shirts which we are supposed to have an exclusive
Boulogne -10-
along with some other person but a third buyer is now buying
them and what they do is change the construction slightly by
Sobin:
Do you have it in writing, Bob?
Boulogne: oh, no. I would never ask for it in writing anyways.
Sobin:
I discovered that whatever is not in the contract is a waste
of time anyway and that doesn't mean that the Chinese don't
mean it, but I've even bought something from the Chinese
according to the specifications, the specification was not the
entire specification and signed a contract then two days later
said to the Chinese, what about this content and they have
told me by word of mouth. I said will you put it in the
contract. No, you signed the contract two days ago; it's too
late. But he said it to me, o.k. and I counted on it. A
month later I gave a sample to my customers, prospective
customer, and he tested it and said it wasn't right. I sent a
cable to China and I got a cable saying a different specification.
I then went back to them and said none of these things agree and
they said the only thing that counts is the contract. I mean
whatever we tell you later, we tell you to the best of our
ability, but nothing counts but what is in the contract so I
GERALD
FORD LIBRARY d
assert, that if you keep buying something and buy enough of
it, they probably won't sell to your competitors to too
grossely effect your business but if ...
Boulogne: I think that's what it is all about.
Sobin:
That's what I think they mean by exclusivity by and large.
Boulogne -11-
Boulogne: Well, we're not that concerned with that anyways. We're not
trying to keep people out particularly.
Sobin:
Have you done a lot of business with China?
Boulogne: No, not really. For the market and for the stage of the market
development, it's substantial but certainly in view of all the
purchasing we do around the world, it's very minute. We still
have some question marks. We think we will resolve several
areas which will eventually be of some benefit to us but
actually up to now we've lost money on Chinese goods.
Sobin:
You're not alone.
Boulogne: Really, in most other markets we just probably at this point
would decide to get out.
Sobin:
But you don't dare, out of this market.
Boulogne: Well, we don't dare. Yes, because we know it's got to develop;
it's got to be important. In other markets we would say, well,
we'll come back when it is ready. With this market, there's no
other market like it; it's too big. We cannot take that chance.
We think relationship because of the political aspect, is very
important and for that reason we are hanging on and we are
learning and we have developed a couple of programs that are
getting to be quite sound and which we can use and which are
building our relationship and where I think we have finally
found the way to make some money.
Sobin:
Has any big company pulled out that you can think of?
Boulogne: I don't know of any.
Sobin:
We're all afraid to pull out anyway.
GERALO a FORD LIBRART
Boulogne -12-
Boulogne: I guess we are. We're cowards.
Sobin:
Well, it isn't that. We all know what a giant market place
it is as a resource and as a market for things we want to
sell and all of us just keep going back.
Boulogne: Progress is being made; I think we have to keep coming back to
that. Progress has been made. There are things that they are
doing for us today that they were not considering two years ago.
It's very slow progress but it is progress nevertheless
Sobin:
Like what?
Boulogne: Well, the things that have been talked about by so many people:
the labeling, the styling, the packaging, the assortments. I
mean they are trying. They really are trying to give in to
some of our demands and they are a little more flexible and
they are making it a little bit easier. It's still a long ways
from what we can do in other markets but as long as there is
progress, I think it's worth the effort.
Sobin:
What are they failing to do still?
Boulogne: Well, it's not so much the little things. It's the big things.
It's the only market that I know of where we really cannot do
any planning. We can not cut out a section of the market and
say well, this this market is going to do this much for us
and the next year we will increase it by this much and we are
just operating in total darkness and that's the biggest
problem.
Sobin:
It's uncertain.
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Boulogne -13-
Boulogne: The uncertainty of the market is just, well you go to the
Fair, you don't know what the price will be because you
really don't know the economic conditions.
Sobin:
You don't even know what's available at the Fair.
Boulogne: You don't even know if it's available. You don't know if you
are too early or too late or you go before the Fair and they're
waiting for the Fair to set the prices. You go after the Fair and
maybe it's too late, everything is sold out.
Sobin:
Sold out, right.
Boulogne: And if you ask what the problems are or how you can improve
the situation you get blanks; you just don't get any good
answers.
Sobin:
Do you notify them before you go to the Fair? Do you tell
them what you are interested in buying?
Boulogne: No, we haven't done that. That's a good point, I think perhaps.
Sobin:
We do. That may be helpful to you. A month before a Fair we
are sending them cables alreasy. Each of the corporations that
we do business with and we are saying we would like to come and
discuss the following quantities with you and so forth and then
we send somebody even a few days before the opening of the Fair
to make sure we're there at the opening even a person not exactly
involved in the business per say, who goes around the cor-
poration and says look the buyer from such parts of our company
will be here.
Boulogne: The guy with the pencil is coming over.
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Boulogne -14-
Sobin:
That's right. Well, this is what we really seriously want to
buy at this Fair and we hope you'll reserve the quantities
for discussion.
Boulogne: I think that's a little easier for you because you're focusing
on certain commodities and for us, you know, fashions change,
styles change. Really till you get there, it's not as easy
to plan, but I think it's a good point; I think we should do
that and I think we would if we were in a more advanced stage.
We can do it in maybe one or two commodities now.
Sobin:
I can only think that it's to your credit that you have
identified an area of opportunity to concentrate in.
Boulogne: We have done that really because of the Fair and the structure
of their marketing, it is very difficult for a large depart-
ment store organization like us to cover the Fair adequately and
we, as you know, we can only get three invitations. There are
no theee people in our company who could assume to buy any of
those commodities for the whole company so I think it makes
sense.
Sobin:
Are you training people for buying, for Chinese buying in that
peculiar atmosphere?
Boulogne: I run sort of a very informal indoctrination. We go over some
of the things that they would be faced with and some of the
etiquette and some of the things to say and not to say.
Sobin:
Is this different than buying most anywhere else, Bob?
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Boulogne:
Not really.
d
Sobin:
The negotiations?
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Boulogne -15-
Boulogne: Well, yes, the negotiations are different. The principals
are the same but certainly we would want to indoctrinate any-
one in any new market so that part. of it is not different but
I do think the big difference is that there is a total different
political atmosphere. You have central planning and when you
have central planning you're dealing with a set of circumstances
that is really very different for most of our people. They are
used to a more capitalistic society and markets where they can
get a freer exchange of ideas, information, prices. I think
certainly doing business even in Rumania is a little easier.
I've never done business in Russia perhaps in Russia where you
have total central planning you run into some of the diffi-
culties of central planning.
Sobin:
Different kinds of negotiations, a different spirit in the
negotiations.
Boulogne: Yes, and the people that you talk to just don't have the same
control over their merchandise, their materials, their scheduling,
their timing, and then, of course, in China I am not certain
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today what the role is of the factory worker, the committee,
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the revolutionary committee, and what point do they see the
order, or do they see the order at all. These are all such
unknowns.
Sobin:
Have you ever visited a factory making anything for you that you
knew was making something for you at that time?
Boulogne: No, we have not. Of course, we have visited factories and I
think we will be seeing a factory. In fact, right now, next
Boulogne -16-
week one of our buyers there now, and he is going to Shanghai
and he's asked to see his product being made and I think they
will probably go along with that.
Sobin:
That's a big step forward, I think.
Boulogne: Yes, it is.
Sobin:
And I think it probably is motivating for the workere in the
factories to see the buyer, the end user of this side for their
purposes. Don't you think so?
Boulogne: Well, I would like to think so,
Sobin:
It may be interesting to you if you ever have a chance and I
don't know that this is still true but at one point I told the
Chinese I was very interested in paper technology and I had
heard that there was quite a big factory right in Kwanchou and
they took me as a private visitor one day, for the whole day,
to see the Kwangchou Paper Works. What was interesting to me
was talking about incentives, there was a shift of women in
that factory and they competed with a shift of men on the same
machines doing the same exact work and they were very proud
to exceed the wutput of the men. And I witnessed the shift
changing and the enthusiasm.
Boulogne: That's fascinating. I must say that's the one area that con-
cerns me the most about the Chinese potential and that is the
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incentive and what it transfers into productivity because
certainly right now some of the factories we've seen, the
productivity is just absolutely unbelievably bad.
Sobin:
Don't you discover that the Chinese, for all of us who might
Boulogne -17-
thinking this is a tremendously motivated gung ho society
don't you witness five people for every job?
Boulogne: Well, you know, this again is part of the concern I have.
We feel that the system may net create the incentive and
therefore the productivity is affected. Certainly the flex-
ibility is affected where you have a factory of 4,000 people
producing 10,000 dozen shirts a month in a market such as
Japan or Korea, that same factory, the same number of workers
could produce perhaps 60,000 dozen and that's a tremendous
difference.
Sobin:
Of course.
Boulogne: Now whether it's the system, whether it's the newness of man-
ufacturing merchandise that's hard to say at this point.
Sobin:
And still we have to account for the fact that the Chinese
so proudly tell us all that they've never revalued or de-
valued their currency in 25 years but ours has - they respond
to the flucuations and the value of our currency and the value
of their currency is fully backed by their productivity and
the rest of the world seems to respect that. I am a product
of the same experience that you have had. I've been to petro-
chemical works that employ 10,000 people and from what I know
about the output of that plant, we could do the same thing with
700 people in this country. Now that's a fantastic difference.
There are 15 times as many people.
Boulogne: Well, we don't know at this point if this is overemployment.
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Boulogne -18-
Sobin:
Of course, we don't. Employment is essential, we know that
and everybody has to work. And the fact of the matter is that
whatever has to be done, gets done. Whatever the goals seem
to be laid before them they seem to meet them, don't they,
because that's a tremendous achievement in the country and
that's a great feeling of accomplishment in serving the
people.
Boulogne: And that's what we are concerned with the end result - right?
Sobin:
What percent age of your time do you spend in China?
Boulogne:
Oh, it's really not very much.
Sobin:
It's still an auxiliary business at the moment that you keep
your eye on?
Boulogne: Yes, outside of some visits away from the Fair where we may
be going into Peking and Shanghai which always takes a minimum
of 10 days, our average stay at the Fair is three days.
Sobin:
And you buy volume things?
Boulogne: And we buy volume things, selected areas in volume in large
quantities.
Sobin:
And the Chinese are now putting your label next to theirs or
something like that?
Boulogne: No, no, we've gone beyond that.
Sobin:
Only yours. But you are not in the fashion business, per se.
Boulogne: No, we're not.
Sobin:
Like Bill Blass's visit there or something.
FORD Boul agne: Well, the market does represent a paradox because in one hand,
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the beautiful meticulous handwork is conduc ive to high fashion,
Boulogne 19-
expensive items, silks, brocades, etc. But then, of course,
you have the long lead times, transportation problems, etc.
so that is very difficult to overcome. On the other hand,
if you want to go from mass, real mass volume priced mer-
chandise there again your work there, your workmanship and
the fabrics are so good that you really feel that should not
be directed there and of course prices don't make it possible
to.
Sobin:
Is that right; I believe that.
Boulogne: And, of course, if you go in the middle market, right in the
heart of the market, you are competing directly with the
United States and our own market so it's a tough situation.
Sobin:
You really have to discern the area of opportunity which gets
very narrow, does it?
Boulogne: At this moment it is quite narrow and of course we would like
to see a market that we could go into it more on our own
scheduling where we could drop in there more frequently in con-
text with our trips to the other markets around that part of the
world, where we could visit factories, making our goods where
we could inspect merchandise while it is being produced and
eliminate so many problems and where we could be partners with
them in producing merchandise and I think we have a long ways
to go.
Sobin:
But they don't seem at all inclined to let you do that.
Boulogne: They have not said no but in their polite way they have
&
said yes either.
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Boulogne -20-
Sobin:
Why do you think they don't let you do that when it seems
to you and me that it is so much in their interest to allow
you to do it?
Boulogne: Oh, I think it's logistics to a certain extent. The number
of people that are available to take you around.
Sobin :
Interpreters.
Boulogne: Hotels. The whole thing. I think it's very hard for them.
They have too many customers; their business is fragment ed.
They have hundreds of countries literally that they are dealing
with and it is very difficult.
Sobin:
Have you expected things to be ongoing when you have had
business with them and developed over a period of a few Fairs,
you did some business and then you came there next time and
they didn't have any goods for you.
Boulogne: No, they never cut us out totally. They didn't have as much
goods as we wanted to buy but I gess that's perhaps as we
referred to in our earlier conversation, we should have done
better planning also.
Sobin:
I guess in terms of big American corporate management technology
this especially is needed because you do profit planning and
budgeting and forecasting, how can you forecast this business?
But it gets lost in the shuffle, it's not really that.
Boulogne: That's right it does and we certainly don't count on it for
our own profits at this point.
Sobin:
Do you think it's reasonable that anybody who does count on
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Boulogne -21-
it for his livelihood ought to be very nervous.
Boulogne: Julian, I have talked to a lot of people who have said that
they were interested in going into China to trade and to set
up business and I've always discouraged everyone of them that
I could.
Sobin:
Me too, Bob.
Boulogne: Because unless you have the resources, and the money, and the
patience, and the time, it could be a disaster.
Sobin:
And you never know if it will pay off unless you just happen
to make a hit which is so unusual. What do you see going
into after apparel, are you in the shoe business, for example?
Sobin:
oh, we think footwear would probably be another area that would
be very important but footwear is a little more sophisticated
than apparel. When I say sophisticated, it's a little more
technical and they really would have to make some progress in
those areas before we would.
Sobin:
There are plenty of American shoe fellows over there by the way.
Boulogne: Oh, they are beginning to go in there, yes. Certainly foot-
wear should have great potential and it should be one of our next
areas of interest.
Sobin:
Do you normally buy, let's say, imported footwear, just to
take an example, from a wholesaler?
Boulogne: oh, yes, from an importer.
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Sobin:
Yes, but now going to China, the Chinese invite you. You
don't need that importer, do you?
Boulogne: No, we may not need an importer for a particular commodity
but we still do a lot of business through importers.
Boulogne -22-
Sobin:
Are you likely still to buy some Chinese goods through
importers?
Boulogne: Yes, we do in fact. An example is the straw shop which is
very successful in our store there is a man who I think you
may know. Clipper Industries.
Sobin:
0h, yes, yes.
Boulogne: They buy straw goods from all parts of the world. Poland,
Spain, China, the Phillipines bring it all into a common
warehouse, ship a selection to our store. We cannot compete
with that sort of thing as an importer who really is a
specialized person. He really has something to sell. Now
someone like that we would do business with.
Sobin:
And it's just more desirable to do business with him than try
to buy that stuff yourself.
Boulogne: Oh, absolutely. We just don't have the facilities, he inspects.
Sobin:
So there is a place for wholesalers, importers, in some of
these businesses even with China.
Boulogne:
ch, absolutely.
GERALD R FORD DEPARTMENT
Sobin:
That's very encouraging.
Boulogne: It could be true in footwear; it could be true in apparel. Any
good importer who carves his own little niche if he's an ex-
pert in his field.
Sobin:
Is it possible that there will be such a rennaisance of
importers that you may find yourself not needing to go to the
Fair at all and you might buy everything from importers?
Boulogne: No, we would never let that happen. We think it's too important
Boulogne -23-
for us to keep contact with the market to know what the price
structure is and if you get away from the market and do it
through importers only you really don't know what the price of
the commodity is.
Sobin:
True, and you could be taken advantage of, can't you?
Boulogne: Absolutely.
Sobin:
Have you had any claims?
Boulogne: Yes, we have had a claim.
Sobin:
Settled decently and fairly?
Boulogne: They were settled decently, somewhat. We compromised and mostly
on our side but we received damages against future shipments
and it was all done according to
Sobin:
Do you want to let them insure? Who insures?
Boulogne: No, no, this was just quality problems.
Sobin:
No, I'm just curious to know.
Boulogne: 0h, we are self insured.
Sobin:
So you buy things CNF?
Boulogne: CNF.
Sobin:
As we all do. You haven't had any claims against Chinese
insurance have you?
Boulogne: No.
Sobin:
What about the political situation? Do you think that there
can be a big change? The Chinese are such expedient people
and all this investment you've made in time and effort and
so forth may be out the window or something or some radical
element takes over and
...
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Boulogne 24-
Boulogne: It could very well happen. I must say that this is the
part that I don't get as involved in as I should. I let
you be the expert on that one.
Sobin:
Ch, boy, I'm no expert; I'll tell you that. I sit and worry
about it just like you do. Well, this has been very, very
helpful and you are so knowledgeable in this area so thank
you very much for all the time you spent.
Boulogne: I enjoyed very much doing it. Thank you.
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