The Cabinet Office, government of Japan ＞ Top page of OTO ＞ Reorganization of the Office of the Trade and Investment Ombudsman

(Provisional Translation)

Recommendation on Market Access Issues as concerns Standards, certifications and Others
"Report of the Comprehensive Review"

March 13, 2003
Market Access Ombudsman Council

This report undertakes a comprehensive review of past complaints handled under the Office of Trade and Investment Ombudsman (OTO), offering proposals concerning additional steps which should be taken to further improve market access.

We ask the Office of Market Access to decide on the action that respects this report to the furthest extent possible, and to take measure at an early date.

I. Tendencies Observed in “Comprehensive Review of OTO Cases”

II. Important  Issues on “Comprehensive Review of OTO Cases”

Nine Themes on Which Specific Recommendations Are Made

“Issues on Standards and Certification System”

Issues on Formulation of Specifications/Standards

1. Open Access to Food Additives Distributed Abroad

2. Review of Medical Classification

Issues on Conformity Assessment for Specifications/Standards

3. Use of  Foreign Testing Data for Inspection of Building Materials, etc

4. Review of the JAS System

“Realization of Japan That is Open to the World 24 Hours a Day, 365 Days a Year”

5. Realization of 24 hour/365 day Customs and Quarantine Services

6. Introduction of Market Principle into Port Services

“Simplification and Acceleration of Import Clearance Procedures”

7. Simplification and Acceleration of Import Clearance Procedures

•Improvement of the simplified declaration system

• Promoting of the one-stop services (Single-window system)

8. Reduction of Charges for Using the NACCS  System

“Others”

9. Revision of the Vehicle Inspection System for Towing Vehicles and Towed Vehicles

Related Materials Concerning Nine Themes for Which Recommendations are Made Materials

[PDF] 1.Outline of Questinonnaire for Comprehensive Review of OTO Cases(PDF file;311KB)

[PDF] 2. OTO Market Access Ombudsman Council and MAOC Experts Conference(PDF file;111KB)

I. Tendencies Observed in “Comprehensive Review of OTO Cases”

OTO has handled more than 1,000 cases of individual complaints and the problem raising process for the last 20 years.  Our aim is to make the Japanese market more accessible from abroad in response to the increasing unification of the world economy.  Each individual case was closely examined and recommendations for improvement were submitted to the responsible authorities.  Many cases have shown improvements as a result of measures implemented in line with the recommendations. Some issues still remain unresolved and it is of great importance to act rapidly and steadily to implement measures for solutions to these issues.  Examinations were made during the problem raising process of fiscal 2001 to see whether necessary measures had been taken and as a result, it was made clear that further actions were needed in some areas.  

Taking these circumstances into consideration, we aimed to conduct thorough review of OTO cases (follow-ups) this fiscal year.  Follow-ups were made on the 231 cases which have not been reviewed properly since the “Report of the Comprehensive Review of OTO Cases” (December, 1998).  88 individual complaints and 143 issues brought up during the problem raising process constitute these 231 cases.  (The follow-up period was from November 1997 to August 2002.)

When cases were classified by field, problems related to animals and plants, and foods came to 52 cases, those related to pharmaceuticals, medical devices and cosmetics to 19 cases, those related to manufacturing to 32 cases, those related to transportation and communications to 26 cases, those related to construction to 16 cases, those related to import procedures to 64 cases and others to 22 cases.  By responsible authorities, the Ministry of Health, Labour and Welfare accounted for 66 cases, the Ministry of Finance for 58 cases, the Ministry of Economy, Trade and Industry for 36 cases, the Ministry of Land, Infrastructure and Transport for 32 cases, the Ministry of Agriculture, Forestry and Fisheries for 26 cases, the Ministry of Public Management, Home Affairs, Posts and Telecommunications for 15 cases, the National Police Agency for 11 cases, the Ministry of Justice for three cases, the Ministry of Education, Culture, Sports, Science and Technology for three cases and the remaining five ministries and agencies for six cases.

When classified by those making complaints, complaints made by domestic economic associations and individual companies accounted for 68% of all complaints.  32% were from overseas foreign embassies and economic associations, among which 13.2% were from the USA/Canada region, 9.5% from Asia and 5.3% from the EU.

(Current Standing of Measures on “Comprehensive Review of OTO Cases”)

The results of measures taken for “Comprehensive Review of OTO Cases” are as follows.  (Although the number of complaints is 231 cases as mentioned earlier, the items concerned account for 280 because some cases are applicable to more than two items in terms of complaint content.)

Among the 280 items, 158 items are categorized as “measures to promote imports,” among which (1) “measures have already been implemented” accounts for 107 items, (2) “measures have partially been implemented” for 46 items and (3) “implementation has been delayed” for five items.  122 items do not belong to “measures to promote imports,” among which 11 items had new measures added to the originally proposed measures.  
It is fair to conclude that certain resolutions were reached on (1) items in “measures have already been implemented,” which account for 67.7% of the items in “measures to promote imports.”

On the other hand, among the 158 items in “measures to promote imports,” (2) and (3) are the ones for which implementation of measures has yet to be completed.　 OTO will continue its efforts to resolve these problems of complaints on a total of 173 items, which includes 122 items excluded from the items in “measures to promote imports.”

Out of 231 cases/ 280 items of complaints,
(1) 158 items require “measures to promote imports” by the responsible authorities
 1]measures for 107 items have already been implemented
 2] measures for 46 items have been partially implemented
 3] implementation of five items have been delayed
(2) 122 items are not categorized in (1)
   new measures are applied to 11 items by the responsible authorities

(Examination Criteria for the Comprehensive Review of OTO Cases)

   Among 173 items mentioned above for which OTO makes continuous efforts to solve problems, nine themes (18 items/16 cases) have been chosen as necessary items for further deliberations from the following perspectives.
1]  Those with greater demand for complaints to be solved; for example, those about which similar complaints have been made many times
2]  Those containing concerns over functional efficiency of measures
3]  Those with expectations of not only improving market access but also revitalizing the economy through correction of high cost structures and facilitation of economic efficiency; and also those which contribute to the development of IT systems and computerization (responding to the computerization of the government)

After a series of deliberations in MAOC Expert Conferences, the following recommendations have been presented.

Nine Themes for which Recommendations Are Made

“Issues on Standards and Certification System”
Issues on Formulation of Specifications/Standards

Review of medical contents classification

Issues on Adaptability Assessment for Specifications/Standards

“Others”

Changes in the vehicle inspection system for both towing and towed vehicles

II. Important Issues on “Comprehensive Review of OTO Cases”

The following remarks are made when we propose the Specific Recommendations for the “Comprehensive Review of OTO Cases” as important issues to be considered for the future handling of OTO cases.

(1)  Issues regarding Standards/Certification System

Issues regarding the standards/certification system have great significance for improving market access.  Many domestic and foreign complaints about the market access of this country are still being made as being incomplete in spite of governmental efforts to promote deregulation and to globalize specifications and standards.  A delay in such improvement is one of the causes of various international frictions.  There are many cases related to the standards/certification system in this year’s “Comprehensive Review of OTO Cases”; and four themes out of nine on which specific measures are recommended after the consideration of MAOC Expert Conference, are related to the standards/certification system.

The standards and certification system needs to be flexible to adapt to the developments in the social and economic environment.  In an increasing social atmosphere of stalling and in a mature society with an aging population and decreasing birthrate, there is a vital need to drastically change the modality of the standards/certification system.  Strong emphasis is placed more than ever on allocating human and economic resources in the areas which vitalize the economy.  Along with this, foreign expertise must be actively utilized to shift the resources which traditionally had been spent on standards/certification proceduresto other areas in such a way that the economy is directly stimulated and revitalized.

(Issues on Formulation of Specifications/Standards)

In order to review specifications/standards or to design new specifications/standards, it is important to ensure the domestic standards in conformity with those that have already been established as international standards.  The recommendations made on “Open access to food additives distributed abroad,” and “Review of medical contents classification” is in line with this concept.
The problem stems from fact that although products with established safety are widely distributed overseas, they are not allowed to be distributed in Japan merely because the domestic specifications/ standards do not conform to the international specifications.

-Administration initiated review-
Against the background of sluggish promotion of conformity with the international specifications lies the Request Doctrine in which approval is considered only when an individual business makes a specific request.  In reality, a considerable amount of time and money is required for filing of requests for approval costs for individual business institutions. Thus, many just postpone the filing.
Administrative actions are needed to initiate positive review of this matter without waiting for requests to be filed by business organizations.

-Active efforts to establish internationally applicable specifications/standards-
Active efforts should be made even in the field where there are no international specifications/standards without waiting for the establishment of such specifications.
Initiative efforts to lead relevant countries towards the establishment of international specifications should be made.

(Issues on Adaptability Assessment for Specifications/Standards)

In order to evaluate conformity with specifications/standards, it is important to find a way to utilize foreign assessment organizations.
This point is also important from the perspective of the optimal allocation of resources as mentioned earlier.  “Utilization of foreign test data for inspection of building materials” and “Review of the JAS System,” on which recommendations for specific measures were presented, are in line with this concept.  The issues have always been how to make positive utilization of efficient foreigntesting organizations in order to reduce the cost of re-inspection (international two-tier cost system), and also how much the Japanese system prevents the utilization and actual operation of foreign testing organizations.

-Applications in English-
Foreign testing organizations need to be approved to be incorporated into Japanese system so that we are able to make full use of them.  One of the major hindrances to application for approval is the submission of papers and documents in Japanese.  It takes a considerable amount of money and time for foreign organizations to submit documents in Japanese.  The burden seems to be too much for overseas institutions to compose all of the required application documents and attached files in Japanese.  It is, therefore, important to accept some applications in English, depending on the contents of the application requirements.

-Establishment of standard processing period-
Another barrier to the filing of applications is that it takes too long for applications to be processed.  In consideration of the convenience of applicants, it is necessary at least to establish a standard processing period required for the approval of foreign testing organizations. 

-Promotion of reciprocal recognition framework-
We need to establish a reciprocal recognition system for the active use of international conformity assessment, which leads to the reduction of burden on customers and to the improvement of customer convenience.  Japan is no exception when it comes to having to make every effort to improve the comprehensive framework to promote reciprocal recognition with other major countries.

(2) Realization of “Japan that is Open to the World 24 Hours a Day, 365 Days a Year”

As the global economy becomes increasingly unified and as economic activities expand over national borders, neighboring countries with advanced international ports are working to improve their facilities, aspiring to become major physical distribution hubs in the world.  On the other hand, Japan has experienced a decline in its position as a physical distribution hub.

In such circumstances, it is not sufficient to adhere to conventional operations such as tax collection and crackdown on products of social evil when dealing with businesses which have direct access to the outside world, namely, customs/quarantine services, cargo handling works at ports and harbors, or port and harbor gates.  These businesses with direct contact with overseas businesses should be viewed as a significant element of physical distribution in Japan.  Developing a 24 hour/365 day system will enable us to realize a “Japan that is open to the world for 24 hoursa day, 365 days a year,” which eventually will bring about not only the improvement of market access, but also the revitalization of the physical distribution hub with enhanced capacities.  Also, once the “24 hours a day/365 days a year” system is realized, this will be a new economic environment in which to cultivate the establishment of a new physical distribution system.  Such newly developed distribution system would make Japan’s physical distribution even more efficient.

In addition, in order to tap the full potential of the system, cooperation between the private and public sectors in customs, quarantine and plant protection services, and management of ports and harbors must be reinforced much further.

(3) Simplification and Facilitation of Import Procedures

(Constant Reviews from the Users’ Viewpoint)

Import procedures must be simplified and expedited in order to facilitate the efficiency of physical distribution of Japan and to reduce the time factors and economic costs.  However, in reality, there is still a huge demand for simplified and speedy procedures at every level of import procedure.  Taking specific recommendations for “Improving the simplified declaration system”as an example, it is often claimed that although the system has great potential for being useful, it has not been fully used.  It is true that complaints made concerning simplifying and facilitating import procedures vary in their form and content; however, close attention must be paid to individual cases and must be reviewed continuously from the users’ viewpoint.

(Promotion and Development of IT Systems and Computerization)

In view of promoting simplification and expedition of import procedures, the promotion of IT systems and computerization of relevant procedures are important.  Improvement in this field would not only facilitate the convenience of users, but also be a significant element for reducing the cost of import related procedures.  Many OTO cases contained proposed suggestions in relation to this subject in the past, such as “improvement of NACCS customs clearance procedures using the Internet.”

Especially in light of the recent movement of the government towards one-stop services (single-window system) for import-export procedures and port related procedures, it is essential to implement one-stop services at the earliest possible time.  Moreover, at the same time, all the procedures must be thoroughly reviewed for the sake of customers, including simplification of procedures by eliminating overlapped procedures, not to mention the mutual connectionof existing systems.

It has a damaging effect on everything when the cost is high, even if convenience is facilitated.  As for the rate structure of the Nippon Automated Cargo Clearance System (NACCS), it must be reviewed flexibly in accordance with changes in economic conditions and financial situations at a given time.  It is important to clarify the rules on the return of surplus or reserves and to reduce the cost by establishing a system in which the effect of cost reduction is reflected in the rate structure.  Information disclosure must also be promoted further to establish a transparent and justifiable rate structure system. 

Setting up a third party organization comprising of users and advisors is also essential to examine the modality of the rating system from various points of view.

(4) Conclusion - Importance of Repeated Review

The circumstances of world trade are changing at a rapid rate.  We are at a crucial stage in the WTO negotiations.
The movement on FTA (Free Trade Agreement) has been quite active in many parts of the world in recent years.  It is essential to incorporate domestic structural reform into these trade developments in order to realize free and transparent trade system and to achieve international competitiveness for Japan.  The activities of OTO are the efforts towards the realization of such structural reform through handling specific individual complaints.

A point clearly and repeatedly brought up through the work of the “Comprehensive Review of OTO Cases” is the fact that similar complaints are made over and over again.  There are, of course, some complaints which cannot be solved to any extent.  In many cases, however, this is a result of a reluctance to do what has to be done and an intention of delaying possible solutions.  This stems from a lack of acknowledgement of the influence on the economy and a lack of risk awareness.  This attitude will hinder the development of structural reform plans and end up damaging the international competitiveness of Japan.

As mentioned at the beginning, in order to secure the implementation of measures by the responsible authorities, follow-ups have been made to the “Comprehensive Review of OTO Cases.” However, if it ends at that, the effect will be limited in its scale.  The important thing is to ensure that success is achieved.  In other words, cases must be followed through to the final stage, until the complaints are resolved.  In order to do so, the MAOC will continue its efforts to determine ‘whether necessary actions are being made’, ‘whether the actions have reached the implementation stage’ and ‘whether the implemented measures are achieving success.’  In the case where achievements are not being made due to insufficient measures or to slow actions, the MAOC will become involved in action to achieve the goals at the earliest possible time.

Nine themes on which specific recommendations are made

1. Open Access to Food Additives Distributed Abroad

1- 1. Issues Raised

 Imports of foods containing food additives which are not designated by the Minister of Health, Labour and Welfare are prohibited in Japan.

As for foods containing food additives with secured safety in foreign countries, their imports must be approved.

(Use of food additives approved in foreign countries [Problem raising process of FY1999])

1- 2. Outlines of Measures by Ministry Concerned (Ministry of Health, Labour and Welfare) (Background of cases)

(Answer from the ministry concerned)
The designation of new food additives must be based on the guiding principle of the amendment of standards concerning the designation and use of food additives (Notice No. 29 of the Director General of the Environmental Health Bureau dated March 1996).  Application with attached documents on safety should be submitted in accordance with this guiding principle.

Designation of food additives in western countries is carried out in the same way as in Japan, through the use of scientific assessment methods.  When safety is secured in foreign countries, it means that there is sufficient scientific data that could be used for safety assessment in Japan as well.  The applications made in accordance with the guiding principle and submitted in conjunction with necessary documents are being appropriately processed forapproval at the Pharmaceutical Affairs and Food Sanitation Council.

1- 3. Examination Results of the Comprehensive Review

(1) New approach of the responsible ministry

A. A request-doctrine have been exercised in the past as in the answer from the ministry concerned described in Section 2.  Since then, the responsible ministry started necessary reviews on the concept of food additives.  In view of the globalization of food, an effort is underway to achieve international conformity for additives with established international safety. 

(a) In other words, a decision was made to conduct assessment on the safety and necessity for the following additives:

1] International safety assessment was conducted at JECFA (Joint Expert Committee on Food Additives) and safety is secured within a certain scope; and

2] Additives approved widely in the US and EU countries, and expected to be highly demanded internationally.
This decision was approved by Pharmaceutical Affairs and Food Sanitation Council in July 2002.

(b) When it comes to perfumes, confirmation must first be made on the propriety of the assessment methods since the safety assessment methods for perfumes used by JECFA differ greatly from those of other additives.

B. The responsible ministry submitted the “Report regarding Treatment of Multipurpose Additives with Secured International Safety(interim report)” at the toxicity and food additive joint conference of the sectional committee of Pharmaceutical Affairs and Food Sanitation Council held on December 19, 2002.  As a result of enquiries to foreign embassies and food relating organizations, 38 items which meet the requirements described in A (a)1]and 2] were selected.  They also selected eight items for which information was not presented although they were selected as “possible food additives to be approved by the tentative assessments” which had been previously announced by the responsible ministry.  It is indicated in the report that discussions and examinations would start on a total of 46 items with the aim of the designation by April 2003.

(2) Examination Results of the Comprehensive Review

A. Problems associated with request-doctrine on approval of food additives

 (International conformity)

To prohibit the distribution of food additives which are widely distributed abroad and whose safety is assured internationally due to Japanese systematic constraints is a huge import barrier.  It is fair to say that this system lacks international conformity.

Under the conventional request-doctrine system, even a food additive with international safety assurance will not be approved unless a specific request is made from an individual institution.  Small and medium-sized enterprises with import needs have been facing difficulties because they are required to spend a lot of time and money on the filing of application forms under such a systematic framework.  This has ended up leading to the postponement of individual applications, and it is well understood to be related to the recent surge of cases of using undesignated food additives that thus violate the Food Sanitation Law.

B. Change from request-doctrine to administration-initiated active designation system

In view of the situation described in Section A above, the administration must take initiatives to designate food additives when they are widely distributed throughout the world and their safety is established internationally, without waiting for requests for approval from enterprises, etc.  Also, international data and research documents on safety should be actively used in the approval process, in order to facilitate the application procedures and to reduce the cost.  Furthermore, the results of examinations and deliberations should be disclosed.

We are faced with the globalization of food distribution and the spread of undesignated food additives.  The fact that the responsible ministry has finally started deliberations towards the administration initiated designation system is highly evaluated. We have seen some positive developments subsequent to that.  In December 2002, the responsible ministry decided to start deliberations and examinations on 46 food additives in accordance with the standards stated in section (1) A (a)1] and 2], aiming at designation by April 2003.

However, it is found from the Comprehensive Review that there are many more food additives other than the 46 additives chosen by the ministry concerned that are widely and safely used abroad.

It is a matter of course that the ministry concerned takes prompt initiative to deliberate and examine those 46 food additives to designate them based on the examination results.

Also, highly demanded food additives other than these particular 46 additives must be examined for designation by administrative initiative. Prior announcement should be made about additional designation, specifying the examined additives, the designation standards, schedules and others.

1- 4. Specific Recommendations

The responsible ministry must take the following measures to improve market access while seriously taking the situations described above into consideration.

(1) The administration should take an initiative to conduct internal examinations and deliberations using available foreign testing data for the designation of food additives which are widely and safely distributed internationally． Additives must be approved for designation unless there are specific and clear reasons for them not being distributed in Japan.  In addition, further efforts should be made to disclose the content of deliberations and examinations.

(2) Early deliberations and examinations should be made by the initiatives of an administration on 46 food additives and the designation of them should be decided based on the examination results.  Also, administration initiated deliberations and examinations should be made on qualifying and hugely demanded food additives other than the 46 items and active additional designations should be made based on the examination results.  Prior announcement should be made about the additional designation, specifying the examined additives, the designation standards, schedules and others.

2.  Review of Medical Classification

2- 1. Issues Raised

L-Carnitine is widely used as a part of dietary supplements, baby foods and sports drinks in European countries and the US.  L-Carnitine is classified as pharmaceutical product under the Pharmaceutical Affairs Law of Japan, and importing of any food containing this product is not approved in Japan.

However, L-Carnitine is a natural source of nutrition contained in milk, beef, asparagus, rice and others.  It is not rational to classify this product as medical supplies, and it should be treated as food.

(Reference)

Products consumed orally are classified as either “foods” or “medical products and others” (pharmaceutical products and quasi-drugs) in Japan.  A classification of a product as “medical products and others” depends on a judgment whether the product is acknowledged by people that it serves the purpose defined by the Pharmaceutical Affairs Law.  “Standards concerning the scope of pharmaceutical products” are established as an indication for this judgment.  Comprehensive judgment is made taking various factors into consideration.  The factors involved in judgment are the components of the product (raw material), the form (dosage form, container, wrapping, brands, etc), the intended use, the effect-efficacy, the dosage and administration, the sales method and the explanation given to the customers.  As a result, some products are classified as “pharmaceutical products” in Japan even though they are treated as foods in foreign countries.

Distribution as foods was enabled for some vitamins from March 1997 by a partial amendment of the standards.  The same treatment was applied to some herbs from March 1998 and to some minerals from March 1999.

2- 2. Outlines of Measures by Ministry Concerned (Ministry of Health, Labour and Welfare) (Background of cases)

(Answer from the ministry concerned)

Extracted or chemically synthesized L-Carnitine can not be classified as food with the following reasons:1] L-Carnitine is an active ingredient approved as a pharmaceutical product in Japan.  Its efficacy and safety as a medical product has been established under the approval system in line with Pharmaceutical Affairs Law based on scientific data (basis) from clinical trials on people.  And therefore, its essential component (raw material) has been used in pharmaceutical products. 2] The side effects of this pharmaceutical product are widely known: such as digestive disturbances (diarrhea, loose bowels, etc.), facial shallowness, hematuria (the presence of blood in the urine), anemia and others. 3] The use of L-Carnitine as food has not been widely known and therefore, it corresponds to “products being used for pharmaceutical products” and to “essential components (raw material) being used solely for pharmaceutical products.”

“The list of essential components (raw materials) being used solely for pharmaceutical products” is subject to addition, revision and deletion whenever necessary as a result of additional knowledge on safety.  And therefore, we would like to examine the safety of L-Carnitine when data based on scientific examinations (includes epidemiological surveys) are presented

2- 3. Examination Results of the Comprehensive Review

(1) Problems concerning list of medical contents classification (International conformity)

Many components, which are treated as foods in EU countries and the US and are not necessarily treated as pharmaceutical components in terms of safety, are still included in the “the list of essential components (raw materials) being used solely for pharmaceutical products,” which is used for current medical contents classification.  The responsible ministry’s explanation of the difference in the treatment of an essential component is based on the different regulations and eating habits of different countries.
However, the prohibition of distribution of foods that are widely distributed and sold abroad due to Japanese systematic constraints is a huge import barrier.  It is fair to say that this system lacks international conformity.

(2) Implementation of active measures for improvement by administrative initiatives

The responsible ministry should initiate review of the classification of components being treated as foods in the US and EU countries by conducting thorough scientific examinations of content, safety and function as food.  The authority should take prompt action to present specific products and schedules forthe revision of “the list of essential components (raw materials) to be used solely for pharmaceutical products.”

(3) To secure uninterrupted distribution as foods

Even if some components are excluded from “the list of essential components (raw materials) to be used solely for pharmaceutical products” with the revision of (2) above, this will serve no purpose if they are not allowed to be distributed or to be sold as foods simply because they are not approved as food additives under the Food Sanitation Law.  Therefore, the responsible ministry should take measures for designation of such components as food so as to secure uninterrupted distribution in line with the revision of “the list of essential components (raw materials) to be used solely as pharmaceutical products.”

(4) Response from responsible ministry concerning L-Carnitine

In response to the complaints made on the L-Carnitine mentioned in the previous section of this report and subsequent submission of scientific data and other documents, experts made deliberations and examinations on this component.  As a result of such proceedings, L-Carnitine was excluded from “the list of essential components (raw materials) to be used solely as pharmaceutical products” and added to “the list of essential components (raw materials) not to be recognized as pharmaceutical components as long as not having a requirement for medical efficacy” by the notice of the Director General of the Pharmaceutical and Medical Safety Bureau of the Ministry of Health, Labour and Welfare dated November 15, 2002 (“Notice No. 1115003 concerning partial amendment of standards on the scope of pharmaceutical products” issued by the Pharmaceutical and Medical Safety Bureau on November 15, 2002).

With the notice of the Director of the Standards Division of the Department of Food Sanitation of the Ministry of Health, Labour and Welfare dated December 25, 2002, it was made possible to distribute L-Carnitine as food without a separate designation as food additive when it is used as food additive  (“Notice No.1225001 concerning amendment of treatment of ‘the list of essential components (raw materials) not to be recognized as pharmaceutical components as long as not having a requirement for medical efficacy’” issued by the Standards Division on December 25, 2002).

2- 4. Specific Recommendations

The responsible ministry must take the following measures to improve market access while taking the situations described above into consideration.

(1) As in the case of L-Carnitine being made available as food, those components listed as the ones to be used solely as pharmaceutical products in Japan although they are widely bdistributed and sold as foods in overseas countries must be scientifically examined on its contents, safety and functions and the classification of such components should be reviewed by active administrative initiatives.  The authority should take prompt action to present specific components targeted for the revision of “the list of essential components (raw materials) to be used solely for pharmaceutical products” and the schedules for such procedures.

(2) Along with the revision of medical contents classification, measures should be taken to facilitate uninterrupted distribution and sales of such components as foods, for example, by designating such components as food additives.

3. Use of Foreign Testing Data for Inspection of Building Materials, etc 

3- 1. Issues Raised

(1) Inspection of foreign building material must be conducted without exception on imported building materials even if they already have foreign specification approvals, and it costs more than one million yen for this inspection.  Simplification of assessment must be promoted by using foreign testing data, etc. [FY1999 process, Tosho]

(2) Foreign testing data on foreign made wooden fire doors should be used for the assessment and approval so as to promote imports through simplified conformation of the Japanese standards.  [FY2001 process, Tosho]

3- 2. Outlines of measures by ministry concerned (Ministry of Land, Infrastructure and Transport) (Background of cases)

(Answer from the ministry concerned)

•    Under the amendment of the Building Standard Law (Law No. 201, 1950) in 1998, the Minister of Land, Infrastructure and Transport allows foreign assessment organizations (approved performance evaluation organizations) to conduct assessment on foreign building materials in accordance with the procedures stipulated the Building Standard Law.  Thus, it is made possible that foreign building materials can be used in Japan with the approval of the Minister of Land, Infrastructure and Transport when they are assessed by approved foreign assesssment organizations (approved performance evaluation organizations).

Also, depending on the types of testing, performance evaluation may be conducted based on foreign testing data.

•    There is no difference in requirements between domestic and foreign organizations for designation (domestic) or authorized (foreign) of recognition organization (authorized recognition organization) to conduct “Recognized Type Conformance” (note).  And it is possible to approve any foreign organization as authorized recognition organization when it meets specification requirements.
As of December 2002, there is no organization which has been approved as an authorized organization for recognition.  It is recommended to use some designated recognition organizations which include foreign countries in their scope of services.

(Note) “Recognized Type Conformance”: The Minister of Land, Infrastructure and Transport entitles some building materials and building devices such as elevators or fire-doors which are produced in large quantities in uniform styles and types to be exempted from individual inspections for building confirmation.

•    The Minister of Land, Infrastructure and Transport has not approved any foreign organization as “authorized organization for performance assessment” or as “authorized organization for recognition” to assess performance and to recognize type conformance as of December 2002.

3- 3. Examination Results of the Comprehensive Review

(Measures for effective use of Authorized Organization for Recognition System and others)

Authorized Organization for Recognition System and Authorized Organization for Performance Evaluation System were newly established by the amendment of the Building Standard Law in 1998.  Under the new systems, foreign inspection organizations are eligible to be approved by the Minister of Land, Infrastructure and Transport as authorized organizations for recognition or as authorized organizations for performance evaluation.  Foreign enterprises now have wider options to use foreign authorized organizations for recognition or authorized organizations for performance evaluation in addition to the choice of using the existing Japanese designated organizations for recognition or designated organizations for performance evaluation under the Building Standard Law.

However, there are no foreign organizations approved by the Minister of Land, Infrastructure and Transport as authorized organizations for recognition or as authorized organizations for performance evaluation as of December 2002 and no foreign enterprises are able to utilize the Authorized Organization for Recognition System and others.

There is no point in setting up the legal framework for Authorized Organization for Recognition System and Authorized Organization for Performance Evaluation System when there are no authorized organizations.  Many foreign testing organizations should apply for the approval and be approved expeditiously as authorized organizations for recognition in order for the effective use of the systems.

However, the responsible ministry states “Authorized organizations for recognition and authorized organizations for performance evaluation are to be approved when a testing organization submits application.  We cannot approve any organization if there is no application.”  The responsible ministry does not take any active measures for promotion of application for approval from foreign testing organizations. 

Accordingly, this committee has devised and is recommending the following specific measures to promote applications for approval as authorized organizations for recognition from foreign testing organizations.

(1) Establishing standard processing period for the application for approval

Currently, the responsible ministry has not established the standard processing period of the application for approval of authorized organizations for recognition and authorized organizations for performance evaluation.

However, to gain an understanding of how much time will be consumed for the process of application of authorized organizations for recognition and authorized organizations for performance evaluation is a significant issue for the organizations considering applying.

When there is no specific idea about the time consumed for the application process and when the transparency of procedure is not secured, many companies are not able to design subsequent business plans and they may be concerned about some confusions in business activities.  This is thought to be a disincentive factor for making applications.

Article 6 of the Administrative Procedure Law (Law No. 88, 1993) stipulates that “administrative agencies shall make efforts to establish standard period of processing applications after such applications reach the office.”  Thus, administrative agencies are required to process applications rapidly and fairly within a certain period of time (standard period necessary for normal processing). 

As mentioned above, it is absolutely necessary to establish a standard processing period for the application and to improve the transparency of processing and to process application promptly in order to promote applications from abroad.  The responsible ministry should set up and announce the standard processing period required for the application approval of authorized organizations for recognition and authorized organizations for performance evaluation.

Even in the case where the screening period is expected to differ depending on the nature of applications, a “normal standard period required for processing” should be established by, for example, setting up a rational period within a certain range or by breaking cases down into patterns. 

(2) Application in English

The documents (note) required to be submitted for the application for authorized organizations for recognition and authorized organizations for performance evaluation are requested to all be in Japanese, although explicit basis for this is not provided in the Building Standard Law, etc.  Hence, foreign testing organizations need to have all the documents translated into Japanese

In order to facilitate applications for registration and approval of foreign organizations under the Japanese recognition and approval system, the effective way is to reduce the burden of foreign organizations (expenses and time consumed for translation) by accepting some English documents depending on the nature of the documents.  This concept was already pointed out in the Recommendation for Market Access Issues as Concerns Standards, Certification and Others (7th Report of Market Access Ombudsman Council (March 18, 2002)).

The same measures must be applied to this case to approve English application documents as a part of specific measures to encourage applications from foreign testing organizations.

Moreover, some documents may be better when they are presented in English than in a translated version in Japanese from the viewpoint of conducting strict examinations.  Submission of such documents in English must be approved.

The ministry concerned should strive to discuss and act promptly to take measures for accepting English documents and to reduce the burden of foreign testing organizaions for the application of documets required to be approved as authorized organizations for recognition and authorized organizations for performance evaluation.

(Note) Required documents for the application of approval (Articles 47 and 72 of “the ministerial ordinance concerning designated qualification accreditation organization based on Building Standard Law” (Ordinance No. 13 of the Ministry of Construction, 1999).
1] application form, 2] article of partnership or act of endowment and certified copy of register, etc., 3] list of assets and balance sheet of the fiscal year prior to the date of application, 4] a document certifies that the applicant is not applicable to Subsections 1 and 2 of Clause 37 of Article 77 (disqualification clause) of the Building Standard Law, 5] business plans for the fiscal year of the date of application and for the following year, etc., 6] names and career summaries of executive officers in the case where an applicant is a corporate body, 7] a document listing the organization name and description of business, 8] a document listing the addresses of offices, 9] names and addresses of stock holders who possess more than 5/100 of the total stocks when an applicant is a corporate body and a document listing the number of stocks possessed by them, 10] a document listing the names and career summaries of assessors, 11] documents outlining the current business, 12] a document describing the business plans concerning recognitions, etc.

(3) Effective PR, etc. for foreign governments and foreign testing organizations and others

Although a legal framework for authorized organizations for recognition or for authorized organizations for performance evaluation was developed by the amendment of the Building Standard Law in 1998, there are no organizations approved by the Minister of Land, Infrastructure and Transport as authorized organizations for recognition or as authorized organizations for performance evaluation as of the current time.  Foreign enterprises are unable to use more convenient foreign assessment organizations for recognition and others.

The responsible ministry states concerning the current status that “authorized organizations for recognition and authorized organizations for performance evaluation are by nature to be approved when a testing organization submits application.  We cannot approve any if there is no application.”  The ministry concerned is not taking any active measures for promotion of application for approval from foreign testing organizations.

However, there is no point in setting up the legal framework for Authorized Organization for Recognition System and Authorized Organization for Performance Evaluation System when there are no authorized organizations.  Establishment of such systems will serve a purpose only when there are many foreign testing organizations are authorized as responsible organizations and when foreign enterprises can use these organizations freely and easily.

Therefore, the responsible ministry should desist from saying “we cannot approve any if there are no applications” in a passive manner; instead, they should take active measures so that a number of foreign testing organizations are approved and effectively used.  An accurate needs survey of the users should be conducted as one of the measures towards this goal; subsequently, active and effective PR activities about the efficiency of systems in question must be conducted for the governments and foreign testing organizations in the regions with high expected demand.

Another way to facilitate the application procedure and to expedite application processing is to compile English application manuals which explain actual procedures on application approvals for authorized organizations for recognition and authorized organizations for performance evaluation, required documents (includes format), consultation services and other related information.  The manuals should be distributed and posted on the relevant website.

The ministry concerned is expected to take immediate action toward this goal.

(4) Approaches toward reciprocal recognitions

When a foreign manufacturer or exporter exports some materials or products to Japan, it is required to verify the conformity of materials or products with Japanese specifications or standards. The expenses and time spent on such applications places a heavy burden on foreign manufacturers and others who are not familiar with Japanese application procedures.

Efforts have already been made in some areas to ease the burden by establishing conformity with international specifications such as those of the International Organization for Standardization (ISO), etc., and with international guidelines for conformity assessment procedures.

The ministry concerned states with regard to the conformity of building materials with the Building Standard Law that “some types of materials are eligible for performance assessment using foreign testing data.”

However, the issues raised in this report concerning fire resistance tests on fire-doors, etc. and strength tests on walls of wooden houses are not included in the category in question, and there is no example of easing the burden on foreign manufacturers through conclusion of mutual recognition agreements.

On the other hand, mutual recognitions have been frequently sought by North America, the EU and British Commonwealth countries, and strong requests have been presented to Japan to conclude mutual recognition agreements between major trading partners to ease the burden of application (expenses, time, etc.) , to expedite market introduction of products and eventually to facilitate market access.

The responsible ministry should consider measures for early realization of reciprocal recognition between major trading partners to ease the burden and improve the convenience of the users as well as to develop better market access.

3- 4. Specific Recommendation

The ministry concerned should take the following measures for the further improvement of market access.

In order to facilitate the applications for approval from authorized organizations for recognition based on the Building Standard Law and from foreign testing organizations as of authorized organizations for performance evaluation, the ministry concerned should take the following measures promptly:

1] The ministry concerned should establish and announce the standard processing period for applications of recognition, and should also make efforts to facilitate rapid processing, while securing the transparency of approval procedures.

2] The ministry concerned should consider and implement the acceptance of English application documents to promote applications of recognitions through an effort to ease the burden on foreign assessment organizations.

3] The ministry concerned should promote active and effective PR activities for the usefulness of the new systems in question.  The ministry should compile an application manual in English which explains the actual procedures for application process of authorized organizations for recognition and authorized organizations for performance evaluation, required documents (including format), consultation services and other related information.  The manuals should be distributed and posted on its website.

The responsible ministry should also consider measures for early realization of reciprocal recognition between major trading partners to ease the burden and improve the convenience of users as well as to develop better market access.

4. Review of the JAS System

4- 1. Issues Raised

Due to the delay of the registration process for “Registered Foreign Certification Organization,” importing companies suffered damage from not being able to import organic produce with JAS stickers, which had originally been scheduled to start on April 1, 2001 (date of law enforcement) under the law of JAS standards for organic vegetables 

The ministry concerned should take following measures to increase the number of Registered Foreign Certification Organizations to facilitate the Registered Foreign Organization System. 1] Measures to make the registration process easier such as accepting registration application forms in English 2] Special measures to eliminate the requirement of “countries with equivalent systems to the JAS System” by using internationally accepted organizations (IOAS) (Raised by domestic enterprises in FY2001)

4- 2. Outline of measures taken by the ministry concerned (Ministry of Agriculture, Forestry and Fisheries)  (Background of the case)

<Decisions made by Office of Market Access (OMA) in FY2001 > 

The following measures are recommended for the promotion of Registered Foreign Certification Organizations which are stipulated by the Law concerning Standardization and Proper Labeling of Agricultural and Forestry Products (JAS Law).  

(a): A standard processing period for the Registration of Foreign Certification Organizations was newly set to be within three months in response to the issues raised.  A continuous effort to expedite the actual implementation through improvement of efficiency of clerical work is needed.

(b): In view of encouraging Registered Foreign Certification Organizations to facilitate the needs of importing companies, specific measures should be taken to allow some required allocation documents in English.

(c): The ministry concerned will consider revision of the JAS Law and take necessary measures to enable importers to utilize Registered Foreign Certification Organizations even if the organizations do not belong to countries having similar systems to the JAS System.  The ministry should also abolish the requirement of "countries having equivalent systems to the JAS System,” a requirement that the ministry has adopted to ensure proper control and supervision of Registered Foreign Certification Organizations, in order to secure proper operation and supervision of organizations. And in doing so, encourage the use of reliable organizations registed by internationally accredited organizations (such as the IOAS).

<Answers from the ministry concerned >

•    The ministry is making efforts to expedite the application process and seven European organizations and six Australian organizations have been registered as of February 17, 2003, and two more organizations are expected to register within FY2002.  The average processing period for applications, excluding the waiting period for answers to our inquiries, is less than three months.

•    Deliberations are still being conducted as to which documents may be acceptable in English, while taking into consideration the fact that the responsible ministry must assume responsibility for the translation of materials if documents are submitted in English.

•    (Reference: Countries having equivalent systems to Japan)

    •   15 EU countries and Australia, (designated in March 2001)

    •   The United States of America (designated in March 2002)

4- 3. Examination Results of the Comprehensive Review

(1) Application in English

The documents required to be submitted for the registration of Foreign Certification Organizations are stipulated in the rules of practice of Article 55, which is applied correspondingly with the rules of practice of Article 85 of Ordinance No. 62 of the Ministry of Agriculture, Forestry and Fisheries of 1950 concerning standardization and appropriate quality labeling of agricultural and forestry products.  The required documents at present are as follows (documents except (a) are attachments).

(a) Application form
(Entry items: name and address, address of office where recognition is assessed, classification of agricultural or forestry products on which recognitions are made, area where recognition is to be made, the number of qualified assessors, items concerning management of assessment works, the existence or not of disqualification, outlines of businesses other than recognitions and their relations to agricultural or forestry products in question)

(b) Resumes of staff in charge of assessments

(c) Article of partnership or act of endowment and certified copy of register (equivalent documents for these when an applicant is a corporate body established under foreign law)

(d) A document listing names and addresses of executive officers

(e) Recent list of assets or balance sheet

(f)  Documents on business plans of the fiscal year and the following fiscal year of the date of application and documents regarding budget balance

(g) Documents listing names and addresses of constituent members according to the types of corporate body

(h) When some of constituent members are engaged in other businesses, outlines of the businesses and documents describing the relations between the businesses and agricultural and forestry products on which assessments are to be made

As mentioned in Section 2 above, the Policy Actions on Market Access Issues as Concerns Standards, Certifications and Others of Fiscal 2001 (decisions made by Office of Market Access (OMA) on March 20 2002) specified that measures are to be taken such as accepting some of these documents in English and speedy implementation are highly desirable. 

The response on this matter by the ministry concerned was that “deliberations are still being conducted as to which documents may be acceptable in English while taking into consideration the fact that the ministry concerned must assume responsibility for the translation of materials if documents are submitted in English.”

However, when looking at the list of required documents from (a) to (h) above, the major component of the entry items are names and numbers and many do not have to be translated into Japanese.
It does not seem reasonable to spend a long time deciding whether or not to accept English documents.  A year has already passed since last year’s decisions made by OMA and it must be said that culmination of the ongoing deliberations is long overdue.

The responsible ministry states that it is “taking into consideration the fact that the ministry concerned should assume responsibility for the translation of materials instead of the applicant.” However, an important factor that must be remembered with respect to the registration of Foreign Certification Organizations is not to put the blame on the applicants by forcing “the responsibility of translation” on applicants if they are found to be unqualified after registration.  Instead, the responsible ministry should make an appropriate and strict judgment on whether the applicant in question possesses sufficient qualifications to be a Registered Foreign Certification Organization.  In order to conduct strict assessment and to make appropriate substantial judgment, English documents may serve better than translated versions of documents in some cases.

When international courts deal with translated documents, the credibility of the documents is first questioned in general.  The courts tend to examine such cases based on the authentic documents in English, etc. rather than the translated documents created in line with the Japanese system.

Therefore, the responsible authority must promptly come to a decision on whether or not to accept English documents and act accordingly to ease the burden on foreign applicants for registration.

(2) Review of the requirement to be “countries with equivalent systems to the JAS System” 

Under the Law concerning Standardization and Proper Labeling Of Agricultural and Forestry Products (Law No. 175, 1950. hereinafter referred to as JAS Law), when a foreign certification organizations apply for registration in Japan, the organization must belong to countries “designated by the ordinance of the Ministry of Agriculture, Forestry and Fisheries as having a system equivalent to the Japanese Agricultural Standards.”  No matter how efficient a certification organization is, it will not be granted registration unless the organization comes from a country designated by the Japanese government (6-2 and 6-4 of Article 19 of the JAS Law).

Policy Actions on Market Access Issues as Concerns Standards, Certifications and Others (March 20, 2002) recommends that the responsible ministry should revise the JAS Law and take necessary measures to make it possible for importers to utilize a Registered Foreign Certification Organization even though it does not belong to a designated country.  The ministry should also abolish the requirement of “countries with equivalent systems to the JAS System,” to secure proper operation and supervision of certification organizations.  And in doing so, it should also encourage the use of reliable organizations registered by internationally renowned organizations (such as the IOAS).

However, the responsible ministry has yet to reach a conclusion on discussions on this matter as of the present time.  The responsible ministry should conclude these discussions immediately in line with the principles of recommendations presented last fiscal year to make it possible for importers to utilize Registered Foreign Certification Organizations if they are well equipped with the capacity to conduct the service required, even they do not belong to countries having similar systems as the JAS System.

The responsible ministry, therefore, should promptly decide to amend the JAS Law to abolish the requirement of “countries having equivalent systems to the JAS System,” and in doing so, encourage the use of reliable organizations registered by internationally acclaimed organizations (such as the IOAS).  In the meantime, the amendment of JAS Law must clarify the measures to make it possible for the registration of organizations not belonging to countries having equivalent systems to the JAS System, as long as they are well equipped with the capacity to conduct the required services.

4- 4. Specific Measures

Based on the above, the ministry concerned is requested to implement the following measures to further improve market access.

(1)    Appropriate action must be taken immediately after conclusion is reached on matters regarding the acceptance of application documents for Registered Foreign Certification Organizations written in English, with the aim of easing the burden on foreign organizations and promoting more applications for registration.

(2)     Conclusion must be reached soon to amend the JAS Law to abolish the requirement of “countries with equivalent systems to the JAS System,” and in doing so, the use of an organization registered by internationally recognized organization (such as the IOAS) must be encouraged. 

In the meantime, the amendment of the JAS Law must clarify the measures to make it possible for the registration of organizations not belonging to countries having similar systems to the JAS System as long as they are well equipped with the capacity to conduct the required services.

5. Realization of 24 hour/365 day Customs and Quarantine Services

5- 1. Issues Raised

<>(1) When importers go through import procedures

after office hours (8:30 – 17:00), at weekends or during the night, they must obtain approval for overtime service hours during office hours and pay handling charges for overtime service system.
Instead of overtime service system, the responsible ministry should extend the customs office hours, making it possible to conduct import procedures 24 hours a day.  Congested ports and airports are particularly in need of prompt action for the implementation of 24-hour services (Problem Raising Process in FY2001).

(2) Handling charges are required for services provided outside office hours.  Clarification of the outside office hours is required.  Because the service provided outside office hours is the same as that during regular office hours, they should abolish the handling charge (Problem Raising Process in FY1999).

(3) As being an issue closely related to the ones above, quarantine must also implement 24 hour/365 day services to bring about the full effect of implementation of 24 hour/365 day customs services.

5- 2. Outline of measures taken by the ministry concerned (Ministry of Finance) (Background of the case)

(1) The outside office hours of customs, as stipulated in Article 98 of the Customs Law, are those in which service is conducted outside regular office hours—at nights, on weekends, and on holidays—whenever requests are made for import procedures, by providing the necessary staff.

Full-time staffs have already been allocated to customs offices where there is great demand for customs clearance outside office hours, and an effective service system has already been developed

We expect actions from the private sector for the implementation of 24-hour service in ports and harbors in the future.

We are determined to be actively involved in improvement of customs systems responding to the specific demand for import/export clearance procedures outside office hours.

In order to gain an understanding of the foreseeable problems towards the movement of 24-hour service in ports and harbors, the operation of trial office hours has been commenced since October 2002 at eight customs offices at seven seaports that deal with a high volume of cargo containers.  The trial office hours are from 17:00 – 21:00 on weekday nights and 8:30 – 17:00 on weekends and holidays.  As a result, applications for request for overtime hours may be accepted even outside of office hours

(2) The outside office hours have already been clearly defined as the hours from the beginning to the end of office hours requested for overtime service.

The overtime service system is provided upon a request for extra service outside of regular office hours.  This system contributes to the convenience of exporters and importers.  Therefore, the administrative cost (personnel expenses, etc) accrued from the provision of the service is to be borne by the applicant who is the beneficiary of the service.  Therefore, this will not be abolished.

5- 3. Examination Results of the Comprehensive Review

(1) Establishing 24 hour/365 day customs and quarantine service system

As the global economy becomes increasingly unified and as economic activities expand over national borders, neighboring countries with advanced international ports are working to improve their facilities, aspiring to become major physical distribution hubs in the world.  On the other hand, Japan has experienced a decline in its position as a major physical distribution hub.  The quality of customs and quarantine services are important components of physical distribution systems and they should be by no means inferior to other countries.  The establishment of a 24 hour/365 day customs and quarantine service system at airports and harbors serves not only customer convenience but also the efficiency of physical distribution of Japan.  The 24 hour/365 day service should initially be introduced to areas where constant demand is expected.

An accurate needs survey must be concluded in order to identify the areas with expected constant demand.  It is necessary to reinforce the network of organizations concerned, such as port authorities, to project accurate current demand, and to identify demand that has yet to come to the surface.  Demand that has yet to come to the surface means latent demand created because of a newly established physical distribution system presuming the economic environment under the 24 hour/365 day service system.  It seems useful to conduct surveys on foreign cases where such services have already been established, in order to identify latent demand.

In addition, services provided at customs houses, quarantine stations and plant protection sections are closely linked and integral in order to establish the best possible system of 24 hour/365 day customs and quarantine services.  Moreover, the ministry concerned should strive to further promote close coordination among them.

The Ministry of Finance started trial services by providing staff to customs houses outside of office hours (7-Days Open Trial) to identify problems associated with the implementation of the 24- hour services at harbors by the end of March 2003.  Such trials must be assessed accurately with the aim of positive implementation at the seven harbors that are conducting these trials.  In addition, 24-hour service must be implemented at least in other areas where constant demand is expected, if not in all areas.

The Ministry of Health, Labour and Welfare and the Ministry of Agriculture, Forestry and Fisheries should also maintain close cooperation with customs service and should engage in active implementation at least in the areas where constant demand is anticipated.

Promotion of rapid service and laborsaving, not to mention the revision of office hours and working conditions, will be necessary for the development of the 24 hour/365 day service for customs and quarantine.  Thus, the outsourcing of some public services to private corporations and the promotion of IT systems are important.  As for the matter of outsourcing of some services, the Ministry of Finance states the view that “the core service of customs which involves the exercising administrative power will not be transferred to private companies, but peripheral services are in the process of being outsourced.”  The Ministry of Health, Labour and Welfare also responds that “a part of analyzing works will be commissioned to the public sector.”  These ministries must conduct constant reviews to promote further outsourcing.  The Ministry of Agriculture, Forestry and Fisheries, on the other hand, insists that “it is impossible to transfer animal plant health inspection services to the private sector.”  The Ministry of Finance and the Ministry of Health, Labour and Welfare should, however, make efforts to outsource the services that can be outsourced in order to facilitate the efficiency of their services.

Based on the above, the responsible ministries must strive to elevate the quality of customs and quarantine services to an international level by implementing 24 hour/365 day services at major ports and airports, to accurately assess demand, and to take necessary measures at the earliest possible time.  Also, they must review working hours and conditions, and outsource services as much as possible.  They must take necessary measures to further promote efficiency and laborsaving by developing IT systems.

The responsible authorities should coordinate closely in order to elicit the best possible outcome of the implementation of 24 hour/365 day customs and quarantine services and should take necessary measures to implement such services at least in places where constant demand is expected.

The Ministry of Finance should continue the outside office hour service at seven harbors where trial services are now underway beyond the end of March 2003.  The Ministry of Health, Labour and Welfare and the Ministry of Agriculture, Forestry and Fisheries should maintain close coordination with related services in providing quarantine services.

(2) Concerning handling charge for off-hour services

Overtime customs clearance service provided outside of office hours requires additional handling charge, but there are many requests for reduction of the charge or its abolishment.
According to the Ministry of Finance, the handling charge is collected on the bases of historical grounds and the benefit principle, but this is one of the causes of higher distribution costs.
At the start of the 21st century, the standpoint of important componentof physical distribution is becoming even more necessary for the future, not to mention the standpoint of conventional customs services such as customs’ collection and crackdown of products of social evil.
The remaining burden of handling the charge on the off-hour services restrains the scope of effect of 24 hour/365 day services.  The responsible ministry must review the handling charge from the view of physical distribution and must take necessary measures, including its potential abolition.  The reduction of handling charge by half in view of promoting Japanese trade as a special measure in designated districts for structural reform plans is regarded highly as a first step toward the revision of handling charges.  Further examination must be continued as to the modality of the handling charge including the calculation methods of a rational charge, etc.  By focusing the effort in designated districts as a start, it is important to promote further efforts to ease the burden of handling charge in view of extending the measures over the designated districts.

In respect of quarantine services, the Ministry of Health, Labour and Welfare states “no specific charges have been collected as yet, and new charges are not likely to be levied on users in the event of implementation of 24 hour/365 day services”, and this is highly evaluated.

Based on the above, the Ministry of Finance must consider the reduction of handling charges, including possible elimination, for overtime services and take necessary measures accordingly in view of implementation of 24 hour/365days services.

5- 4. Specific recommendations

Based on the above, the ministry concerned is requested to implement the following measures to further improve market access.

(1) The responsible authorities must strive to elevate the quality of customs and quarantine services to an international level by implementing 24 hour/365 day services at major ports and airports, to accurately assess demand, and to take necessary measures at the earliest possible time.  Also, they must review working hours and conditions, and outsource services as much as possible. They must take necessary measures to further promote efficiency and laborsaving by developing IT systems.

(2) The responsible authorities should coordinate closely in order to elicit the best possible effect of implementation of 24 hour/365 day customs and quarantine services and should take necessary measures to implement such services at least in places where constant demand is expected.

(3) The Ministry of Finance should continue the service outside office hours at the seven harbors where trial services is now underway after the end of March 2003.  The Ministry of Health, Labour and Welfare and the Ministry of Agriculture, Forestry and Fisheries should maintain close coordination with related services in providing quarantine services

(4) The Ministry of Finance must consider the reduction of handling charges, including possible elimination, for overtime services and take necessary measures accordingly in view of implementation of 24 hour/365days services.

6. Introduction of Market Principles into Port Services

6- 1. Issues Raised

(1) Terminal charges and transportation fees for port services in Japan are high but the handling speed is slow. As the costs of Japanese port services are too high, imported goods are inferior to domestic goods in terms of price competition. In addition, the acceptance of goods is seen as being delayed, as services for cargo handling are not adequately available at night and on Sundays.

Market principles should be introduced to port services so as to reduce the costs of cargo handling and transportation fees in port services and raise the handling speed.

The final opinion of the Administrative Reform Committee was put forward in December 1997 but took too long a time to be implemented by 2000. Cost reduction is a problem that requires immediate attention and it is required that the government implement deregulation at the earliest possible time (FY1999 process, Tosho).

(2) As this is not a problem regulated by the government but one between labor and management, it makes no sense if services such as cargo handling service are not available on a 24 hour/365 day basis, and it is therefore required that the Ministry of Land, Infrastructure and Transport give guidance to employers’ organizations (FY2001 process, Tosho).

6- 2. Outline of Measures Taken by Ministries Concerned (Background of cases) (Ministry of Land, Infrastructure and Transport)

<Decision made by Office of Market Access (OMA) in FY1999>

Regarding the introduction of market principles into port services, the following measures will be taken.

•   In order to raise the efficiency of port services and promptly enhance the quality of services through a competition mechanism, deregulation measures will be taken in the earliest possible stage in fiscal 2000 in the nine major ports (Keihin, Chiba, Shimizu, Nagoya, Yokkaichi, Osaka, Kobe, Kanmon and Hakata) that handle container cargoes, i.e., to change from the licensing system to the approval system regarding port transportation business (the regulation of supply and demand to be abolished) and from the approval system to the notification system regarding charges

•    In order to ensure the effectiveness of the deregulation measures, efforts will be made in such a way that no barriers exist to new entrants

<Answers from the ministry concerned >

(1)  The partial amendment of the Law of Port Transportation Business with to the aim of revitalizing Japanese ports and enhancing the efficiency of port cargo handling services, i.e., changing the licensing system to an approval system regarding port transportation business (abolition of the regulation of supply and demand) and changing the approval system to the notification system regarding charges in the nine major ports, was enforced in November 2000.

In addition, regarding deregulation in provincial ports other than the above-mentioned nine major ports, according to the cabinet decision made on March 29 of this year (Three-year Deregulation Program (Revised)), an examination will be started in fiscal 2002 with a conclusion to be made by the end of fiscal 2003.

(2)  An agreement has been reached between labor and management to the effect that by the end of November 2001, the cargo handling service will be available on a 24 hour/365 day basis except on New Year’s Day and the gate operation service will be available between 8:30 and 20:00 on weekdays, Saturdays, Sundays and public holidays alike.

The Ministry of Land, Infrastructure and Transport, following its efforts in 2001, will also set up an inquiry commission1) on promoting efficiency of the port distributing system in fiscal 2002 and is studying the possibility of 24 hour/365 day full gate opening through validation experiments in Yokohama Port.

Note 1): The commission will consist of the Japan Port Transport Association, Japan Shipowners’ Association, Japan Shippers’ Council, Federation of Economic Organizations, port administrators and administrative departments (port authorities, Marine Board, Customs Bureau of the Ministry of Finance, Japan Coast Guard and the Ministry of Health, Labour and Welfare).

6- 3. Examination Results of the Comprehensive Review

(1) Deregulation in provincial ports other than the nine major ports

In recent years, Japanese ports have occupied a less important position in the East Asian area, as can be seen from issues such as the declining number of ships calling to Japanese ports for those backbone container shipping routes connecting East Asia to the EU and the U.S. The fact has been raised both at home and abroad as one of the major reasons that it is difficult to bring about competition among companies of port services under the business licensing system, and it is becoming difficult to provide services that meet the needs of shipping companies and shippers.

Based on such conditions, in order to improve the efficiency of port transportation business and enhance the quality of the service, the Law of Port Transportation Business (Law No.161, 1951) was revised in 2000. Regarding the nine major ports, not only was the regulation of supply and demand concerning ordinary port transportation business abolished and changed to the business approval system, but the regulation on freight and charges was also revised with the charge approval system changed to the prior notification system.

On the other hand, regarding provincial ports other than the nine major ports, it was decided in the “Three-year Deregulation Program (Revised)” (Cabinet decision on March 29, 2002) that “a reexamination should be promptly started with a conclusion to be made by the end of fiscal 2003.” And according to the Ministry of Land, Infrastructure and Transport, at present investigations now under way include the investigation on the influence from the nine major ports for which deregulation has been implemented ahead of other ports, hearing of opinions from parties concerned such as users (shipping companies and shippers), port administrators, port servicing companies and labor unions, and the investigation of actual conditions of provincial ports, and based on the full validation of the actual conditions in provincial ports, a central roundtable conference will be set up in 2003 with a conclusion to be made by the end of fiscal 2003.

However, regarding deregulation in the nine major ports this time, after the Administrative Reform Committee put forward its final opinion in December 1997, it took about three years for the actual deregulatory measures to be implemented in November 2000 and in the problem raising process of fiscal 1999, the complaint against the delay itself was raised as a problem.

Further, regarding deregulation for provincial ports other than the nine major ports this time, for example, local governments have made the proposal about the concept of the special zone of structural reform and they are strongly demanding prompt implementation.

Therefore, regarding deregulation for provincial ports other than the nine major ports this time, no delay like the previous time is ever allowed and the responsible ministry should make it sure that a conclusion to the reexamination is made by the end of fiscal 2003 and take measures to promptly implement it.

(2) Measures to prevent any barrier to new entrants

The partial amendment of the Law of Port Transportation Business concerning deregulation for the nine major ports, i.e., the amendment that abolished the regulation of supply and demand and changed the licensing system to the approval system regarding port transportation business, and changed the approval system to the notification system regarding charges in the nine major ports, was enforced in November 2000.

As of December 1, 2002, about two years after the revised law was enforced, ten applications submitted by new entrants were approved (among which one was from Chiba Port, one from Shimizu Port, three from Osaka Port, four from Kanmon Port and one from Hakata Port), 63 applications for changing the scope of business were submitted and 102 cases of freight change were notified, and the responsible ministry intends to do its utmost to steadily enforce the amended law in the future as well.

On the other hand, some companies have lodged the complaint that when the entering port transportation business, a new entrant is in fact forced to become a member of the port transportation business-related trade organization and to those that are not willing to become a member, the condition is that it is impossible to start business as a new entrant.

In order to ensure the effectiveness of the deregulation measures, the responsible ministry should continue its efforts in such a way that no barriers exist to new entrants.

(3)    Matters such as 24 hour/365 day full opening of the port gate

Regarding the 24 hour/365 day full opening of the port gate, from the viewpoint of further raising the efficiency of Japanese port distributing system, the “Outline of Policy of New Integrated Distribution System” was decided by the Cabinet in July 2001, in which the necessity of implementation at an early stage was emphasized.

At present, the cargo handling service in Japanese ports is available on a 24 hour/365 day basis, but the port gate service is available from 8:30 to 20:00 (and to 21:00 at the seven major ports of Tokyo, Yokohama, Nagoya, Osaka, Kobe, Kanmon and Hakata), but in major overseas ports such as Singapore, Hong Kong, Pusan and Los Angeles, the gate service is also available on a 24 hour/365 day basis, and in order to enhance the position of Japanese ports, the 24 hour/365 day full opening including the gate operation has become a necessity.

Under such circumstances, since October 2002, validation experiments have been conducted at Yokohama Port for the purpose of realizing the 24 hour/365 day full opening of the port gate at an early stage, and the responsible ministry will sum up the results of the validation experiments by the end of fiscal 2002, grasp in the concrete the needs of shippers and trucking companies to use the gate and examine the possibility of realizing the 24 hour/365 day full opening of the port gate.

In addition, the Customs Bureau of the Ministry of Finance implemented on the experimental basis the measure to provide services and extend business hours on Saturdays, Sundays and public holidays for a period between October 2002 and the end of March, 2003, and in line with this, the operating time of the port gate has also been extended to 21:00.

However, the above-mentioned effort aimed at the 24 hour/365 day full opening of the port gate has given the impression it is still at in the initial stages; for example, it has not yet been made clear when the results of examining the possibility of realizing the 24 hour/365 day opening of the port gate will be released.

In a situation where the major physical distribution bases in neighboring countries such as advanced ports are under improvement with their handling capacity being significantly expanded, in order that Japanese ports can win a position as an international physical distribution base with international competitiveness in its true sense, in addition the 24 hour/365 day cargo handling service, the realization of the 24 hour/365 day full opening of the port gate and the 24 hour/365 day customs administrative procedures will be indispensable.

Consequently, in order to win a position as an international physical distribution base with international competitiveness, the responsible ministry should take the following measures for the purpose of realizing the 24 hour/365 day opening of ports at an early stage: (1) it should be made clear when the results of examining the possibility of realizing the 24 hour/365 day full opening of the port gate will be released and the decision should be steadily implemented and (2) concrete measures should be taken for the purpose of addressing the issue of realizing the full opening of the port gate at an early stage through cooperation between the government and the private sector. And additionally, (3) cooperation with customs clearance and quarantine operations should be reinforced and convenience enhanced.

6- 4. Specific Recommendations

In view of the above, the responsible ministry is required to take the following measures for the purpose of further improving market accessibility.

(1)  Regarding deregulation for provincial ports other than the nine major ports, the responsible ministry should make it sure that a conclusion of the reexamination is released by the end of fiscal 2003 and should take measures to promptly implement it.

(2)  In order to continue ensuring the effectiveness of the deregulation measures, the responsible ministry should make efforts in such a way that no barriers exist to new entrants

(3)  In order to make Japanese ports win the position of being international distributing bases with international competitiveness, the following measures should be taken for the purpose of realizing the 24 hour/365 day full opening of ports at an early stage: (1) it should be made clear when the results of examining the possibility of realizing the 24 hour/365 day full opening of the port gate will be released and the decision should be steadily implemented and (2) concrete measures should be taken for the purpose of addressing the issue of implementing the full opening of the port gate at an early stage through cooperation between the government and the private sector. And additionally, (3) cooperation with customs clearance and quarantine operations should be reinforced and convenience should be enhanced.

7. Simplification and Acceleration of Import Clearance Procedures 

 •   Improvement of the simplified declaration system
 •  Promotion of the one-stop service (single window system)

7- 1. Issues Raised       

In order to enhance the efficiency of the physical distribution system in Japan and reduce costs in terms of time and economic resources, it is important to simplify and accelerate import clearance procedures.

(Improvement of the simplified declaration system)

•  The simplified declaration system introduced in March 2001 is declaration procedures according to which an approved person, on the condition that he will strictly comply with the laws regarding the specified types of cargoes, separates the cargo-receiving declaration from the tax return which is completed after he receives the cargo. The cargoes to which this system is applicable are specified as “goods that are imported on a continual basis,” and more specifically, those that have been imported at least 24 times in the past one year. The system is not applicable if goods are not imported so frequently. The number of times for which the goods specified by this system are imported should be eased, for example, to 30 times in three years (Individual complaint).

(Promotion of one-stop services (single window system))

•  From the viewpoint of promoting the simplification and acceleration of import procedures, the computerization of various import procedures is an important factor, and complaints related to the computerization of import procedures were raised even in the past OTO cases, such as the need to “improve the customs clearance procedures like NACCS by using the Internet.” This time, in particular, the government is making preparations for the commencement of one-stop services (single window system) regarding export and import and port-related procedures, and in line with the efforts aimed at the realization of the earliest possible operation of one-stop services (single window system), from the viewpoint of system users, the government should not limit its efforts only to the interconnection of the existing systems but should thoroughly review all the procedures such as examining the overlapped operations and simplifying procedures.

7- 2. Outline of Measures Taken by Ministries Concerned (Ministry of Finance) (Background of cases)

(Improvement of the simplified declaration system)

The simplified declaration system is approved only in cases where an importer that has a good record of compliance with laws.

For goods that fall under the scope of applicability of this system, as no inspection is conducted from the viewpoint of duty, in order to obtain approval to use the system, it is in principle necessary to sufficiently ensure compliance with laws, and therefore an importer is required to meet the necessary condition that it has never violated laws such as customs law, that it has well familiarized itself with the import procedures for the goods specified by the system and that he can be expected to conduct the correct declaration in an assured way.

Of those conditions, regarding the familiarization with the imported goods specified by the system, if the condition of “actually obtaining an approval for import at least 24 times in the past one year” regarding the import of the said goods is not satisfied, an importer is considered not to have familiarized himself well with the import of the said goods.

Currently, the above rule is being followed. In addition, as it is one year and a half since the system was introduced in fiscal 2001, the various aspects of the system are being reviewed based on the condition of implementation as well.

7- 3. Examination Results of the Comprehensive Review

(1)  Improvement of the simplified declaration system

In order to enhance the efficiency of the physical distribution system in Japan and reduce costs in terms of time and economic resources, it is important to simplify and accelerate import clearance procedures. The simplified declaration system introduced in March 2001 is declaration procedures according to which an approved person, on the condition that he will strictly comply with the laws regarding the specified types of cargoes, separates the cargo-receiving declaration from the tax return which is completed after he receives the cargo. Originally, this should have been a system highly worth using. But in spite of this, for example, as the rate of utilization of the simplified declaration system accounts for about 6% of the total cases where special importers have obtained an approval for import, the system has not necessarily been fully utilized and it cannot be said that the introduction of the system has exhibited a full effect.

The reason for this is that necessary conditions such as specifying the goods to which the system can be applied and providing security are too stringent for many importers. In particular, the necessary condition of “goods for which an approval for import has been obtained for at least 24 times in the past one year” is too stringent.

In view of the above, the responsible ministry, in order to enable more importers to use the simplified declaration system, should immediately review the necessary conditions suchas specifying the goods and providing security, and in particularthe responsible ministry should revise the specifying condition from“goods for which an approval for import has been obtained at least 24 times in the past one year” to “goods for which an approval for import has been obtained at least six times in the recent one year.”

(2)  Promotion of one-stop services (single window system)

From the viewpoint of simplifying and accelerating import procedures, the promotion of computerized import procedures not only enhances the convenience for users but is also an important factor leading to a direct reduction of costs related to import procedures.

At present, as part of its effort to realize the computerization of and use of IT for administrative procedures, the government is promoting one-stop services (single window system) regarding export and import and port-related procedures, aiming to put one-stop services (single window system) into operation in the earliest possible stage in fiscal 2003. However, users are eagerly expecting that one-stop services (single window system) will be realized at the earliest possible time. Efforts should be made to put the system into operation even one day earlier, and the system should be made operational by mid-July 2003 at the latest.

In addition, in promoting one-stop services (single window system), the effect will be limited if the existing systems alone are interconnected. In addition to the interconnection of the existing systems, from the viewpoint of enhancing convenience for system users, the government should thoroughly review all the procedures such as examination of the overlapped operations and simplification of procedures. Furthermore, even after the system is put into operation, the government should continue to pay attention to users’ requests and make readjustments from the users’ viewpoint. It is also an important thingto study how to connect with the systems in the private sector in the future.

Based on the above, in order to simplify and accelerate import procedures, the responsible ministry should actively promote the one-stop service (single window system) regarding export and import and port-related procedures from the viewpoint of computerizing administrative procedures. Efforts should be made to put the one-stop service (single window system) into operation even one day earlier, and the system should be put into operation by mid-July 2003 at the latest. Further, from the viewpoint of system users, the government should not limit its efforts only to the interconnection of the existing systems but should thoroughly review all the procedures such as examination of the overlapped operations and simplification of procedures and even after the system is put into operation, the government should continue to pay attention to users’ requests and make readjustments from the users’ viewpoint.

7- 4. Specific Recommendations

Bases on the above, the responsible ministry should take the following measures to further improve market accessibility.

(1)  In order to enable more importers to use the simplified declaration system, the responsible ministry should immediately review the necessary conditions such as specifying the goods and providing a security, and in particular the responsible ministry should revise the specifying condition from “goods for which an approval for import has been obtained for at least 24 times in the recent one year” to “goods for which an approval for import has been obtainedat least six times in the recent one year.”

(2)  In order to simplify and accelerate import procedures, the responsible ministry, in cooperation with other government departments concerned, should actively promote the one-stop service (single window system) regarding export and import and port-related procedures from the viewpoint of computerizing administrative procedures. Efforts should be made to put the one-stop service (single window system) into operation even one day earlier, and the system should be put into operation by the end of July 2003 at the latest. Further, from the viewpoint of system users, the government should not limit its efforts only to the interconnection of the existing systems but should thoroughly review all the procedures such as examining the overlapped operations and simplifying procedures and even after the system is put into operation, the government should continue to pay attention to users’ requests and make readjustments from the users’ viewpoint.

8. Reduction of Charges for Using the NACCS System

8- 1. Issues Raised  

Along with the revision of the Air-NACCS in October 2001, the fixed charge system was changed to the metered rate system, and as a result, international courier service companies that handle a large number of small lot home deliveries raised charges accordingly.
The revision this time was made by carrying out the bureaucratic procedures without providing users with sufficient explanations and information. Therefore, the air-NACCS charge structure should be reviewed by setting up a neutral organization to conduct a cautious review from a multifaceted viewpoint.

Charges for using NACCS are determined in a way that the total expenses can be financed, and consequently, it is difficult to have an incentive to reduce costs. In addition, with the system development and management having been undertaken by some designated companies over a long period, it cannot be said that the market mechanism principle is working. Consequently, efforts should be made to reduce the total expenses by raising the operation efficiency through methods such as effective use of competitive bidding and outsourcing, thereby reducing the charges for using the system.

Users have no other choice than to use NACCS and have to pay the determined charges. The NACCS Center is held responsible for making explanations to users, and information should be disclosed as well in order to facilitate users’ supervision, thereby enhancing the transparency of charges. (Problem raising process of fiscal 2001)

8- 2. Outline of Measures Taken by Ministries Concerned (Ministry of Finance) (Background of cases)

<Decision made by office of Market Access (OMA) in fiscal 2001>

The following measures will be taken regarding the NACCS charge structure.

(i)  Regarding NACCS, in line with the further information disclosure and enhancement of transparency of charges for using the system, efforts will be made to concretize the measures that should be taken promptly in fiscal 2002 concerning full-scale competitive bidding for the system development and management and the outsourcing of operations, thereby further raising the operation efficiency and promoting a reasonable pricing system, and thus reducing charges for using the system.

(ii)  Regarding the model of charges for using NACCS, in order to conduct reviews based on a neutral viewpoint and from a multifaceted viewpoint such as measures to reduce the total expenses and model of charges paid by users, measures will be taken to review the charge system, such as promptly setting up a panel that includes experts. Regarding Air-NACCS, the charge system will have been revised by September 2004 at the latest when the measure to ease drastic changes expires. At that time, study will be made on the model of determining reasonable charges by taking account of economies of scale.

<Answer from the ministry concerned>

(1)  Regarding the enhancement of the transparency of charges for using the system through information disclosure, the so-called public comment at the time of charge revision was held at the very beginning and efforts have been made to enhance the transparency, such as providing information such as the basis of and the ground for computation (for example, public comment in February 2002 in connection with the charges for using the marine system and the charges for using the air system to be applicable as from April 2002). In addition,according to the law concerning disclosure of information held by independent administrative institutions that took effect in October 2002, efforts are scheduled to be made for further disclosure of information including that on charges for using the system.

(2)  In order to raise the efficiency of operations, the expenses of the overall operations have beenexamined and services like computer operation are continuing to be provided by means of outsourcing. In fiscal 2002, more efforts were made to raise efficiency, such as review of the communication lines based on the actual condition of use and the competitive bidding that was held in August 2002 for Net-NACCS, which is scheduled to be put into operation in March 2003.

(3)  In the same format as in the decisions made by OMA, according to the direction of the “Review of the charge system of the Air-NACCS by September 2008 at the latest,” the establishment of the group including experts will be prepared within 2003.

In order to promote this, the “Study Group of Charges for Using Air-NACCS,” which is the special team assembled for studying the charge system, was started on September 10, 2002 within the NACCS Center and developed the system for organizational research and examination.

8- 3. Examination Results of the Comprehensive Review

(1)    Measure to further reduce the total expenses

The charges for using NACCS are determined in a way that the total expenses can be financed, and therefore, in order to reduce charges for using the system, it is indispensably necessary to actively adopt measures to reduce the total expenses. Although measures have already been taken to reduce expenses, now that the expenses of system development and management account for a major part of the total expenses, in order to reduce the total expenses, it is natural to further reduce project expenses for system development and management which constitute a major part, while taking account of the maintaining of security, and at the same time, administration overheads, of which labor cost accounts for the major part, should also come under review to see whether any reduction is possible.

In addition, in order to further promote cost reduction, it is important to make full explanations to users and providethem with information, and the further disclosure of information and the enhancement of the transparency of charges for using the system will contribute to the further reduction of charges for using the system.

Regarding the analysis and validation of the system development and renewal from the cost-benefit viewpoint, although the responsible ministry has mentioned the aspect of effect, it is difficult to say that the analysis and validation have been adequately made from the cost-benefit viewpoint. Also, based on the issue raised that the system development and management have been undertaken by some designated companies over a long period, along with the efforts to reduce the role played by those mainframe computers for which there exists a high possibility of depending on a particular manufacturer, the government should try to further promote the full-scale introduction of competitive bidding and the outsourcing of operations so that the operations can be conducted with a higher efficiency and at reasonable cost.

In view of the above, at the same time of further disclosing information and raising the transparency of charges for using the system, efforts should be made to concretize the measures that should be promptly taken through the full-scale introduction of competitive bidding for the system development and the outsourcing of operations, thereby enabling operations to be conducted at a higher efficiency and reasonable cost, and furthermore, measures should be taken to reduce the total expenses including administration overheads, such as adequate reexamination of the system development and management from the cost-effect viewpoint

(2)  Flexible review of charges for using the system and formulation of the rule to return surplus funds and reserves

Charges for using the system are reviewed every five years and measures are taken flexibly according to the economic conditions. However, under the circumstances where not only IT-related technological innovations are making progress at a high speed, but the environment surrounding the Japanese economy is also undergoing great changes, it is difficult to correctly predict mid-term demand in a period of four to five years, and in view of this, it is inevitable to say that the current method of reviewing charges is too slow and lacks promptness. Further, a large sum of surplus funds and reserves (\6.8 billion as of the end of March 2002) has been accumulated in the NACCS Center, and even in the single fiscal year of 2001, the center generated profits amounting to \750 million. The accumulation of such a large amount of surplus fund and reserve is attributed to the fact that the current method of reviewing charges for using the system, as pointed out in the above, lacks promptness and fails to cope with the situation in a flexible way, and on top of that, the absence of an explicit rule to return the large amount of generated surplus fund and reserve to users is also a contributing factor.

In view of the above, the charges for using the system should be reviewed in a flexible way according to the economic and financial conditions and in such case, not only should there be an explicit rule to return surplus funds and reserves to users, but as was discussed in 3 (1) above, the result of reducing various expenses included in charges of using the NACCS system should be immediately reflected in charges for using the system, thereby leading to a further charge reduction.

(3)  Setting up of a third party panel to review charges for using the system

According to the decision made by OMA in fiscal 2001, it was decided to immediately set up a third party panel, and the "Research Group for Charges for Using Air-NACCS" set up in the center should proceed with the preparations for setting up what is known as a third party panel, and this panel consisting of experts and users should be set up at the earliest possible time. This third party panel should study matters on the model of charges for using the Air-NACCS system including the items that should be studied in the future and the direction in which the review should be made, e.g., the method of reducing costs and a charge system for which the factor of economies of scale is taken into account. During the process of the study,along with the release of the minutes from the meeting, both neutrality and transparency should be secured, such as permission for observers to attend the meeting if necessary.

Further, regarding Sea-NACCS, too, a third party panel consisting of experts and users should be set up in the same way at the earliest possible time, and study on the model of the Sea-NACCS charge system should be made from a multifaceted viewpoint and a neutral standpoint.

In view of the above, a third party panel consisting of experts and users regarding charges for using the Air-NACCS system should be set up as early as possible in fiscal 2003. This third party panel should study matters on the model of charges for using the Air-NACCS system including the items that should be studied in the future and the direction in which the review should be made, e.g., the method of reducing costs and a charge system for which the factor of economies of scale is taken into account. During the process of the study, along with the release of the minutes from meetings, both neutrality and transparency should be secured to the greatest extent, such as disclosure of information in a wide range and permission for observers to attend the meeting if necessary.

Furthermore, regarding the Sea-NACCS, too, in order to study the model of charges for using the system from a multifaceted viewpoint and a neutral standpoint, a third party panel consisting of experts and users should be set up in the earliest possible stage just as in the case of Air-NACCS.

8- 4. Specific Recommendations

In view of the above, the responsible ministry should tackle the issues in a way that the NACCS Center can take the following measures for the purpose of further improving market accessibility.

(1)  At the same time of further disclosing information and improving the transparency of charges for using the system, efforts should be made to concretize the measures that should be promptly taken through the full-scale introduction of competitive bidding for the system development and the outsourcing of operations, thereby enabling operations to be conducted at a higher efficiency and reasonable cost, and furthermore, measures should be taken to reduce the total expenses including administration overhead, such as adequate reexamination of the system development and management from the cost effectiveness viewpoint.

Also, charges for using the system should be reviewed in a flexible way according to the economic and financial conditions and in such case, not only should there be an explicit rule to return surplus funds and reserves to users, the result of reducing various expenses included in charges of using the NACCS system should be immediately reflected in charges for using the system, thereby leading to a further charge reduction.

(2)  A third party panel consisting of experts and users regarding the charges for using the Air-NACCS system should be set up at the earliest possible time in fiscal 2003. This third party panel should study matters on the model of charges for using the Air-NACCS system including the items that should be studied in the future and the direction in which the review should be made, e.g., the method to reduce costs and a charge system for which the factor of economies of scale is taken into account. During the process of the study, along with the release of the minutes from meetings, both neutrality and transparency should be secured to the greatest extent, such as disclosure of information in a wide range and permission for observers to attend the meeting if necessary.

Furthermore, regarding Sea-NACCS, too, in order to study the model of charges for using the system from a multifaceted viewpoint and a neutral standpoint, a third party panel consisting of experts and users should be set up in the earliest possible stage just as in the case of Air-NACCS

9. Revision of the Vehicle Inspection System for Towing Vehicles and Towed Vehicles  

9- 1. Issues Raised 

As the camping trailer is expensive and it is not easy to secure a parking place, in many cases users hope to rent such a vehicle.

However, the existing vehicle inspection system in Japan requires that the camping trailer (towed vehicle) should be inspected in the condition of being connected to the traction vehicle, and as the cars that can be used to tow a camping vehicle are limited to the car whose name and type were individually entered in the vehicle inspection certificate beforehand, it is in fact impossible to connect the rented camping trailer to one’s own car to travel, and this is preventing imported camping trailers from being widely used.

On the other hand, the EU and the US have introduced the system in which the traction ability of a said vehicle is indicated and users can freely choose a towed vehicle according to the traction ability of the said vehicle.

In view of this, the Ministry of Land, Infrastructure and Transport should revise the existing vehicle inspection system and enable users to freely choose and use a towed vehicle according to the traction ability of the traction vehicle. (FY1999 process, the U.S. Embassy in Japan)

9- 2. Outline of Measures Taken by Ministries Concerned (Ministry of Land, Infrastructure and Transport) (Background of cases)

<Decision made by Office of Market Access (OMA) in FY1999>

The following measures will be taken regarding the inspection and registration of traction vehicles and towed vehicles.

•   In order to make it possible to tow a camping trailer by a vehicle other than one registered beforehand for the purpose of facilitating the use of rented camping trailers, study should be immediately started on the simplification of procedures during the camping trailer registration, including the possibility of introducing the European and US system that the car manufacturer indicates on each car the upper limit of the weight that can be towed by the car and the results of the study should be released in 2000 at the latest.

<Answer from the ministry concerned>

Regarding the simplification of procedures during the camping vehicle registration, the Ministry of Land, Infrastructure and Transport set up an investigative panel consisting of experts to study the matter and the result of the study was summarized in December 2000.

At present, while maintaining the existing system that the name and type of a car that can be used as a traction vehicle should be entered in the vehicle inspection certificate of the trailer, the Ministry is continuing to work on a simplified substitutable system whereby regarding a vehicle equipped with a connection device, the user, if filing an application for revising the entered items along with the data submitted by a relevant organization, may enter the maximum towing weight (generally not exceeding two tons) required by the behavior of the engine, the brake and the connection device in the remarks column of the vehicle inspection certificate and should be allowed to use the vehicle to tow a trailer so long as that value is not exceeded, and detailed study is now under way on matters such as the method used by the relevant organization to submit data, clear distinction between the roles of towing-related parties and necessary technical conditions for the connection device.

In the future, the Ministry will further enhance its study and take necessary statutory measures regarding matters such as method used by a relevant organization to submit data on the permissible towing weight, clear distinction between the roles of towing-related parties, necessary technical conditions for the connection device and timing to enforce the new system.

9- 3. Examination Results of the Comprehensive Review

Regarding this case, the “Opinions on the Issue of Market Opening Concerning Standards and Certification System” put forward by the plenary meeting (the meeting of Office of Trade and Investment Ombudsman on March 16, 2000) pointed out: “It should not take a long time to study whether or not the method that has already been implemented in the EU and the US will be introduced in Japan.”

On the other hand, the responsible ministry has pointed out that “the investigative panel consisting of experts studied the matter of simplifying procedures of the camping trailer registration, and the result of the study was summarized in December 2000,” but it is more than two years since the result of the study was released in December 2000, and with the measure for simplification failing to be implemented, the party that raised the issue is also requiring prompt implementation.

The responsible ministry has raised the reason why the measure for simplification fails to have been implemented as follows: it is necessary to study the issues put forward in the results of the study: i.e., (1) submission of data on the maximum towing weight by relevant parties (car manufacturer, trailer industry, etc.); (2) clear distinction between the roles of towing-related parties; (3) necessary technical conditions for the connection device; and (4) provision of information needed to ensure safe towing. However, a conflict of interests still exists among the parties concerned regarding the study of these issues, and therefore the coordination effort made by the responsible ministry has run into trouble.

Also, regarding the future schedule, the responsible ministry has pointed out: “In the future, as soon as a consensus is reached among the parties concern, in addition to procedures such as preparations for enacting relevant laws, solicitation for public comments and notification to the WTO, other necessary operations such as compilation of a guide book will be conducted, with the necessary measures scheduled to be completed by the end of the next fiscal year (2003).”

However, the actual condition is that about three years have passed since the plenary meeting put forward its opinion, and moreover, the measure for simplification has not yet been implemented even though more than two years have passed since the above results of the study was released, and therefore the measure for simplification should be promptly implemented. In addition, for that purpose, measures such as announcing the work schedule for implementation to the public should be taken immediately.

Further, when the system referred to in this case is revised, it is deemed necessary to hold extensive hearing of and review opinions regarding the scope of the responsibilities held by parties concerned, such as car manufacturers, car users and the responsible ministry, concerning the existing procedures of application for registration and vehicle inspection which are regarded as the key point for the coordination among parties concerned, and the responsible ministry should conduct study including solicitation for public comments.

In view of the above, the responsible ministry should announce a detailed work schedule for implementation to the public, such as timing to solicit public comments and timing to notify the WTO, and take prompt measures in a way that the new system will be assuredly put into operation by the end of fiscal 2003 at the latest.

9- 4. Specific Recommendations

In view of the above, the responsible ministry is required to take the following measures for the purpose of further improving market accessibility.

Regarding the revision of the vehicle inspection system for towing vehicles and towed vehicles, the detailed work schedule for implementation should be announced to the public, such as timing to solicit public comments and timing to notify the WTO, and prompt measures should be taken in a way that the new system will be assuredly put into operation by the end of fiscal 2003 at the latest.