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 Opening Measures as concerns Standards, Certifications and others
"Report of Market Access Ombudsman Council"
April 12, 1993
Market Access Ombudsman Council
The Office of Trade and Investment Ombudsman (OTO), in accordance with; the "Second Annual Report of SII Follow-up (July 30, 1992)", the "Comprehensive Economic Measures (August 28, 1992, Ministerial Conference for Economic Measures)", and others; decided on September 21, 1992, the "Consideration on the Market Opening Measures as concerns Standards, Certification and others".
This report is, based on the above decision, that the OTO Advisory Council put forward its opinions on necessary policy actions, identifying problems concerning Japanese standards and certification framework and others, pursuant to complaints by foreign enterprises and others concerned.
The Government shall decide on responses promptly and implement measures, respecting duly these opinions in the report.
I. General observationsces
II. Comments
III. Description of Complaints Submitted and Results of deliberation
1. Foods, Health, Medicine
1-(1) Introduction of date marking system conforming to international standards and changing commercial practices relating to the date marking
1-(2) Shortening time required for assigning a customs tariff number to imported foods, and clarifying classification standards
1-(3) Clarifying quarantine standards for imported foods
1-(4) Accepting water supply equipment conforming to major foreign specifications
1-(5) Relaxing regulations concerning the requirement for a technical director and for related facilities relating to the import and sale of cosmetics
1-(6) Simplifying process of obtaining examination certificates for imports of medical equipment samples
2. Industry, Transportation
2-(1) Easing regulations of High Pressure Gas Control Law
2-(2) Expanding imports of automobile parts
2-(3) Changing the two-process rule for textiles articles and apparel enjoying preferential tariffs
2-(4) Improving method of inspection of gas dryers by the Japan Gas Equipment Inspection Association
2-(5) Shortening period to be required for type approval of imported motor vehicles.
2-(6) Relaxing regulations pertaining to storage space for motor homes
2-(7) Accepting U.S. inspection and certification data for airworthiness certificate tests of imported aircraft and helicopters made in the U.S. and radio equipment inspection
2-(8) Clarifying specifications for alkaline storage batteries under the "Common Specifications for Construction of Electrical Equipment" and achieving harmonization between JIS and IEC standards"
3. Import Formalities
3-(1) Changing customs clearance procedures outside the normal customs office hours (overtime service system)
3-(2) Improving service to payers of customs duties by using SEA-NACCS
3-(3) Relaxing regulations requiring presentation of an original certificate of origin in examinations for preferential tariffs.
3-(4) Waiving requirement to present original import permit when re-importing items after free repairs
3-(5) Relaxing requirement to submit original parameter sheets when exporting defective products to return to manufacturer
3-(6) Combining the Trade Relation and Non-trade Payment Report and the "Report on payment for invisible foreign trade"
3-(7) Relaxing the requirement for a letter of proxy for duty-free import under the Temporary Tariff Measures Law
3-(8) Review of system for paying consumption tax on imported items (including simplification of valuation declaration procedures when importing from a foreign subsidiary)
3-(9) Eliminating the liquor tax payment deadline and eliminating discrimination between domestic and imported liquor concerning tax refunds
3-(10) Relaxing import procedures on feed grains
4. Other
4-(1) Lowering the income tax rate on dividends paid by subsidiaries to its parent companies
4-(2) Relaxing restrictions on Gaikokuho-Jimu-Bengoshi (GJB) practicing in Japan
5. Complaints Withdrawn by Complainants After Being Submitted Initially
I. General observations
1. In order for Japan to continue growth in harmony with the international community, it is vital to remedy foreign perceptions that our domestic markets are closed.
To do this, not only we must respond to other countries' requests, but we must take the initiative to open our domestic markets and in so doing encourage the growth of imports.
Regarding complaints on which no real progress has been made notwithstanding discussions with foreign countries over a number of years, it must be realized that such situations can contribute to feelings that our markets are closed.
2. We have made efforts to make our system of standards and certification framework more harmonized with international systems. However, some of the complaints submitted indicate that needed reexamination of the existing system has not taken place, or that in some areas the system has been slow to deal with new products and technologies.
In other fields, there is the question of how to respond to new domestic needs which regulations had not anticipated.
Many complaints concerning import procedures were submitted, and review of the complaints revealed that in some cases the current system and its application place an unnecessary burden on importers or make procedures difficult for importers to use.
To improve access to our markets, it is very important to make our standards and certification framework harmonized with international systems and to simplify and expedite import procedures, and the government should make every effort possible to accomplish this.
3. Only by steadily working to change each of our systems will make our markets become more open, more competitive and more transparent. The reviews described in this report are a part of this task, but in order for our markets to become truly open, we must apply the experience accumulated in the process and continue our efforts.
In addition, it is important that the government reviews its regulations and systems not only from the viewpoint of domestic conditions but from the perspective of importers as well.
It is also important that we take positive steps to explain the steady pace of our efforts to other countries and obtain their understanding.
II. Comments
1. Action on Complaints
The ministries and agencies concerned made efforts to resolve the complaints raised and took the steps described below.
The OTO Advisory Council trusts that these actions will remedy the problems experienced by the complainants.
(1) Foods, health, medicine
1) A large number of classification examples will be made public, in order to clarify the customs classification standards for imported foods.
2) Quarantine offices will be instructed to test product uniformly to ensure that all offices handle quarantine inspection of imported foods in the same manner.
3) The Japan Waterworks Association will examine the safety of major foreign specifications and review its model approval standards. It will also adopt a system of carrying out testing in plants abroad.
4) Regarding the requirement for a technical director when cosmetics are imported and sold, this will be reviewed with the complainant to determine whether specific chief technician candidates meet the qualification requirements.
5) Procedures for obtaining examination certificates for imports of medical equipment samples will be simplified.
(2) Industry, transportation, construction
1) The Pressurized Gas Safety Association will establish a channel offering advice to foreign companies, and simplify the formalities relating to High Pressure Gas Control Law.
2) Given the more prevalent international division of labour in developing countries, and taking into consideration the preferential tariff system and conditions in the domestic industry, the question of whether to revise preferential origin approval standards for woven garments will be examined.
3) The Japan Gas Equipment Inspection Association will support the adoption of reciprocal approval with foreign countries. In order to lighten the inspection burden, the Association will prepare to use the test results of foreign testing organizations, when certain conditions are met.
4) Regarding the examinations of motor vehicle type approval, although the standard processing periods are shorter than that of other countries, examinations will be processed in the short time possible, in order to facilitate the process for importers.
5) Regarding motor homes, the ministry or agency concerned will hold thorough discussions with the complainant, once the complainant produces a definite concept, to make it possible to park motor homes in locations other than in the vicinity of the owner's residence, when such locations meet certain conditions.
6) Regarding airworthiness certificate inspection of imported aircraft and helicopters, and inspection of radio equipment, technical-level discussions between the complainant and experts will be held in the near future.
7) Specifications for alkaline storage batteries under the "Common Specifications for Electrical Facilities" will be clarified, and JIS standards will be reviewed and an attempt made to unify international standards, for further harmonization of JIS with IEC standards.
(3) Import formalities
1) The complainant and the NACCS Center will discuss improving service to tariff payers through the use of SEA-NACCS.
2) Regarding presentation of certification of origin when preferential tariff rate examination takes places, an extension for presenting an original certificate of origin will be granted under certain conditions, for products which are not subject to preferential tariff quota control.
3) Concerning customs procedures for products re-imported after free repairs, it will be reconfirmed that applicants should be required to present only essential documents.
4) Concerning parameter sheets presented when exporting defective products for return to manufacturer, copies, and not originals, of the parameter sheets will be acceptable under certain conditions.
5) Revision of the formats of the "trade relation and non-trade payment report form" and the "Report on payment for invisible foreign trade" will be studied with a view to reducing the burden on reporters.
6) Regarding tariff-exempt imports under the Temporary Tariff Measures Law, presentation of a letter of proxy will not be required when the proxy relationship between the importer and the actual user can easily be verified.
7) Regarding the valuation declaration for consumption tax on articles imported from related persons, it will be reconfirmed that applicants should be required to present only essential documents.
8) Regarding various systems on feed grain imports, the complainant, the government and the private sector will continue to exchange views in an effort to have common understanding on the facts.
(4) Other
Regarding the income tax rate on dividends paid by Japanese subsidiaries to foreign parent companies, the conclusion or amendment of tax treaties will be promoted to lower the tax rate on reciprocal basis.
2. Needed Measures
In light of the complaints submitted, the ministries or agencies concerned should take the steps described below.
(1) Regarding date marking system for food in principle, date of minimum durability should be basically indicated instead of date of manufacture.
(2) Regarding customs clearance procedures during off-duty hours, office conditions for customs clearance should be surveyed immediately and current procedures reviewed based on those findings.
(3) Regarding the various restrictions on Gaikokuho-Jimu-Bengoshi (qualified foreign lawyers), the Study Committee on Foreign Lawyers Issue should issue logical conclusions consistent with international practices as soon as possible.
The following complaints were withdrawn by the complainants.
(1) Relaxation of restrictions on imports of pharmaceuticals
(2) Review of administrative guidance concerning the use of domestically produced barley for beer relating to malt imports
(3) Simplification of import procedures for processed unsweetened cocoa products
(4) Harmonization of performance evaluation of elevator parts with international specifications
(5) Conformity of flameproof performance specifications with international standards and acceptance of foreign data
III. Description of Complaints Submitted and Results of deliberation
1. Foods, Health, Medicine
1-(1) Introduction of date marking system conforming to international standards and changing commercial practices relating to the date marking
1. Complainants: the U.S. Embassy, the American Chamber of Commerce in Japan (ACCJ)
2. Ministry concerned: Ministry of Health and Welfare, Ministry of Agriculture, Forestry and Fisheries
3. Complaint:
In Japan, under the provisions of the Food Sanitation Law and the JAS Law, foods must bear basically the date of manufacture. The Food Sanitation Law also requires that some foods carry the date of minimum durability, the JAS Law requires that some indicate period of minimum durability. There are also cases where food processing industry associations voluntarily indicate date of minimum durability.
The EC follows a dating labelling system concordant with Joint FAO/WHO Food Standards Programme (Codex). In the United States, there are no federal regulations concerning date marking, but some states require indication of date for some limitation.
The complainants complain that Japanese retailers and wholesalers institute unduly short sales and stocking periods on the basis of date of manufacture, because of Japanese consumers' preference for freshness, and that this places foreign foods at a disadvantage, compared to domestically-produced foods, because of the time for shipping and customs clearance. They believe that following are expected,
1) Introduction of a date marking system following international standards
2) Change of customs of date of minimum durability is the most available setting unduly short sales and delivery deadline.
The complainants further state that information on the optimum consumption period is what consumers really need, and that adopting a date marking system in accordance with international standards will help conserve resources by reducing returns and discards.
4. Results of deliberation:
(1) Joint FAO/WHO Food Standards Programme (Codex), which is the international food standard already states that date marking on foods should be based on a "date of minimum durability," and the EC nations have introduced a system in accordance with this. From the viewpoint of Japan's position in the international community and current international trade in foods, our date marking system for foods should be harmonized with international standards.
The current system of indication of date of manufacture has been used for many years. It is useful for administrative measures i.e. tracing the cause of defective products and recalling such products, and has also been familiar with consumers as an important food selection criterion.
Nevertheless, the progress of food manufacturing and distribution, together with the diversification of foods, make it difficult for consumers to judge preservation on the basis of foods' appearance, and it is therefore more practical to label foods with date of minimum durability rather than date of manufacture.
It has also been pointed out that the unduly short sales deadline based on date of manufacture can contribute to waste, with more foods in good condition being returned, and to higher costs as a results of lowered efficiency in production and distribution. This situation would be improved if introduction of date of minimum durability would be introduced.
Accordingly, regarding date marking system, in principle, date of minimum durability should be basically indicated instead of date of manufacture.
Taking into consideration the characteristics (durability) of various foods, and the fact that indication of date of manufacture is thoroughly entrenched, after hearing from consumers and industry officials concerned thorough study is needed to reach a decision on what measures should be taken.
(2) Regarding retailers and wholesalers' commercial practices relating to stocking and sales periods, introducing labelling to show date of minimum durability is likely to encourage consumers to select products appropriately. This will alleviate the need for setting delivery and sales deadline shorter than necessary and make it easier for foreign foods to compete with domestically produced foods.
The merchants concerned will be required to take steps to change their commercial practices, in accordance with the Guidelines for Improving Trade Practices (June 1990).
Cases where setting of sales deadline leads to unjustified returns contrary to the Anti-Monopoly Law must be dealt with rigorously by the Fair Trade Commission.
1-(2) Shortening time required for assigning a customs tariff number to imported foods, and clarifying classification standards
1. Complainant: Japan Trade Council (Nihon Boekikai)
2. Ministry concerned: Ministry of Finance
3. Complaint:
When a product is being imported for the first time and it is difficult to assign it a customs tariff number, importers usually receive advance ruling from customs authorities and verify the number of the applicable customs tariff schedules, the applicable tariff rate, and whether the item is subject to import quotas.
According to the complainant, in some cases it takes up to one month to receive an answer from customs authorities. The complainant feels that the classification standards, on which assignment of a customs tariff number is based, should be clarified to enable importers to determine customs classification beforehand.
4. Results of deliberation:
Since application of customs classifications affects importers' business plans, the government believes it is important to make classification standards as clear as possible. Accordingly, the ministry or agency concerned should take positive action to release more classification examples.
The ministry or agency is currently reviewing steps to increase the number of classification examples made available, and it is hoped that importers will also render active cooperation.
1-(3) Clarifying quarantine standards for imported foods
1. Complainant: Japan Trade Council (Nihon Boekikai)
>2. Ministry concerned: Ministry of Health and Welfare
3. Complaint:
The complainant believes that quarantine testing classifications and testing standards should be made available in Japanese and English and has asked that all quarantine offices should be instructed to test identical products uniformly to ensure that each office handles products in the same manner.
4. Results of deliberation:
Regarding testing standards, the ministry or agency concerned has advised that an English version of Specification Standards for Foods and Food Additives will be published during the current fiscal year. All quarantine offices will also be advised to test identical products uniformly so that products are handled in the same manner by all offices. The complainant has been informed of these steps and has deemed them satisfactory.
1-(4) Accepting water supply equipment conforming to major foreign specifications
1. Complainant: the U.S. Embassy
2. Ministry concerned: Ministry of Health and Welfare
3. Complaint:
The Japan Waterworks Association (Nihon Suido kyokai) is an association of waterworks operators (public corporations, etc.) enjoying the confidence of ordinary users, who prefer to buy Association-approved water supply equipment. For this reason, companies wishing to engage in manufacturing and selling water supply equipment usually request model approval by the Association. Model approval standards require that harmful substances not leach our during use, that the materials used be of JIS or JIS-equivalent quality and that on-the-spot inspection be carried out at approved testing facilities in Japan.
For these reasons, even though products may be manufactured according to major foreign specifications, if the specifications of the country concerned do not meet JIS specifications, special parts must be developed or attached. Also, foreign manufactures, with no testing facilities in Japan must make a sizeable investment to acquire facilities beforehand or delegate testing to other companies in Japan, which can affect industrial secrecy.
Given the circumstances, the complainant asserts that
(1) if there are no safety problems, model approval of products meeting foreign specifications should be granted even if they do not conform to JIS specifications, and that
(2) testing facilities should include foreign plants.
4. Results of deliberation:
The basic aim of the model approval system is to ensure the safety of water supply equipment. Accordingly, decisions concerning model approval should be made from the viewpoint of product safety, and it is inappropriate to exclude products solely because details concerning materials specified in foreign specifications do not conform to JIS specifications.
Therefore, the Nihon Suido Kyokai should examine the safety of major foreign specifications, and if safety is verified, review its approval standards to permit model approval of products manufactured according to these specifications.
Regarding testing facilities, systems for official testing in foreign plants have already been established by other laws and the Association should introduce a similar system.
The Nihon Suido kyokai has begun to review product safety of products made according to the specifications mentioned in this complaint. It is also continuing to examine the issue of testing in foreign plants and taking steps to make this possible.
1-(5) Relaxing regulations concerning the requirement for a technical director and for related facilities relating to the import and sale of cosmetics
1. Complainant: Korean Trade Association (Kankoku Boueki kyokai)
2. Ministry concerned: Ministry of Health and Welfare
3. Complaint:
Companies importing and selling cosmetics resemble manufacturers in that they supply cosmetics to the public. Since problems with sanitation must be avoided, businesses importing and selling cosmetics are regulated under the Pharmaceutical Affairs Law and must obtain a license, again like manufacturers. Conditions for licensing require that each sales office has a technical director who has the requisite knowledge and experience and that it has related facilities (storage facilities, testing facilities).
The complainant states that the requirement to employ pharmacists and have related facilities greatly increases the costs of companies importing and selling cosmetics, and believes that when very safe cosmetics are involved the requirements to hire pharmacists and have the required facilities not be applied.
4. Results of deliberation:
The requirements to hire chief technicians and have the required facilities are the minimum necessary to ensure appropriate quality control. Even if cosmetics are very safe, defective products can be produced if quality control is neglected. Accordingly, it is inappropriate not to apply these requirements. However, chief technicians do not necessarily have to be qualified as pharmacists. Persons having completed specialized courses in pharmacology or chemistry in high school or other institutions, or with equivalent knowledge and experience also qualify, and knowledge and experience gained abroad are valid. Regarding testing facilities, which are mentioned in the related facilities required, testing may be carried out at testing facilities specified by the minister of Health and Welfare, and thus the complainant should have no difficulty meeting this requirement.
The ministry or agency concerned and the complainant have agreed to examine the qualifications of specific chief technician candidates to determine whether they meet qualification requirements.
1-(6) Simplifying process of obtaining examination certificates for imports of medical equipment samples
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Health and Welfare
3. Complaint:
Regarding imports of pharmaceuticals for testing and research purposes which have not been approved under the Pharmaceutical Affairs Law, the importer must undergo prior examination by a pharmaceuticals examiner and obtain an examination certificate which is required for customs clearance.
Documents needed to obtain an examination certificate are an import report form, a testing program certificate, an affidavit certifying that the articles have not been imported to sell or give away, and an invoice. If an importer orders multiple units and these are imported in a number of shipment, in connection with the invoice and air waybill.
The complainant states that in the case of medical equipment, it is common for shipment to be divided even when only one order for samples was placed; It is very inconvenient to have to obtain an examination certificate each time and the procedure should be simplified.
4. Results of deliberation:
The purpose of the examination certificate is to determine the appropriateness of the types, amount, and purpose of medicines not approved under the Pharmaceutical Affairs Law being imported. In cases like those described in the complaint, where identical products are imported in more than one shipment, office procedures could be amended to make it possible to verify the appropriateness of the imports expected in the initial application. Accordingly, these procedures should be reviewed.
In the light of this complaint, the ministry or agency concerned is currently examining the situation in order to change procedures for obtaining examination certificates, and this is expected to settle the matter.
2. Industry, Transportation
2-(1) Easing regulations of High Pressure Gas Control Law
1. Complainant: the U.S. Embassy
2. Ministry concerned: Ministry of International Trade and Industry
3. Complaint:
Regarding High Pressure Gas Control Law, the complainant believes that
(1) A committee including foreign experts should be established to review the law in order to harmonize its provisions with international standards;
(2) When empty ship containers are refilled with gas, the requirement for a permit in addition to a production permit each time a tank is refilled, should be reviewed;
(3) When machinery is given special approval, machinery of the same design should be automatically approved.
4. Results of deliberation:
The complainant has already been advised of the following steps taken regarding this complaint:
(1) Japan and the U.S. agreed that High Pressure Gas Safety Institute of Japan would establish a channel to handle inquiries from foreign companies by April 1992 and that the two sides would discuss their respective standards in specific cases. The channel was set up by the Institute on April 30, 1992.
(2) Regarding simplification of procedures for ship container permits, Japan and the U.S. agreed to take concrete steps on this matter by October 1992, taking the opinions of other counties into consideration. The matter was resolved when a directive introducing comprehensive permit procedures was issued by the head of the Industrial Location and Environmental Protection bureau on October 28, 1992 (Directive 4/334 Special Refilling of Bonded High Pressure Gases).
(3) Special approval procedures for identical equipment in the case of subsequent applications can be simplified, but in fact there are fine differences in each case and each application requires individual inspection. However, Japan and the U.S. agreed to review details concerning reducing the documentation needed for approval procedures during 1992 and to implement changes promptly. This matter was settled by reducing the number of documents, such as interim calculation reports, required, for all applications filed after January 1, 1993.
2-(2) Expanding imports of automobile parts
1. Complainant: Keidanren
2. Ministry concerned: Ministry of International Trade and Industry, Ministry of Finance
3. Complaint:
Automobile parts (parts and accessories) which are classified under Chapter 87 in the tariff schedules are treated as customs-duty-free but some parts, for example fabric used for upholstering automobile seats, or fanbelts, are currently dutiable.
Japan has made an international commitment to boost import of automobile parts, and the complainant believes that imposing duties on some auto parts lacks uniformity and that specially processed parts, parts cut to fit specific models and other parts obviously intended to be used in automobile which are currently dutiable should be treated as duty-free by classifying them in Chapter 87 of tariff schedules.
4. Results of deliberation:
Since customs classifications are based on the provisions of the HS Convention (the International Convention on a Harmonized Commodity Description and Coding System), it is inappropriate to attempt to solve this problem by changing customs classifications and their interpretation.
The ministry or agency concerned states that each customs office has an advance ruling system for posting information on applicable Customs tariff number, and that this can in some cases resolve the issue brought up by the complainant.
2-(3) Changing the two-process rule for textiles articles and apparel enjoying preferential tariffs
1. Complainant: Keidanren
2. Ministry concerned: Ministry of International Trade and Industry, Ministry of Finance
3. Complaint:
Considering the aim of the preferential tariff system, products which are eligible to preferential tariffs must be limited to those which are actually manufactured and processed in the beneficiary country. Decisions as to whether products meet this provision are made according to the standards for certifying country of origin.
In the case of textiles articles and apparel, manufacturing is divided into four processes:
1) obtaining or manufacturing base fibers;
2) manufacturing thread;
3) manufacturing cloth; and
4) manufacturing sewn products.
Products which have undergone two or more processes are subject to certification of country of origin (two-process rule).
The complainant states that in the case of articles of apparel, (Chapter 62 in the tariff schedules), under the current two-process rule, if manufactures in Thailand or another ASEAN country, for example, depend on parts from NIEs, the preferential tariff cannot be applied. Therefore, the current standards for certifying country of origin should be changed to make it easier for producers to avail themselves of preferential tariffs.
4. Results of deliberation:
The current two-process rule is also used in European countries and is not unusual in international terms.
But where articles of apparel (Chapter 62) are concerned, offshore production in developing countries is becoming more prevalent and the two-process rule might be able to respond to these changing conditions. Accordingly, it's desired that articles of apparel manufactured not only in a single country but using offshore production are to be eligible for preferential tariffs.
The concerned ministry or agency has stated that it will undertake a review of the current standard for certifying country of origin for articles of apparel (Chapter 62) taking into consideration how this works within the system as a whole and conditions in the domestic industry.
2-(4) Improving method of inspection of gas dryers by the Japan Gas Equipment Inspection Association
1. Complainant: Keidanren
2. Ministry concerned: Ministry of International Trade and Industry
3. Complaint:
The Japan Gas Equipment Inspection Association (JIA), at the request of gas equipment manufactures, carries out model inspection of gas appliances and inspection of manufacturing plants (follow-up inspections) and issues certificates for products passing both inspections. Submitting products for inspection by the Association is voluntary, but gas appliances bearing these certificates are partially exempted from inspection under the Fire Prevention Law, and manufacturers intending to sell gas appliances usually submit their products for inspection. An inspection fee (several hundred thousand yen per year) is required, and two units of the same model must be supplied for dismantling.
The complainant states that anyone intending to import and sell gas dryers is essentially obliged to pass the JIA inspection but that since only a small number of gas dryers are imported, the inspection costs make this unprofitable. Therefore, gas dryers meeting U.S. safety standards should be treated the same as those passing the JIA inspection.
4. Results of deliberation:
Regarding following-up inspection, since 1991 the JIA and the AGA (American Gas Association) have adopted a reciprocal certification system whereby U.S. manufacturers' products exported to Japan undergo inspection by the AGA at the request of the JIA.
Regarding model inspection, no reciprocal certification system has adopted, mainly because of product liability concerns on the part of the U.S. manufactures, but reciprocal certification should be encouraged, not only with the U.S. but with other countries as well.
Additionally, even if reciprocal certification is difficult, the JIA is planning to implement a system to honor test results of foreign inspection organizations if specific technical requirements are met, and doing so would lessen the burden imposed by inspection.
2-(5) Shortening period to be required for type approval of imported motor vehicles.
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Transport
3. Complaint:
To obtain motor vehicle type approval, it is necessary to pass an examination for certification by Ministry of Transport. The ministry's standard processing period for type designation and type notification is two months or less.
The complainant believes that examination procedures for type approval should be divided into wide-raging examinations such as those required for full model changes and into examinations for minor changes, and that, bearing importers' circumstances in mind, the standard processing period for minor changes be shortened from the current two months required.
4. Results of deliberation:
Type approval examinations are affected by seasonal fluctuation in the number of cases up for examination and the workload for other duties. Therefore, there is some concern that it may not be possible to complete examination in time if the standard processing period for minor changes is shortened. Moreover, adopting different standard processing periods could make processing more complicated and increase the workload.
Accordingly, it is not appropriate to adopt different standard processing periods according to the type of application.
However, the administrative branch must endeavor to expedite its work promptly within the existing framework, and although the standard processing period might be shorter than that of other countries, it is necessary, bearing the importers' interests in mind, to conduct examination as quickly as possible.
In the light of the current complaint, the concerned ministry or agency undertakes to speed up examination procedures in the future.
2-(6) Relaxing regulations pertaining to storage space for motor homes
1. Complainants: the Japanese Chamber of Commerce and Industry, the Tokyo Chamber of Commerce and Industry
2. Agency concerned: National Police Agency
3. Complaint:
Under the current "Law for Securing Storage Space of Automobiles (Garage Law)" and enforcement ordinances, automobile owners are required to secure a storage space for their vehicle within a 2-km radius of the place from which said vehicle is used. The phrase "place from which said vehicle is used" (shiyo no honkyo no ichi) is interpreted to mean the residence of the vehicle owner or person responsible for storing the vehicle. Ordinarily, in the case of an individual, this refers to the persons' address, and in the case of a company, to the location of its office.
The complainants state that in central Tokyo it is extremely difficult to secure storage space for large vehicles like motor homes within 2-km of radius their owners' residences. They also state that such large vehicles are not likely to be used like passenger autos or mini-vans for daily and leisure use as an ordinary means of transportation around the owner's home, so in practice there is little risk that they will be parked illegally. Therefore, in the of motor homes, they call for "place from which said vehicle is used" in the current law to be interpreted to include storing in locations other than in the vicinity of owners' residences.
The complainants envision parking facilities for motor homes capable of accommodating a large number of vehicles, located near expressways or highways or at existing campgrounds. If such locations were approved as the "place from which said vehicle is used" for storing motor homes, they are prepared to examine the feasibility of building such facilities.
4. Results of deliberation:
In the case of automobiles owned by individuals, under the current law the "place from which said vehicle is used" specified is the owner's home address, because automobiles are used for multiple purposes. If owners do not secure storage space near home, automobiles are likely to be left parked on the street.
Motor homes, however, are used principally for leisure in areas outside cities and their size makes them impractical to use as ordinary means of transportation. Accordingly, unlike ordinary automobiles, there is little need for the "place from which said vehicles is used" to be the owner's home address.
It is therefore necessary to allow motor homes to be parked in suitable, properly supervised facilities and consider such facilities the "place from which said vehicle is used" even if it is not the owner's residence. Once the complainants develop a detailed concept for motor pools, the ministry or agency concerned will discuss with them the necessary facilities and supervision, to make it possible to designate locations not in the vicinity of owners' homes as storage space for motor homes.
2-(7) Accepting U.S. inspection and certification data for airworthiness certificate tests of imported aircraft and helicopters made in the U.S. and radio equipment inspection
1. Complainant: the U.S. Embassy
2. Ministry concerned: Ministry of Transport, Ministry of Posts and Telecommunications
3. Complaint:
The Civil Aeronautics Law stipulates that in order for aircraft to be imported and used for domestic flights, these aircraft must pass airworthiness inspections and receive airworthiness certificates. In addition, under the Radio Law, radio equipment installed in aircraft must pass the required inspections and be licensed by the Minister of Posts and Telecommunications.
The complainant states that these inspections impose excessive burdens and costs, claims the inconsistency with the Japan-U.S. Bilateral Airworthiness Agreement for civil aviation products, which means there is no need for airworthiness certificate inspection and radio equipment inspection for aircraft which have received airworthiness certificates in the U.S. The complainant would like to hold a technical-level discussion of experts to resolve the U.S. concern.
4. Results of deliberation:
There are many points which must be clarified regarding this complaint. First, the complainant fails to state which parts of the airworthiness certification inspection and radio equipment inspection under the current Civil Aeronautics Law and the Radio Law constitute a burden. Further, the Japan-U.S. Bilateral Airworthiness Agreement is perceived differently by the complainant and by the ministry or agency concerned.
To resolve this issue, the complainant and the ministry or agency concerned must arrive at a consensus and then proceed to consider the necessary actions. From that viewpoint, the technical-level meeting by experts proposed by the complainant should be held in the near future.
The ministry or agency concerned has agreed to take the necessary actions in this direction.
2-(8) Clarifying specifications for alkaline storage batteries under the "Common Specifications for Construction of Electrical Equipment" and achieving harmonization between JIS and IEC standards
1. Complainant: the Japan Chamber of Commerce and Industry
2. Ministry concerned: Ministry of Construction, Ministry of International Trade and Industry
3. Complaint:
Government Buildings Department of the Construction Ministry has prepared "Common Specifications for Electrical Facilities," which lists common requirements pertaining to equipment, installation methods and safety measures during construction. These are the specifications according to which the department orders construction of electrical facilities. Regarding alkali storage batteries, these specifications call for batteries conforming to JIS standards (or better, in some cases), but no clear standards or methods determining the meaning of "or better" are indicated.
The complainant states that since it is unclear whether alkali storage batteries made by foreign manufacturers and which meet IEC standards, which is the international standard, conform to these specifications, this effectively makes complicates participation in public construction projects. Accordingly,
(1) standards for determining what constitutes JIS standards or better should be clarified, and
(2) JIS standards for alkali storage batteries should be made compatible with IEC standards as soon as possible.
Regarding differences between the two standards, for example, under JIS standards, when capacity is specified this unconditionally determines dimensions, whereas this is not the case under IEC standards.
4. Results of deliberation:
(1) The "Common Specifications for Electrical Facilities" are intended only to list common requirements as model for specifications; these specifications alone are not a barrier to the use of foreign-made alkali storage batteries. However, to the person ordering construction, there are what determine the construction specifications and it is possible that import of foreign products could be impeded as a result.
Therefore, with regard to the above specifications, exactly what constitutes "JIS standards or better" must be clarified, to expand opportunities for using foreign products.
The Common Specifications were amended in April 1993 to state that for storage batteries which come under the Construction Standards Law and the Fire Prevention Law, any storage batteries approved by the Storage Battery Equipment Approval Committee of the Japan Storage Battery Association meeting either JIS or IEC standards are compatible with the Common Specification. This change has effectively settled the complaint in question.
(2) JIS and IEC standards lack compatibility because each set of standards was adopted or changed after other. Also, the IEC standards themselves are a mixture of various countries' standards and have not been standardized as an international standard. However, the ministry or agency concerned should review JIS standards and continue working to archive standardization with international standards.
The next review of JIS standards is scheduled for January 1994, and the complainant has agreed to participate in revising JIS standards concerning the shape of electrode plates and testing methods to make them more compatible with IEC standards.
3. Import Formalities
3-(1) Changing customs clearance procedures outside the normal customs office hours (overtime service system)
1. Complainant: the U.S. Embassy
2. Ministry concerned: Ministry of Finance
3. Complaint:
Subject to approval by the Director-General of Customs, the overtime service system is in effect to customs clearance procedures on Sunday, holiday or outside normal Customs office hours of any other days.
For every application to obtain approval, users are required to pay the overtime service fee based on one-hour units. Further, in order to determine the number of staff required for overtime service and expected processing time, the maximum number of cases per application is determined according to the type of cargo. In the case of air cargo imports or exports, the maximum number is set at five per application.
The complainant states that although it is possible to clear a considerable number of small package shipment in one hour, since the current overtime service fee schedule limits the maximum number to be cleared per application to five, the overtime service fees as a whole are a considerable burden and regulations concerning the current fee schedule should be reviewed to take current conditions into account.
4. Results of deliberation:
Under the current fee system of overtime service, the beneficiary is compensated, which are calculated according to hourly expenses of the Customs for staff and facilities. The limit on the number of articles per application is determined based on the average time (number of applications one staff can process per hour) required for import/export procedures (included, physical examination).
Calculations of time required for customs clearance should of course reflect the actual time required as far as possible, but the method actually used (many staffers handling a large number of cargoes) makes objective calculations difficult. For lack of a better method, then, the number of items per application is limited according to specific guidelines.
Items clearing customs are also examined according to the level of risk of the particular cargo. Even if the cargo is a small package shipment if it is judged to be high-risk, it is examined carefully. Therefore, it does not hold that small package shipment must be processed quickly simply because they are small package shipment.
The current limits per application, however, were set based on conditions in 1987. Customs processing has been speeded up since then and because the number of small package shipment cleared has been steadily increasing, the current handling fee schedule can end by putting more of a burden than actual expenses to companies specializing in handling small package shipment.
Accordingly, the ministry or agency concerned should immediately review actual customs processing conditions during contingency office hours and review current handling procedures based on these findings.
3-(2) Improving service to payers of customs duties by using SEA-NACCS
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
SEA-NACCS (Nippon Automated Cargo Clearance System for maritime cargo) is a computer system for the purpose of making the customs clearance procedure of maritime cargo efficiently and accurately. Customs clearance formalities can be carried out by inputting or outputting data through terminals installed in offices of users, which include customs, customs brokers, and banks. The system is operated by Nippon Automated Cargo Clearance system Operations Organization (NACCS Center), the corporation with the approval of the Minister of Finance. The costs related to the systems operation such as fees with regard to the host computer, the terminals and the administrative expenses are shared by the users.
Large importers use the comprehensive payment system, remitting customs duties and consumption tax in a lump sum for each month. In this case, customs duties are usually calculated on the basis of information supplied by customs brokers. But the information is sometimes incorrect because of broker's error and the importers, to avoid arrears in customs duties, have up to now obtained a breakdown of customs duties from the customs authorities to verify the amount of customs duties beforehand. Since the NACCS was introduced, however, this exchange of papers with the customs authorities no longer takes place, and as the importers themselves do not use NACCS, it is difficult for them to make a prior check of the amount of customs duties.
To remedy this situation, the complainant requests that customs authorities or the NACCS Center provide an information service for payers of customs authorities or the NACCS Center provide an information service for payers of customs duties, and that a research committee of experts from the public and private sectors be set up to examine the system and any problems it may have, and the issue of cost-defrayment if necessary.
4. Results of deliberation:
This complaint concerns improving the services provided by the NACCS Center, which operates the SEA-NACCS. The complainant should first collect and arrange the demands of expectants to use this service and identify them in detail.
After that, the complainant and the NACCS Center should discuss the issues involved in improving the Center's services and resolve the problem in a manner satisfying all parties.
Regarding this matter, the complainant has agreed to take the necessary steps and is currently collecting information on user's demands.
3-(3) Relaxing regulations requiring presentation of an original certificate of origin in examinations for preferential tariffs.
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
In order to import items under preferential tariffs, an original certificate of origin issued by the customs authorities of a country enjoying preferential tariffs must be presented when carrying out customs formalities. (However, if the item is not under limit controls [in terms of value or volume] for preferential treatment, and if the customs authorities agree that it is difficult, through no fault of the importer, to obtain a certificate of origin, on the understanding that the certificate will be provided afterwards, the importer may be granted an extension to produce the certification in exceptional cases. But if the item is under limit control, an original certificate must be produced, except if unobtainable due to disaster.)
In the particular case brought up by the complainant, a certificate of origin had already been obtained at the source, but the original had not arrived by the time import processing began. The situation was explained to the customs authority, but no extension was granted because it was unclear whether the situation was the importer's fault, and finally the importer gave up trying to import under the preferential tariff.
The complainant feels that examination for preferential tariffs should be more flexible, allowing preferential tariff treatment even if the importer is unable to ascertain why local conditions caused a delay in obtaining a certificate of origin, by having a copy of the certificate sent by facsimile, on condition that the original be provided later, and that importers should be allowed to submit an original certificate of origin later, for items under preferential limit control as well.
4. Results of deliberation:
Extensions for supplying certificates of origin are currently granted only when the certificate is unavailable because of circumstances which are not the importer's fault. But when the importer cannot ascertain the reasons for the delay at the source, it is impossible to demonstrate to the customs authorities that this is not the importer's fault. As a result, cases may arise where items cannot be imported under preferential tariffs.
There is little reason for importers intending to obtain preferential tariffs to intentionally delay obtaining a certificate of origin, and in cases where it is certain that the certificate will be provided later, there are little needs to require the importer to prove the reason for the delay.
The procedure was revised in April 1993, when the ministry or agency concerned issued a revised enforcement order under the Temporary Tariff Measures Law and a basic tariff directive. This allows, in the case of items not under limit controls, extensions for providing a certificate of origin (to be supplied later) under certain conditions, even for reasons of unavailability other than disasters or other uncontrollable circumstances.
Regarding items under limit control, these are generally administered strictly in order of arrival, and because fairness in imposing duties must be maintained, revisions of the current system are inappropriate.
3-(4) Waiving requirement to present original import permit when re-importing items after free repairs
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
Tariffs on imported cargoes are based on the assessed value noted on the import (tariff payment) declaration. Ascertaining whether the value shown is appropriate, however, is usually determined by the price shown on the invoice attached to the import (tariff payment) declaration.
Since no import transaction (buying/selling) actually takes place in the case of items re-imported after free repairs, the price shown on the invoice when re-importing is "0," but in many cases the invoice shows a separate nominal price for the item, for the purpose of customs procedures.
The complainant states that the customs authorities, in some re-import cases, require importers to produce the import permit and invoice used when the item was first cleared through customs. In cases where the invoice attached for re-import shows a nominal value, the complainant believes that assessed value can be determined on the basis of this price, and that the documents submitted when the item was originally imported should not be required.
4. Results of deliberation:
Customs authorities sometimes require importers to produce documents in order to appropriately assess customs valuation. The necessary documents vary according to the contents of each application, and therefore it is inappropriate to declare that import permits and other documents issued when the item was first imported are uniformly unnecessary, as the complainant contends.
Considering the burden of applicants, however in the case described above when nominal price is shown on the invoice at re-import, as far as possible, the customs authorities should not require importers to present the import permit and other documents issued when the item was originally imported.
The ministry or agency concerned, bearing in mind that this complaint was submitted, should reconfirm that the applicant should be required to present only essential documents.
3-(5) Relaxing requirement to submit original parameter sheets when exporting defective products to return to manufacturer
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
When exporting defective products to return to manufacturer, and when it is unclear whether the said products are considered strategic materials, domestic manufacturers are required to submit to the customs authorities parameter sheets certifying that the items are not strategic materials.
The complainant states that the customs authorities, when requesting parameter sheets, require that these be originals. But when identical products are being returned, this necessitates making up an original for each, which creates a heavy office workload, and the complainant believes that copies should be considered acceptable.
4. Results of deliberation:
This complaint was resolved by making it acceptable to submit copies of parameter sheets and not the originals, as the complainant had stated. However, only copies certified by an official of the exporter with representative capacities to be copies of the original will be accepted.
3-(6) Combining the Trade Relation and Non-trade Payment Report and the "Report on payment for invisible foreign trade"
1. Complainant: Keidanren
2. Ministry concerned: Ministry of International Trade and Industry, Ministry of Finance
3. Complaint:
Persons or organizations dealing in ship charters, insurance and other matters directly related to cargo import/export or brokering trade transactions are required to fill out a "Trade Relation and Non-trade Payment Report" and a "Report on payment for invisible foreign trade" and to submit these forms to the International Trade and Industry and Finance Ministers through authorized foreign exchange banks.
The purpose of the respective forms differs and some items on the forms are different but since both reports have a standardized format, in practice the applicant (the importer/exporter) fills out the forms identically and submits them to the bank.
The complainant states that the current format requires the applicant to prepare and retain separate sheets because the names of the forms and their destinations are different, and that to cut down office work the two forms should be combined so that one sheet can serve the purposes of both reports.
4. Results of deliberation:
In accordance with the complainant's request, the format of the two reports was standardized in 1984, considerably reducing the burden on the reporter. However, the present request for further revision indicates that the current format may not necessarily be meeting reporters' needs fully yet.
The ministry or agency concerned has begun examining the type of format that would be easiest for reporters to fill out for their various transactions and we trust that this will improve the situation.
3-(7) Relaxing the requirement for a letter of proxy for duty-free import under the Temporary Tariff Measures Law
1. Complainant: Keidanren
2. Ministry concerned Ministry of Finance
3. Complaint:
When importing an item duty-free under the Temporary Tariff Measures Law, the import declaration is usually made under the name of the user of the item in question. But because in many cases the user is in fact importing, with delivery left to a trading company, the customs authorities require that the import declaration show the names of both the user and the trading company under "importer" and verify the relationship between the parties by checking contracts or other documents.
According to the complainant, in the case of such imports, the customs authorities require a letter of proxy from the importer in addition to the contract. In cases where the relationship can be verified easily through a contract, the complainant believes that clearance should be allowed without requiring a letter of proxy.
4. Results of deliberation:
The ministry or agency concerned has replied that, in cases where the delegate relationship between the importer and the actual user can be verified easily through contracts, no letter of proxy will be required. This answer was found satisfactory by the complainant.
3-(8) Review of system for paying consumption tax on imported items (including simplification of valuation declaration procedures when importing from a foreign subsidiary)
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
(1) In the case of domestic transactions, the total consumption tax due over a specific period must be reported and paid at the head office location. In the case of imports, the consumption tax must be declared and paid at the time of import, together with the import declaration and the declaration and payment of tariff. The complainant believes that the requirement to pay consumption tax on import transactions at the time of import places an overly heavy clerical burden on the importer and constitutes a barrier to import. In accordance with the principle of non-discrimination in domestic and import transactions, the complainant feels the system should be changed so that the total consumption tax on import transactions over a specified period can also be reported and paid at the head office location.
(2) Further, regarding import transactions when seller and buyer are related, for example, the parent company and its subsidiary, to use the transaction price as the tax assessment standard for tariff and consumption tax, the importer is required, when submitting the import declaration, to submit a valuation declaration and to prove that the relationship in question does not affect the transaction price. The complainant believes that
1) since consumption tax is assessed based on invoice price, there may be no need to provide strict proof that the price at the time of import is appropriate, as is the case for tariff;
2) regarding items on which no tariff had been levied, or accordingly no valuation declaration for paying tariff purposes had been required, but on which it became necessary after introduction of the consumption tax to submit a valuation declaration for payment of consumption tax, with numerous documents as proof that the price was appropriate, Valuation declaration procedures for consumption tax on imports from a related person, should be simplified; the requirement to submit documentary proof dropped; and consumption tax assessed based on the invoice prices.
4. Results of deliberation:
(1) It is not unreasonable for importers to consider that the current requirement that consumption tax on import transactions be paid each time import takes place generates extra paperwork, compared to the system of declarations and paying the consumption tax due over a specific period, as is done for domestic transactions.
However, in order to ensure reliable and efficient tax collection, it is a practical method to assess the consumption tax due on an imported item as part of overall import procedures and collecting this together with duty when the item is cleared. EC countries, which have a value-added tax, require declaration and payment of this tax over a specific period for domestic transactions, but where imports are concerned, the tax must be declared and paid at the time of import. In this respect, the Japanese system is similar to that use in the EC. Further, if there were systems for declaration and paying consumption tax on imports for specific periods, interest benefits would accrue on the undue tax accumulated until the time of payment. As expressed above, there are various problems involved and therefore it is inappropriate to change the system to allow reporting and payment of total consumption tax on imports over a specific period.
(2) Concerning the valuation declaration for consumption tax on imports between related persons, it is not unreasonable for importers to consider that this requirement, applicable only in the case of imports and not in the case of domestic transactions, generates extra paperwork.
However,
1) to ensure appropriate and fair assessment of the consumption tax, it is necessary to calculate the taxable price for consumption tax appropriately, regardless of whether or not the item concerned is subject to tariff.
2) Since, if the valuation declaration for consumption tax on imports from a related person were omitted, it would become difficult to assess tax appropriately, and transactions between related persons might enjoy an advantage over other ordinary transactions, those proposals are considered to be inappropriate due to the various problems involved from the stand point of fair and proper taxation.
However, the ministry or agency concerned, bearing it mind that this complaint was submitted, should re-confirm that the application should be required to present only essential documents in cases of valuation declarations for consumption tax on imports from related person.
3-(9) Eliminating the liquor tax payment deadline and eliminating discrimination between domestic and imported liquor concerning tax refunds
1. Complainant: Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
(1) Regarding the liquor tax on liquor produced in Japan, when liquor was moved from its place of manufacture in a specific month the law currently requires that a tax declarations be filed by the end of the next month, and that the liquor tax be paid by the end of the second following month. In the case of imported liquor, a liquor tax declaration must be filed, and the tax paid, at the time of import, together with the import declaration and the declaration and payment of tariff. The complainant states that while the liquor tax on domestic liquor is due two month after the liquor has been moved, the liquor tax on imported liquor must be paid immediately on import and that this lack of a payment extension constitutes discrimination between domestic and foreign products. The complainant believes that payment of the liquor tax on imported liquor should also be allowed to be made on a monthly basis.
(2) When domestic liquor is returned to its place of manufacture or re-shipped from another place of manufacture, an exemption is granted for the initial tax imposed on the liquor to avoid double taxation. But in the case of imported liquor, a tax refund is made only if the liquor is in breach of contract and is placed in bond within six months of the date of the import license for purposes of re-exportation or disposal, or if it is re-exported in its original condition within one year. The complainant states that when liquor must be disposed of because of damage or other reasons beyond its control, the liquor tax is refunded if domestic liquor is returned to its place of manufacture, but there is no provision for a tax refund for imported liquor. According to the complainant, this constitutes discrimination between domestic and foreign products and a tax refund should be granted for imported liquor if it is returned to its prior untaxed status, for example, by being placed in bond.
4. Results of deliberation:
(1) It is not unreasonable for importers to consider that the current requirement that the liquor tax be paid at the time of import generates extra paperwork, compared to the system of reporting and paying the liquor tax due over a specific period for domestic transactions.
But where imported liquor is concerned, it is usually the case that many entities are liable to taxation, and since they may not necessarily import liquor on continuing basis, assessing the liquor tax due as part of overall import procedures and collecting this together with tariff is a practical method for ensuring reliable and efficient tax collection. Other indirect taxes are also assessed and collected at the time of import, and considering that this method of collecting indirect taxes is used by other countries as well, it is inappropriate to change the system to allow reporting and payment of total liquor tax on imports of liquor over a specific period because of the various problems involved.
(2) Concerning the handling of taxes on imported liquor which must be disposed of because of damage, responsibility for the integrity of the product at the distribution stage lies with the liquor broker or seller. The government cannot be expected to deal with eventualities occurring during distribution, although special situations could arise if a disaster is involved. The complainant states that a tax refund should be made to eliminate discrimination between domestic and imported products, but the provision for tax refunds for domestic liquor is in place to avoid double taxation in the event that liquor returned to the manufacturing plant is re-used as an ingredient and re-shipped as liquor. This provision is not intended to refund the liquor tax on liquor disposed of at the manufacturing plant. Given these circumstances, various factors make it inappropriate to refund the liquor tax on imported liquor disposed of because of problems occurred at the distribution stage.
3-(10) Relaxing import procedures on feed grains
1. Complainant: the U.S. Embassy
2. Ministry concerned: Ministry of Agriculture, Forestry and Fisheries
3. Complaint:
Corn imported for livestock feed is exempted from customs duties in order to promote the livestock industry. But to prevent its diversion to other uses, it must be either steam-flaked or mixed with certain secondary ingredients such as bran, seed cake. As regards barley, all barley is under government administration, according to the provisions of the Food Control Law. The complainant believes that these measures push up the price of feed and constitute an import barrier, and that they should be abolished.
4. Results of deliberation:
This issue has been discussed by Japan and the U.S. for many years and the complainant and the ministries or agency concerned have been unable to reach a conclusion because of the considerable differences of understandings on the matter.
In this regard, it is necessary to give due consideration to the possibility that a misunderstanding that our markets are closed could be created, despite the fact that Japan imports virtually all feed grains, if this matter is further repeatedly brought up as a market access problem.
To cope with this situation it is considered to be necessary for the ministry or agency and the U.S. embassy, together with private sector parties, to continue to discuss the issue in order to share understanding on whether the current import systems on corn for livestock feed as to whether the current systems do indeed constitute an import barrier.
The sluggish growth of corn imports is basically due to the increased imports of meat as a result of beef import liberalization, which have put a damper on the increase in the number of heads of livestock raised in Japan. However, in the background to the complaint there seems to be the perception on the part of the complainant and some livestock farmers that steam-flaking processing of corn for single ingredient feed constitutes an unreasonable restriction on livestock farmers' feeding methods. Therefore, in ministry or agency concerned should continue to explain the necessity for this processing.
4. Other
4-(1) Lowering the income tax rate on dividends paid by subsidiaries to its parent companies
1. Complainants: the European Business Council (EBC), the American Chamber of Commerce in Japan (ACCJ), Keidanren
2. Ministry concerned: Ministry of Finance
3. Complaint:
Under the "provision of lower tax rate on dividends," in effect until fiscal 1989, the corporate income tax rate on corporate earnings earmarked for dividends was set at 32%, while the basic tax rate at 42% on retained earnings. But this provision was abolished in fiscal 1990 when corporate income tax was cut, making all corporate income subject to a uniform tax rate of 37.5%. When a corporation pays dividends to another corporation in addition to the corporate tax refereed to above which is imported on income distributed as dividends, a 20% income tax is also deducted at the source. However, when Japanese subsidiaries of foreign companies pay dividends to their foreign parent companies, the rate of withholding tax charged by Japan is limited by the tax treaty (treaty to avoid double taxation on income) with the country in question; in the case of treaties with most industrialized countries, this ceiling rate is 10%. In tax treaties with Luxembourg, Norway and the Netherlands, which were concluded after the abolition of "provision of lower tax rate on income distributed as dividends", the ceiling tax rate was set at 5%, concordant with the 1977 OECD model treaty, because of such abolition.
The complainants have submitted the following complaints concerning the income tax rate on dividends paid by Japanese subsidiaries to foreign parent companies:
(1) After the "provision of lower tax rate on dividends" was abolished, foreign parent companies receive fewer dividends from their Japanese subsidiaries than prior to the abolition, because of increased corporate tax burden on foreign companies. This is contrary to the government's policy of encouraging direct investment into Japan and dampens foreign entities' interest in doing so. Since Japan has abolished the relatively low corporate income tax rate provided for in the "provision of lower tax rate on dividends," the relatively high tax rate of 10% set out in tax treaties with various countries on the assumption that this provision was in effect should be lowered to 5%, which is set out in the OECD model treaty, as in the tax treaties with Luxembourg, Norway and the Netherlands concluded after the provision was abolished.
(2) Taking into a comprehensive consideration the facts that revising tax treaties with individual countries will take a great deal of time, that supporting and strengthening the OECD model treaty is in Japan's long-term interest, and that there is a marked unbalance between direct investment by Europe and the U.S. into Japan and Japanese direct investment into those regions, Japan should advise the governments concerned that it will revise the tax treaties and do so independently, without waiting to negotiate the changes.
4. Results of deliberation:
Applying a lower tax rate on dividends paid by Japanese subsidiaries to their foreign parent companies has been done through bilateral tax treaties based on reciprocity. This is also an international rule. This tax rate cited in the reciprocal tax treaties is not one which can be lowered unilaterally by changing domestic laws. If this were done, a lower tax rate would apply not only to treaty partners but also to every other country in the world. This can hardly be considered a realistic approach, either in international terms or from the standpoint of Japanese tax policy. Accordingly, treaty provisions based on reciprocity should be handled in accordance with the usual international rules, i.e. through bilateral negotiations.
Tax treaties between Japan and many industrialized countries currently set the income tax rate on dividends paid by subsidiaries to parent companies is at 10%. However, this tax rate is predicated on the existence of the "provision of lower tax rate on dividends" that was applicable to corporate income tax in Japan. Because this provision has now been abolished, there is little reason for Japan to continue applying this tax rate. Therefore, bilateral tax treaties setting the tax rate at 10% should be changed as soon as possible to lower the rate to 5%, based on reciprocity and as set forth in the OECD model treaty. In fact, tax treaties concluded after the abolition of this provision, with Luxembourg, Norway and the Netherlands set the tax rate at 5% because of the abolition. The government should therefore adopt the same policy in its tax treaties with other industrialized countries. Since tax treaties regulate not only taxation on dividends between parent companies and their subsidiaries, but cover all other aspects of income taxation, it should be necessary to take into account overall balance of various matters and the conditions of treaty partner countries.
But, bearing in mind that Japan needs to take an initiative to make investing in Japan more attractive and to promote such investment, Japan should not wait for treaty partner countries to request that the tax rate be lowered. Japan should, instead take an initiative to propose to lower the tax rate and act promptly. The ministry or agency concerned have the above considerations in mind and take all possible actions in this direction, taking into consideration the various matters relating to income tax treaties.
4-(2) Relaxing restrictions on Gaikokuho-Jimu-Bengoshi (GJB) practicing in Japan
1. Complainant: the EC Committee Representative, the European Business Council
2. Ministry concerned: Ministry of Justice
3. Complaint:
Person who is qualified to become a foreign lawyer may, after obtaining approval from the Minister of Justice and registering with the Japan Federation of Bar Associations, be recognized as GJB authorized to carry out certain legal work pertaining to foreign law, but they are not allowed to hire Japanese lawyers or to practice law jointly with Japanese partners.
The complainants believe that the current restrictions on GJB are overly strict and that as the volume of work involving both Japanese and foreign law increases, restrictions should be relaxed as described below to permit more efficient processing and offer better service.
1) Allow foreign lawyers to hire Japanese lawyers
2) Allow joint practices between foreign lawyers and Japanese lawyers
3) Eliminate the requirement of five years' experience practicing law
4) Allow foreign lawyers to use the name of the law firm they are associated with in their home countries directly in the name of GJB offices in Japan
5) Allow foreign lawyers to serve as representatives of parties in arbitration procedures for international commercial affairs
4. Results of deliberation:
With the globalization of world trade and increasing interdependence in trade and investment, Japan needs to review its systems and restrictions to harmonize them with those of the international community. Legal services are no exception
Corporate activities have also become more international in scope, and legal matters involving both Japanese and foreign law will continue to increase. It will thus be necessary to meet user needs for better service by diversifying the types of legal services available and promoting competition.
Negotiations over the complaint in question between Japan and the U.S. and Japan and the EC have been going on for a long time, but substantial differences of opinion persist. Since there is no prospect of a solution in sight, this creates the impression that the Japanese market is closed.
In order to establish harmonious trade relations with other countries, it is very important for Japan, being the only major industrialized country with a trade surplus, to take more active market opening measures and to change perceptions that domestic markets are closed.
In the Study Committee on Foreign Lawyers Issue, the Justice Ministry and the Japan Federation of Bar Associations are currently reviewing ways of dealing with the complaint submitted, since this affects the Japanese legal system. Given Japan's position in the international community, however, logical conclusion acceptable to the international community which way includes the change of current law must be reached as soon as possible.
5. Complaints Withdrawn by Complainants After Being Submitted Initially
(1) Relaxing restrictions on imports of pharmaceuticals
The EC Committee Representative and the European Business Council claimed that restrictions on pharmaceuticals for experimental use and samples for sales promotion constituted discrimination against foreign products and that these should be changed. However, in the process of investigating the matter, it became evident that there was a misunderstanding on the part of the complainants, and the complaint was withdrawn.
(2) Reviewing administrative guidance concerning the use of domestically-produced barley for beer relating to malt imports
Regarding barley used for manufacturing beer, Keidanren claimed that administrative guidance led to a de facto obligation to use expensive domestically produced barley and that this practice should be reviewed. However, in the process of investigating the matter, it was discovered that no administrative guidance takes place, and the complaint was withdrawn.
(3) Simplifying import procedures for processed unsweetened cocoa products
Regarding processed unsweetened cocoa products, Keidanren requested that the requirement to buy domestically produced powdered milk when granting a customs quota be eliminated. However, in the process of investigating the matter, the complainant realized that this measure is necessitated by domestic policy, and the complaint was withdrawn.
(4) Harmonizing performance evaluation of elevator parts with international specifications
Keidanren submitted that procedures for obtaining a performance evaluation of elevator parts from the Japan Building Center should be simplified. In the process of investigating the matter, however, the complainant was unable to obtain details and finally withdrew the complaint.
(5) Bringing flameproof performance specifications into conformity to international standards and accepting foreign data
The U.S. Embassy submitted that U.S.-made curtains conforming to U.S. flameproof standards were not accepted in Japan, but was unable to obtain details on the matter and finally withdrew the complaint.