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
"4th Report of the Market Access Ombudsman Council"

March 17, 1997
Market Access Ombudsman Council

Based on the "Policy Actions on Market Opening Measures as concerns Standards, Certifications and others"(adopted by the Office of Market Access, May 27,1993),etc., clarify in this report where the problems with Japan's standards, certification and others lie and recommend actions needed in this relation to complaints received from foreign businesses and others.

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

I. General Observations

II. Comments

1. Animals, Plants and Foods

1-(1) Consolidation of Ministry of Agriculture, Forestry and Fisheries and Ministry of Health and Welfare quarantine procedures
1-(2) Simplification of food inspection procedures

2. Pharmaceuticals, Medical Equipment and Cosmetics

2-(1) Relaxing import procedures for medical equipment in categories not yet approved
2-(2) Deregulation on cosmetics

3. Industry

3-(1) Deregulation relating to internal combustion
3-(2) Deregulation of sales restrictions for illegal measurement units
3-(3) Deregulation on refrigeration facilities
3-(4) Deregulation on attached freezing facilities
3-(5) Relaxation of container re-testing period

4. Transportation and Traffic
4-(1) Clarification of formula used to calculate output for fishing vessel propelling apparatus
4-(2) Reducing the number of documents required concerning construction of high-speed ferries and ensuring their confidentiality
4-(3) Deregulation in order to lower harbor fees

5. Construction(None)

6. Information and Telecommunications
6-(1) Deregulation of preservation of documents on microfilm

7. Import Procedures
7-(1) Simplification of presentation of documents using electronic systems
7-(2) One stop service for legal procedures for imported cargo
7-(3) Simplification of procedures for extension of payment date for Customs duties and consumption tax on imported cargo
7-(4) Elimination of document preservation requirement for import applications kept by Customs brokerage
7-(5) Permission for Customs clearance and unloading of sea cargo on holidays

8. Other
8-(1) Review of landing examination criteria

I. General Observations

1. Increasing integration of the global economy and mega-competition require that changes be made to the various systems entrenched in our economy and society. The possibilities for further growth will be limited unless we take action now. Far-reaching changes must be made, no matter how painful they may be.

The government is currently undertaking reforms to simplify and make administrative operations more efficient, in order to deal with new era. The government's announced policy of eliminating all economic regulation and of thoroughly reviewing social regulation and retaining only the minimum required to achieve original objectives must be followed through with strong resolve in all areas.

Our main focus in promoting structural change has been on maximizing benefits for consumers by improving market access. It is essential to improve market access so that we can create an open socioeconomic system suitable for an age of unrestricted movement of people, capital and information, and which can incorporate the world's newest trends. If imports and investment grow as a result of improved market access, consumers will have a broader range of choice and be able to avail themselves of goods and services hitherto unavailable; this will also contribute to shrinking the gap between domestic and world prices. At the same time, increased competition among domestic and foreign firms will invigorate and improve the economy's efficiency and ultimately create more employment opportunities.

February 1997 marked the 15th anniversary of the establishment of the Office of the Trade and Investment Ombudsman (OTO). Over this time, the Market Access Ombudsman Council has reviewed rules and regulations from the perspective of improving market access, and we believe that its activities have helped encourage the restructuring currently being carried out. We must take the positive approach that the specific, detailed complaints brought up by foreign businesses present a valuable opportunity for change. Our sincere efforts in this direction will bring about true structural change yielding an open socioeconomic system.

2. With this in mind, since autumn 1996 the Council has been studying the 59 complaints concerning the standards and certification system, etc. which were raised by foreign businesses.

The complaints we studied include problems of impaired market access due to the existing standards and certification system; problems of outdated regulations or procedures which fail to reflect advances in technology, mainly in the fields of information and telecommunications; and barriers to the employment or business activities of foreigners and to the smooth distribution of sea cargoes. One of the characteristics of the problems brought up this time is that many of them are concerned not only with the traditional aspect of boosting imports, but with creating a positive environment to attract foreign businesses and promote direct investment. We hope that a proactive response will be forthcoming, as this can help solve some of the serious problems, such as shrinking the gap between domestic and world prices and correcting the domestic high-cost structure, that we face today.

Reviewing the work involved in responding to these complaints, in all cases we ask that the government take appropriate action in the areas mentioned below. While the ministries concerned have taken a flexible and positive approach, their actions or those of private sector groups with related interests are not always satisfactory. The government must take a more serious approach from the perspective of total cost-benefit for the economy.

(1) The purpose of regulation and appropriateness of the methods used must be reviewed on an ongoing basis, because of the socioeconomic changes and technological progress which have occurred since the rules were originally laid down.

Economic regulation, manifested mainly in the form of supply-demand regulation, must be abolished at an early date, to allow market forces maximum play. Even if regulation is needed to protect natural resources or ensure safety, the methods used should be the most effective for the purpose at hand, and their usefulness must also be reviewed in the light of the most advanced technical standards. In some cases, rapid changes in information and telecommunications technology, or improvements in quality control, have made rules outdated or unnecessary. The time has come to consider some kind of organizational response, for example, introducing a system mandating periodic review of regulations in place.

(2) The government should actively contribute to creating international standards and specifications, and harmonize the specifications and standards used in its standards and specification system as soon as possible with internationally accepted specifications and standards, in the areas where they exist.

Although there has been some progress in coordinating standards and specifications, complaints regarding harmonization with international standards and specifications were made again this year. This means that further efforts are needed. If certain standards and specifications used in Japan are not in harmony with international norms, foreign businesses should be given a clear reason for this. Regulations unique to Japan must be based on objective, scientific data, and they should be created or changed in a transparent environment, with input solicited not only from persons in the industry concerned but from foreign and domestic experts in the field as well.

(3) Deregulation must be promoted and government involvement reduced to a minimum. In cases where regulation is retained, it is important to create clear guidelines beforehand, to establish transparency where administrative penalties, etc. are concerned. From this perspective, the Administrative Procedures Law must be upheld, and the spirit of the law must be adhered to as closely as possible in areas excluded from application as well.

Where application of standards is concerned, the ministries concerned should ensure that their local officials in regional bureaus and so on apply them in ways consistent with the original intent of the system.

(4) Given the advances in the fields of information and telecommunications, further efforts should be made to computerize systems for handling Customs declarations and other import procedures, as this will greatly enhance users' convenience. The ministries concerned should streamline their respective office procedures and work in close coordination to simplify and speed up the overall system in order to adequately meet users' needs.

(5) Public relations activities should be carried out and various media used to describe the overall standards and certification system, import procedures, and so on, and how they are applied, to further understanding on the part of foreign businesses and promote imports and investment. When private bodies establish their own systems and carry out certification, this can in some cases impede market access, when their standards different from international standards and so on. The government should guide the organizations in question to ensure that their standards and certifications cause no misunderstandings, and ensure that they provide appropriate information to users and suppliers alike.

3. From the above perspective, we request that the government and concerned organizations make renewed efforts to facilitate market access. The Market Access Ombudsman Council will follow up on government actions taken in response to its recommendations, and will undertake further reviews as necessary.

The Council wishes to take an active role in changing Japan's economic structure and improving market access, as steps are taken establish a new socioeconomic system through current actions to streamline the government and reduce regulation. The Council will once again review specific, individual complaints and recommendations it has made in the past and further deliberate the aspects these cases have in common, with the goal of presenting a proposal to the Office of Market Access Ombudsman Council Headquarters in June 1997.

II. Comments

1. Animals, Plants and Foods

1-(1) Consolidation of Ministry of Agriculture, Forestry and Fisheries and Ministry of Health and Welfare quarantine procedures

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Agriculture, Forestry and Fisheries and Ministry of Health and Welfare

3. Background:

(1) To prevent transmission of infectious diseases to domestic livestock through foreign imports of ungulates (cattle, swine, etc.), horses, chickens etc. and their products (hereafter referred to as "specified quarantine items"), the Ministry of Agriculture, Forestry and Fisheries (MAFF), in accordance with the Law on Prevention of Infectious Diseases in Livestock, requires import inspections (animal quarantine). Article 37 of the law specifies that no imports of specified quarantine items shall be allowed unless they are accompanied by a test certificate issued by a government body of the exporting country stating that quarantine inspection has shown that the items in question contain or are believed to contain no pathogens for infectious diseases in livestock.

(2) Concerning imports of meat and meat products, the Ministry of Health and Welfare (MHW), in accordance with Article 5 of the Food Sanitation Law intended to prevent threats to food sanitation through the import of meat from diseased animals or animals which have died of disease, requires that such imports be accompanied by a sanitary certificate issued by the government of the exporting country. In accordance with the requirements of the Food Sanitation Law, this certificate must carry particulars as to the date of slaughter and the date of processing.

(3) As described above, the inspection certificate required by the MAFF is for the purpose of preventing the spread of infectious diseases to livestock, while the MHW certificate is required to maintain food sanitation.

(4) Further, in the specification standards for meat products of Article 7 of the Food Sanitation Law, raw ham may not be imported unless it meets the manufacturing method standards for raw meat products. These manufacturing method standards specify the ratio of salt required for pickling, to prevent food sanitation problems due to microorganisms.

4. Complaint:

Regarding imports of French chicken and Italian raw ham, the animal quarantine certificates issued by the MAFF sometimes lack certain particulars required when the MHW conducts food quarantine inspections.

For example, when both uncut meat and meat cut into parts are listed on the same certificate, the food quarantine inspection requires certification of the date of processing. Where raw ham is concerned, MHW requirements for the salt ratio are stricter than those of the MAFF. Japan's import inspection standards, differing from ministry to ministry, are sometimes misunderstood by foreign businesses, causing delays in Customs clearance or returns of goods. The two ministries concerned should publicize the content of domestic laws and quarantine systems more widely and should agree on a standard health certificate.

The MHW should also show the sanitation certificate form to exporting countries and ask those countries to conform to this. Further, since the MHW has not clearly communicated to the exporting countries which particulars are required on the certificate, it should cooperate with exporting country sanitation inspectors by showing them the sanitation certificate format and specific examples of entries of the required particulars. The particulars required on the sanitation certificate should also be simplified.

5. Results of deliberation:

Import procedures are an issue involving multiple ministries, and the ministries concerned should simplify their procedures and work together to simplify and expedite procedures in general.

According to the ministries, where Italian raw ham mentioned in this complaint is concerned, in response to a request by the government of Italy the MAFF and the MHW met in December 1996 to coordinate standards which would meet their individual requirements. They are currently discussing mutually acceptable standards and acceptance of the particulars entered on certificates issued by the Italian authorities with the Livestock Sanitation Bureau of the Italian government. If this is accepted, a uniform health certificate designed to include the necessary quarantine and food sanitation particulars will be presented to the Japanese authorities.

(1) The each of two ministries' progressive stance is welcomed. They should actively continue working together to explain Japan's standards in bilateral consultations with the countries concerned, and work to ensure that the particulars to be included on the health certificate meet the standards of both ministries, to avoid inconveniencing the exporting countries.

(2) To avoid incomplete information on certificates, the MHW should thoroughly inform exporting countries concerning the particulars it requires on sanitary certificates.

(3) Among the particulars required on sanitary certificates, the MHW is currently studying dropping the requirement for showing the date of processing, when the date of slaughter is known. Conclusions to study concerning simplification of the particulars required should be reached by the end of FY1997 and implemented without delay.

1-(2) Simplification of food inspection procedures

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Health and Welfare

3. Background:

According to Articles 16 and 17 of the Food Sanitation Law, notification of import of any foods, additives, food additive, apparatus, or container/package for sale must be given to the Quarantine Office, and inspection undergone as required. Article 15 of the Ministerial Ordinance further stipulates the particulars to be notified (e.g. name and address of importer, raw materials, manufacturing method, names of additives, etc.).

According to Article 15, Clause 3 of the Food Sanitation Law, when foods imported may be in contravention of the Food Sanitation Law due to local conditions at the place of origin, they must undergo testing ordered by the Minister of Health and Welfare.

To prevent the occurrence of health hazards arising from human consumption of foods, additives, and equipment in direct contact with foods must meet specified standards. To confirm that these standards have been met, test data from an official testing organization in the exporting country (public testing organizations registered with the MHW by the exporting country's government as having a certain level of testing capabilities) or from a testing organization specified by the Minister of Health and Welfare must be presented.

Article 15, Clause 3 of the Food Sanitation Law mandates testing for aflatoxins in pistachio nuts, peanuts, almonds, walnuts and other nuts, because of the strength of the toxin, the fact that aflatoxins are unevenly distributed, the greater possibility of contamination at the place of production or during transport, and because of infractions in the past. For similar reasons, data from official testing organizations in the exporting countries is not accepted in this case.

4. Complaint:

Although nuts (raw pistachio nuts) must be tested for aflatoxins at the time of import, cargoes shipped by air and accompanied by a certificate from the exporting country attesting that the shipment is free of aflatoxins should be exempted from testing in Japan and only simple testing carried out.

5. Results of deliberation:

Regarding testing for aflatoxins in pistachio nuts, peanuts, almonds, walnuts and other nuts, based on past test results, the ministry concerned has exempted cashew nuts from testing since May 1996, and macadamia nuts and hazelnuts since July 1996.

Accordingly, the matter of whether raw pistachio nuts may also be handled in the same way will be studied during FY1997, depending on how they are stored and maintained during production and processing and based on test results so far.

2. Pharmaceuticals, Medical Equipment and Cosmetics

2-(1) Relaxing import procedures for medical equipment in categories not yet approved

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Health and Welfare

3. Background:

In order to manufacture, import medical equipment (equipment or devices intended to diagnose, treat or prevent illness in humans or animals, or to have some effect on the structure or function of human or animal bodies and specified by statute) manufacturers and importers must obtain a permit to do so, as stipulated by Articles 12 and 22 of the Pharmaceutical Affairs Law.

Under Articles 14 and 23 of the same law, except for medical equipment specified by the Minister of Health and Welfare (medical equipment that does not require to get approval for each product category) each product category of medical equipment manufactured, imported must be evaluated tested for structure, benefits, effects, performance, standards, etc. to determine that there are no problems as far as quality, efficacy or safety are concerned, and approval obtained from the Minister of Health and Welfare.

Medical equipment is divided into three classes, from I to III. Class I equipment is that which requires no approval and which does not touch the body, or among types of equipment which touch the body, has no major impact on the body in case of malfunction. After changes to the law in 1994, the overall ratio of Class I equipment rose from 5% to 30%. Class III equipment is that which is implanted in the body. Since this equipment is directly related to sustaining life, risk control is carried out for each type of equipment. Class II equipment is that which is in neither Class I nor Class III and which requires approval for each product category.

Medical equipment which requires no approval by product category (Class I medical equipment) includes 82 types of equipment and that which meets Japan Industrial Standards (JIS). These 82 types of medical equipment are used directly by professionals. Since their efficacy, safety and quality have been confirmed and their use has become established in technical terms, they require no approval. Similarly, no approval is required for medical equipment conforming to JIS standards which is already in common use, whose usefulness is known and vouched for, and which meets quality and performance standards from the perspective of medical and engineering knowledge and stipulated by JIS. However, the equipment for home treatment which is the subject of this complaint falls under Class II and thus requires approval.

In other countries, in the United States for example, no distinction is made between home and professional use where medical equipment is concerned. Although approval to manufacture medical equipment, including electric therapy devices for home use and electronic blood pressure measuring instruments, is required under the Medical Equipment Safety Act, no approval is needed for massage chairs and certain other products for home use. In the case of those products, the manufacturers themselves must prove the quality, safety and so on of the products, as called for in the Consumer Products Safety Act. Similarly, the EU makes no distinction between medical equipment for home and professional use. Products are supervised under the Medical Devices Directive, with procedures required in proportion to the risk involved to the body. Where home massage equipment is concerned, procedures are necessary according to the classifications described below.

(1) Low-risk treatment devices

Self-certification record (of quality, efficacy and safety of the product itself, evaluation of quality control capabilities at the place of manufacture) to be drawn up by manufacturer (e.g. permanently magnetized treatment devices)

(2) Devices other than those in (1) above

Certification (of quality, efficacy and safety of the product itself, evaluation of quality control capabilities at the place of manufacture) by third parties approved by public health bureaus of EU member countries to be obtained (e.g. massage devices, electromagnetic treatment devices)

4. Complaint:

Simple massage equipment, magnetic health devices and other equipment used for personal health care are basically treated in the same way as authentic medical equipment, requiring MHW pharmaceutical approval procedures. It is not necessary for simple health care devices with little possibility of having adverse effects on life or health to be treated the same way as authentic medical equipment intended for professional use, and accordingly, simple devices used for personal health care should be exempt from the pharmaceutical approval requirement.

5. Results of deliberation:

Safety regulations intended to protect public health should be kept to the minimum consistent with the intended objectives. Overly stringent regulations not only impose a burden on businesses, they also have adverse effects from the consumer's perspective by restricting market access for foreign products, limiting the range of choice among available products and keeping prices high. As well, it is important to establish and make public clear guidelines for examination of applications and to provide information, from the viewpoint of ensuring transparency.

The concerned ministry has so far taken steps to eliminate the approval requirement, by establishing specifications and so on, for medical equipment whose quality, efficacy and safety has been established, but further actions should be taken, as described below.

(1) Regulations concerning medical equipment, including the scope of equipment requiring approval or not, differ in Japan, the United States and Europe. However, the ministry should take steps to promote international harmonization. It should also make public the conditions required for exemption from approval and when it is decided that approval is no longer necessary for certain types of medical equipment, announce the reasons for its decision.

(2) It is unnatural to require that home health care equipment like massage devices, magnetic health devices and so require the same approval as medical equipment for professional use. The matter of eliminating the approval requirement for such devices should be studied and a conclusion reached by the end of FY1997.

(3) Procedures in connection with elimination of the approval requirement should be established, by making clear which department parties wishing to have their products exempted from approval may address for this purpose.

2-(2) Deregulation on cosmetics

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Health and Welfare

3. Background:

(1) Import/sales permit for cosmetics and quasi-pharmaceuticals

When importing and selling cosmetics, each business' branch must obtain an import/sales permit for cosmetics for each sales outlet (Pharmaceutical Affairs Law, Article 13, Clause 23.) Granting of permits requires that testing facilities be installed (use of other testing facilities is also permitted) and that technicians be assigned on duty (Article 17, Clause 23 of the same law). The use of outside testing facilities in place of the importer/seller's own testing facilities has been allowed for cosmetics as well as for quasi-pharmaceuticals for animal testing and some chemical testing.

(2) Permit by type and approval by type

Standards for ingredients used in cosmetics which are commonly believed to be harmless are set down for each type of cosmetics (classified into 25 types, for toning lotion, lipstick, etc.), and permit standards are set down for each type of cosmetics.

Cosmetics within these standards may be imported after receiving approval by type and by presenting a notification of product import for individual products (listing the domestic sales name, name of the importer/seller, name of the manufacturer, and list of ingredients contained).

For cosmetics which fall outside the standards for permit by type (cosmetics which include ingredients being used in Japan for the first type and so on), comprehensive approval by type, for the ingredients and quantities contained, must be obtained. Examination for approval is based mainly on safety data provided by the applicant, but if ingredients have previously been used in other cosmetics, the requirement for this data may be waived. The Organization to Promote Research and Aid Persons Suffering from Pharmaceutical Product Side effects (referred to hereafter as the "Pharmaceutical Products Organization") provides advice on the type of documentation (or whether documentation is required at all) for cosmetics concerning which businesses are planning to file an application. Industry organizations have also compiled a list of specific product names of ingredients used in cosmetics and their descriptions as well as a "List of Standard Ingredients for Cosmetics in Japan."

(3) Sales name for cosmetics

Although the sales name for cosmetics must be indicated on the product reporting form, it may be given any name by the manufacturer (importer/seller).

However, any points which are untruthful or misleading must be indicated (as required by Article 62, corresponding Clause 54 of the Pharmaceutical Affairs Law).

Permit authority over the manufacture (import) of cosmetics is delegated to the prefectural governments, which verify product-reporting forms submitted to the prefectural governor. When the sales name is untruthful or misleading, guidance is given.

In the Response to Market Opening Issues Relating to Standards, Certification, etc. (March 26, 1996, the Office of Market Access), the concerned ministry has indicated that it will take the following actions for deregulation on cosmetics ingredients and streamlining import procedures.

To promote international harmonization, a review of the overall system regulating cosmetics ingredients will be carried out during FY1996. When this is done, the following actions will be taken:

(1) To promote international harmonization where standards for permit by type are concerned, the standards in use in the United States and the EU will be incorporated into Japan's standards for permit by type, for ingredients whose use is allowed in the United States and the EU. Regarding the import of cosmetics incorporating the same ingredients as those used in cosmetics which have already been approved, standards for ingredients not included in the standards for permit by type will be laid down, based on data presented for approval procedures, and promptly incorporated into the standards for permit by type, to avoid the need for approval of those cosmetics.

(2) Regarding the system of import/sales permits for each sales outlet, the necessity of the requirement for technicians on duty and for testing facilities at each sales outlet will be reviewed during FY1996 and improvement measures taken promptly.

(3) Regarding the imported products reporting form submitted when products are imported, this requirement will be reviewed during FY1996 so that it imposes no actual burden and improvement measures taken promptly.

4. Complaint:

(1) Each company importing and selling cosmetics and quasi-pharmaceutical products is required to have its own testing facilities, and there are limits on the types of cosmetics for which outside testing facilities may be used. Although these requirements are ostensibly for the purpose of ensuring safety, they appear to be excessive regulation, and the use of joint testing facilities by affiliated company groups and the use of outside testing facilities for quasi-pharmaceuticals should be allowed.

(2) Companies are required to apply individually for approval of cosmetics, and requiring them all to assemble data concerning the same ingredient for application is a waste of time and money for both examiners and applicants. Additionally, verification of previous examples of use and of standards for ingredients which have not previously been approved is carried out by the Pharmaceutical Products Organization in a 15-minute interview for each company. This imposes a substantial burden on applicants based away from Tokyo, who must travel long distances for the interview. Except in cases where the applicant requests confidentiality, the ingredient names and standards for approved ingredients should be made public immediately in some way, including the Official Gazette and over the Internet, so that whenever one company receives approval for a particular ingredient, that ingredient should thereafter be exempted from the requirement for approval by type and should be handled in the same way as standard ingredients under permits by type.

(3) The prefectural governments have the authority to decide whether a certain sales name may be used for cosmetics, but their standards lack uniformity, and although businesses may inquire beforehand whether a name is allowed, they do not receive a clear answer immediately. Examples of names which were not allowed in the past, and the decision-making standards should be clarified and made public immediately.

5. Results of deliberation:

The concerned ministry has established a study group of experts to study the system of regulation for cosmetics, which is hearing the views of industry groups (the Japan Federation of Cosmetics Manufacturers, the American Chamber of Commerce in Japan, the European Business Council, the Japan Cosmetics Import Group, etc.), and studying the current situation, including drawing up negative lists and positive lists for restrictions on ingredients and showing all ingredients. The study group will compile a report on ideas and problems to be considered by March 1997. Where the standards for permit by type are concerned, new ingredients (approximately 140) will be added to the standards, taking into consideration ingredients used in the United States and Europe, and types will be amalgamated (from 25 to 11 types) in March 1997. Based on comments made at last year's Market Access Ombudsman Council, the ministry's positive approach to streamlining regulation on cosmetics is a favorable development. But the fact that a complaint was made again this year indicates foreign businesses' strong desire for less regulation on cosmetics. Accordingly, the review currently being conducted by the study group should address the following points:

(1) Testing facilities are necessary to ensure the quality of quasi-pharmaceuticals, and the expanded use of facilities other than those owned by each company is being studied in FY1997. When doing so, the study group should also consider allowing the use of facilities owned by affiliated company groups for cosmetics as well.

(2) Regarding approved ingredients which it has been deemed no longer require approval, such ingredients should be incorporated into the standards for permit by type of cosmetics once a year, after the standards have been organized, and made public. Regarding ingredients which are not in the standards for permit by type, but which have been used before, a system of making such ingredients public should be introduced, with due regard for intellectual property rights.

(3) The concerned ministry has published a guidebook providing examples of untruthful or exaggerated (e.g. "miracle," "powerful") sales names for cosmetics or of misleading names (e.g. "nutrition," "fat-reducing") and reminded businesses to avoid using these. In addition, it should work more closely with the prefectures to ensure uniformity of standards in how names are handled, and after studying the prefectures' standards, provide a more extensive list of example during FY1996.

3. Industry

3-(1) Deregulation relating to internal combustion

1. Complainant: American Chamber of Commerce in Japan

2. Ministry concerned: Ministry of International Trade and Industry (MITI)

3. Background:

When emergency auxiliary power generators are installed, prior notification of the building plan is required as necessary. If the facilities described fail to meet technical standards and so on, the builder may be ordered to change or abandon the building plan (Electrical Business Law, Article 48). The decision as to whether conditions are met is made after examination by MITI or by a MITI regional bureau, whichever received the notification.

The Japan Internal Combustion Power Generation Facilities Association ("the Association") has an approval system for privately used power generators which also applies to emergency auxiliary power generators. However, the current law makes no clear mention that it is necessary to obtain approval from the Association. In the past, it was obligatory for such equipment to be inspected by the Minister of International Trade and Industry prior to use, although equipment was exempt from inspection if approved by the Association. But when the Electrical Business Law was revised in 1995, the requirement for prior inspection of emergency auxiliary power generators was abolished.

The Association's standards for approval incorporate all of MITI's technical standards and also include more detailed standards which are the Association's own. MITI's technical standards are drawn up with usage within Japan in mind and do not necessarily coincide with ISO and other international standards.

4. Complaint:

The complainant has raised the following issues concerning installation of emergency auxiliary power generators.

Under the technical standards used by MITI, approval of engine model and class, generator model, and control panel model is required. Only after approval for all these individual elements has been obtained can the equipment be installed. A large amount of detailed documentation, including blueprints, specifications, sales history, manufacturer's quality control measures and organization, etc. must be presented when application for approval is made. There is also the Japan Internal Combustion Power Generation Facilities Association ("the Association"), which has an Approval Committee for Private Power Generating Equipment ("the Committee"), which includes MITI and other administrative bodies among its members. The complainant understands that equipment which has obtained an approval certificate issued by the Committee is not required to go through MITI's approval process and is virtually automatically guaranteed to be certified as meeting MITI technical standards. Many private sector customers are under the impression that the Association's approval has a legal basis, and since many client companies insist on it, suppliers sometimes have to include a notation in their contracts to the effect that their equipment will receive approval from the Association. As a result, the complainant submitted equipment for approval, but was made to undergo operational tests and to modify the equipment to meet the Association's specifications, which entailed considerable expense. This added expense is unavoidably passed on to Japanese consumers.

The complainant's equipment conforms to ISO standards, etc., which are international standards. Most countries other than Japan require no additional testing or structural modifications if the equipment meets those standards, and the equipment can be sold without restrictions. The complainant believes that the Japanese government should accept the prevailing international standards, as doing so will enable non-Japanese companies to sell their products on the Japanese market and to improve quality and safety without difficulty, and will also contribute to keeping prices down.

5. Results of deliberation:

he transparency of domestic systems, and measures in this direction should be continued. The ministry concerned has been conducting a review, due to be completed by the end of March 1997, to require only standards have to do with safety functions. In addition to JIS, these standards also conform to those of the American Society of Mechanical Engineers (ASME), and this is a positive development.

Where the private sector is concerned, in addition to technical standards set by the government mainly to ensure safety, voluntary standards are sometimes used. These standards can be useful in contributing to lower prices and improved quality, through the use of standard specifications, and can provide valuable information assisting consumers in selecting products. However, when these standards are not compatible with international standards, the fact that foreign products meeting international standards must be modified to conform with these standards can constitute a barrier to imports of foreign products, and can be even less transparent than government standards to foreign businesses. Additionally, even if the government deregulates, the continued existence of approval activities by a private sector body which retains similar standards negates the point of deregulating and can be a barrier to imports. This is also a disadvantage from the viewpoint of rectifying the high cost structure of the domestic economy and structural reform. It is important to study cases with specific advantages and disadvantages in mind.

The Association's approval system for private power generating equipment is an activity that is the Association's own, carried out according to its own approval standards. According to the ministry concerned, there are no legal restrictions on installing equipment which has not been approved by the Association. By the same token, there is no guarantee that equipment approved by the Association will automatically be approved as meeting the technical standards based on the Electrical Business Law. However, Association approval continues to play a major role, leading to misunderstandings on the part of some concerning the relationship between the Association's approval and the government's approval in private sector transactions, and this could impede market opening.

Accordingly, the ministry concerned should take the following actions:

(1) To improve market access, it is necessary for domestic standards to harmonize with international standards. The ministry should harmonize its legally mandated technical standards for internal combustion engines with international standards like ISO and so on by the end of March 1997.

(2) Active measures should be taken to inform users and suppliers of power generators for private use that there is no connection between the Association's approval system and the approval system mandated by law and administered by the government. The Association should also be given strong guidance to the effect that it avoids giving the appearance that there is a legal requirement for its approval system. In particular, the Association's pamphlet should be revised by June 1997 to avoid giving third parties misunderstandings. Efforts should also be made to change the practice among private sector companies of not accepting products not approved by the Association, if this appears to be impeding imports of foreign products.

3-(2) Deregulation of sales restrictions for illegal measurement units

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of International Trade and Industry

3. Background:

Article 9 of the Measurement Law (which states that Measuring instruments used for measurements of the quantity of the state of physical phenomena enumerated in Article 2 Paragraph 1 Item 1 and graduated or marked with non-legal measuring units shall not be sold or exposed for sale), forbids the sale, etc. of measuring instruments graduated or marked with non-legal measuring units. This article is based on the principle that measuring instruments are the means by which measurement is established, and regulates all measuring instruments, in order to establish uniformity of measuring units smoothly. As thermometer is a measuring instrument defined in the Law, neither thermometers marked in Fahrenheit degree, which is a non-legal measuring unit, nor thermometers marked in Fahrenheit and Celsius degree which is a legal measuring unit can be used.

Most foreign countries except for the United States, have legal prohibition on the use of units other than international nits (SI) for transaction. Countries like France also regulate the sale, etc. of measuring instruments graduated in non-legal measuring nits.

The sale of some imported products which are not measuring instruments and are marked in Yard-pound system of units, non-legal measuring units is allowed for the time being, on condition that such products must also be graduated in legal measuring units (Article 5 of the Addendum to the law). This treatment was newly permitted, taking into account the increase of imported goods and to the extent that it can be regarded as permissible in the light of the intent and objectives of the Measurement Law, when the Measurement Law was revised in 1992.

4. Complaint:

The following complaint has been made regarding the sale of the product with a measuring instrument marked in non-legal measuring units.

The product in question is a globe of the world whose base a thermometer is fixed to. However as the thermometer is marked in both Celsius and Fahrenheit degrees, it cannot be sold in Japan. Article 9 of the Measurement Law prohibits the sale of products marked in Fahrenheit for temperature, inches and feet for lengths, pounds for weight, cubic feet for volume and square feet for area. Although the sale of a thermometer marked in Fahrenheit only is a problem, the complainant believes that there is no need to ban the sale of a thermometer which is marked in both Fahrenheit and Celsius.

5. Results of deliberation:

The concerned ministry has decided to exempt the product in question in this complaint, a globe of the world with a thermometer marked in both Celsius and Fahrenheit degree in its base from the regulation of sale of the Measurement Law (the decision had already been noticed on February 10, 1997 to prefectural weights and measures offices). Although the intent of the law is to regulate measuring instruments used for transaction or certification, or for making proper measurements, the thermometer in question is a "decorative article" on a globe of the world used for study or interior decoration purposes, and is interpreted as not being subject to restrictions on sale or etc. of the Law. This interpretation is appreciated as a resolution with a positive approach in the light of flexible and pragmatic application of the Law.

However, as no one can deny the possibility that similar problems could occur again in the future, and in order to facilitate the sale of foreign products, this resolution should not be confined to the issue at hand. The concerned ministry should be addressed to consider the following activities:

(1) The ministry concerned should continue efforts to standardize measurement units with SI international units in order to further promote trade by means of harmonizing with International standards. However, taking into consideration the progress of other countries including the United States which is the largest trade partner for Japan in standardizing their measurement units with SI units, the rigid application of the Measurement Law is not very needed in the light of the law's real intent like this case. Accordingly, the Measurement Law should be applied flexibly to avoid any negative import activities and consumer purchases.

(2) If the law is applied flexibly, this should be publicized in a timely fashion, and local officials, including weights and measures officials at the prefectural level, should be well informed. Once a certain amount of experience in application is acquired, the matter of whether this comes under the sales restriction of the Measurement Law will be studied when the study of establishing yardstick to avoid any negative impact on import activities and consumer purchases is undertaken. If such yardstick are adopted, this should be publicized in a timely fashion and all officials, including weights and measures officials at the prefectural level, should be informed.

3-(3) Deregulation on refrigeration facilities

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of International Trade and Industry

3. Background:

Manufacturers of pressurized gases which come under Article 2 of the Pressurized Gas Control Law, are obliged by Article 5 of the law to obtain a permit from or report to the prefectural governor, depending on gases as coolant must appoint coolant safety officers as described below and must supervise maintenance operations for the facilities in question. In the case of freezing equipment with a freezing capacity of over 50 tons, and in accordance with facilities classification according to regulations in Article 22 of the law, the safety officer appointed for facilities with a daily freezing capacity of over 300 tons must hold a Class I supervisor's license for freezing equipment; for facilities with a daily freezing capacity of over 100 tons to under 300 tons, the safety officer appointed must hold a Class II supervisor's license for freezing equipment or better; for facilities with a daily freezing capacity of over 50 tons to under 100 tons, the safety officer appointed must hold a Class III supervisor's license for freezing equipment or better.

Chlorofluorocarbon 11, whose manufacture is prohibited in order to preserve the ozone layer, is not considered a pressurized gas, due to its character for burning, in Article 2 of the Pressurized Gas Control Law and does not come under its provisions. However, fluorocarbon 134a, used as a substitute for chlorofluorocarbon 11, is considered a pressurized gas, because of its character for burning, and comes under the law.

4. Complaint:

Since alternative chlorofluorocarbon gas has begun to be used in building cooling systems as a result of the ban on the manufacture of chlorofluorocarbons, more cooling systems are requiring certified operators. Generally speaking, a building with a total floor space of over 20,000 square meters requires a cooling system with a capacity of over 300 freezing tons, but cooling equipment which comes under the Pressurized Gas Control Law (freezing safety regulations) requires an operator with a Class I supervisor's license. However, since there has been virtually no need for personnel with such qualifications until now, their numbers are extremely limited and this is creating major problems in the operation of freezing systems. Persons with the less advanced qualification (Class II) should be allowed to operate the systems and the requirement to have qualified personnel on duty at all times while the system is running should be eased.

5. Results of deliberation:

Although intended to prevent accidents, overly stringent safety regulations increase the burden on businesses. From the perspective of creating an environment conducive to international business, such regulations can inhibit direct investment in Japan and should be kept to a minimum.

The concerned ministry has taken steps to eliminate the requirement for qualified personnel if cooling facilities are named as designated facilities, so that persons with Class II certification can operate building cooling systems. In other words, upon application by building cooling system manufacturers, cooling systems which are deemed to be safe in terms of structure and features, through the presence of various safety and control apparatus, are now considered designated facilities, under the designation system dating from February 1996, and users of designated cooling systems are no longer required to appoint safety officers, even if the system in question has a cooling capacity of over 50 tons.

In the light of this complaint, the concerned ministry will study the requirement to appoint a safety officer for cooling equipment other than designated equipment, based on past safety records and in order to apply the system in a practical manner, in a committee including prefectural staff in charge and persons in related businesses during FY1997, and based on the results of this study, will change ordinances, etc. to this effect during FY1997.

In order to reduce the burden on businesses, the concerned ministry should study the matter and, after reaching a conclusion, take the necessary action as soon as possible.

3-(4) Deregulation on attached freezing facilities

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of International Trade and Industry

3. Background:

So-called attached freezing facilities, in other words, facilities in pressurized gas manufacturing facilities as a whole by bursting or through leakage of pressurized gases. Therefore, as a constituent part of pressurized gas manufacturing facilities, they are regulated by the related provisions (safety regulations for ordinary pressurized gases, regulations for liquefied petroleum gas, safety regulations for refineries) of the Pressurized Gas Control Law, which sets technical standards for pressure resistance of pressurized gas manufacturing facilities (Articles 11, 12, and 13 of the law). Further, Article 14, Clause 1 of the law stipulates that a permit must be obtained from the Minister of International Trade and Industry if the installation of attached freezing facilities involves construction to change the position, structure or facilities of the manufacturing plant.

When the freezing facilities are as described in Article 5 of the law, they are regulated under the safety regulations for freezing and a safety official for freezing must be appointed, depending on the freezing capacity of the facility, but facilities for freezing pressurized gas manufacturing facilities are not considered freezing facilities.

4. Complaint:

Under the Pressurized Gas Control Law, facilities for freezing pressurized gas manufacturing facilities with a legal capacity of more than three frozen tons are treated as attached freezing facilities. No such regulations exist in other countries, and since these are specialized facilities, the equipment is expensive and this increases the cost of domestic investment. Indirect cooling systems using brine or frozen water should be exempt from the attached freezing facility designation.

5. Results of deliberation:

Although intended to prevent accidents, overly stringent safety regulations increase the burden on businesses. From the perspective of creating an environment conducive to international business, such regulations can inhibit direct investment in Japan and should be kept to a minimum.

In the light of this complaint, the concerned ministry will study the regulations on attached freezing facilities, including the need for continued regulation and based on past safety records, in a committee including prefectural staff in charge and persons in related businesses during FY1997, and based on the results of this study, will implement measures during FY1997.

In order to reduce the burden on businesses, the concerned ministry should study the matter and take the necessary action after reaching a conclusion as soon as possible.

3-(5) Relaxation of container re-testing period

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of International Trade and Industry

3. Background:

In order to ensure the safety of pressurized gas containers, Article 48, Clause 1, Item 5 of the Pressurized Gas Control Law stipulates that containers for which a certain period mandated by statute (1-6 years) has elapsed after testing, may not be refilled with gas unless they are tested anew for pressure resistance.

Under Article 47, Clause 1, Item 4 of the Container Safety Regulations, the period for re-testing of seamless containers of less than 500-liter capacity which are the subject of this complaint is set at three years.

In other countries, the period before re-testing is required is 5-10 years in the United States, 2-20 years in the U.K. and 2-10 years in Germany.

4. Complaint:

The Pressurized Gas Control Law (Container Safety Regulations) sets the re-testing period for seamless containers of less than 500-liter capacity at three years. As there appear to be no technical problems, the period before re-testing is required for seamless containers of less than 500-liter capacity should be made the same as the five years for seamless containers of over 500-liter capacity.

5. Results of deliberation:

Although intended to prevent accidents, overly stringent safety regulations increase the burden on businesses. From the perspective of creating an environment conducive to international business, such regulations can inhibit direct investment in Japan and should be kept to a minimum. This is especially so when the burden imposed is much greater in comparison to other countries.

In its January 1996 report, the Safety Council on Pressurized Gases and Explosives recommended that the length of the period before re-testing is required for containers and peripheral equipment be extended, given improvements in the quality of pressurized gas containers, and after studying technical data and other information. Accordingly, in the light of this complaint, the concerned ministry is currently studying the overall re-testing system for containers, including the length of testing cycles, in a committee including persons in related businesses during FY1997, and based on the results of this study, will implement measures during FY1997.

In order to reduce the burden on businesses, the concerned ministry should study the matter and take the necessary actions after reaching a conclusion as soon as possible.

4. Transportation and Traffic

4-(1) Clarification of formula used to calculate output for fishing vessel propelling apparatus

1. Complainant: American Chamber of Commerce in Japan

2. Ministry concerned: Ministry of Agriculture, Fisheries and Forestry (MAFF)

3. Background:

In Japan, there are established rules for each type of fishing, governing fishing areas, fishing seasons, and the number, size and performance of fishing vessels, in order to preserve marine resources and to maintain order in the fishing industry.

When the Minister of Agriculture, Forestry and Fisheries determines that the construction of fishing vessels requires adjustment from the viewpoint of regulating the fishing industry and other aspects concerned with the public good, the minister has the authority to determine the number of motorized fishing vessels, maximum total tonnage, or performance standards by area of the prefecture(s) involved or by type of powered fishing vessel (Fishing Vessel Law, Article).

Under Article 3, Clause 2 of the Fishing Vessel Law, construction, modification or conversion of a fishing vessel requires a permit from the Minister of Agriculture, Fisheries and Forestry or from the prefectural governor. The type of engine to be used in the fishing vessel is set down in the "performance standards for motorized fishing vessels" (MAFF notice, July 1982) in Article 3 of the above law. These standards specify the maximum engine performance allowed by tonnage class.

The Fishing Vessel Law measures engine horsepower based on the number of cylinders and engine bore (diameter of cylinder). Specifically, the following calculation formula is set down in the rules for applying the above law.

No. of horsepower allowed for engines under the Fishing Vessel Law: CD²N where C is the constant determined by the ratio of cylinder diameter to piston stroke, D is engine bore, and N is the number of cylinders.

4. Complaint:

The Fishing Vessel Law regulates the size of the vessel and the engine's horsepower in relation to the vessel's size. In engineering terms, engine performance is defined in terms of maximum horsepower and maximum torque (see Note 1) determined by engine revolutions, fuel combustion ratio (see Note 2) and compression ratio (see Note 3). Under the Fishing Vessel Law, however, engine horsepower is calculated using a formula based on engine bore and after the fact measurement. This allows engine stroke to be lengthened (see Note 4) without relation to total engine displacement, and is suitable for Japanese engines. Other countries regulate engine size based on actual horsepower and total engine displacement. Progress in engine technology now allows engine makers all over the world to increase horsepower without physically changing engine bore, and Japan should at least adopt and make public clear standards fully capable of reflecting actual horsepower and based on engineering standards related to electronic control or total engine displacement.

Note 1: Torque is the force required moving a central rotating shaft. Used as the principal indicator, along with horsepower, of engine performance. Horsepower indicates the amount of work done within a certain time, while torque expresses the volume of the work done. Expressed as maximum torque.
Note 2: The fuel combustion ratio is the mixing ratio of air and fuel within a cylinder.
Note 3: The compression ratio is the numeral expressing the ratio of the total volume of gas enclosed within a cylinder, during the compression process in piston engines.
Note 4: Stroke refers to the maximum and minimum length of movement of a piston within a cylinder.

5. Results of deliberation:

Even though a certain amount of regulation may be required to preserve marine resources, the most effective means for achieving that end should be used. That means should also be clear and practical to foreign businesses. The ministry concerned states that it is necessary to regulate the output of fishing vessel engines, in order to preserve marine resources. But even if restrictions on engine output were necessary, the method used to calculate the output should be consistent with international standards and should be based as much as possible on objective, scientific data.

The ministry concerned is currently reviewing the method used for calculating fishing vessel engine output, and when it does so, the following measures should be taken:

(1) Review the method used for calculating output of fishing vessel engines, including the need to regulate output per se, during FY1997.

(2) Although there are no restrictions on actual horsepower, as this can easily be changed after legally required inspections, this problem is also likely to exist in other countries.

Accordingly, the systems in use in various other countries should be studied thoroughly during FY1997, and regulations compatible with international standards should be adopted. In particular, objective criteria can certainly be used for total engine displacement and they should accordingly be adopted.

(3) When new standards are established, the opinions of fisheries and fishing vessel groups should be solicited, but since this matter also involves engineering questions, opportunities should be provided to hear the opinions from as broad a range of interested persons as possible. Only then should the new standards be established.

4-(2) Reducing the number of documents required concerning construction of high-speed ferries and ensuring their confidentiality

1. Complainant: Australian Embassy

2. Ministry concerned: Ministry of Transport

3. Background:

The task of the Maritime Credit Corporation (referred to hereafter as "the Corporation") is to assist maritime passenger and cargo transport operators and harbor transportation operators to raise funds for vessels and for harbor transportation facilities when they have difficulty doing so, in order to ensure smooth and appropriate maritime and harbor transport operations

The Corporation promotes the modernization and rationalization of domestic maritime transportation and one of its main businesses is to provide financial and technical assistance by building a joint-owned domestic passenger vessels with maritime passenger transport operators (referred to hereafter as "operators"). This business is financed by fiscal investment and loan program funds.

When the Corporation builds a joint-owned passenger vessel with an operator, the corporation studies the financial and technical feasibility and of the vessel the technical capability of the shipyard selected by the operator. Since this business is financed by fiscal investment and loan program funds, the Corporation sets a standard vessel price and makes sure of the validity of contract.

The advantages of this joint-owned ship system are that no collateral is required for loans advanced for the Corporation's share of the vessel, and that the construction costs shared by the Corporation may be repaid by the operator long-term over the life of the vessel. Throughout the joint ownership period, the operator pays the Corporation a monthly "usage fee" which is repayment of principal and interest on the funds provided in part by the Corporation, using the principal amortization method. When the joint ownership period is concluded, the operator buys the Corporation's ownership share in the vessel for a nominal residual value on account book.

As a rule, the operator selects the shipbuilder, and if desired, may select a foreign shipbuilder. Two jointly owned vessels are currently being built in Australia.

4. Complaint:

The Corporation's policies, especially those regarding financing for shipping companies, impede access to the Japanese market by foreign shipbuilders. The Corporation requires vast amounts of documentation, including even companies' detailed and highly confidential technical and financial information, and provisions for respecting the confidentiality of this information are insufficient.

One reason for this is the Corporation's method of calculating its standard price. However, market prices for vessels are much lower than the Corporation's standard price and this calculation method is unnecessary. Furthermore, the contract contains no provisions for changes through negotiation, which is contrary to international practice. The Corporation also inspects the vessel according to its own quality assurance standards, in addition to the Ministry of Transport's safety inspection, because it is the co-owner.

Since the Corporation's documentation, standard contract forms and so on are all in Japanese only, these should be translated into English to make them easier to understand by foreign shipbuilders.

The Corporation should review Japanese ship purchasing procedures to accord with standard international practice.

5. Results of deliberation:

Because of increasing interdependence with the international community, the operations and procedures of government organizations, aimed mainly at domestic operators until now, should be reviewed to accord with international business practices, from the perspective of facilitating market access.

The Corporation has always set the same terms of competition for both domestic and foreign shipbuilders for vessels constructed jointly, and in such cases requires that the shipbuilder provide technical information, blueprints and so on. In the light of this complaint, however, under direction from the concerned ministry, the Corporation will take action on practical and technical matters to reduce the number of documents required and protect confidentiality, and institute measures to solve the problems raised in the complaint. This positive stance on the part of the ministry and the Corporation has also been welcomed by the complainant as an indication of the ministry's and the Corporation's efforts to harmonize their procedures with international business practices.

Where contracts are concerned, the Corporation is currently reviewing its standard contract and will consult domestic and foreign shipbuilders as to changes which should be made. It will also undertake to translate materials into English, using examples from other government organizations engaged in similar activities, for the convenience of foreign shipbuilders.

4-(3) Deregulation in order to lower harbor fees

1. Complainant: Belgium-Luxembourg Chamber of Commerce

2. Ministry concerned: Ministry of Transport

3. Background:

(1) Outline of the Port Transportation Business Law

The Port Transportation Business Law was adopted in 1951, and the framework for the current provisions of the law was established in 1959. The aim of the law is to promote public welfare by establishing order in port transportation and the healthy development of port transportation activities (Port Transportation Business Law, Article 1).

Port transportation activities refer to port transportation activities, regardless of whether they are for profit or not. Port transportation activities involve loading or unloading cargo from ships in port in response to demand by others, transporting cargo to cargo handling places, and sorting or storing the cargo in cargo handling places.

(2) Licensing system for operation

In order to ensure order in port transportation, Article 4 of the Port Transportation Business Law mandates a licensing system for port transportation operations. If an entity wishes to handle port transportation business, they must receive a license for this from the Minister of Transport for each type of activity (general port transportation business, port stevedoring business, lighter transportation business, raft transportation business, tallying business, surveying business, weight measuring business) and for each port (although a common license applies for tallying business, surveying business and weight measuring business). The Minister is required to examine the application and grant the license, based on standards such as whether the new operation will supply more service than demand in particular port warrants.

(3) Certification system for fares and charges

A ministerial ordinance sets fees and charges for port transportation activities, and approval from the Minister must be approved from the Minister according to ministerial ordinance obtained for this. Approval is also required when fares and charges are changed.

4. Complaint:

Port and import handling charges are frequently many times the cost of shipping by sea, and the difficulty of obtaining a license to become a port transportation operator means that there is little competition and contributes to higher prices.

To stimulate competition, the Port Transportation Business Law should be amended or the current law applied more flexibly regarding the granting of licenses for applications made for engaging in port transportation activities.

5. Results of deliberation:

Ports are the link between domestic and international distribution, and from the viewpoint of market access it is vital that they be operated efficiently. At present, the Port Transportation Business Law requires permits for port transportation operations and uses an approval system for fees and charges. Severe restrictions on entry into this business and price controls impede market mechanisms and fail to meet users' needs. As a result, distribution costs for foreign goods are very expensive, which leads to concerns that they may be at a disadvantage compared to domestic products. Accordingly, a fundamental review of the Port Transportation Activities Law should be undertaken.

After this complaint was raised, the concerned ministry changed its stance and has now adopted a policy of abolishing supply-demand adjustment for port transportation and has made it clear that it will begin a concrete study of this matter. The ministry will also review price controls at the same time. These are positive steps, but changes should be made in the following directions:

(1) The concerned ministry intends to abolish supply-demand adjustment in three to five years' time, but adjustment should be abolished as soon as possible.

(2) In the review process, the rigid fee schedule should be made more flexible and greater use of discounts made, to provide a greater variety of fees and charges and lessen the burden on businesses.

(3) In addition, when specific deregulatory measures are taken, these should be adequately publicized so that parties wishing to operate port transportation are not hampered from doing so due to misunderstandings of the system.

6. Information and Telecommunications

6-(1) Deregulation of preservation of documents on microfilm

1. Complainant: American Chamber of Commerce in Japan

2. Ministry concerned: Ministry of Finance

3. Background:

The requirements for ledger entry and for preserving ledgers under the Tax Law and Regulations are necessary from the viewpoint of ensuring proper and fair taxation under the self-assessment system. For example, corporations filing blue returns are required to keep the necessary ledgers and record transactions therein and to keep those ledgers for a period of seven years, in case of assessment for tax evasion during the period. (Article 126 of the Corporation Tax Law, Article 59, Clause 1 of the Ministerial Ordinance Implementing Corporation Tax Law)

This period was extended to seven years from five years when the law was revised in 1981. However, records for the two additional years (the sixth and seventh years) may be kept on microfilm as long as certain conditions are met)(Article 59, Clause 5 of the Ministerial Ordinance Implementing Corporation Tax Law. The Notification of the Ministry of Finance "Preservation Method Set Down in Article 59, Clause 5 of the Ministerial Ordinance Implementing Corporation Tax Law).

In view of recent progress made in information technology, government ministries and agencies have taken or are considering taking measures by amending the law they administer or by issuing interpretation notices, regarding document preservation on microfilm or other media. The Plan to Promote Deregulation adopts, as general remarks, the implementation of the necessary deregulatory measures based on the results of studies, such as the report submitted by the Working Committee for Reviewing System s of the Advanced Information and Telecommunication Society Promotion Headquarters. The Committee's report (June 1996) states that, even in the case thorough study is especially needed, such study should be completed by the end of FY 1997 and necessary measures should be taken as soon as possible to allow the use of electronic data system (including microfilm) for preserving documents (if law amendment is required, a bill should be submitted to this effect).

4. Complaint:

The complainant raised the following points about document preservation on microfilm.

The Corporation Tax Law requires that tax-related documents be preserved for seven years. Although records for the sixth and seventh years may be preserved on microfilm, those for the first five years must be preserved in the form of the original documents. The Commercial Law and the Civil procedure Law also require that tax-related documents be preserved, but they allow the use of microfilm for documents for the entire period. The Ministry of International Trade and Industry and the Ministry of Labour also require documents to be preserved for a certain period, but they allow preservation to be made on microfilm for the entire period.

Since microfilm is admissible as evidence in court in the United States and other advanced countries, microfilm is used to preserve government and business records. In the United States in particular, a federal law of 1949 states that as long as an original microfilm has been made by the usual method, that copies have been made by the usual method, that the copies are accurate reproductions, and that it can be proved that the copies are faithful reproductions of the original, these can be used as evidence in any trial or administrative procedure. Many states also have laws with similar content.

Although rules for preservation of ledgers for commercial transactions are gradually being relaxed as a result of deregulation, document preservation will not become more practical unless the Corporation Tax Law provisions are loosened as well. Other ministries acknowledge the safety, reliability and efficiency of microfilm, and therefore preservation of documents on microfilm should be allowed under the Corporate Tax Law as well.

5. Results of deliberation:

Government regulation must be continually reviewed to keep up with changing technology. Especially today, when progress in telecommunications is so rapid, conditions may be substantially different than at the time laws were implemented. Accordingly, a review should be carried out, with due consideration for the purpose of the various systems in place. While regulation in other countries reflects progress in technology, Japanese rules which remain unchanged can impede imports and foreign investment in Japan. In this complaint, considering that other countries have incorporated changes in document preservation technology into their regulatory systems, the use of old rules in Japan could be viewed by foreign companies as impeding business activities. Since this is undesirable from the perspective of creating a favorable climate for business and promoting foreign investment in Japan, action should be taken quickly, bearing in mind why the requirement for ledger preservation exists.

The concerned ministry (the National Tax Administration) established a study group to examine the retention of account books and record under the Tax Law and Regulation in July 1996. This group is currently studying the conditions for use of preservation in electronic form and will issue a report in March 1997. Preservation of documents on microfilm will be studied with these results in mind, but the concerned ministry should take steps in the following direction, from the viewpoint of establishing a more positive environment as mentioned above.

(1) For documents whose preservation is mandated by the Tax Law and Regulation, the conditions under which the use of microfilm may be allowed should be studied, from the viewpoint of ensuring fair taxation. Preservation on microfilm should be allowed for the entire period for which preservation is required, taking into consideration the overall cost-benefit to the economy, and keeping in mind the conditions for use of document preservation in electronic form.

(2) Even if this revision requires changes to the Tax Law and Regulation, all procedures necessary for this should be taken during FY1997.

7. Import Procedures

7-(1) Simplification of presentation of documents using electronic systems

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of International Trade and Industry (MITI)

3. Background:

Article 68, Clause 1 of the Customs Duties Law requires that an original invoice be submitted to Customs when cargoes are imported, to allow Customs duties on the cargo to be assessed. The NACCS (Customs Information Processing System) electronic system is currently used, and this system handles various Customs procedures and associated private sector clerical work.

Importers must also submit an invoice (copies are acceptable) to Customs, in accordance with the reporting requirements under Article 16 of the Foreign Exchange and Foreign Trade Control Law, Article 16 of the Import Trade Control Law, and Article 10 of the regulations for control of import trade. In accordance with Article 17 of the Import Trade Control Law, the invoice submitted is used in post-facto examination to establish whether the import cargo in question meets legal requirements. In certain cases, the importer is required to provide a report, and the information on the invoice is used to extract various statistics and to study trends in goods imports.

4. Complaint:

Currently, when merchandise is imported, importers submit an original invoice for MITI when the Customs declaration is made, along with an invoice for Customs. The NACCS system used by Customs incorporates all the contents required by MITI, and accordingly MITI should obtain data from NACCS and eliminate the requirement for an invoice for MITI.

5. Results of deliberation:

Streamlining of Customs procedures should be actively promoted, to reduce the burden on businesses; electronic information and other technologies should be used as advantageously as possible for this.

According to the concerned ministry, the NACCS does not incorporate all the information which the ministry uses for post-facto examination and for extracting various statistics based on invoices. The parties concerned are currently discussing whether the NACCS can be used to streamline import procedures.

This is a positive development, and from the perspective of reducing the burden on businesses, a conclusion concerning review (including reduction of the number of items on which information is required, and the use of the NACCS) of the requirement to present invoices to MITI should be reached by the end of FY1997, and the concerned parties should take steps in this direction.

7-(2) One stop service for legal procedures for imported cargo

1. Complainant: Yokohama Chamber of Commerce

2. Ministry concerned: Ministry of Finance, Ministry of Health and Welfare (MHW), Ministry of Agriculture, Fisheries and Forestry (MAFF)

3. Background:

(1) Legal procedures

1) Customs procedures
Any person who is to import any goods shall declare to the Director-General of Customs the name well as quantity and price (the quantity and value to be taken as a basis for customs valuation) of the goods and any other necessary matters with respect to the goods and obtain an import permit, after necessary examination of the goods concerned. (Customs Law Article 7, Clause 67)
For cargoes for which permits or approvals are required by other laws and regulations, Customs must be shown proof that the cargo has obtained the necessary permit or approval and receive confirmation of this. Cargoes for which proof or confirmation cannot be obtained may not be imported. (Article 70 of the above law)

2) Import procedures for foods
To prevent the occurrence of health hazards arising human consumption of food or drink, Articles 16 and 17 of the Food Sanitation Law require that imports of additives, food additive, apparatus, or container/package for sale be reported to the Quarantine Office and undergo testing if necessary.
Since it is necessary to determine whether imported foods conform to the Food Sanitation Law, food sanitation officials with specialized knowledge of food sanitation are assigned to Quarantine Offices.

3) Plant quarantine procedures
Plant pests can spread rapidly, harming agricultural products and having a highly negative impact on agricultural production and they are also extremely difficult to eradicate. To prevent the entry of plant pests into Japan and to protect domestic agricultural products from such pests, imported plants must undergo quarantine, in accordance with the provisions of the Plant Protection Law.
Plant importers must report this to the Plant Protection Office and plants must undergo inspection by plant Protection Stations. (Article 8 of the Plant Protection Law)

4) Animal quarantine procedures
Infectious livestock diseases can spread rapidly, harming domestic livestock and having a highly negative impact on the domestic livestock industry. These diseases are also very difficult to eradicate. To prevent the entry of infectious livestock diseases into Japan, imported animals and animal products must undergo quarantine, in accordance with the provisions of the Infectious Livestock Disease Prevention Law.
Importers of animals, etc. must report this promptly to the Animal Quarantine Office and present the product as is for inspection by animal quarantine officers. (Article 8 of the Infectious Livestock Disease Prevention Law)
In addition, Foreign countries use similar procedures for food, plant and animal quarantine.

(2) Concentrating offices for legal procedures

Offices for legal procedures (Customs, Quarantine, Plant Protection Stations, Plant Quarantine, and Animal Quarantine) are in the same location in the terminal building at airports. In the case of ports, however, only Otaru, Osaka and Moji have all the above offices in one building.

Importers may arrange beforehand to have officials from the nearest legal offices on hand when the cargo arrives, in order to ensure speedy completion of legal procedures.

4. Complaint:

Officials from many different offices must be available when cargoes are imported, and the fact that the offices are not in centralized locations means that import procedures take considerable time. Like Narita, which handles air cargo, ports should establish new facilities or inspection duties should be delegated to Customs officers, to enable businesses to carry out the required procedures in one location.

5. Results of deliberation:

To further expedite and simplify import procedures as a whole, the concerned ministries completed the interface between NACCS (Nippon Automated Cargo Clearance System) and the Support System for Supervising Imported Foods (MHW) on February 3, 1997. Interfaces for the Computer Processing System for Imported Plant Inspection Procedures, for procedures under the Plant Protection Law, and the Computer Processing System for Animal Quarantine Procedures, for procedures under the Infectious Livestock Disease Prevention Law (MAFF), are currently being developed and are expected to become operative during FY1997.

These interfaces will allow NACCS users, by using a NACCS terminal, to complete the import declaration for Customs, reporting procedures for MHW and application procedures for MAFF for the same cargo without having to go to individual offices, and to receive notification of test results. These interfaces are expected to cover nearly 80% of imported cargoes requiring Customs procedures and various permits and approvals required by laws other than those related to Customs, and to substantially contribute to speeding up and streamlining import procedures.

Regarding sanitary certificates issued by the exporting country's government and required under the Food Sanitation Law for imports of meat and meat products, the MHW will establish online connections with the governments of some exporting countries (at present Australia, New Zealand and the United States, depending on the capabilities of the system), enabling sanitary certificates to be sent directly to quarantine offices.

These are positive developments from the viewpoint of speeding up and streamlining import procedures. However, the concerned ministries should take more extensive measures, as described below.

(1) Information should be provided on which specific procedures will be simplified as a result of the interface between the MHW/MAFF systems and the Customs Bureau's NACCS.

(2) Prior publicity should be provided to foreign embassies in Japan regarding the progress of interfaces between computer systems for handling import procedures.

(3) The concerned ministries should undertake further cooperation and support, and work in close coordination to further speed up and streamline import procedures. The inter-ministry liaison committee for import procedures should be used effectively for this purpose.

(4) When facilities at existing ports are improved or new ports are opened, the concerned ministries should work toward establishing facilities enabling all legal procedures to be completed in one location.

7-(3) Simplification of procedures for extension of payment date for Customs duties and consumption tax on imported cargo

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Finance

3. Background:

Customs duties and consumption tax due on foreign cargoes must be paid before an import permit is issued; cargoes may not be removed from bonded warehouses until payment is made (Article 9, Clause 1 and Article 72 of the Customs Duties Law and Article 50 of the Consumption Tax Law). When the consumption tax was implemented in 1989, a new method of payment for Customs duties and consumption tax owed on imported cargoes was introduced, in addition to the existing immediate payment method. Under the new payment method, importers are allowed to extend the period of payment for up to three months after importation of goods by putting up collateral of equal or greater value than the amount of Customs duties owed. As an added convenience to users, the use of delayed collateral (collateral for Customs duties due at different periods) is also allowed (Article 9-2 of the Customs Duty Law, Article 51 of the Consumption Tax Law).

The collateral is administered using the NACCS (Nippon Automated Cargo Clearance System), at Customs houses where the system is in use. NACCS includes two systems, Air-NACCS (Air Nippon Automated Cargo Clearance System) and Sea-NACCS (Sea Nippon Automated Cargo Clearance System). As a result of the rapid growth of air cargo after the 1970s and the need for speedier Customs processing, Air-NACCS was computerized in 1978 and Sea-NACCS in 1991. Because the systems developed in this way, they currently operate independently from each other, and collateral must be registered separately in each system.

A nationwide collateral system, in use at Customs houses which have computerized systems, was introduced in April 1995 for Sea-NACCS and in November 1995 for Air-NACCS.

4. Complaint:

Under the current system, collateral for payment extension (three months) must be established separately for air and sea cargo, and procedures carried out separately for each. Posting more collateral than necessary entails collateral guarantee charges and importers usually set the collateral very close to the expected total for Customs duties and consumption tax. Since they cannot apply extra collateral from sea cargo to air cargo, they must increase their collateral for air cargo. The increase in the consumption tax from April will further increase such expenses. If collateral for air and sea cargo could be unified and used wherever it is needed, importers would not need to increase collateral, and accordingly, the system should be amended to allow unified collateral to be used for air and sea cargo and one procedure for both.

5. Results of deliberation:

More extensive use of computerized systems for import procedures like Customs clearance and so on greatly improve users' convenience. Given the progress of information technology, efforts should be made to use such systems for operations. Where administration of collateral using NACCS is concerned, the system has been improved by introducing the nationwide collateral system and, in an action taken in response to a complaint last year, all Customs houses have been allowed to handle collateral for application for approval of cargo transactions prior to import permit. However, it is important to continue improving the system for the further convenience of users.

The concerned ministry expects that developing a new system enabling sharing of collateral for Sea-NACCS and Air-NACCS will require considerable time and money; cost-effectiveness is a factor which must be considered. Since the Sea-NACCS system is due to be renovated in October 1999, this issue should be studied when the next-generation Sea-NACCS system is reviewed.

To reduce the financial burden on users, the collateral administration system should be unified to a greater degree. When Sea-NACCS is renovated in 1999, the NACSS system should be changed to make it possible to post shared collateral on both Sea-NACCS and Air-NACCS.

7-(4) Elimination of document preservation requirement for import applications kept by Customs brokerage

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Finance

3. Background:

(1) Customs brokerage is defined as having another person acting as a representative or proxy file Customs declarations for export or import with the Customs house, in accordance with the provisions of the Customs Law and other laws and ordinances relating to Customs Duty, and prepare forms for Customs procedures (Customs forms) to be presented to the Customs or the Minister of Finance in accordance with the provisions of the Customs Law and other laws and ordinances relating to Customs Duty. Carrying out Customs brokerage under license of Director-General of Customs is defined as Customhouse broker, and parties wishing to handle Customs brokerage having received a license from the Director-General of the Customs, whose has jurisdiction in the area in which the business is to be located called Custom brokerage (The Law of Customs Brokerage Articles 2, 3).

(2) In accordance with Article 22, Clause 1 of the Law of Customs Brokerage and Article 8 of the Cabinet Order for Enforcement of the same law, ledgers recording brokerage activities must be entered and retained for a period of three years. The documents to be preserved include declarations, applications, statements of dissatisfaction and so on submitted to the Director-General of Customs or to the Minister of Finance which are concerned with customs clearance operations.

As set down in Article 22, Clause 1 of the above law, Customhouse brokers are required to preserve documents concerning customs clearance for a specified period because these constitute the original materials from which the ledgers they are obliged to keep are created, and to clarify their responsibilities as representatives filing customs declarations. These documents are also useful for determining causes of errors discovered after procedures have been completed and for verifying fees received.

(3) The Director-General of Customs may suspend Customhouse brokers from carrying out all or part of their activities if they violate the Law of Customs Brokerage and other laws and ordinances relating to Customs duty or revoke their licenses The Law of (Customs Brokerage, Article 34). When it is necessary to ensure that the Law of Customs Brokerage is carried out appropriately, Customs officials may investigate Customhouse brokers' ledgers, as stated in the regulations in Article 38 of the said law.

(4) Import or export declarations filled out by Customhouse brokers and submitted to Customs are generally kept by Customs for seven years. Import or export declarations filed using the NACCS (Nippon Automated Cargo Clearance System) are preserved on magnetic tape for seven years at the NACCS Center.

(5) In cases where any goods are imported in evasion customs duties, through fraudulent or any other illegal acts, or without payment of customs duty on the said goods with respect to which custom duty shall be paid, revision, determination or determination for duty assessment, with respect to customs duty on such goods, may be made on or before the date when the period of 7 years expires from the prescribed time limit for payment (Customs Law, Article 14, Clause 3).

4. Complaint:

Customs declarations filed by Customhouse brokers must be kept for three years, under Cabinet Order for Enforcement of the Law of Customs Brokerage. Having to keep such documents for three years in each sales office requires considerable storage space and takes time and money to keep well organized. Costs and other burdens could be reduced if the requirement for document preservation were simplified. Three parties currently preserve the same customs declaration forms: the Customs (seven years), Customhouse brokers (three years) and the NACCS Center, when declarations are filed on NACCS (preserved for seven years on magnetic tape). If a copy of the declaration is needed for verification by Customs after the declaration has been made, the forms kept by the Customs or by the NACCS Center (on magnetic tape, in this case) should be sufficient, and Customhouse brokers should not be required to keep the forms for so long, or should be exempted from keeping them altogether.

5. Results of deliberation:

Government regulation requires constant updating in order to keep up with changes in technology. This is especially so where information and telecommunications technology is concerned, and it should be borne in mind that conditions can be very different from circumstances when the rules were first drawn up. According to the ministry concerned, it is necessary to supervise and guide Customhouse brokers appropriately in order to protect users (importers) and ensure that customs procedures are carried out appropriately. Customhouse brokers are required to keep import and export declaration forms, but this requirement should be reviewed periodically, taking the existing level of technology into consideration, to avoid over-burdening Customhouse brokers.

From this perspective, the ministry concerned should thoroughly consider the opinion of the complainant, who wishes to reduce costs in connection with storing the documents. The issue of reducing the burden (by allowing, for example, the use of electronic media to store documents, taking into account factors such as abilities to ensure genuineness, readability of date, ease of preservation, and legal validity) on Customhouse brokers resulting from the requirement to keep documents should be studied and all procedures necessary to implement this taken in FY1997.

7-(5) Permission for Customs clearance and unloading of sea cargo on holidays

1. Complainant: Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Finance, Ministry of Agriculture, Fisheries and Forestry, Ministry of Health and Welfare

3. Background:

(1) The way that cargo is moved in ports differs depending on the type of cargo and the physical environment of each port, but ships generally moor at a wharf or at a buoy offshore, as specified by the port supervisor. Later, the cargo is unloaded by port transportation operators and taken to sheds, etc. If import procedures have not been completed, the cargo is taken to bonded sheds. After being sorted in sheds, the cargo is transported to warehouses and stored there, or is transported to its destination by land transport operators.

(2) Under the Overtime service system (Article 98 of the Customs Duties Law), Customs has been providing the necessary officials on an auxiliary basis, even outside of normal working hours, including Saturdays, Sundays and holidays, if a request is made for import or export procedures.

In the major airports (Narita Airport and the Tokyo Air Cargo Office, Kansai International Airport, Nagoya Airport, Fukuoka Airport) and ports (Shimonoseki) where there are frequent requests for procedures on an auxiliary basis outside of normal working hours, Customs officials are on service outside of normal working hours.

(3) Plant pests can spread rapidly, harming agricultural products and having a highly negative impact on agricultural production and they are also extremely difficult to eradicate. To prevent the entry of plant pests into Japan and to protect domestic agricultural products from such pests, plants imported through major airports or ports throughout the country must undergo quarantine, in accordance with the provisions of the Plant Protection Law.

Plant importers must report this to the Plant Protection Stations and plants must undergo inspection by plant quarantine officers. (Article 8 of the Plant Protection Law)

(4) To prevent the occurrence of health hazards arising human consumption of food or drink, Articles 16 and 17 of the Food Sanitation Law require that imports of additives, food additive, apparatus, or container/package for sale be reported to the Quarantine Office and undergo testing if necessary.

Since it is necessary to determine whether imported foods conform to the Food Sanitation Law, food sanitation officials with specialized knowledge of food sanitation are assigned to Quarantine Offices.

The working hours at Quarantine Offices (at ports) are from 8:30 a.m. to 5:00 p.m., weekdays only.

4. Complaint:

Yards and Customs offices at ports are closed on Saturdays and Sundays, and accordingly no import declarations for sea cargo can be made on Saturdays and Sundays. Accordingly, when ship cargoes arrive toward the middle or the end of a week, verification of unloading of the cargo must be done on weekends and import declarations made the following week, which makes it impossible to handle emergency shipments. Import declarations for ship cargoes should be accepted on Saturdays and Sundays, and it should be possible to transport cargoes from the yards on those days as well.

No clear provisions for plant quarantine, food declaration, etc. duty outside of normal working hours are noted in the Customs Duties Law (Article 98), for all the procedures from arrival to transportation from the port when fresh food imports are involved and in actual practice, no service is available on holidays (see note). Transportation out of container yards is also not in operation on holidays, and although the auxiliary office opening system exists, it is actually impossible to carry out import procedures on holidays. When the cargo involved is fresh food, it is important to transport it from the point of origin to shops in as short a time as possible. To handle the increase in imported products, Customs officers should be made available on holidays at major ports, as they already are at the airports in Narita, Kansai, Nagoya and Fukuoka.

(Note from secretariat)
The Customs Duties Law mandates customs procedures. Plant quarantine, food declarations, etc. are required under the provisions of other laws.

5. Results of deliberation:

Although the issue of transporting cargoes out of container yards on holidays is a problem related to the working hours of private businesses, including cargo consignees, ports are an important link between domestic and international distribution and because the high costs involved in using those ports are a problem, the government sector should take the initiative in responding.

The ministry concerned should use the auxiliary office opening hours system to handle Customs procedures on Saturdays, Sundays and holidays, outside of normal working hours. At the port of Shimonoseki, the ministry is taking measures to assign officials on duty outside of normal working hours to conduct inspections. At all other Plant Protection Stations, actions are being taken to make plant quarantine officers available, even on holidays and outside of normal working hours, if a request to this effect is received. These are positive steps, but to expedite import procedures on holidays when a number of ministries or agencies are involved, the ministries concerned should take the following further actions, and should work in close coordination when doing so:

(1) At ports other than Shimonoseki where there is sufficient demand, if any efforts should be made to make Customs officers available outside of normal working hours, taking administrative efficiency into consideration.
(2) Quarantine offices operated by the Ministry of Health and Welfare have extended working hours at the main airports. The same measures should be instituted at major ports, to meet users' needs and in accordance with actual conditions where food imports are concerned.

8. Other

8-(1) Review of landing examination criteria

1. Complainant: Belgium-Luxembourg Chamber of Commerce, Tokyo Chamber of Commerce

2. Ministry concerned: Ministry of Justice

3. Background:

Foreigners entering or residing in Japan are required to obtain a status of residence as set down in the Immigration Control and Refugee Recognition Law. The activities they are permitted to engage in and the length of the period of stay are determined by their respective status of residence.

In the case of accepting foreigners coming to Japan to work, to control entry and stay appropriately, under the Immigration Control and Refugee Recognition Law from the viewpoint of avoiding any adverse effects on domestic industries and daily life, and preventing persons from working or staying illegally, the entry of foreigners is controlled by setting down in statutes the size of business, work experience, salary level and so on to determine the type and scope of work they may engage in.

(1) In general, when work is the purpose of stay, "Investment/Business Manager," "Engineer," "Specialist in Humanities/Inter-national Service" or "Intra-company transferee" may conform.

1) In order to obtain the status of residence of under the "Investment/Business Manager" securing premises to be used as an office for the business in Japan and two or more full-time employees and so on are needed. The maximum period of stay under this status of residence is three years.
2) In order to obtain the status of residence of the " Engineer " or " Specialist in Humanities/Inter-national Service," the individual must have a contract with a public or private organization in Japan and meet certain educational and work experience requirements and so on. The maximum period of stay under this permission is one year.
3) In order to obtain the status of residence of the "Intra-company transferee", the individual must have been employed by a head office or branch of a foreign company for one year or more, works in Japan in connection with a transfer by the head office or branch to Japan, and will not be working in the company's Japanese office for more than five years and meet other requirements. The maximum period of stay under this permission is one year.

(2) Regarding an extension of period of stay a foreigner in Japan can continue to reside under the same status of residence when the Minister of Justice determines, upon presentation of supporting documents submitted by a foreigner, that there is a reasonable grounds to grant the extension of the period of stay.

4. Complaint:

(1) Foreigners residing in Japan whose status of residence is "Intra-company transferee" must renew an extension of their period of stay every year if they desire to remain in Japan for work and extensions are granted a maximum of four times only. The exception is when the individual become a board member of his company's Japanese branch; in this case, there is a possibility for change of status, but this does not apply when the operation employs only one or two persons, including the individual in question.

When a Belgian company determines that an extension of period of stay is necessary for its non-Japanese employees, these extensions should be granted.

(2) When a Japanese company summoned two Thai nationals from a Thai customer company to be joint managers, their applications were held up for six months and finally refused on the grounds that the company did not meet requirements for capital as a trading company. When inquiries were made, the persons involved were told that they could not be told the details about the requirements and the complainant believes that these requirements should be clearly described.

Subsequently, the office was expanded and more capital acquired, and when the individuals submitted new applications, they were granted certificate of Eligibility for a period of six months. These two persons are currently receiving salaries, and paying social insurance and pension contributions and taxes in exactly the same way as Japanese, as company board members. However, there is no guarantee that they will again be granted if they return to Thailand and apply again, and the complainant believes that status of residence should always be granted, when the persons are employed as a same status of residence in exactly the same way as Japanese.

5. Results of deliberation:

Growing interdependence in the international community means increased movements not only of goods and capital, but of people as well. The movements of investments and people are complementary, and beginning a new business across national borders often necessitates the movement of people, along with new management resources, technology and know-how. The movement of such factors of production can also contribute to invigorating Japan's economy. Accordingly, overly stringent restrictions on the movement of people can hamper investment in Japan and have a negative effect of our country's economic growth.

From this viewpoint, the following revisions with regard to specific criteria for status of residence for foreigners working in a legitimate business in Japan should be reviewed so as to remove obstacles to their entry or stay in Japan.

(1) Regarding the application and the examination criteria for the status of residence, further clarification and transparency should be achieved by the explicit stating of the interpretation and application of the contents of the status of residence and its examination criteria in order to facilitate the entry and stay in Japan of persons engaged in legitimate business.

(2) Regarding the maximum term of stay of five years for Intra-company Transferee, the ministry concerned has indicated that this provision will be examined during FY1997 and the results of the consideration of this matter should be given as early as possible, to extend this term for persons concerned in order to facilitate the conduct of their legitimate business.

(3) Regarding the status of residence for Investor/Business Manager, the rules will be applied flexibly in addition to the present formulaic requirements such as the number of employees or the size of office, in cases where this involves a change of status from Intra-company Transferee, to permit a change of status when the applicant proves his business to be in a healthy state.