4th Report of the Market Access Ombudsman Council (March 17, 1997)

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.

Government decision (March 25,1997)

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

When vessels jointly owned by the Maritime Credit Corporation are built, the necessary measures will be taken to harmonize practical and technical matters relating to the reduction of documents needed and ensuring confidentiality with international business practices. When its standard contract form is amended, the Corporation will refer to the opinions of domestic shipyards as well as foreign ship builders. When the contract is translated into English, the Corporation will seek to offer convenience to foreign shipyards, making active use of examples from other government organizations involved in similar operations.