6th Report of Market Access Ombudsman Council (March 16, 2000)

3-(1) Introducing the market principle to port business

1. Complainant: Tokyo Chamber of Commerce and Industry

2. Ministry concerned: Ministry of Transport

3. Background:

(1) Current situation where port transport business is concerned

In order to establish order to port transport business, a license system is used to control entry, under Article 4 of the Port Transport Business Law. Approval of the Minister of Transport must be obtained to set or change fares and fees for port transport business in the way that the Ministry of Transport ordinance indicates.

(2) Background to the revisions made to the Port Transport Operations Law

The Administrative Reform Council submitted its final report in December 1997. Regarding port transport business, it recommended abolishing the business license system (Supply-Demand Adjustment) and adopting a permission system instead, and abolishing the fee approval system and replacing it with a fee filing system. In accordance with the Council's final report, from May 1998 the Council for Transport Policy began deliberating on specific approaches for deregulation and compiled its final report on specific measures (introducing the market mechanism), for deregulating port transport business in June 1999. In order to actualize this final report, the Ministry of Transport submitted a bill to amend the Port Transport Operations Law to the Diet in February 2000.

4. Complaint:

Port business longshoring and transport fees are high and processing is slow. It is said that it costs almost as much to ship cargo by sea from foreign ports to Japanese ports as it does to transport the said cargo overland from Japanese ports to neighboring cities inland, and there are same cases where rather than use Japanese ports for transshipment, it is cheaper for shippers to transship at Pusan in neighboring Korea. Since the cost of port business in Japan is too high, it places imports at a price disadvantage compared to domestic products. Furthermore, cargo transactions are delayed because Sunday and Nighttime operations are insufficient. The market mechanism should be introduced to port business, to reduce port longshoring and transport costs and speed up operations.
The final opinion of the Administrative Reform Council were made in December 1997, but implementing them during 2000 is taking too much time. Over 90% of the members of the Tokyo Chamber of Commerce and Industry are small and medium enterprises or very small businesses, and in today's economic climate they are facing great difficulties; reducing costs is an issue that requires not a second's delay. The complainant requests implementation of deregulation at an early date.

5. Results of deliberation:

One of the reasons why port business longshoring fees and transport fees are higher in Japan compared to other ports in East Asia is that entry into port business is restricted by the Port Transport Business Law, which means that port business which already have licenses are protected and not exposed to competition from ordinary businesses carrying out similar transport operations, and that operations lack efficiency.
As a result, the costs for using Japanese ports are high compared to international levels, and various port charges in Japan are twice as high as those of Singapore, Pusan, Kaohsiung and others. Whereas ports like Hong Kong and Singapore are handling 4-5 times the volume of cargo compared to 10 years ago, cargo volume remains at the same level in Kobe and in Yokohama is barely 1.5 times the cargo volume of 10 years ago. The status of Japanese ports has declined considerably as far as their use as important physical distribution points is concerned.
The longer action is delayed and protection is continued, the more overhaul of efficiency of port business will be delayed and international competitiveness affected even more seriously. Accordingly, a system should be established for boosting efficiency of port business to a level comparable to those in other countries at an early date.
The ministry submitted a bill to amend the Port Transport Business Law, calling for implementing deregulation (switching from a business license system to an business permission system [eliminating Supply-Demand Adjustment], changing the fee approval system to a fee filing system) first at ordinance-designated specific ports (the 9 major ports of Keihin, Chiba, Shimizu, Nagoya, Yokkaichi, Osaka, Kobe, Kammon, and Hakata, which handle the bulk of containerized cargo volume), and for making operations more efficient and improving service by expediting cooperation and consolidation of operators through Business Cooperatives, to the 147th regular session of the Diet in February 2000, and wishes to implement deregulation during 2000.
In order to ensure that deregulation is effective, new entry of good, competitive companies into port transport business should be guaranteed, and to avoid formation of cartels and so on, competition among operators should be promoted and maintained, in order to lower charges for port operations, fares and so on, and shorten processing time, as soon as possible.

Based on the above, the ministry should take the following actions where introducing market mechanisms into port business is concerned.

(1) In order to boost efficiency and improve service through competition as soon as possible, deregulation in the form of switching from a business license system to a business permission system (eliminating Supply-Demand Adjustment) and changing the fee approval system to a fee filing system should be carried out at the 9 major ports handling the bulk of containerized cargo (Keihin, Chiba, Shimizu, Nagoya, Yokkaichi, Osaka, Kobe, Kammon, and Hakata) as quickly as possible during 2000.

(2) To ensure that deregulation is effective, measures should be taken so that entry of new operators is not hampered.

Government decision (March 21, 2000)

3-(1) Introducing market mechanisms to port business

The following measures to introduce market mechanisms to port operations will be taken.

(1) In order to boost efficiency and improve service through competition as soon as possible, deregulation in the form of switching from an operating license to an operating permit system (eliminating restrictions on supply and demand) and changing the permission system for fees to a notification system will be carried out for the 9 major ports handling the bulk of containerized cargo (Keihin, Chiba, Shimizu, Nagoya, Yokkaichi, Osaka, Kobe, Kammon, and Hakata) as quickly as possible during 2000.

(2) To ensure that deregulation is effective, measures will be taken so that entry of new operators is not hampered.