Japan

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Japan

Unique in the Asian landscape from a customs and trade perspective

In many ways Japan is somewhat unique in the Asian landscape from a customs and trade perspective. It has been a large, well developed and open economy for a long time. It has adopted many of the standards, practices and approaches of the most developed trading nations in the world. It is a significant donor of aid and development, including training and assistance for other Asian countries in the development and modernisation of their customs and international trade rules and facilities.

On the other hand, Japan was somewhat isolated from the rest of the world for a very long time, trading only with China, Korea and the Netherlands until the late 19th century. Politically and economically this relative isolation manifests itself to this date, with many protectionist measures remaining in Japan’s approach to international trade, and a strong reluctance by the general population to open Japan to more international competition.

Consequently, importing into and exporting from Japan is at times very modern and facilitative, and at times highly regulated and protective. Customs duties vary tremendously, while duty exemptions and preferential duties are available for a large section of imported goods. Until recently and under certain conditions, Japan allowed sales between two non-resident entities to be used for customs valuation purposes (similar to the concept of “First Sale for Export” in the EU and US), but changes in administrative instructions and the wording of the Japan Customs Tariff Law in 2013 have made this all but impossible, or at least unattractive, forcing many multinationals to change they way the import into Japan.

Japan imposes import quotas and/or import licenses for specific items such as firearms, chemical weapons, silk, grains and products originating from certain countries. In addition, it requires locally registered companies to act as importer for certain goods, requiring title to such goods to change at the appropriate time in the supply chain. Other goods, although not requiring an import license, are subject to prior approval by a relevant authority before they can be imported into Japan. Proper tariff classification is critical not only to ensure compliance but to even make importing possible.

Japan Consumption Tax, applicable on imports as well as sales, bears resemblance to VAT , GST or Sales Tax systems in other countries but is implemented in a unique way, leading to much confusion and non-compliance risks for multinational companies.

From an export perspective, Japan has an advanced Export Controls regime governed by the Ministry of Economy, Trade and Industry (METI). Compliance is required both for exports from Japan and for overseas entities.

Japan is an increasingly active negotiator of bi- and multi-lateral Free Trade Agreements (FTAs). Notable FTAs are those with ASEAN and Australia, and its accession to the Trans-Pacific Partnership negotiations.

The Customs and Tariff Bureau is responsible for enforcing customs and related laws, and for collecting customs duties and other taxes on imported goods. In the past year, customs audit activity has increased markedly. Detailed documentary support is expected when responding to queries and challenges from Customs. This necessitates advanced control processes and procedures to manage both imports and exports.