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Japan: Import requirements clarified under economic partnership agreement with EU

Japan: Import requirements clarified

Representatives of the government of Japan and the European Union (EU) agreed to a process that is intended to address concerns about the implementation of the economic partnership agreement between Japan and the EU. In turn, Japan Customs this week announced how it would implement the new process with respect to imports from the EU into Japan.

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Background

The EU-Japan economic partnership agreement (effective date of 1 February 2019) was seen as an opportunity for significant customs duty savings opportunities and a reduction of trade barriers for importers in Japan and exporters in the EU. To realize these potential benefits, however, there are specific requirements in Japan that must be satisfied and detailed support to be provided at the time of import in Japan.

In general—except for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (implemented 31 December 2018), and the Japan-Australia economic partnership agreement—the remainder of Japan’s free trade agreements and economic partnership agreements operate as follows: A government body in the exporting country certifies that country of origin of the goods as a requirement for claiming preferential tariff treatment at the time of import. However, the EU-Japan economic partnership agreement (and the CPTPP) are based on a system of self-certification. And this has caused Japan Customs to use a less familiar principle.

As a result, from the February 2019 effective date of the EU-Japan economic partnership agreement, Japan Customs began requesting qualification analysis details—e.g., bills of material, regional value content,  tariff shift analysis, description of manufacturing processes, etc.—to be included on the certificate of origin (or as an attachment) at the time of import. Given the administrative burden of complying with these measures, there have been importers who viewed these requirements as making it impractical for them to pursue a claim for preferential duty treatment under the EU-JP economic partnership agreement. Importers that did not satisfy these requirements had shipments delayed and, in certain cases, claims denied.

In a response, EU authorities and the import community in Japan countered that the requests of information by Japan Customs are contrary to the principles of a free trade agreement or economic partnership agreement.


Agreement on rules of origin

Representatives of the government of Japan and the EU in late June 2019 met in Brussels and reached an agreement for a smoother and more efficient implementation of the economic partnership agreement, and specifically for simplification of the import declaration by which preferential tariff treatment is claimed in Japan.

Under the Conclusions of the Committee on Rules of Origin and Customs-Related Matters [PDF 1.55 MB], the EU and Japan agreed to the following:

  • An importer is not required to provide any additional explanation (besides the statement on origin) concerning the originating status of the product if not available to the importer.
  • To reply to a request for explanation, an importer is not required to obtain additional information from the exporter that had completed the statement on origin, and the exporter is not required to provide this information.
  • An importer that reports that it cannot provide an explanation in addition to the “statement on origin” issued by the exporter, is not required to specify a reason why this additional explanation cannot be provided.
  • The absence of an explanation, in addition to the statement on origin, will not lead to a rejection of the claim or a denial of the preferential tariff treatment under the economic partnership agreement.
  • When necessary, verification may be conducted based on Articles 3.21 and 3.22 of the economic partnership agreement that includes the use of risk assessment methods.


Explanation of new process from Japan Customs

Japan Customs on 17 July 2019 published a notification (English) that explains how to apply these new procedures—both in the interim and once they are fully formalized.


KPMG observation

Currently, trade professionals are not certain how the new process may affect the approach of Japan Customs or the frequency of customs verification requests, but for the time being, it appears that the new process could help address some of the administrative burden and associated trade barriers.

 

For more information, contact a professional with KPMG’s Trade & Customs practice in Japan:

Masaharu Umetsuji | +81 3 6229 8070 | masaharu.umetsuji@jp.kpmg.com    

Kozu Takayuki | +81 3 6229 8205 | takayuki.kozu@jp.kpmg.com 

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