Regulatory Developments European carriers and forwarding companies in Japan struggle with high costs and insufficient infrastructure at international airports, rigid custom clearance procedures and outdated restrictions on foreign-owned companies engaging in domestic freight forwarding business in Japan. The newly privatised Japan Post aims to aggressively expand while still enjoying preferential regulatory treatment, thereby posing a serious threat to the functioning of the market and the ability of competitors to provide services to the Japanese public. Japan Post is already competing with private-sector express carriers with the Express Mail Service (EMS), a special value-added international express package that today comprises around 18% of the outbound express market. EMS is increasingly popular among businesses, as well as with individual consumers. Japan Post is working hard to improve the quality of service in terms of speed, trace ability, reliability and increased weight range. It has further made EMS a key part of its business expansion plans, and focused on its expansion by collaborating with China Post and launching an advertisement campaign in leading business newspapers. As EMS is not subject to the same strict regulations that apply to other express services, the expansion is highly questionable from a competition point of view. The Ministry of Internal Affairs and Communications (MIC) defends this regulatory discrepancy by arguing that EMS is part of basic universal service and, hence, should be regulated like regular letter mail. However, this argument disregards the fact that with EMS, Japan Post is directly competing with private-sector operators. Therefore EMS should be removed from the universal postal service, just as Japan Post's domestic parcel service ("Yu-Pack") was removed in 2005. The privatisation implementation plan submitted by Japan Post has been accepted by the Postal Privatisation Committee to "be in line with the general guidelines" and hence consistent with equal footing requirements. However details of the plan are not publicly disclosed, disallowing any opportunity for questions or debate. The Government of Japan should make the complete privatisation plan public and address the issues and concerns raised by express delivery industry. Prospects for EU-Japan Economic Integration A well-functioning freight forwarding and logistics services market is crucial for global integration and competitiveness of the Japanese industry. All companies active in Japan, whether foreign or Japanese owned, with customers and/or operations outside of the country depend on efficient freight services both domestically and across borders. European companies offering Japanese consumers access to their worldwide logistic operations have largely been successful, but still face serious regulatory challenges. Distorted competition caused by a discrepancy in rules and regulations for carriers providing the same services, prohibitive costs, insufficient infrastructure at airports, and restrictions on foreign-owned carriers ultimately results in inefficiencies and higher prices for users. The recent privatisation will allow Japan Post to expand its business area to logistics services. If Japan Post continues to enjoy regulatory and financial benefits unavailable to private international express carriers and freight forwarders, it will not only have an adverse effect on the economic vitality of the logistics, express delivery and postal sector, but also the Japanese economy as a whole. Freight forwarders play a crucial role as facilitators in the economic integration of the EU and Japan. Facilitating logistics capability through a unified regulatory structure should, therefore, be at the core of an EU-Japan Economic Integration Agreement. Priorities
Key Issues and Recommendations ■ Customs clearance Yearly status report: new issue. Freight forwarders and express carriers employ hundreds of people to clear cargo through customs for both imports and exports and pay several hundred million yen for overtime work of the Customs offices and the use of the online clearance system (NACCS) to ensure that high-quality service is provided to customers. Freight forwarder and express carrier companies are required to declare details of the shipments and to pay customs duty on behalf of their customers. The newly privatised Japan Post is not required to undertake any of these costly measures as Custom officers themselves perform the inspections and hence the costs are a public expense covered by tax revenue. Acknowledging this discrepancy, the Ministry of Finance (MOF) revised the Customs Law so as to require that all postal cargo from Japan Post valued above 200,000 Yen is subject to the same customs clearance procedures as applied to international express carriers. However, cargo from other international express carriers must undergo customs clearance procedures when cargo is valued above 10,000 Yen. A timetable has not yet been set for Japan Post to comply with the same 10,000-Yen limit imposed on the other international carriers. Recommendation:
■ Security Yearly status report: new issue. Private freight and express carriers are subject to security regulations implemented by the Ministry of Land, Infrastructure and Transport (MLIT) and the MOF but these regulations do not apply to Japan Post. Security is an issue of increasing importance in the world today and for Japan Post to be exempt from complying with the standards expected by the rest of the industry in Japan seems an anomaly and constitutes not only an unfair competitive advantage, but also a potential security threat. Recommendation:
■ Exemption from parking laws Yearly status report: new issue. Local police agencies have exempted postal vehicles from the parking law. While private express carriers' vehicles are prohibited from and ticketed for parking, postal vehicles carrying EMS are parking in the same locations without a similar penalty. In busy commercial areas this is a significant advantage. Recently, the police agency declared that they will remove EMS pick-up from the exemption of parking law restrictions and apply the same approach as for "Yu-pack" pick-up. However, it is unclear how the police can distinguish between pick-up of EMS and other mail services as the same vans are used for these services. Recommendation:
■ Ban on foreign operations Yearly status report: new issue. The Freight Forwarding Business Law was introduced in Japan to support the creation of an integrated freight forwarding industry utilising all different freight modalities (sea, land, railway and air). However, the law forbids foreigners (a person who does not have Japanese citizenship or a corporation based in foreign country, or a foreign-controlled local company) to engage in domestic air freight forwarding business. The restriction applies only to air freight. This implies that a European freight forwarder is allowed to transport shipments from customers' sites to the gateways on road and/or rail, but may not use air within Japan. Recommendation:
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