Regulatory Developments Japan has developed a depth of knowledge and expertise in processing materials, and is at the forefront of many sensitive technologies, such as rechargeable batteries for hybrid vehicles, or nanotechnologies for manufacturing semiconductors and other various electronic components. These advanced technologies are largely based on the availability of key raw materials and Japan's ability to secure a stable supply of high quality materials. It is therefore of utmost importance that Japan secures its raw material supplies by adopting a strategy based on security, competitiveness, and access to its domestic market for overseas suppliers of raw materials. Japan has been reluctant to reduce tariffs on industrial materials on a unilateral basis before formal negotiations on tariff reductions take place under the auspices of the WTO. With this as a pretext, the Government has more-or-less refused to take up the idea in discussions and no progress has been achieved. Japan, one of the main consumers of industrial materials in the world, would greatly benefit from unrestricted access to the reliable sources of high quality products at the market-based prices that European companies can offer. In this regard, the EBC welcomed the removal of duties on ferro-molybdenum imported from Chile. Moreover, following requests from the domestic stainless steel industry, the Government of Japan is now contemplating removing tariffs on chromium, a key ingredient in the manufacturing of all stainless steels. It is now understood that the Ministry of Economy, Trade and Industry (METI) supports the removal of the import duties on chromium products, while this request is being studied by the Ministry of Finance (MOF). Prospects for EU-Japan Economic Integration Tariffs damage competitiveness and threaten the future of the domestic Japanese industry. The tariffs on processed nickel significantly increase local procurement costs at a time when companies in sectors such as stainless steel production are facing stiff challenges from overseas competitors, particularly in Korea and China. The same situation applies to fused aluminium oxide (artificial corundum, tariff codes 281810010 sized grain and 281810090 not sized grain), and to silicon carbide (tariff codes 284920010 sized grain and 284920090 others), both widely used in the refractory and abrasive industry and in electric components. Silicon carbide in particular, is used in wire-sawing for electronics and photovoltaic use, a rapidly expanding application in Japan. Imported fused aluminium oxide and silicon carbide are both subject to a 3.3% tariff, even though domestic melting and base production can only fulfil at best 10% of the yearly requirements. While consumers can currently import much of their fused aluminium oxide requirements from tariff-exempt countries under the General System of Preference (GSP), this is becoming more difficult, given the global shift in production to non-GSP countries with larger-scale facilities. Moreover, some categories of products are neither produced domestically nor available from tariff-exempt sources. The result is that Japanese consumers are dependent on imported products subject to high tariffs, and the global competitiveness of the Japanese manufacturers suffers accordingly. In the case of silicon carbide, Japan is importing 97% of its requirements from only one source because it is a tariff-exempt country. A situation of dependency has been created, threatening the long-term stability of supplies to the Japanese industry. Priorities
Key Issues and Recommendations ■ Nickel Yearly status report: no progress. Approximately 60% of total stainless steel production contains nickel, corresponding to roughly 40% of total production costs. Therefore it is critical that Japanese manufacturers are able to procure their nickel requirements at competitive prices and are ensured easy and stable access to nickel products. However, Japan is the only developed country in the world to apply duties on processed nickel products, such as nickel metal (import code 750210000), ferro-nickel (import code 7202600100 / 7202600100) and nickel oxide sinters (import code 750120100 / 750120210). These products are subject to tariffs ranging between 3.0% and 3.3% or 44 yen/kg. The continuation of tariffs on imported processed nickel products and the impact this has on European producers can no longer be justified. The impact of high tariff rates on refined nickel is a significant increase in costs for domestic users, particularly in the stainless steel industry. Japanese nickel producers have increased production to cover fixed costs, despite stagnant domestic demand, and so now export over 30% of their total output. They are competing with Korean and Chinese companies, who have to pay little or no import duties. The Japanese industry's global competitiveness is under threat from Korean and Chinese rivals, operating two to three times larger factories than any Japanese facility. European stainless steel rivals have also improved their competitive strength by concentrating production in a few giant mills. The EBC believes that eliminating tariffs on nickel would be an important step towards enhancing the competitive strength of Japan's stainless steel industry. Recommendation:
■ Fused aluminium oxide and silicon carbide Yearly status report: no progress. Fused aluminium oxide and silicon carbide are both subject to a 3.3% tariff, though most imports come from countries enjoying tariff exemption under the Generalised System of Preferences. For some categories, a duty is being applied to some products that are not even produced in Japan. This increases the price for imported fused aluminium oxide and effectively penalises the Japanese end-user, a situation exacerbated by a current shortage of supply. With regards to silicon carbide, almost all imports come from only one source. In this context, such dependency on only one source makes Japan vulnerable to supply shortages or market control attempts. Recommendation:
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