KnowTheUK

Getting the goods to your customers

PREPARING YOURSELF FOR THE LOGISTICAL CHALLENGES

  • Ranked 10th out of 160 countries in the World Bank’s 2014 International Logistics Performance Index.
  • Has established a highly developed logistics system in the past 50 years despite vast geographic challenges – namely that approximately 73% of Japan’s landmass is mountainous.
  • Relatively small country with a total surface area of 377,960km2 – making it slightly smaller than California – and a single time zone: Japanese Standard Time (UTC+09:00). Japan consists of a total of 6,852 islands, the four largest of which are Honshu, Hokkaido, Kyushu and Shikoku.
  • In 2014, 93% of the Japanese population lived in urban areas.
  • Japan has a much lower consumer return rate than its Western counterparts, with an average returns rate of between 2 and 3%.
  • The Japanese consumer base has grown accustomed to quick domestic deliveries, which can be troubling for international retailers who have their stock located outside Japanese borders. The below tables show the pros and cons of international and domestic delivery for an internationally-headquartered retailer delivering to Japan.

International Shipping

Pros Cons
No setup required Slower delivery
Easier to manage inventory Higher risks of damage
Expensive in the long term

Domestic Shipping

Pros Cons
No setup required Requires a warehouse
Lower risk of damage to goods Inventory management
Cheaper in the long term High setup cost

JAPAN’S LARGEST CITIES

Consumers living within the green zone tend to receive their domestic orders on the same day they place them. Those in the orange will typically receive these orders within the next 24 hours, and in the red zone consumers largely receive their packages within 24-48 hours. As a general rule, the maximum wait time for domestic deliveries is approximately 2 days.

Retailers need to learn the delivery times of shipping internationally to Japan and be able to communicate this information clearly to their customers. Japanese consumers need to be made aware that international products will take longer to arrive than domestic goods.

JAPAN’S DELIVERY ROUTES

Japan is extremely well served by numerous airports, railways, expressways and ferry routes.

Japan boasts 1.25 million km of paved roads and 20,140 km of railways.
There are additionally roughly 1000 ports in Japan. The 5 designated ‘super’ container ports are Tokyo, Yokohama, Nagoya, Osaka and Kobe.

KEY LOGISTICS OPERATORS

Key domestic logistics service providers in Japan are Nippon Express, Yusen Air & Sea Service, Yamato Holdings and Sagawa Express. The national provider is Japan Post.

Notable international logistics service providers include DHL, Schenker, UPS and FedEx.

CUSTOMS CONSIDERATIONS

Potential exporters to Japan should not be deterred by the nation’s reputation as a closed and heavily regulated market. Barriers to market access for a majority of goods are largely informal, though customs regulation and procedure should be researched well in advance of export, and appropriate partners identified.

Process

All goods imported into Japan must first be declared to the respective customs office holding jurisdiction over the bonded, or ‘Hozei’, area where imported goods are stored awaiting clearance. Goods are declared via a customs import declaration, which describe the quantity and value of the goods to be imported, as well as a variety of other necessary particulars. Such declarations must be made by the person or entity importing the goods, although in practice it is usually a customs broker that files the declaration and presents a received import permit as a proxy for importers. There are no special registration requirements for importers.

This import declaration must be made, generally, after the goods have been taken into a Hozei area or other specially designated zone. When goods arrive at a port of entry, a carrier company issues an arrival notice to the importer. In the case of highly regulated goods, an import declaration may be required while the cargo is still on board the shipping vessel. Following the receipt of a declaration, an import permit will be issued by the customs office after document reviews and any necessary examinations of goods have taken place, and all applicable taxes and tariffs have been paid. Where specific categories of goods for import require permits and approvals under laws and regulations in addition to the general Japanese Customs Law, a certificate of application for such permits and approvals must be submitted prior to clearance for review.

Customs documentation for imports

An import declaration form must be prepared in triplicate and submitted to Japanese Customs along with additional documentation, which includes:

  • Invoices;
  • Bills of Lading or Sea Way Bills (for import of air cargo, an Air Way Bills);
  • Insurance certificates;
  • Freight accounts;
  • Packing lists.

The following documents may be necessary, depending on the type of goods for import:

  • Permits or approvals required by laws and regulations other than the
  • Customs Law, such as the Plant Protection Law;
  • Generalised system of preferences and certificates of origin (where a preferential rate is applicable); and
  • Statement on reduction of or exemption from customs duty and excise tax (where applicable).
  • Import prohibitions and restrictions

Some goods are prohibited from import into Japan altogether, whilst others are restricted and so must meet further requirements. Restricted goods require additional documentation (evidence of licenses, authorisations, certificates etc.) at the time of import declaration, or at the time of the inspection necessary for import declaration. Without customs confirmation of such evidence, an import permit will not be given.

Some Japanese laws require importers to submit certain certificates issued by foreign authorities in order to obtain the necessary licenses/authorisations for importation. Importers should research, in advance, what documents are necessary for submission.

Restricted imports include:

  • A variety of food, wildlife and animal products;
  • Tableware, containers/wrapping and toys;
  • Agricultural chemicals and fertilizers;
  • Pharmaceuticals, cosmetics and medical equipment.
  • Some goods imported into Japan are subject to quotas set by Ministry of Economy, Trade and Industry (METI). Quotas are imposed on a variety of foods including some dairy products, seafood, cereals and grains. Such importers must obtain an import quota allocation certificate from METI.

Product labelling and packaging

Japanese authorities, including the customs service, are particular about packaging and labelling – both where labels are affixed to products themselves or upon parcels. Correct packing, marking and labelling are, of course, critical to smooth customs clearance. Imported goods as well as transport documents must show metric units of measurement and weight.

Many food and consumer products are subject to very specific labelling requirements, and research should be done prior to exporting your particular products to Japan. Products labels must typically be in Japanese.

Special labelling regulations apply to, amongst other things:

  • Food and drink;
  • Electrical appliances;
  • Soap;
  • Aluminium foil and plastic film;
  • Some kitchen utensils;
  • Cleaning materials;
  • Toilet and bath fittings;
  • Certain furniture;
  • Hot water bottles;
    Cosmetics.

Foodstuffs must have a sticker attached to each package showing a detailed description of contents, including artificial colourings or preservatives, name and address of importer and date of import or manufacture in Japanese.

Packaging

The use of straw packing materials is prohibited in Japan.

TAX

Customs duties, consumption tax and excise duties are levied upon goods imported into Japan. Excise duty is charged on alcohol, tobacco, and fuel products and the amount of tax payable is calculated based upon the quantities of the imported goods. If you sell online to Japanese customers and ship your products directly from outside of Japan to within its borders, the customer will need to pay customs and sales taxes as an importer.

Customs duty

Japanese tariffs are based upon the Harmonised System, and most duties are calculated ad valorem as a proportion of the estimated value of the goods concerned, based on the approximate cost, insurance and freight (CIF) value. Some items, however, including certain alcoholic beverages and cereals, are dutiable at a specific rate, whilst still others are dutiable at a compound rate such as a combination of both ad valorem and specific rates.

Duty rates in Japan vary from 0% to 30%, with the average duty rate at 3% (excluding agricultural products). Some products can be imported free of duty.

When the total CIF value of commercially imported goods is 200,000 yen or less per importation, a simplified tariff schedule is applicable.

Consumption tax

Consumption tax is imposed at a rate of 8% on, in general, all goods imported into or manufactured in Japan. The amount of consumption tax payable on imported goods is calculated on the basis of the CIF value of the goods plus any customs duty payable and, where applicable, other excise taxes payable.

This rate is likely to increase to 10% in October 2015.

Minimum thresholds

Importantly for e-retailers and Japanese consumers alike, Japan has minimum thresholds below which customs duty and consumption tax are waived. These taxes are not payable by an importer if the CIF value of imported goods does not exceed JPY 10,000 (around $80).

Note that the duty and consumption tax exemption does not apply to imports of the some products, such as leather goods, knitted apparel, and some types of footwear. Excise duties imposed on goods are not waived under this scheme.

Free trade agreements

  • Preferential customs duty rates are granted to imports from countries with whom Japan has signed free-trade or economic partnership agreements. 15 have been signed and a further 8 are under negotiation.
  • Negotiations are ongoing between the European Union (EU) and Japan for a comprehensive Free Trade Agreement (FTA).
  • Japan additionally grants preferential tariff treatment under its Generalised System of Preferences scheme to 137 developing countries and 14 territories.

Other areas of interest

Meeting your regulatory responsibilities

Some routes to the Japanese e-commerce market will oblige you to set up a distinct legal entity.

Reaching and engaging your consumers

It is important for your website to capture the right look and feel to attract Japanese consumers as they attribute great importance to the aesthetics of online shops.

Receiving payment from your customers

Despite the advanced nature of bank cards and electronic payment systems in Japan, cash-on-delivery remains a popular payment method for goods purchased online.

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