H. R.

College of Commerce and Economics

Churchgate, Mumbai , Maharashtra ( 400020 )

Trade Restriction of a country

Program of the study : M.COM ADVANCE ACCOUNTANCY
Name : NAMITA DIGAMBAR PATIL
Roll No. : HFPMCAA0045
Title of the Project : Trade Restrictions of JAPAN.

SR. NO TITLE
1. INTRODUCTION
2. THREE TYPES OF BARRIERS
3. TRADE POLICY IN JAPAN
4. TRADE RESTRICTIONS
Import ban and restrictions
Custom tariff and taxes
5. TARIFF AND NON TARRIF BARRIERS
6. TARIFF QUOTAS
7. PRODUCT CRETIFICATION, LABELLING AND PACKEGING
8. JAPANESE FOREIGN TRADE IN FIGURES
9. CONCLUSION

10. REFERENCES

INDEX
 INTRODUCTION

A trade restriction is an artificial restriction on the trade of goods and/or

services between two or more countries. However, the term is controversial because what

one part may see as a trade restriction another may see as a way to protect consumers from

inferior, harmful or dangerous products.

A trade barrier is defined as “any hurdle, impediment or road block that hampers

the smooth flow of goods, services and payments from one destination to another.”

They arise from the rules and regulations governing trade either from home country

or host country or intermediary

Trade barriers are manmade obstacles to the free movement of goods between

different countries and impose artificial restrictions on trading activities between countries.

Trade barriers are often criticized for the effect they have on the developing world. Because

rich-country players call most of the shots and set trade policies, goods such as crops that

developing countries are best at producing still face high barriers. Trade barriers such as taxes

on food imports or subsidies for farmers in developed economies lead to overproduction and

dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs

also tend to be anti-poor, with low rates for raw commodities and high rates for labour

intensive processed goods. The Commitment to Development Index measures the effect that

rich country trade policies actually have on the developing world.

 Trade barriers are mostly a combination of conformity and per-shipment

requirements requested abroad, and weak inspection or certification procedures at home. The

impact of trade barriers on companies and countries is highly uneven. One particular study

showed that small firms are most affected (over 50%)

THE THREE TYPES OF TRADE BARRIERS

Trade barriers are restrictions on international trade imposed by the

government. They are designed to impose additional costs or limits on imports and/or exports

in order to protect local industries. These additional costs or increased scarcity result in a

higher price of imported products and thereby make local goods and services more

competitive (see also comparative advantage and trade) There are three types of trade

barriers: Tariffs, non-tariffs, and quotas. We will look at all of them in more detail below.

Tariffs

Tariffs are taxes that are imposed by the government on imported goods or

services. They are sometimes also referred to as duties. Tariffs can be implemented to raise

the cost of products to consumers in order to make them as expensive or more expensive than

local goods or services. In many cases, tariffs are used to protect local industries that could

otherwise not compete with foreign producers. Of course, the countries affected by those

tariffs usually don’t like being economically disadvantaged, which often leads them to

impose their own tariffs to punish the other country.

 Non-Tariffs

Non-tariffs are barriers that restrict trade through measures other than the direct

imposition of tariffs. This may include measures such as quality and content requirements for

imported goods or subsidies to local producers. By establishing quality and content

requirements the government can restrict imports because only products can be imported that

meet certain criteria. More often than not, these criteria are set to benefit local producers. In

addition to that, the government can grant subsidies, i.e. direct financial assistance to local

producers in order to keep the price of their goods and services competitive.

Quotas

Quotas are restrictions that limit the quantity or monetary value of specific

goods or services that can be imported over a certain period of time. The idea behind this is to

reduce the quantity of competitive products in local markets which increases the demand for

local goods and services. This is usually done by handing out government-issued licenses that

allow companies or consumers to import a certain quantity of a good or service. Although

technically speaking, quotas are non-tariff measures, they take quite a different approach than

the other measures discussed above. Instead of just making it more difficult or costly to

import goods, quotas actually limit the number of products that can be traded. There is no

way for foreign producers to circumvent such a quota. The most restrictive type of quota is

an embargo, i.e. an entire ban of trade and/or commercial activity concerning a specified

good or service.
Why Are Tariffs and Trade Barriers Used?

Tariffs are often created to protect infant industries and developing economies but are also

used by more advanced economics with developed industries. Here are five of the top

reasons tariffs are used:

Protecting Domestic Employment

The levying of tariffs is often highly politicized. The possibility of increased competition

from imported goods can threaten domestic industries. These domestic companies may fire

workers or shift production abroad to cut costs, which means higher unemployment and a

less happy electorate.

The unemployment argument often shifts to domestic industries complaining about cheap

foreign labour, and how poor working conditions and lack of regulation allow foreign

companies to produce goods more cheaply. In economics, however, countries will continue

to produce goods until they no longer have a comparative advantage (not to be confused

with an absolute advantage).

Protecting Consumers

A government may levy a tariff on products that it feels could endanger its population. For

example, South Korea may place a tariff on imported beef from the United States if it thinks

that the goods could be tainted with a disease.

Infant Industries

The use of tariffs to protect infant industries can be seen by the import substitution

industrialization (ISI) strategy employed by many developing nations. The government of a

developing economy will levy tariffs on imported goods in industries in which it wants to

foster growth. This increases the prices of imported goods and creates a domestic market for

domestically produced goods while protecting those industries from being forced out by

more competitive pricing. It decreases unemployment and allows developing countries to

shift from agricultural products to finished goods.

Criticisms of this sort of protectionist strategy revolve around the cost of subsidizing the

development of infant industries. If an industry develops without competition, it could wind

up producing lower quality goods, and the subsidies required to keep the state-backed

industry afloat could sap economic growth.

National Security

Barriers are also employed by developed countries to protect certain industries that are

deemed strategically important, such as those supporting national security. Defense

industries are often viewed as vital to state interests, and often enjoy significant levels of

protection. For example, while both Western Europe and the United States are

industrialized, both are very protective of defense -oriented companies. 

Retaliation

Countries may also set tariffs as a retaliation technique if they think that a trading partner

has not played by the rules. For example, if France believes that the United States has

allowed its wine producers to call its domestically produced sparkling wines "Champagne"

(a name specific to the Champagne region of France) for too long, it may levy a tariff on

imported meat from the United States. If the U.S. agrees to crack down on the improper

labelling, France is likely to stop its retaliation. Retaliation can also be employed if a trading

partner goes against the government's foreign policy objectives.

 Common Types of Tariffs

There are several types of tariffs and barriers that a government can employ:

 Specific tariffs

 Ad valorem tariffs

 Licenses

 Import quotas

 Voluntary export restraints

 Local content requirements

Trade policy in Japan

Japan's Ministry of Economy, Trade and Industry (METI) is organised into

many bureaus and agencies to formulate and execute a wide range of economic, industry and

trade policies, which are aimed at promoting Japan’s international trade and investment,

while fostering a conducive business environment for sustaining Japan's economic growth.

METI’s Trade Policy Bureau consists of divisions grouped by both geographical

area as well as function, and is the bureau with primary responsibility of administering

Japan’s participation in multilateral institutions as well as bilateral trade relations with all of

Japan’s trading partners.

Japan has concluded 18 free trade agreements (FTAs) and economic partnership

agreements (EPAs) including those with Singapore, Malaysia, the Philippines, Thailand,
Brunei, Indonesia, Vietnam, India, Mongolia, Mexico, Chile, Peru, Australia, Switzerland

and EU. The Japan ASEAN EPA has been effective since 2008.

The Japan-led Comprehensive and Progressive Agreement for Trans-Pacific

Partnership (CPTPP) entered into force on 30 December 2018 among the first six ratifying

countries, namely Japan, Canada, Australia, Mexico, New Zealand and Singapore, and came

into effect in Vietnam on 14 January 2019.

In October 2019, Japan and the US signed a bilateral trade deal which is set to

take effect on 1 January 2020. The agreement consists of tariff reductions on agricultural and

industrial goods, as well as commitments on digital trade.

Trade Restrictions

Import Ban and Restrictions

Japan prohibits the import of certain items including narcotics, firearms,

explosives, counterfeit currency, pornography, and products that violate intellectual property

laws. In addition, Japan imposes restrictions on the sale or use of certain products including

those related to health such as medical products, pharmaceuticals, agricultural products, and

chemicals.

The following articles are prohibited by law:

  Heroin, cocaine, MDMA, opium, cannabis, stimulants, psychotropic substances, and

other narcotic drugs (excluding those designated by Ministry of Health, Labour and

Welfare Ordinance);

 Firearms (pistols, etc.), ammunition (bullets) thereof, and pistol parts;

 Explosives (dynamite, gunpowder, etc.) ;

 Precursor materials for chemical weapons;

 Germs which are likely to be used for bio-terrorism;

 Counterfeit, altered, or imitation coins, paper money, bank notes, or securities, and

forged credit cards;

 Books, drawings, carvings, and any other article which may harm public safety or

morals.

Some imported goods may have a negative effect on Japan industry,

economy, and hygiene, or on public safety and morals. Such goods fall under "import

restrictions" as provided by various domestic laws and regulations. Import permit or prior

approval for these goods is required for inspection or other requisites.

Japan strictly prohibits entry of narcotics and related utensils, firearms, firearm

parts and ammunition, explosives and gunpowder, precursor materials for chemical weapons,

germs which are likely to be used for bio-terrorism, counterfeit goods or imitation coins or

currency, obscene materials, or goods that violate intellectual property rights. Other restricted

items include but are not limited to certain agricultural and meat products, endangered

species and products such as ivory, animal parts and fur where trade is banned by

international treaty.

In addition, Japan imposes restrictions on the sale or use of certain products including those

related to health such as medical products, pharmaceuticals, agricultural products and

chemicals. For these products, Japanese Customs reviews and evaluates the product for

import suitability before shipment to Japan. Licenses from relevant regulatory bodies may

also be required for the importation and sale of those products. The use of certain chemicals

and other additives in foods and cosmetics is severely regulated and follows a “positive list”

approach.

Restricted items include but are not limited to certain agricultural and meat

products, endangered species and products such as ivory, animal parts and fur whose

international trade is banned by international treaty, and more than two months' supply of

medicines for personal use and more than 24 items of cosmetics.

For these restricted products, Japanese Customs reviews and evaluates the

product for import suitability before shipment to Japan. The use of certain chemicals and

other additives in foods and cosmetics is severely regulated and follow a "positive list"

approach. Under the ATA Carnet System, commercial and exhibition samples, professional

equipment, can be admitted without paying duties in the country.

Customs Tariff and Taxes

Japan’s tariff is on average one of the lowest in the world, approximately

2.5% for non-agricultural products.

Japan grants Most-Favoured Nation (MFN) or preferential treatment to a

country or territory that meets one or more of the following criteria:

 It is a Member of the WTO;
  It is covered by a provision of the Cabinet Order under Article 5 of the Customs Tariff

Law;

 It has a bilateral treaty with Japan.

Japan is a signatory to the WTO Information Technology Agreement which has

agreed to eliminate tariffs on most of the information technology products.

In addition to customs duties, a consumption tax of 10% is levied on a wide

range of goods and services. Additional taxes are levied on imported liquors and tobacco

products.

Though tariffs are generally low, Japan has barriers that impede imports of

alien products in the country, viz. technical standards unique to Japan, requirement of prior

experience, regulations favouring local produced products, formal and informal cartels, etc.

Customs Requirements and Documents

A number of documents are required for customs clearance in Japan. An

import (Customs duty payment) declaration form must be submitted to Japan Customs with

the following documents:

 Invoice

 Bill of lading or Air Waybill

 The certificate of origin (where a WTO rate is applicable)

 Generalised System of Preferences, certificates of origin (Form A) (where a

preferential rate is applicable)

 Packing lists, freight accounts, insurance certificates, etc. (where they are deemed

necessary);
  Licences, certificates, etc. required by laws and regulations other than the Customs

Law (where the import of certain goods is restricted under such laws and regulations);

 Detailed statement on reductions of, or exemption from customs duty and excise tax

(where such reduction or exemption is applicable to the goods);

 Customs duty payment slips (where the concerned goods are dutiable).

The commercial invoice should include names of the shipper and consignee

and detail of each commodity in the shipment. The packing list should include the contents of

each container, its gross and net weights in metric measurements.

Tariffs and non-tariff barriers

Tariff

Tariffs are based on the Harmonised System - most duties are ad valorem (per

cent) based on the General Agreement on Tariffs and Trade (GATT) valuation system

approximately cost, insurance and freight (CIF) value (‘Incoterms 1990’).

On average, the applied tariff rate in Japan is one of the lowest in the world. In

addition, import duties on many agricultural items continue to decrease, and tariffs in many

major sectors, such as autos and auto parts, software, computers, and industrial machinery are

zero. However, certain products including leather goods, certain processed foods and some

manufactured goods have relatively high tariff rates. While Japan's import tariffs are

generally low overall, the nation’s average agricultural import tariff (roughly 19 percent) is

among the worlds highest for industrialized countries. By comparison, the average
agricultural import tariff is 9.7 percent in the United States and 16.3 percent in the European

Union.

  The Customs and Tariff Bureau of Japan's Ministry of Finance administers

tariffs. As a member of the Harmonized System Convention, Japan shares the same trade

classification system as the United States (limited to six-digit code). Japan's tariff schedule

has four columns of applicable rates: general, WTO, preferential, and temporary. Goods from

the United States are charged WTO rates unless a lesser "temporary" rate exists. Japan

assesses tariff duties on the CIF value at ad valorem or specific rates, and in a few cases,

charges a combination of both. Japan's preferential system of tariffs grants lower or duty-free

rates to products imported from developing countries.

A simplified tariff system for low-value imported freight valued at less than ¥100,000, such

as small packages for personal imports, simplifies determination of tariff rates. This system

also eliminates the extra time necessary to classify the product and its precise value, and

thereby minimizes customs brokers' handling charges. Importers can choose either the normal

rate or the simple tariff, which could be higher or lower depending on the product.

  Japan maintains tariffs and restrictions on items, including agricultural items,

which are relevant to some Australian exporters.

The Japan Australia Economic Partnership Agreement entered into force in

2015. Tariffs are expected to reduce in a number of product areas, some immediately, some

over several years.

Generalised preferences are granted to developing countries. A ‘self-

assessment’ system designed to expedite customs clearance allows prior calculation of duty

by importers.
The Customs and Tariff Bureau of Japan’s Ministry of Finance administers tariffs. The

average applied tariff rate in Japan is one of the lowest in the world.  Simple average applied

Most Favored Nation (MFN) tariff for Japan, according the WTO data, is as follows:

 Total — 4.3%

 Agriculture products — 15.5%

 Non-agriculture — 2.5%

Japan: Average industry sector MFN applied duties (selected industries)

 Non-electrical machinery — 0.0%

 Electrical machinery — 0.2%

 Transport equipment — 0.0%

 Manufactures,   — 1.1%

 Clothing — 9.2%

 Chemicals — 2.3%

Non-tariff barriers

Potential exporters to Japan should not be deterred by a widely perceived

view that the market is closed and heavily regulated. Barriers to market access for

merchandised and value added goods are mainly informal. Examples of informal barriers

include, successful entrance into business networks, maintenance of market presence and

product quality assurance.

 Formal restrictions, mostly on agricultural produce, do exist and the

Australian Government has a range of market access issues, which it continues to work on

with the Japanese Government on behalf of Australian industry.

Customs laws, regulations and import processes are strict and need to be

clearly understood by exporters. Find out more about customs laws

Import licensing may be required for some imports. Two categories exist:

1. Import Quota (IQ): Quotas set by Ministry of Economy, Trade and Industry

(METI), range from moderately to severely restrictive. Quotas are imposed on a

variety of foods including some dairy products, seafood, cereals and grains. Importers

must obtain an import quota allocation certificate from METI, which entitles the

importer to receive an import licence on application to a foreign exchange bank.

2. Import Declaration (ID): a wide range of raw materials, semi-finished products and

manufactured goods can be imported without prior approval from METI. Completed

ID forms are freely verified by authorised foreign exchange banks on application,

prior to import.

Goods must be cleared through customs within the validity period of the

licence (usually six months). Imports from Australia, which include most fresh fruits

(excluding certain oranges, mangoes, Fuji apples, pineapples and green bananas) are subject

to restrictions.
Tariff Quotas

The tariff quota system charges a lower duty rate (primary duty rate) on

imports of specific goods up to a certain quantity, but a higher duty rate (secondary duty rate)

on quantities exceeding that volume. This system protects domestic producers of similar

goods but also benefits consumers with the lowest tariff rates possible. The tariff quota

volume for each allocation can be applied in one of two ways: according to the order in

which the request was received, or according to prior allocations. Japan utilizes the prior

allocation method. The tariff quota system does not restrict direct imports, since imports can

be made without a tariff quota certificate, provided high duty is paid. Regarding footwear,

quota allocations to individuals or companies are based on historical trade performance in the

importation of footwear. Japan has allocated quota not to quota traders but to footwear

importers, so business can take place as per footwear importers requirements. At the same

time, new importers can acquire special quota for new importers. The Government of Japan

implements this system in accordance with governmental regulation. Therefore, Japan

believes that new importers have opportunities to obtain quotas under the current quota

allocation system.
Product certification, labelling and packaging

Labelling

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.

Many food and consumer products are subject to very specific labelling

requirements and importers should always be consulted on proposed labelling.

Containers of canned and bottled goods, soft drinks, small goods, frozen

foods and pre-packed foods must be marked and labelled solely in metric measurement by the

Australian exporter, even though responsibility for metric measuring rests with the Japanese

distributor.

Drug usage directions should be printed in Japanese. Special labelling

regulations apply to:

 electrical appliances

 soap

 aluminium foil and plastic film

 some kitchen utensils

 cleaning materials

 toilet and bath fittings

 certain furniture
  hot water bottles

 cosmetics.

Packaging

Use of straw packing materials is prohibited. Proposed packaging should be

cleared with importers as they have definite preferences. Goods should be marked according

to normal commercial practice.

Special certificates

Animals, plants and their products require health certificates issued by an

approved authority in the country of origin. Frozen vegetables and fruit must be accompanied

by a certificate of condition (Form E46) instead of a phytosanitary certificate.

Meat for human consumption requires an additional certificate, issued by an

approved authority in the country of origin, stating that the animals were free from designated

infectious diseases prior to slaughtering and that subsequent processing was under hygienic

conditions.

Imports of food require a food import permit issued by the Ministry of Health

and Welfare. Alcoholic beverages may require a certificate of age.

Electrical appliances must conform to the Electric Appliance Control Law, with

certain goods requiring type approval before being permitted to be sold in Japan.
 Machine tools under a year old must be accompanied by a certificate of date of

manufacture.

Documentary requirements

Fax signatures are not permitted. Minor typing and other errors in

documentation often result in serious delays and complications at point of entry

Pro-forma invoice

No special requirements.

Commercial invoice

A minimum of three copies are required and must be signed by the supplier and

include the following details:

 marks and serial numbers of packages

 description and quantity of goods

 CIF value (Incoterms 2010)

 place and date of preparation

 destination and consignee

 name of vessel

 import licence number

 conditions of contract relating to determination of the value

 It is strongly recommended, whenever possible, to include the HS Commodity

Classification of the goods to be imported. Complete invoices and packing lists should be

forwarded promptly to the importer by airmail.

JAPANESE FOREIGN TRADE IN FIGURES

Foreign trade is an essential element of the Japanese economy, but the country

is not fully open and imposes extensive non-tariff barriers, especially in the agricultural

sector. Japan is the world's 4th largest importer and exporter of goods, and foreign trade

accounts for 36.8% of the country's GDP. Japan mainly exports motor vehicles (13.9%), auto

parts and accessories (4.6%), electronic integrated circuits and micro assemblies (3.9%),

ships and boats (1.9%) and petroleum oils (1.6%). The country's main imports include

petroleum oils (10.1%), petroleum gas and other gaseous hydrocarbons (6.2%), transmission

apparatus for radio-telephony (3.4%), coal and similar solid fuels (3.2%), and electronic

integrated circuits and micro assemblies (2.6%).

According to the latest IMF data, the volume of exports of goods and services is expected to

be 9.6% for 2021, up from the negative rate recorded in 2020 (-11.6%) due to the global

economic crisis following the outbreak of the Covid-19 pandemic. The same applies to the

volume of imports, which is expected to increase by 8.3% in 2021 compared to 2020, when it

reached a minus rate of -8.3%.

The country's main partners are China, the United States, South Korea,

Australia, Hong Kong, Saudi Arabia, and Thailand. Japan is currently negotiating a number of free trade

agreements. In March 2018, Japan and ten other countries signed the Comprehensive and Progressive

Agreement for Trans-Pacific Partnership (CPTPP). The EU and Japan have concluded an Economic

Partnership Agreement, which entered into force in 2019. Japan is the EU’s second-biggest trading partner

in Asia after China, and together they both account for about a quarter of the world's GDP. In November
 2020, Japan signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free

trade agreement in history. According to the Joint Leaders’ statement signed on 15 November 2020, RCEP

will "cover a market of 2.2 billion people, or almost 30% of the world’s population, with a combined GDP

of US$ 26.2 trillion or about 30% of global GDP, and accounts for nearly 28% of global trade (based on

2019 figures)".

The country traditionally has a large trade surplus, however, in 2019 its trade

balance dropped, reaching USD 3,5 billion. That was mainly due to plummeting shipments to China and

regional markets, as weak global demand and US - China trade frictions took their toll on the trade-reliant

economy. According to WTO, Japan's exports of goods reached USD 705.6 billion in 2019, while imports

amounted to USD 721 billion. Concerning the service sector, 2019 level of exports raised to USD 200.5

billion, as well as imports which reached USD 201.7 billion.

Foreign
2015 2016 2017 2018 2019
Trade Values

Imports of 648,494 606,927 671,434 748,488 720,957

Goods (million
USD)

Exports of 624,939 644,933 698,367 738,143 705,564

Goods (million
USD)

Imports of 173,689 184,710 190,822 198,837 201,713

Services (millio
n USD)

Exports of 157,863 173,821 181,599 188,812 200,541

Services (millio
n USD)
 CONCLUSION

In conclusion trade barriers make trade so much easier between countries. It has its benefits

when it comes to producing more of a product and making more money from tariffs from

products being taxed. Each trade barrier has its own purpose when it comes to helping trade.

In the end trade barriers make all the complicated stuff that goes along with trading a little bit

easier on the producer. Trade Barriers are very important when it comes to international

trade, do it makes things easier.

 
REFERENCES

 https://en.wikipedia.org/wiki/Trade_policy_of_Japan

 https://research.hktdc.com/en/article/MzM0NTcxMjg4

 https://www.austrade.gov.au/australian/export/export-markets/countries/japan/doing-

business/tariffs-and-regulations

 https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp

 https://tradebarriers.weebly.com

 https://www.globaltrade.net/international-trade-import-

exports/f/business/text/Japan/Trade-Policy-Japan-Import-Tariffs.html
 ACKNOWLEDGMENT

I would like to express my special thanks of gratitude to my teacher , who

gave me the golden opportunity to do this wonderful project of International Economics on

“Trade Restrictions of Japan” , Who also helped me in completing my project. I came to

know about so many new things I am really thankful to them.

Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing

this project within the limited time frame.