Amend HS code in 2012

HS code was changed in January 2007, and I had hard time to cope with this change, e.g. updating corporate classification system. Now, the next big wave is expected on 1 January 2012.

WCO headquarter adopted the amendments to the international HS goods nomenclature.
These amendments will be submitted to the WCO Council for approval in June 2009.

Main points to be amended are as follows:

• The use of HS as the standard for classifying and coding goods of specific importance to food security and early warning data falling within the ambit of the Food Security Information for Action Programme of the UN Food and Agricultural Organization (FAO).
  
• Create additional subheadings for the identification of chemicals and pesticides controlled under the Rotterdam Convention and ozone depleting substances controlled under the Montreal Protocol.
  
• Simplified by the deletion of more than 40 headings or subheadings due to low volume of trade. Certain products will be separately identified in either existing or new headings. Advances in technology are also reflected in the amendments.

Once approved by the WCO Council, all amendments, except those for which an objection has been timely notified to the WCO Secretariat, will enter into force for all Contracting Parties to the HS convention on 1st January 2012.

It looks far too away future, but good preparation always makes you smart guy.

(Source: http://www.wcoomd.org/files/1.%20Public%20files/PDFandDocuments/Highlights/HS%202012%20-%20HSC%20EN%20v3.pdf )

Refund of CVD

As reported in this blog, Counter Vailing Duty ("CVD") of Hynix DRAM made in Korea was abolished as of April 23. No more CVD in importing into Japan.

One important topic for this CVD is the paid CVD can be refunded to importers in Japan.
As CVD is a counter-measure to the subsidy to Hynix by Korean governmental financial institute, in order to make the industry competitiveness equal status, Japanese decided to impose CVD to Hynix Korea DRAM. However, based on the protest by Hynix, Japanese government have re-investigated whether the duty rate of CVD was appropriate or not.
The result is that there is no more ground of CVD in current situation, and the effect of the subsidy was disappeared in some years ago, CVD was abolished.
The refund of the CVD is the amount of difference between actually paid CVD and "should-be CVD amount", which is, e.g. JPY3.98 per 256MB per item. (Please be noted the actual calculation should be more complicated based on the procedure sheet by Customs.)

As the implementation of CVD was first time in history in Japan, not many of traders know this refund system. Although the check of paid CVD result and the calculation of the refund would be complicated and troublesome, it would be worth while doing so for traders who paid CVD a lot.

Good luck!

(Source: Cabinet Order to abolish CVD: http://www.customs.go.jp/kaisei/seirei.htm#H21s122
Report of investigation of CVD: http://www.customs.go.jp/kaisei/kokuji/H21kokuji/H21kokuji0140.pdf
Procedure of refund of CVD: http://www.customs.go.jp/kaisei/tsutatsu/H21tsutatsu/H21tsutatsu0476.pdf )

Concern - FEFTL amendment (2)

Following the yesterday's article, I have another concern for implementation of amended FEFTL in export control of technology transfer, and actually this is much more important for operation of real business world.

(2) When is the point in time of export in technology?

Question: If Japanese company export group of various software to foreign country through Internet and the software can be used only after the exporter give "virtual key" to foreign company, when is the point in time of export in technology? The assumption is that the software works only after activating with key, and foreign company cannot use the other software without the key. The security by key is never broken. The point of time of export is whether:
a) the time when foreign company receive the software? or
b) the time when they activate the software by key?

The answer is, it is b). The time when the software is activated by key.

This is based on the "Ekimu Tsutatsu" (Notification), it prescribe that the point of export of technology in such case is "the time when the technology is transferred to non-resident".
Trust me, this answer was verified by METI, and even in US EAR's case, the answer is same.
Actually, many of software company have similar business model. Give series of software to customers initially, and then provide activation key depending on customer needs and bill to customer based on the activation key accordingly.

Now, my concern is the amended new FEFTL have new provision that the permission is required if document, drawing, or electric media which have sensitive technology is exported.
In addition, this is applicable to transmission of technology. The amended FEFTL impose more "cross boarder" check of technology transfer. This is understandable to cope with actual business world and make the export control more reliable and practical.

Then, concern coming to my mind, the activation key business model as above may be affected by amended law? The software company may need to get license for not only key activated software, but also for non-activated software provided to overseas company even if it is never be used?

It is too early to give definite answer before Cabinet Order, Ministerial Order, and related notification are announced. We need to check and read carefully after they are disclosed.

As usual, the devil is in the details. Stay tuned.

Concern - FEFTL amendment (1)

As amendment of FEFTL was officially approved by Diet yesterday, this will be entry into force within one year. This amendment will impose more strict export controls on technology transfers. Although the Cabinet Order and Ministerial Ordinance is not yet announced, which provide more details for implementation, I will raise some concerns in this new rule.

(1) Japanese export rule Extra Territorial??
Unlike US export control, current Japanese export control rule is NOT extra territorial.
However, by reading the amended law carefully, it is understood that the new amended rule can be applied to non-residents, thus it may be extra territorial export control!

For example to be specific, new article 25 of FEFTL says,
"When a resident or a non-resident intends to conduct transactions・・・ with a non-resident, shall obtain　・・・　 permission ・・・　to　the transactions."

Current law stipulate only from a resident to a non-resident, but amended new law include a non-resident as one who need to obtain export license. This may mean the law covers the transaction from third country to third country by foreigners. This may give broad interpretation that Japanese export control may be extra territorial.

As long as I have heard, METI don't have intention to make the implementation be extra territorial. However, trader need to check more details notification closely after it is announced.
If required, encourage to make public comment in concerned points.
If somebody find loophole in law, such guy may enforce the law intentionally with unexpected way.

Amendment of FEFTL approved in the Diet

As of today April 21, 2009, the amendment of FEFTL (Foreign Exchange and Foreign Trade Law) was officially approved in the Diet in Japan. After the approval, the implementation is ruled as within one year.

This amendment of FEFTL is to impose more strict export controls on technology transfers and increases penalties for export control violations.
(Summary of change is to refer my blog in March 2. http://japantradecompliance.blogspot.com/2009/03/japan-feftl-amendment.html )

The amendment of FEFTL have been since 1987, namely 22 years interval.

(Source: CISTEC web site: http://www.cistec.or.jp/service/gaitame_kaisei.html )

Japan-Peru EPA negotiation start

According to METI news release on April 14, it was officially announced that Japan will start EPA negotiation with Peru. The detailed schedule outline will be discussed later.

As for import from Peru to Japan, the main items are zinc ore, copper, and fish meal.
From export from Japan to Peru, its 60% of amount are vehicle related products.
Currently Peru impose 9% of customs duty to passenger vehicle and bike.
As Peru have already started EPA with Korea (under negotiation) and China (signed), Japanese industries have concern about substantial inequality in customs duty compared with rival countries.

(source: http://www.meti.go.jp/press/20090414005/20090414005.pdf )
(source: http://www.jetro.go.jp/news/releases/20090325933-news )

CVD for Hynix DRAM will be abolished

On April 13, METI and MOF announced Japan will abolish countervailing duty ("CVD") for Hynix made in Korea DRAM, which is currently 9.1%.
This is expected as effective on April 23.

This CVD for Hynix Korea DRAM was implemented from January 2006, with the reason that Hynix was supported by subsidy by Korean government and it was used to lower the price of DRAM, consequently Japanese DRAM manufacturer negatively affected by that.
Initial CVD rate was 27.2% as of January 2006. Korea protested it to WTO, then after the investigation, the rate was lowered to 9.1% in September 2008.
Since then, re-investigation was made and now it was announced that the subsidy by Korean government is no longer effective in current situation, thus Japanese government decided to abolish this CVD.

Source: METI web site http://www.meti.go.jp/press/20090413002/20090413002.pdf
MOF web site: http://www.mof.go.jp/singikai/kanzegaita/siryou/kanb210413.htm

Vietnam back-to-back CO in AJCEP

According to the announcement by Japanese METI on April 8th, Vietnam have limitation of issuance of back-to-back C/O (Country of Origin) in AJCEP, which was implemented in Dec 01, 2008.

Same manner as ordinary C/O, Vietnam's Ministry of Industry and Trade （商工省） have authority to issue AJCEP C/O.

In issuing back-to-back C/O by Vietnam, trader need to understand the commodities must be under control of Vietnam customs. For example, the commodities under bonded area or EPA (Export Processing Zone) are OK to issue back-to-back C/O, but if they are after import customs declaration, Vietnam authority will NOT issue back-to-back C/O, according to the announcement.

This could be operational limitation of making use of back-to-back C/O. For Japan, back-to-back C/O system is first time to handle in AJCEP, the operational guidance or information of back-to-back C/O is not enough so far.

(Source: METI web site http://www.meti.go.jp/policy/trade_policy/090408AJCEPannouncement.pdf - Japanese only)

Japan customs valuation criteria update - assist in manufacturing

Japan customs issued notification on March 31, 2009 to update customs valuation criteria, under Finance Customs notice #368, and effective on April 01, 2009.
One of them is criteria change in customs valuation rule traders need to know.
Here is summarize of important one, which is "assist element" in manufacturing.

Customs Tariff Law Basic Notification 4-2-3, Guidance of inspection cost for imported goods

In customs valuation rule, Customs Tariff Law Basic Notification 4-2-3 describe as "the cost for inspection of goods which buyer go to seller's site and inspect the goods in seller's manufacturing process is NOT included in transaction value".
However, if the buyer is involved in "work of manufacturing" other than inspection work, such cost relating to manufacturing must be added into transaction value.

As major manufacturers' supply chain is getting global, it happens quite often that engineers in headquarter visit overseas manufacturing site and provide technical support.
It has been challenging issues how to treat such cost of technical support, whether to include in customs transaction value or not.
Update in basic notification this time provide much clearer criteria in such a case.

Former notification provided the definition of "manufacturing work" to be added to customs transaction value as below four criteria.

1. Work for processing or manufacturing
2. Production control
3. Operaiton progress control
4. Transportation for processing or manufacturing

Apparently, 1 and 4 are understandable as manufacturing work, but 2 and 3 have vague meaning, including management work, and difficult to judge in real operation. Update of notification this time deleted both 2 and 3, then only 1 and 4 remain. This update would give much clearer definition!

In addition, as expenses to be added to customs transaction value for person who engages in manufacturing work, the former notification provided following five elements.

1. Voyage expense (including preparation expense)
2. Expense during the stay
3. Labour cost (including wage and bonus in home country)
4. Expense for taking care of absent home during the trip
5. Other expenses related to above.

It looks former notification covered all kinds of related expenses broadly! Update this time focus more specifically and prescribe only as below expenses.

1. Voyage expense (including preparation expense)
2. Expense during the stay
3. Wage (expense equivalent to direct labor cost)

In the new notification, it is not required to include bonus or welfare program expense into customs transaction value. This criteria change could be positive news for global manufacturing players who have been worried about definition of customs valuation assist elements.

(Source: http://www.customs.go.jp/kaisei/tsutatsu/H21tsutatsu/H21tsutatsu0368/H21t0368_annex02.pdf - Japanese only)