WORLD TRADE  
ORGANIZATION  TN/TF/W/42 
3 June 2005  
 
(05-2266) 
Negotiating Group on Trade Facilitation Original:   English 
   
COMMUNICATION FROM JAPAN 
  
 The following communication, dated 1 June 2005, from the Delegation of Japan, is being 
circulated in advance of the Negotiating Group meeting of 13-14 June.  
_______________ 
 
 
EXPLANATORY NOTE ON RISK MANAGEMENT – JAPAN’S EXPERIENCE 
  
I. INTRODUCTION 
1. This paper elaborates the idea of risk management in trade procedures as it was proposed in 
TN/TF/W/17 and introduces the experience of Japan with this concept, focusing in the area of 
customs procedures.  We hope that this submissi on will contribute to deepening the understanding of 
risk management among the Members.  We also h ope Members recognize that this concept can be 
applied not only to customs but to othe r trade procedures required by governments. 
 
II. DEFINITION OF RISK MANAGEMENT 
2. Occasionally, trade facilitation and customs control are viewed as conflicting concepts.  
However, both concepts are simultaneously realizab le by introducing the idea of risk management, 
where in-depth inspection is conducte d when the risk is considered to be high and where immediate 
import permits are given when the risk is considered to be low.  Therefore, risk management is an 
indispensable element for trade facilitation while maintaining appropriate control. 
 3. The benefits of this concept have been wi dely recognized in other relevant international 
organizations.  For example, the following excerpt  from the WCO Guidelines on the Revised Kyoto 
Convention could be a useful reference in un derstanding the concept of risk management: 
 
"For Customs administrations there is always an element of risk in facilitating the movement of 
goods and persons.  The extent of controls to en sure compliance with the laws and regulations 
which the Customs are responsible for enforcing s hould be proportionate to the level of assessed 
risk. 
 "Customs administrations today are required to  provide extensive facilitation while maintaining 
control over the international movement of goods, means of transport and persons.  The level of 
risk is determined in the context of the prioriti es of the Customs administrations e.g. whether the 
priority is collection of duties and taxes or ch ecking prohibitions and restrictions or any other 
specific area that has been identified."
1 
 
4. Based on this thinking, the General Annex Chapter 6 of the WCO Revised Kyoto Convention 
requires customs to use risk management for customs control purposes as follows: 
                                                      
1 WCO, Kyoto Convention – General Annex – Chapter 6 Guidelines on Customs Control , July 2000. TN/TF/W/42 
Page 2  
 
 
Standard 6.3
 
In the application of Customs control, the Customs shall use risk management. 
 Standard 6.4
 
The Customs shall use risk analysis to dete rmine which persons and which goods, including 
means of transport, should be examined and the extent of the examination.  Standard 6.5
 
The Customs shall adopt a compliance measurem ent strategy to support risk management. 
 
III. JAPAN’S EXPERIENCE IN THE AREA OF CUSTOMS 
5. Recognizing the benefit of utilizing risk mana gement as an underlying concept to effectively 
cope with the increasing volume of trade with limited human and financial resources available, Japan, in the area of customs procedures for example, has introduced this concept on a step-by-step basis and 
has been applying control proportionate to th e assessed risk based on customs’ experience, 
information, analysis of risk indicators such as importer, producer, port of departure, import value, 
and type of goods.  Furthermore, in view of the be nefits that risk management can bring to customs 
administration, Japan has been providing technical assistance in this area to developing-country officials, either by our own initiative or in cooperation with the WCO.  
6. For example, smuggling of import prohibited goods is considered a risk to customs 
administration for the danger it poses for social stab ility and public health.  To effectively cope with 
such a risk, customs accumulate past import records and relevant information for each importer, in an 
integrated and organized manner.  Next, for indi vidual import declarations, on the basis of risk 
indicators that are likely to lead to detection of  smuggling (importer, type of good, volume, value, 
source of goods, etc.), customs decides to conduct an in-depth inspection of imported goods if the risk 
of smuggling is considered to be high or immediately a llow import if the risk is considered to be low.  
This risk assessment is continuously updated based  on the latest import records thereby enabling 
customs to assess risk in import declarations on the b asis of the latest information.  This has allowed 
customs to simultaneously pursue the policy objective of facilitation and control.  Furthermore, with a 
view to realizing both objectives in a more e fficient manner, Japan customs implemented CIS 
(Customs Intelligence Database System) in 1991 for accumulating information pertaining to import 
declarations.  In addition, the concept of risk management is being used in export procedures and 
other trade procedures such as quarantine.  7. The introduction of such a concept has enable d Japan to implement various trade facilitation 
measures for a legitimate flow of goods while taking appropria te actions against ille gal transactions or 
movement of goods.  These measures include, but are not limited to, the following:  
- Simplified Declaration Procedures (since 2001) 
Release of goods before declaration for customs duty payment  
- Instant Import Permit Upon Arrival System (since 1996) 
Import permit immediately after the goods are brought into Customs Areas 
 
- Pre-Arrival Examination System (since 1991) 
Completion of customs procedures before the arrival of cargoes 
 
- Deferred Payment System for customs duty and other taxes (since 1989) 
Payment of customs duty and other taxes within 3 months after release of goods 
  TN/TF/W/42 
 Page 3 
 
 
IV. TIME RELEASE SURVEY 
8. In our proposal on Article X in TN/TF/W/8, we proposed the publication of a standard 
processing period for major trade procedures.  In Jap an’s case, as a result of introducing the measures 
mentioned in paragraph 7 above, th e time required for the release of goods has been substantially 
reduced and the result of the time release survey h as been published (see annex 1 and 2).  At the same 
time, appropriate customs duty collection and effici ent control against the import of prohibited goods 
have been maintained.  According to a survey cond ucted by the private sector in Japan, it is reported 
that not only the use of IT but also the improvement  of the regime itself have greatly contributed to 
such a reduction in the time required for release of goods.  Japan has been introducing this survey 
method in APEC and other relevant fora and has been providing technical assistance to developing 
countries, either by our own initiative or in cooperation with the WCO. 
   TN/TF/W/42 
Page 4 Annex 1  
 
Import Lead Time required for Release of Goods  
(Sea Shipment) 
       Changes in Import Lead Time since 1991
 
 
26.131.135.135.439.445.247.6
36.837.84649.563.784.994.5
4.34.95.610.213.119.826.1
0 20 40 60 80 100 120 140 160 1807th (1997)6th (1996)5th (1995)4th (1994)3rd (1993)2nd (1992)1st (1991)
 
 
   
 
    
 Port entry  Carrying-in Declaration Permit (7.0 days) 
(6.2 days) 
(4.8 days) 
(4.0 days) 
(3.6 days) 
(3.1 days) 
(2.8 days)   TN/TF/W/42
 Page 5Annex 2  
 
Definition of Import Lead Time  
     
 
    
 
    
 
     
 
    
 
     
 
  
__________ Order 
Loading 
Carrying vessel departure 
from export port 
Carrying vessel arrival at 
import  port 
Unloading 
Import declaration 
Import permit 
Freight carrying-out 
Delivery Overseas  
consignor 
Overseas Port 
Domestic Port 
 
 
Bonded  
storage area 
 
(container  
yard) 
 
 
 
 
 
Consignee Definition of 
lead time in 
Study General 
definition of 
lead time The time required for the release of goods from the arrival of cargo to 
Customs im port permission