WORLD TRADE  
ORGANIZATION   
G/STR/Q1/JPN/17 
21 November 2011 
 (11-6040) 
Working Party on 
State Trading Enterprises Original:   English 
 
 
 
STATE TRADING 
 
Replies to Questions Posed by AUSTRALIA1 Concerning the New and 
Full Article XVII Notifications of JAPAN2 
   The following communication, dated 27 October 2011, is being circulated at the request of the Delegation of Japan.    
_______________ 
 
 
Rice, Wheat and Barley 
 Reason and Purpose (Section 2(a), p.5) 
 
Japan has stated that the rationale for the Rice, Wheat and Barley STEs in the 
promotion of national life and the economy.  Australia notes that the Japanese Cabinet Office, 
recently reported recently that (Second Report  on Regulatory and Structural Reform 
(21 July 2011, p.11)):  "Competition between businesses which are trying to purchase quality 
products at low prices is obstructed by the low level of liberalisation evidenced in state trading, 
through which private companies purchase wheat,  barley, dairy products ...  By allowing 
private companies to give greater scope to thei r originality and ingenuity, competition between 
these companies will be enhanced, which in tu rn will benefit Japanese consumers … [Further,] 
the elimination or simplification of Japan's st ate trading system would contribute to greater 
administrative efficiency".  Does Japan have any plans to implement changes to its STE 
program in line with the Cabinet Office report?    
Reply 
  Japan is not considering the elimination or simp lification of its state trading system mentioned 
in the Second Report on Regulatory and Structural Reform (21 July 2011).   
                                                      
1 G/STR/Q1/JPN/15.   
2 G/STR/N/13/JPN.   G/STR/Q1/JPN/17 
Page 2  
 
  Description of the Functioning of the State Trading Enterprise (Section 3(a), p.5) 
 
Could Japan explain how the STE collects pa rt of the out-of-quota- tariff on out-of-
quota imports of rice, wheat and barley?  How mu ch of the over-quota tariff (and/or non-tariff 
duty) accrues to the STE and how is this calcul ated?  Could Japan detail how it considers the 
factors in Article XVII (b) of the GATT when collecting these mark-ups?    
Reply 
  Out-of-quota-duties on out-of-quota imports of rice, wheat and barley, bound in Japan's 
schedule, are "the sum of tariff and an amount collected  by the Government of Japan or its agents", as 
is indicated in notes to Section I-A of PartI.3 of th e schedule.  "Part of the out-of-quota-tariff" in the 
question is "an amount collected by the government of Japan or its agents".  This amount is collected 
by MAFF as an administrative organ and is 292 yen pe r kilogram for rice, 45.20 yen per kilogram for 
wheat, and 28.60 yen per kilogram for barley.  They are calculated as the difference between the 
bound out-of-quota duty and the amount of tariff pr escribed in the domestic  tariff related law. 
 
As is explained above, the amount collected is not a mark-up, but a part of the bound out of 
quota duty, and MAFF acting as a state-trading enterpri se does not interfere in out-of-quota imports of 
rice, wheat or barley.  Therefore, Article XVII of  the GATT is not applied to out-of-quota imports. 
 
How Export Prices are determined (Section 3(e), p.6) 
 
Could Japan explain how Japanese companies ca n be exempted from paying mark-ups 
on imported wheat if they export the same vol ume of wheat overseas?  Does this (re)exported 
wheat need to be the same imported product, or ca n it be domestic product?  Can it also include 
processed wheat products (such as noodles)?  If so, how are these grains versus processed 
volumes calculated and what conversion factors are used?    
Reply 
  The imports of wheat which is used for manufacturing processed products for exports are not 
subject to State trading.  Therefore, mark-up is not charged for such imported wheat.  All the wheat 
imported under this scheme must be used for ma nufacturing processed products that are exclusively 
exported. 
 
Brief Description of Market Structure (Section 3(h), p.6) 
 
Could Japan explain the government's conn ection to the National Rice, Wheat and 
Barley Improvement Association?  Why are tend ers of domestically produced wheat transacted 
to within plus or minus seven per cent of a "sta ndard" or fixed price set by the Association?  
 
Reply 
  The National Rice, Wheat and Barley Improvement Association is a private entity which 
operates the tender of domestically produced wheat. 
  The price limit placed is determined thro ugh the annual discussion between agricultural 
producers associations and users associ ations, with a view to preventing volatility in prices due to the 
weather as well as to the fluctuation in the volume of  production that is characteristic of wheat.  The 
government is not involved in this framework.    G/STR/Q1/JPN/17 
 Page 3 
 
 
  Supporting Table I (p.13) 
 
The marks-ups for imported wheat and barley are listed in this table as 17 yen/kg and 
7 yen/kg, respectively.  Are these actual applie d mark-ups for all tenders?  Or monthly or 
quarterly "target" mark-ups for indivi dual tenders under the General Import?  
 Reply 
 
 The mark-up for wheat, 17 yen/kg, is a yearly target for the General Import tenders. 
 
 All imports of barley are under the SBS tenders .  The mark-up for barley, 7 yen/kg, is applied 
for all barley tenders as the minimum amount.  
Australia understands that the STE was not able to extract mark-ups from import 
wheat under the General Import during the period  September 2007 to Apr il 2008.  Could Japan 
explain why this fact is not reflected in the table, which lists mark-ups throughout that period as 17 yen/kg? 
 
Reply 
 
That is because the mark-up for wheat (17 yen/kg) is a yearly target.   
 
Since all state-traded barley is traded through Simultaneous Buy Sell (SBS) tenders, 
where the purchase and resell price fluctuate with global prices, how can the mark-up remain at 
a constant 7 yen/ kg as depicted in the table?  Is this a "target" or minimum mark-up figure?   
 
Reply 
  The mark-up for barley, 7 yen/kg, is collected as the minimum amount under SBS tenders.  
Milk Products 
 
Description of the Functioning of the State Trading Enterprise (Section 3(a), p.8) 
 
ALIC appears to accrue rent on both in-quo ta and out-of-quota imports.  Could Japan 
clarify the process through which ALIC collects pa rt of the tariff (and/or non-tariff duty) on 
over-quota imports of designated dairy products ?  If ALIC's rent on out-of-quota imports is 
automatically fixed at the bound rate, does this  imply that ALIC generates more rent per 
kilogram from out-of-quota than in-quota trade?   
 
Reply 
  For designated dairy products, a part of bound out-of-quota duty is collected by the agent of 
the government.  More concretely, ALIC, as a governme nt agent, buys designated dairy products from 
importers, and then sells them back to them while  collecting the balance of buying and selling amount 
as a part of the bound rate of duty.  It is exercised in line with notes to Section I-A of part I.3 of 
Japan's Schedule.  
 For in-quota imports, ALIC collects the mark-up within the condition prescribed in Section I-
B of part 1.3 of Japan's Schedule.   G/STR/Q1/JPN/17 
Page 4  
 
  How the Resale Prices of Imported Produc ts are determined (Section 3(f), p.8) 
 
Could Japan explain why SBS tenders have been introduced for whey for stock feed use, 
dairy spreads and butter oil, but not for other desi gnated dairy products such as milk powders?  
Why have SBS tenders for butter only been intro duced on an ad hoc or "emergency" basis?  
What is the rationale for this application?  
Reply 
  In order to stabilize the supply and demand situa tion, the imports of d esignated dairy products 
are basically made through General tender.  SBS tende rs are used for certain dairy products for which 
there are especially a wide variety of demand from domestic users in terms of quality and price, such 
as whey, processed whey and dairy spreads. 
 
 In addition, SBS tenders are also used in lim ited occasions, when the supply of a certain dairy 
product is seriously in short that it is apparent that the imports are urgently needed.   
 
Brief Description of Market Structure (Section 3(h), p.8) 
 
In light of recent increased butter imports by the STE, could Japan explain why the 
government prevented the activation of the vo lume safeguard for butter (through issuing 
Government Ordinance No.306, 30 September 2 011)?  In the past, when the butter volume 
safeguard was similarly triggered by the STEs own imports, the government did not prevent the activation of the safeguard, even in the fact  of domestic supply shortages.  Why does the 
Government allow the activation of the safeguar d in certain situations but not in others?  
 Reply 
 
 Volume-based safeguard is, as principle, i nvoked when import volume exceeds the trigger 
level since such a case causes serious in jury to the domestic industries. 
 
 However, the domestic law stipulates that volume-based safeguard may not be invoked in 
exceptional case that there would be no potential to  cause serious injury to the domestic industries 
considering imports trend of the commodity in quest ion and other relevant circumstances.  For butter 
this year, the demand-supply situation was such that it was regarded as the case in accordance with 
the above terms. 
 
Supporting Table I (p.17) 
 
Could Japan explain why no mark-ups are listed for any of the dairy products in 
Table I?  Could Japan provide the mark-ups as applied for this STE?    
Reply 
 
 According to the guidelines for Table 1, Memb ers may notify either "average import price 
and average representative domestic sales price" or "mark-up".  Japan notify "average import price 
and average representative domestic sales price".   
 
Other  
Could Japan clarify the procedure through which importers of "designated sugar" (for 
example, raw sugar with a polarimetric readi ng of below 98.5 degrees) are required, under  G/STR/Q1/JPN/17 
 Page 5 
 
 
  Article 5(1) of the Sugar and Starch Price Adjustment Law (2007)3, to sell their imports to 
ALIC?   
 
Reply 
 
 All importers of Designated Sugar are re quired to sell their imports to ALIC under 
Article 5(1) of The Sugar and Starch Price Adjustment Law.    
 More concretely,  
  (1) The importer submits the application fo rm for selling of the designated sugar to 
ALIC. 
 (2) Then ALIC purchases the sugar from the importer at the Average Import Price (AIP) 
decided in accordance with Article 7 of the Law. 
 
Could Japan also clarify the procedure th rough which ALIC then resells the same 
designated sugar back to the same importer under  Article 8(1) and (2) of  the Sugar and Starch 
Price Adjustment Law (2007).  This latter sectio n stipulates, "To conduct the resell, when ALIC 
purchases the designated sugar as stipulated in Ar ticle 5(1), it may attach the condition that the 
seller must repurchase the designated sugar".   
 
Reply 
  ALIC is required to resell the sugar which th ey bought from the importer back to the same 
importer under Article 8(1).   
 
 To conduct the above, ALIC, conc urrently with the purchasing at AIP, resells the sugar to the 
importer at the price provided for in Article 9, by which the levy is added to AIP. 
 
Could Japan clarify why this particular a rrangement for sugar (which requires certain 
importers to sell and then repurchase their produc ts to and from ALIC at different prices) is 
not notified? 
 
Reply 
 
 These procedures are stipulated only for collec ting levy by ALIC: ALIC does not impose any 
restriction on importing or selling of Designated Sugar.  Therefore Japa n doesn't notify them as a state 
trading. 
 
  
__________  
                                                      
3 "Those who make an import declaration … of raw sugar, other types of sugar or mixed sucrose 
containing glucose or other sucrose, as stipulated in the Cabinet Ordinance ("designated sugar" hereafter) shall sell the imported designated sugar to ALIC in th e event that the average import price of the import 
declaration … is below the Rationalisation Target Price".  Sugar and Starch Price Adjustment Law  (2007), 
Article 1, section 5.  Article 3(2) of the same law defi nes the "Rationalisation Target Price", which is set by the 
Minister of Agriculture, Forestry and Fisheries, as an "imported sugar price below which the promotion of sugar 
resource production and the sound development of domestic sugar refinery industry could be adversely affected, 
and thus the impact of which needs to be buffered".