Recommendationsof theEU-Japan Business Round Table
to the Leaders of the European Union and JapanTokyo, 20 April 2018
Working Party 1
Trade Relations; Investment and Regulatory Cooperation; Financial
Services, Accounting and Taxation

Working Party Leaders:

Co-ChairMr. Danny RISBERG
ChairmanEuropean Business Council (EBC)in Japan

Co-ChairMr. Hitoshi KAWAGUCHI
Senior Vice President / Chief
Sustainability Officer
NISSAN MOTOR Co., Ltd.

Vice Co-Chair
Mr. Markus BEYRER
Director General
BUSINESS EUROPE

Vice Co-Chair
Mr. Shinji FUKUKAWA
Senior Advisor
Global Industrial and Social
Progress Research InstituteWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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List of Abbreviations
Abbreviation
AEOs
APA
ATP
BEPS
BPR
CAA
CBCR
CCCTB
CE
CLP
CMR
CoRAP
DDA
ECHA
EIOPA
EN
EP
EPA
EU
FDI
FSA
FTA
FTT
G8
G20
GATS
GDP
GHS
GoJ
GPA
GPS
HSE
ICTs
IEC
IPM
ISO
JAS
JELMA
JET

Meaning
Authorised Economic Operators
Advance Pricing Agreement
Adaptation to Technical ProgressBase erosion and profit shifting
Biocidal Products Regulation
Consumer Affairs Agency
Country by Country reporting
Common Consolidated Corporate Tax Base
Conformité Européenne (European Conformity)
Classification, labelling and packaging
Carcinogenic mutagenic or reprotoxic
Community Rolling Action Plan
Doha Development Agenda
European Chemical Agency
European Insurance and Occupational Pensions
Authority
Européen de Normalisation de Normalisation(European Standards)
European Parliament
Economic Partnership Agreement
European Union
Foreign Direct Investment
Financial Services Agency
Free Trade Agreement
Financial Transaction Tax
Group of EightGroup of Twenty
General Agreement of Trade in Services
Gross Domestic Product
The Globally Harmonized System of Classification andLabelling of Chemicals
Government of Japan
The Agreement on Government Procurement
Gross Product Strategy
Health Safety and Environment
intra-corporate transferees
International Electrotechnical Commission
Interface Public Members
International Organisation for Standardisation
Japan Agricultural Standard
Japan Electric Lamp Manufacturers Association
Japan Electrical Safety & Environment Technology
Laboratories

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JETRO
JIS
JR
KPIs
LED
LoA
MAFF
METI
NTM
NOL
OECD
OR
PPPR
PSE
R&D
REACH
RoHS
SDS
SIEF
SMEs
SVHC
UNECE
VAT
WCO
WHO
WTO
WP

Japan External Trade Organisation
Japan Industrial Standard
Japan Railways
Key Performance Indicators
Light-Emitting Diode
Letter or Access
Ministry of Agriculture, Forestry and Fisheries
Ministry of Economy, Trade and Industry
Non Tarrif Measure
Net Operation Loss
Organisation for Economic Co-operation andDevelopment
Only Representative
Plant Protection Products regulation
Electrical Appliance and Material Safety Law
Research & Development
Registration, Evaluation, Authorization and Restrictionof Chemicals
Restriction of Hazardous Substances
Safety Data Sheet
Substance Information Exchange Forum
Small and Medium size Enterprises
Substance of Very High Concern
United Nations European Commission for Europe
Value Added Tax
World Customs Organisation
World Health Organization
World Trade Organization
Working Party

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Introduction
Japan is the EU’s sixth largest trading partner and the EU ranks as Japan’s third largest
trading partner. While already significant, this trade relationship has considerable
upwards potential and the benefits of the EU-Japan Economic Partnership Agreement
will stretch beyond the many European and Japanese companies already operating ineach other’s home markets to all those, attracted to the new opportunities it creates.
Working Party 1 stresses that the implementation of the agreement must address the
specific concerns of European and Japanese businesses reflected in this and previous
reports. With so much at stake, we are urging the authorities on both sides to ensurethat the necessary progress is made. Many reforms are required to secure a fair andcompetitive environment for business and have been identified from the extensive firsthand operational experience of Working Party 1 members in the Japanese andEuropean markets. This report sets out concrete recommendations that address thefollowing key issues:

Creation of a common regulatory environment, mutual recognition of regulations,standards and market authorisations to the extent possible, adoption ofinternational standards and enhancing regulatory cooperation

Elimination of unnecessary barriers and bureaucracyEnsuring fair competition and equal treatment of all companies, domestic & foreignEnsuring fairer and more open competition in services



Improving conditions for foreign direct investment
and finally,

Pursuing simpler, lighter and sensible tax systems, including theimplementation of the BEPS Actions without additional administrative burden

Working Party 1 welcomes the conclusion of the EU-Japan EPA which was achieved
last year and urges both governments to work for a swift entry into force by early 2019.
To highlight priority issues in the text that follows, one asterisk (*) indicates “priority”
recommendations. (e.g. WP 1/ # 01* / EJ to EJ)

Recommendations from both
European and Japanese industries
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WP-1 / # 01* / EJ to EJ Strengthening the EU-Japan Economic Relationship:
Call for early entry into force of the EU-Japan EPA
The BRT lauds the governments of the EU and Japan on the successful conclusion of
the EPA. During the EU-Japan Telephone Summit last December, Prime Minister Abe
and EU Commission President Juncker issued a joint statement confirming thefinalisation of negotiations on the EU-Japan EPA.
The BRT strongly believes that the EU-Japan EPA, which is comprehensive, ambitious
and mutually-beneficial, will unlock the potential of the EU and Japan economic
relationship through further expansion of trade and mutual cooperation.
The BRT also welcomes the inclusion in the EU-Japan EPA of a framework to discuss
issues on regulatory coherence and regulatory cooperation which aim at harmonisationof the regulatory environment between EU and Japan.
Given the significance of the EU-Japan EPA as mentioned above, the BRT calls on the
Authorities of the EU and Japan to continue their commendable efforts in working with
their respective legislative bodies and national governments for an effective Economic
Partnership Agreement that would enter into force by early 2019.

WP-1 / # 02* / EJ to EJ
Recommendations for an ambitious multilateral tradeagenda following the WTO Ministerial Conference in Buenos Aires
Under the growing pressure of protectionism in the world, the EU and Japan must
defend together with other WTO members the centrality of the WTO as the guardianof the multilateral trading system, and the value of WTO agreements as a basis of fairrules to maintain order in global trade and to promote further liberalization. The
negotiating pillar of the WTO must be reinforced to better disseminate the benefits ofglobal value chains, and the EU and Japan must play a central role in this regard.
Businesses also call on both authorities to safeguard the proper functioning of theenforcement pillar of the WTO, its Appellate Body. The current deadlock in theappointment of new judges means that the body is at risk of being paralysed later thisyear, undermining the possibilities for dispute settlement and encouraging WTO
members to go beyond WTO rules in their attempts to remedy trade issues.
It is evident that the WTO is to maintain its core role as the forum to create multilateral
trade rules. In this context, the EU and Japan should lead the member countries of the
WTO and adapt the organisation to the changing global trade environment better, forinstance, by re-evaluating its negotiating processes to make them more efficient, bydeveloping proposals and taking the lead in discussions, and by facilitating, where
possible, the delivery on the remaining DDA mandate and by agreeing to create newsets of rules on issues beyond the DDA.
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The BRT also welcomes the entry into force of the Trade Facilitation Agreement in2017, which will serve as a boost to global trade by reducing costs of trade by 10-15%
and adding $ 1 trillion to the global economy. Its objectives are to speed up customs
procedures, make trade easier, faster and cheaper, provide clarity, efficiency andtransparency, reduce bureaucracy and corruption, and use technological advances. It
is now important that remaining WTO members ratify the agreement and that those
who have already ratified ensure its effective implementation, making use of technicalassistance where necessary.
Additionally, the BRT suggests that the authorities of the EU and Japan should,
together with other WTO members, explore further topics that are essential for thesmooth functioning of global value chains. These could include, for example, digitaltrade and e-commerce, subsidies, the reduction of export restrictions, investment(facilitation) and competition. Exploring these topics could reinforce the interest in themultilateral trading system and underline the central role of the WTO in rule making.
The BRT strongly supports the progress in these issues, and requests the authoritiesof the EU and Japan to further make efforts to vitalize and create momentum in orderto move negotiations forward, as well as to facilitate the timely and successful
conclusion of plurilateral agreements such as the Trade in Services Agreement (TiSA)
and/or the Environmental Goods Agreement(EGA).
Furthermore, the BRT requests the authorities of the EU and Japan to exert theirutmost efforts to realise global free trade in goods and services under the auspices ofthe WTO, including environmental goods, so long as it does not discriminate unfairly
between products and sectors.
However, tariff liberalisation should not be limited to finished goods but include goods
over the whole value chain to have a real impact and to take into account the
globalisation of the value chains.
The BRT anticipates the authorities of EU and Japan to lead the discussion of further
expanding the product coverage and membership countries and regions for the
Information Technology Agreement (ITA), as agreed in December 2015.
< Recent Progress >The WTO Ministerial Conference held in Buenos Aires on 10-13 December 2017 could
not reach unanimous consensus to adopt a ministerial declaration, and did not makean agreement on issues of negotiated areas, such as agriculture and fisheries. A
number of WTO members expressed the following views:


it is crucial for the WTO and its members to take into account concerns expressedagainst trade and globalisation, while ensuring that the multilateral trading systemremains relevant and is updated to better respond to current challenges;
the WTO must not refrain from discussing potentially contentious issues such as
agriculture and market access for non-agricultural goods and services.

The BRT hopes the negotiation on other agenda items such as non-agricultural market
access (NAMA), agriculture, non-tariff barriers (NTBs) and export subsidies will makeprogress. For the future course of DDA negotiation, however, two courses of its
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continuation and termination have been set forth in parallel. The BRT expects further
progress in WTO’s DDA negotiation to reach a new stage in negotiation, which should
result in mutually beneficial outcome for both developed and developing countries.
< Background >The BRT is a strong supporter of the multilateral trading system, whose core functions
are trade liberalisation, rule-making and dispute settlement. However, to liberalize
multilateral trade, the initial high-level ambition of the Doha Round, launched in 2001,
has not been maintained, resulting in the current deadlock of negotiations due to thelack of political will and the inability to bridge the gap in the market accesscommitments between OECD and emerging country members.
Especially given the great and increasing uncertainty in the world economy, the WTO
must demonstrate its ability to deliver results for the business community. As the onlyinternational organisation creating rules and setting standards on trade at themultilateral level, the WTO must remain a leader in this area and take more andstronger action. The existing legal framework provides an excellent basis for suchaction. However, it needs to be updated in order to respond to a changing global
economic landscape.
WTO members made partial progress in the DDA at the 9 th and 10th WTO Ministerial
Conferences held in Bali in December 2013 and in Nairobi in December 2015
respectively. Unfortunately, the 11th WTO Ministerial Conference held in Buenos Airesin 2017 resulted in very limited outcomes.

WP-1 / # 03* / EJ to EJ Applying
regulatory cooperation
1.

international

standards

andenhancing

General recommendations

The BRT strongly supports the joint development and application of internationallyharmonised technical requirements and procedures for the testing and approval of
products that are traded internationally.
Building on the last December’s successful conclusion of the EU-Japan EPA, the BRT
recommends the authorities of the EU and Japan to enhance their regulatory
cooperation even further and to increase communication between the two economies.
Needless to say, the aim is to eliminate barriers to trade and investment in order topromote business and to disseminate the experience of the EU and Japan to the restof the world.
To this end, the BRT encourages the authorities of the EU and Japan to work evencloser in the relevant fora to develop international product standards and certification
procedures. The BRT recommends that the authorities of the EU and Japan should
apply such standards in as many sectors as possible.
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Where international standards have not yet been developed, the BRT urges theauthorities of the EU and Japan, when possible, and appropriate, to accept the mutual
approval of the import, sale or use of products that have been approved on the basisof functionally equivalent requirements.
Taking into account the benefit of common regulatory environment, the BRT welcomesthe inclusion in the EU-Japan EPA of a framework to promote regulatory cooperation
to ensure that the authorities of the EU and Japan not take unnecessary measures
which act as an impediment to trade and investment.
The BRT recommends that the policy-makers of the EU and Japan should increase
their understanding of existing and upcoming regulations of the other side. Where aharmonised regulatory framework between the EU and Japan has not yet beendeveloped, the regulatory authorities of the EU and Japan should review their domestic
technical regulations and conformity assessment procedures at regular intervals todetermine the scope for further regulatory harmonisation. The outcome of thesereviews, including scientific and technical evidence used, shall be exchanged between
the regulatory authorities and provided to industry upon request.
The BRT recommends that the regulators of the EU and Japan should study thepossible impact of new regulatory developments on domestic and foreign business to
avoid taking initiatives that might unwittingly create barriers to trade and investment.
They should exchange annual legislative work programmes at the earliest stage toprevent regulatory divergence and the creation of new trade barriers. In addition, theyshould agree to an early warning system for draft legislation to facilitate an effective
bilateral dialogue.
The policy-makers of the EU and Japan should develop a joint strategy to promotebetter regulation by learning from each other’s experience and adopting a common
system of good governance. Throughout the process, the two authorities should haveclose dialogue with businesses.
The BRT calls on the Leaders of the EU-Japan Summit to ensure that the EPA will bea living agreement and will provide a solid and comprehensive framework forregulatory cooperation to address the sector-specific concerns of the business
community. As a long-standing advocate of regulatory cooperation, and recognisingthat this is a key issue for the future, the BRT hopes that this joint initiative will reinforce
and complement the upcoming EPA and set the frame for a solid, forward-looking andlong-lasting regulatory cooperation. The BRT is willing to support the EU and Japanese
Authorities on regulatory cooperation matters.
Finally, the BRT would like to see a modernisation and updating of the MRAs that weresigned at the beginning of the last decade for them to become truly Mutual Recognition
Agreements so that the products covered under these schemes do not have to betested and approved in accordance with both EU and Japan regulations.
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<Background>
The BRT believes that regulatory cooperation will be a key to the economic prosperityof the two economies. Given the successful conclusion of the EU-Japan EPA lastDecember, it will be more important than ever not only to ensure that new regulations
do not nullify or impair the market access benefits accruing to either party under theagreement or create new barriers to bilateral trade, but also to expand and strengthen
the relations between the two economies so that the benefits of their cooperation willfurther increase and so that they will eventually be able to expand such regulatory
cooperation to other bilateral and multilateral relations.

Sector specific recommendations
2.

Create a common chemicals regulation
Policies on the control of chemicals such as the EU’s REACH and RoHS andJapan’s Chemical Control Law have a significant impact on global supply chains.
The two Authorities should not only implement effective regulations, but alsoestablish a common list of restricted substances and a common approach to theevaluation of risks and sharing of data. The two Authorities should enablemutual use of physicochemical properties and toxicity information which bothgovernments hold. The two Authorities should then discuss on the basis ofsound science the establishment of common hazard classification criteria, andharmonise the classification results. Such a common regulatory environment
will not only benefit industries through cost mitigation but also benefit users andconsumers through lower prices and consistent protection.
Furthermore, the two Authorities should develop a common policy on emerging
issues such as endocrine disruptors and nano materials. The two authorities
should also support supply chain management in developing countries incooperation with businesses.

3.

Create a common resource efficiency policy
The authorities of the EU and Japan should promote the concepts of resourceand energy efficiency, using the right incentives, standardised methodologies,
criteria and a common format of environmental product declaration between the
EU and Japan and cooperate with each other so that such policies areinternationally shared.
The two authorities should work together at the multilateral level to promoteinternational harmonisation of energy conservation regulations, relevantlabelling rules, and environmental and carbon footprint schemes.

4.

Expand the benefits of AEOs
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The authorities of the EU and Japan should aim at introducing further regulatory
cooperation in order to give more concrete benefits to AEOs. The BRT is awarethat the two authorities are engaged in regular discussion following theagreement on the mutual recognition of the AEOs in June 2010 between the EU
and Japan, but that no concrete benefits have emerged for operators.
According to the progress report of the EU in 2015, the scope of this agreement
is restricted to 'security and safety' only. The BRT would like in this regard to
put emphasis on the simplification of import procedures where companies are
given greater freedom while taking greater responsibility for their imports without
an excessive administrative burden. The BRT recommends that the two
authorities should consider expanding the legal base if it is necessary to realise
the simplification of import procedures.

5.

Adoption of UN Regulations and promotion of regulatory cooperation in theautomobile sector
In the automobile sector, the EU and Japanese Authorities should accelerate
their adoption of UN Regulations to lower the cost of regulatory compliance forboth European and Japanese automobile exporters by extending the benefitsof mutual recognition. Also the EU and Japanese Authorities should work
together to establish internationally harmonised technical requirements andtesting procedures that will encourage the smooth market adoption of newenvironmentally friendly power-train technologies – clean diesel, electricvehicles, hybrid vehicles and fuel-cell vehicles.
Furthermore, common regulatory environment brings benefits to the effective
and efficient implementation of new technologies such as automated driving.
Therefore, the BRT recommends that the EU and Japanese authorities work
together to remove potential barriers in existing regulations, and aim to establish
a well-designed and globally harmonised future looking regulatory frameworkon new technologies.
< Background for 5 >In 1998, Japan became the first country in Asia to accede to the UN-ECE 1958
Agreement on the Mutual Recognition of Type Approval for Vehicles etc,
which provides that vehicle components which have received type approvalaccording to UN Regulations in one contracting country are exempt fromtesting in any other signatory country where those regulations have been
adopted. Japan has now adopted UN-ECE Regulations in 41 of the 47 areas
included in Japanese type approval for passenger cars.

< General Background for 1-5 >Implementation of these recommendations will lead to a significant improvement in
the business environments of both the EU and Japan.

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WP-1 / # 04 / EJ to EJ

Avoiding double contributions on social security

The BRT welcomes the conclusion of social security agreements between Japan and
12 EU Member States. Negotiations or preliminary talks are under way between Japanand 3 EU Member States. The BRT requests that, Japan and the Member States of
the EU should make further efforts to expand the network of Social Security
Agreements.
The BRT takes note that no new preliminary talks have been started since 2012
between EU Member States and Japan. The BRT is concerned that Japan and theremaining 13 EU Member States, with whom talks have not commenced, could beleft without a social security agreement. The BRT recommends that the authorities of
the EU and Japan should explore the possibility to make a common EU-Japanagreement on social security to cover the remaining Member States.
In addition, they should introduce an interim measure, by which a host country should
either exempt contributions to pension funds unilaterally or refund the contributions in
full, not only partially, when expatriates return to their home country.
< Recent progress >There has been limited progress in the past year
< Background >When an individual EU Member State and Japan conclude a bilateral social security
agreement, it lessens the burden both on companies as well as their employees. So
far, social security agreements between Japan and Germany, the United Kingdom,
Belgium, France, the Netherlands, Czech Republic, Spain, Ireland, Hungary andLuxembourg have entered into force. The agreements between Japan and Italy andthe Slovak Republic have been signed. Furthermore, negotiations are underway
between Japan and Sweden and Finland, and are at the preparatory stage between
Japan and Austria.

WP-1 / # 05* / EJ to EJ
IssuesRecommendation on BEPS Action Plan and Other Tax

The BRT supports the creation of an internationally fair taxation framework and levelplaying field. At the same time, the BRT urges the authorities of the EU and Japan toensure that the implementation of the BEPS Actions should not create additional
administrative burden on businesses.
The BRT welcomes the agreement by OECD/G20 countries to implement the masterfile-local files system in the transfer pricing documentation in BEPS Action 13. The
BRT eagerly awaits coherent and successful implementation in the bilateral andmultilateral relations between the EU Member States and Japan in a way that will
reduce the compliance costs and uncertainty significantly. In this respect, there aresome countries who appear to be seeking CbCR directly from MNE’s subsidiaries
situated therein, as opposed to the OECD’s suggested protocol where CbCR should
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only be filed by the MNE’s top parent company with the tax authorities of the ultimate
parent company’s jurisdiction, and any subsequent sharing of CbCR between various
countries where the MNE’s subsidiaries are located shall be done under theexchange of information clause of respective tax treaties. The BRT recommends that
the OECD suggested protocol should be adhered to by the countries where MNE’s
subsidiaries are situated.
The BRT recommends that the authorities of the EU, its Member States and Japan toalso aim at facilitating the conclusion of bilateral and multilateral APAs.
The BRT emphasises that it is important that the scope of information required fordisclosure to tax authorities of each country through Country-by-Country Reporting
be internationally coherent and in accordance with BEPS Action 13 in order to realisea level playing field. The BRT opposes to the European Commission’s proposal for
Public CbCR as it breaches confidentiality of information on taxpayers.
The BRT also would like to point out that information concerning a tax payer should
be kept confidential by the tax authorities as BEPS Action 13 demands.
In terms of Permanent Establishment (“PE”), BEPS Action 7 has not given any
specific consideration to the global trading business model broadly conducted by thefinancial services industry at all. The BRT requests that the tax authorities in
European countries shall give utmost consideration before making any tax
assessment based on the determination that a trader booking into an offshore
booking entity under the global trading business should qualify as dependent agent.
Such determination that a trader qualify as a dependent agent PE will become
significant obstacles for the global financial industry.
The BRT requests that the tax authorities in European countries give the utmost
consideration to the implementation requirements in other jurisdictions before
implementing new tax rules, which may or not be BEPs Action 13 and 17 related.
As was agreed by OECD/G20 countries in 2013, introduction of the measuresdeveloped by the BEPS Action Plan should not lead to unnecessary uncertainty forcompliant taxpayers and to unintended double taxation.
The BRT welcomes the commitment made by 20 countries including Japan and 13
EU Member States (Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Poland, Slovenia, Spain, Sweden and the UK) to provide formandatory binding MAP arbitration in their bilateral tax treaties as a mechanism toguarantee the resolution of treaty-related disputes within a specified timeframe. The
BRT recommends that this mechanism should be extended to include all the EU
Member States and Japan.
Furthermore, the BRT would like to recommend the authorities of the EU and Japanto
1. Pursue simpler, lighter and sensible tax systems that will lead to growth andinnovation. A simple, light and sensible tax system will reduce the incentive to
avoid or reduce taxation. It should include participation exemptions that will
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exempt dividends and capital gains received from business investment above acertain holding threshold from further corporate taxation.
2. Reduce administrative burden. The more complex a tax system and the heavier
the tax burden, the more time and money both businesses and tax authorities
spend merely to comply or enforce.
3. Promote healthy competition in attracting investments. In the majority ofinvestment decisions, a combination of tax, human resources and infrastructure
plays the decisive role. The authorities of the EU and Japan should promote andcompete on the three factors in a healthy way in order to attract investments.
4. Eliminate double taxation. Double taxation still weighs heavily on cross-borderbusiness activities. The EU Member States and Japan should modernise the tax
treaties between them and ensure, to the greatest possible extent, that dividend,royalty and interest payments are exempted from withholdings taxes.

<Recent Progress>
There was a progress as the final package of measures was presented by the OECDand endorsed by G20 leaders.
<Background>
The BEPS Action Plan was proposed by the OECD and endorsed by G20 Finance
Ministers and Central Bank Governors in July 2013. The OECD presented the final
package of measures (the 2015 Final Reports) to G20 Finance Ministers and they
endorsed the final package on 9 October 2015. The G20 leaders endorsed the
BEPS and committed to its implementation on 15 November 2015.

WP-1 / # 06* / EJ to E

Recommendation on Financial Transaction Tax

The BRT maintains its serious concern over the EC’s proposed financial transaction
tax (FTT), particularly with respect to its wide range of application. If imposed, theFTT will result in reduced volume of financial transactions and decreased liquidity. It
will also lead to a significant increase in funding costs and impairment of legitimate
hedging activities by parties including non-financial corporations. The decreased
liquidity in secondary markets is also likely to cause impacts on primary markets
eventually. Additionally, the BRT maintains its serious concerns where bank levies
or similar are introduced and are calculated based on the balances of financial
institutions. The concerns are similar to those highlighted for the FTT.
Impact on liquidity, funding costs and hedging costs should be carefully considered in
the ongoing discussion on scope of transaction, country of taxation and tax rate in
one harmonised tax regime so as to develop and integrate capital markets in the EU.
< Background >The EC announced proposals in September 2011 to impose a Financial Transaction
Tax on financial instruments between financial institutions when at least one party to
the transaction is located in the EU. However, it has since concluded that a common
FTT system could not be attained within a reasonable amount of time by the EU as a
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whole. On 14 February 2013, the EC published a proposal for a Council Directive
implementing enhanced cooperation between 11 Member States in the area offinancial transaction tax (Now 10 Member States due to the exit of Estonia). Due tothe intricate discussion such as the scope of taxable derivatives, implementation datehas been postponed several times from initial January 2014 As of today, no date has
been set for a final agreement.

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Recommendations from
European industry to Japan
WP-1 / # 07 / E to J
Harmonisation & mutual recognition of standards andproduct certifications; acceptance of international standards where applicable
Industry still faces standards and products certification that are not harmonised withinternational standards or regulations. Furthermore, some overseas approvals,
despite havingbeing issued in accordance with EN and or ISO, are not recognisedby the Japanese authorties. This leads to delays inthe introduction of innovative new
products to the market and increases import costs. While accepting the need tosafeguard consumer health and safety, the BRT urges Japan to promote theharmonisation of standards and certification procedures, the mutual recognition of
product certification and, in areas where harmonised standards do not exist, themutual approval of the import, sale or use of products that have been approved on
the basis of functionally equivalent requirements, so that products certified for one
market are automatically accepted in the other market. The BRT recommends theJapanese Government to place particular emphasis on:
Automobiles
The Government of Japan should adopt the relevant UN Regulations in all areas
where Japan requires certification for passenger cars but does not currently accept a
UN approval as demonstrating compliance with Japan’s national requirements, sothat a vehicle certificated in the EU can be sold in Japan without modification or
further testing. The Government of Japan should also work towards the international
harmonisation of Japan’s technical requirements for commercial vehicles whichshould be included within the scope of the provision of any EPA.
Moreover, the EU-Japan ETA should include a meaningful Automotive Annex
covering all kinds of vehicles (i.e. passenger vehicles and commercial vehicles) to
avoid the appearance of any future market access barriers.
<Recent progress>o Resolved: 8 items


76 GHz Radar; Closed Crankcase Ventilation; DRL; TNS and PHP
Variants; Ultra-Small Mobility, Rim Marking of Light Alloy DiscWheels, Definition of Vehicle Type; Seating Space and Head
Clearance.

o Resolved - Subject to confirmation: 4 items


Tag Axle GCW; Tyre/Wheel Protrusion; Angle of Exhaust Tailpipe;
Whole Vehicle Inspection.

o Outstanding: 4 items


Stamping/Embossment – VIN items- combustible engine andelectric motor; Endurance Testing

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Construction Products
The Government of Japan should work together with the EU Authorities towards
mutual recognition of all JAS/JIS and EN standards for all building materials. This isunfortunately still rather common with non-recognition of standards in the flooring
sector as well as for roofing sheets. Mere reference to ISO standards within JAS/JIS,
has not proved to be adequately helpful in facilitating the process.
The Government of Japan should, furthermore, better support local and regional
authorities to ensure that transparent and consequent interpretations are made in
regards to technical regulations and guidelines.
< Recent progress >There has been some progress, however much work still remains. We furthermore
note that the Japanese government did not respond to the issue of discrepancy
between ISO and JIS/JAS in its progress reports of April 2013, April 2014, April 2015,2016, as well as in 2017, but rather chose to focus on the possibility for overseas test
facilities to carry out testing in accordance with JAS/JIS.
< Background >The Japanese construction sector has long been a very “domestic” market. Even in
the aftermath of the 2011 Tohoku earthquake and tsunami, there is little evidence
that this situation is changing.

Railways
Though standards are not so different and data generated at European researchfacilities are relevant for Japan, duplicate testing in Japan is required for theJapanese market. This has repeatedly been communicated by one operator.
Duplicate testing raises the costs of imports, making them less competitive thandomestic products.The Government of Japan and the EU authorities should work
toward establishing a mechanism through which test data and certification of railway
equipment provided by European organisations is accepted in Japan, and vice versa.
The BRT furthermore recommends the Japanese Government to take a more active
roleinestablishing a system whereby standards and requirements are available
publicallyso that European companies will have a better understanding of what isneeded in order to offer goods and services that meet or exceed the safety measuresin the Japanese market.While the BRT understands that operators might havedifferent performance requirements, the same safety requirements and standards
should preferably be used by all operators in Japan, which currently is not the caseas each individual operator can choose its own standards and requirements. As afirst step, test results and approvals by one operator should be accepted by otherdomestic operators.
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Some progress has been made in the past, and the EPA covered these issues quite
extensively. Therefore the BRT is slightly more optimistic about the future. However,
it is difficult to analyse exactly what progress has been made. The core issue still
remains that there is no common conformityassessment scheme in Japan to whichall
operators adhere. The BRT takes note of the efforts of some operators in publishinga list of potential future procurements, and views this as a good first step to improved
market access.
< Background >While the Japanese Government is active in various international standards fora,
these standards and regulations are not necessarily used by the Japanese operators
There is, therefore, no possibility for foreign manufacturers to know exactly what
requirements must be fulfilled. Furthermore each operator can in principle have theirown testing requirements as there is no legislation on exactly what safety
requirements need to be fulfilled.

Processed Food
For processed food, the combination of differences between EU and Japanesestandards and technical requirements as well as cumbersome border procedures
results in high costs for EU exporters. High conformity costs are incurred because
Japanese authorities do not accept evaluations made by the EU or international
bodies, and the FSC is constantly asking for tests to be carried out in Japan. The
market potential for European exporters would be greatly enhanced by:a) Substantially increasing the list of permitted additives and enzymes, inaddition to speeding up and fundamentally revising the approval processb) Introducing mutual recognition of conformity assessment procedures toeliminate the duplicate costs of evaluations.
c) Introduce deadlines for all parts of the application process. While there are
guidelines on timelines these only cover part of the application process.
Accordingly, it is difficult for an applicant to know how long the application
will take.
< Recent progress >Sanitary and phytosanitary issues were discussed under the EPA and a wholechapter is dedicated to this. However as with many other areas, it is difficult to say
exactly what the practical outcome will be. While not necessarily the same in detail, it
is fair to say that the WTO SPS agreement has not been enough to remedy all
problems. It should be noted though that thanks to the EPA, Japan has approved anumber of food additives, both for food and drinks.
< Background >The limited number of permitted food additives in Japan and unaligned standards
between the EU and Japan increases costs and prevent EU exporters from utilisingscale effects.
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LED lamps and luminaries
Lack of harmonisation of international electrical safety standards, such as IEC, andJapanese standards and technical requirements, such as PSE/JIS/JET results inhigh costs and effectively prohibits entry to the Japanese market for EU companies.


The current standard issued by the Japanese ministry (i.e. METI) is notcompatible with standards used by manufacturers of other countries

The BRT requests Japan without delay to harmonise with international standards andsafety/technical requirements in order for Japan to avoid being left behind in the
global market. The market for LED lamps and luminaries is rapidly expanding andthese products are expected to play an important role in saving energy on a global
basis.
< Recent progress >While the Japanese Government has agreed to harmonise JIS with IEC,theauthorities have also said that this will take more than five years. Needless to say thisis not acceptable. Japan has issued a list of products where an IEC test report canbe used (“appendix 12”). However, updating of the list is slow and does not cover all
LED lamps and luminaries.
< Background >Japan has its own standards and technical requirements, such as PSE and JIS, anddelays in setting standards such as J-deviation increases costs and prohibits EU
companies and exporters from entering the Japanese market. In addition, lack ofharmonisation of standards of remote control prohibits EU companies from entering
the Japanese market.
Labelling rules
The Japanese Household Product Quality Labelling Law prescribes in detail theinformation that labels must contain for a number of products. While several
improvements were made in the latest revision of the law, some issues still remain fora number of products, such as teacups. In these cases, there is still a requirement toaffix the label on the actual product, and not merely to label the box if this includes
several identical items. Japan should introduce further flexibilities to the labelling law.
< Recent progress >This issue was brought up in the Regulatory Reform Council where both
representatives for European companies as well as domestic companies argued for arevision of the Household Labelling Law. The CAA has produced a draft which was
published calling for comments, and it is our understanding that the new law will bepassed in 2017.
< Background >The Household Product Quality Labelling Law and accompanying voluntary labelling
guidelines, “hyojikitei”, prescribe in extreme detail how household products should belabelled when sold in Japan.

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WP-1 / #08 / E to J

Self-verification and risk assessment

The Japanese Government should expand the allowed use of self-verification.
Currently, in many cases, Japan requires approval to be obtained from either aGovernmental body or a third party. This puts both a cost and a time premium on theprocess when the relevant company trying to put the goods or services onto themarket. The latter aspect is of particular importance for sectors with short productcycles.
While it is understandable that Japan wants to protect the safety of human life, as
well as animals and plants, a proper risk assessment should be undertaken so thatthose products or services with controllable risk can use a self-verification procedure.
< Background >While Japan has introduced the concept of self-verification, third party or government
approval is often the norm. This means that the time to put the products onto themarket increases as well as the cost. This problem is particularly evident when test
methods are not harmonised.

WP-1 / # 09 / E to J

Automobiles

The Government of Japan should put kei cars and other motor vehicles on the same
fiscal and regulatory footing.
< Recent progress >The change in the taxation of kei-cars fromFY2015isa welcome first step towards
reducing the discrepancy in the burden of taxation on compact cars and kei cars, but
it does not go far enough. In the FTA negotiations, the GOJ should commit to further
fiscal and regulatory changes so that European compact cars can compete on equalterms with kei-cars in the Japanese market.Recently, both METI and JAMA havesuggested to reduce the level of discrepancy to the order of 1:2.
Nevertheless, for the time being, the discrepancy in the base level of taxation of keicars and subcompact cars at 1:3.3 remains unacceptably wide.
< Background >“Kei” or mini-cars are those vehicles legally restricted to a maximum length of 3.4m, awidth of 1.48m, a height of 2m, and to an engine displacement of 660cc and below.
Kei cars benefit from lower automobile related taxes, automobile liability insurance
and motorway tolls and are subject to less stringent overnight garaging requirements.
The continued existence of the privileges enjoyed by kei cars is an anachronism
which distorts the competition with compact and subcompact cars, which do not
enjoy the same prerogatives, even though their performance and specifications are
similarWP-1 / # 10 / E to J

Fuel Cell Vehicles

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Pending agreement and implementation of Phase II of the UN Regulation for HFCV’sconcerning the material requirements for hydrogen storage systems, the Japaneseand EU Authorities should introduce flexible arrangements to allow
manufacturers/importers to demonstrate that HFCV’s meet each other’s requirements
and approval procedures< Background >UNR 134: Hydrogen and Fuel Cell Vehicles, Phase I of the UN Regulation for
HFCVs,entered into force in June 2015 and has been adopted by the EU and Japan.
However, despite Japan having implemented Phase I, HFCV tanks imported into
Japan would still need to meet Japanese unique national requirements concerning
metal materials. Whereas the EU uses a performance-based approach to approvehydrogen compatible materials, Japan’s approach is more prescriptive, in effectlimiting the choice of materials to very few specific types of stainless steel andaluminium.

WP-1 / # 11 / E to J

Freight and logistics

Further to the WP-A / # 03 / EJ to EJ, the BRT recommends that Japan revises its
AEO system to introduce real benefits for operators regardless of whether they are
forwarders, customs brokers or importers. Furthermore, the administrative loadneeds to be lessened if companies are to be truly attracted to the AEO status.
The AEO concept should focus more on offering simplifications if the operator meetsthe agreed criteria for traceability and adheres to the agreed process flow. Examplesof this could be:-

Reducing the physical examination of shipments-

Being able to use alternative documentation for showing “direct shipment”
under free trade arrangements-

Usinga bonded warehouse as a port of first entry in regards to products
covered by quarantine related regulations.

-

The use of double printed documents.

-

Electronic Delivery Order for ocean freight-

Smartboxes should be allowed to be part of the container. Only in Japan does
this has to be declared as part of the cargo, hence it has to be declared forimport.

The Japanese Government should furthermore take a lead in trying to digitalise theindustry as currently sector parties, including large companies, are still using fax and“paper” orders. With increased difficulties in securing human resources, it is of utmost
importance that effective solutions are implemented.

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We are, furthermore,particularly interested in obtaining more specific information on
the information gathering that Government of Japan is carrying out in cooperation
with the private sector as mentionedin the progress report.
< Recent progress >Japan Customs deregulated customs clearance beyond the local customs jurisdiction
territory in October 2017. The BRT applauds this change which is a significant
improvement that industry has long requested.
< Background >The current system of AEO has unfortunately not led to the simplifications that many
operators had hoped for. On the contrary, in many cases the administrative burden
has increased.

WP-1 / # 12 / E to J

Aeronautics

Haneda D runway weight restrictions are an obstacle to the use of European-madeaeroplanes and an obstacle to further development of international traffic at Haneda.
These weight restrictions should be re-examined to allow the operations of new andlarger airplanes such as Airbus-made A380 and A350. We request the relevant
Authorities of both sides to cooperate in making the necessary verifications.
Additionally, for the newest mid-size A350 aircraft, operation could be possible with there-verification of the withstand load in regard to part of the construction.
< Yearly Status Report >No progress has been seen on this recommendation. However, the recent approval of
the 747-8i (Code F aircraft) for day-time operations at Haneda offers hope that theA380 (also a Code F aircraft) also will be approved soon for day-time operation as
there are some airlines looking at operating the A380 via Haneda.
<Background>With the purpose of expanding airport capacity in response to the increase in air travel
demand as well as to reduce congestion, a fourth runway (D runway) and aninternational terminal were opened in Haneda in October 2010. So far, the focus has
been on flights to and from Asian countries, but its use for long-haul international routes
is expected increase in the future. The number of flights will grow together with thedemand but will be limited in the end by the capacity in terms of slots. The recent
dramatic increase in the number of foreign visitors to Japan, just under 20 million in2015, has caused the GoJ to revise the target upwards to 40 million for 2020. The
average size of aircraft (230 seats)departing from Haneda is now lower than it was in1980 (240 seats) when 747s were used domestically. To see traffic grow at Tokyo’s
airports and more specifically Haneda, work needs to be done to ensure that larger
aircraft can be used at Haneda. In this regard, the use of new and larger aircraft will
be an important part of the airlines’ strategies. Under such circumstances, aircraft
weight restrictions on the D runway could impede the conversion of Haneda Airport tothe use of larger and newer aircraft. New aircraft such as the A350 and A380 are
significantly quieter and more environmentally friendly than older aircraft now in use atHaneda airport and, with plans to overfly the city to increase flights to and from Haneda,
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it is essential that quiet aircraft are used as much as possible. In order to avoid
disturbing the flow of the Tama River, the D runway was overhauled using a pier-likestructure instead of a conventional landfill. Due to this, weight restrictions have beenplaced upon the aircraft in use, and with the entire lineup of Airbus’ newest A380 andA350 series exceeding the weight limit, these aircraft could no longer be used as they
currently are (cf. chart below).

Unit: tons

Weight limit

Total weight
Main gearload, t/gear
Wheel load
WP-1 / # 13 / E to J

A380

A350-1000

A350-900 B747-400

400
139.5

571
161.6

308.9
146.9

268.9
126.0

396.0
92.8

B777200ER
286.9
134.9

26.2

26.9

24.5

31.5

23.2

22.5

Promoting foreign direct investment

The Government of Japan should create a business environment that will foster
investment of foreign firms in the domestic economy. To this end, and in line with thetreatment applied to stock swaps involving purely domestic companies, it should
consider allowing tax deferrals for capital gains stemming from direct cross-bordermergers and re-organisations.
The BRT furthermore would like to point out the disadvantageous rules for Net
Operation Loss (NOL).With the upcoming changes, companies in Japan will be able
to carry forward 50% (from 2017) of their losses for ten years. This is well behind the
NOL in neighbouring countries, countries with which Japan competes forinvestments.
On the other hand Japan has improved the situation for foreigners in regard toinheritance tax policies. It should however be pointed out that the Japanese
inheritance tax law is extreme in that it combines high tax brackets with a low
deductable amount for the immediate family
Moreover, while such improvement of the generic investment environment is aprecondition, regulatory reform is the best motivator for foreign companies to enter
the Japanese market. In the sectors where the formal barriers to foreign investment
were removed some time ago, such as automotive and machinery, foreign
investment is relatively high. By contrast, two sectors where investments are low are
the financial and medical fields. Japan’s regulatory environment in these sectors
remains much more difficult than the rest of the world to allow for foreign companies
to set up any larger operation than the minimal level needed to serve the existingclient base. Mutual recognition of market certifications would be an important firststep to improving investments in the medical field. Mutual acceptance of principles
governing the financial services industry and the mutual acceptance of the homeregulator as the core regulator would go a long way to improving the investment
environment in the financial sector.
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While Japan has established incentive programmes for FDI, they are often limited inscope and application procedures are very inflexible. There are also some indications
that Japan is contemplating shortening ofthe period.
< Background >Despite its position as the world’s third largest economy, Japan’s level of inward FDI
as a proportion of GDP remains one of the lowest among all OECD countries. Even
with the reorganisation of JETRO and the efforts starting with former Prime Minister
Koizumi to increase FDI to Japan, only very small improvements have been seen.
According to OECDin 2016inward FDI stocks was accounted for only 3.9% of GDP, aslight reduction from the previous year.

WP-1 / # 14 / E to J

Procurement< General Recommendations >The Government of Japan should increase its efforts to facilitate better access to the
procurement market in Japan. This could be achieved by lowering the threshold for
public tenders and removing the “operational safety clause” within the transport
sector. Japan should also include more cities in the GPA as currently onlynineteen
are included.
Japan should, furthermore, make more information available in English. The BRT isaware of the recent initiatives by JETRO, but complete information is rarely available
in English. In addition the BRT requests that the use of English when submitting
tender proposals to allowed or at least partially allowed, especially for the technicalspecifications.
In addition the BRT asks that Japan streamlines the requirements on pre-registration
and also recognises overseas experience and qualifications when setting up
requirements for the bidders.
< Specific Recommendations >In the bidding process in public tenders for helicopters>a. More balanced competition should be ensured by comprehensive evaluation
systems that also take aircraft performance into account.
b. Single year budget procurement constraints should be relaxed.
Procurement of integrated systems of space ground equipment should be
encouraged.

The share of open tendering as a means for procurement by the Japaneseutilities should be increased substantially.

The recent changes to the Operation Safety Clause should indeed lead tomore open calls for tenders in accordance with the WTO agreement on
government procurement. The BRT would be interested in knowing if theWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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Japanese authorities have any data on the increase of open calls for tenders
due to the changes in the definition of the OSC.

< Recent progress >The BRT has seen some changes in particular for the three JR Honshu companies
and is therefore looking forward to see what impact the changes in the OSC will
have.While the Japanese authorities has defined the Operational Safety Clause theBRT views this definition as too all-encompassing.
< Background >Studies have shown that over 80% of the total procurement market in Japan is notcovered by the GPA.1 Currently some sectors are exempted from the threshold of 5
million SDR. Some changes have been seen, such as the establishment of a national
data base on calls for tenders, and the first ever open call for tender in the railway
sector. However, significant improvements are required to bring Japanese
procurement closer to the levels of the EU.

WP-1 / # 15 / E to J

Financial reporting

Recommendation:
The BRT recommends that the ASBJ give greater priority to attaining alignment of
JGAAP with IFRS, thereby reducing the need for cumbersome reconciliations. This
will contribute to reduced costs, improved data transparency and accuracy, and at
the same time strengthen the attractiveness of the Japanese financial market by
improving the comparability of Financial Statements.
The BRT further recommends that regulators consider adjusting tax and company
laws to facilitate financial reporting convergence where there are close ties between
them. That way companies can keep existing tax accommodations while obtaining
the aforementioned benefits of financial reporting alignment.
< Recent progress >New recommendation< Background >The global push to integrate financial reporting standards and enhance cross-bordercompatibility continues to gather steam with an increasing number of companies
adopting International Financial Reporting Standards (IFRS) in Europe and Japan.
However, challenges remain for multinational companies headquartered in Europe
with significant subsidiaries domiciled in Japan. This is because such subsidiaries will1

Copenhagen Economics, “Assessment of barriers to trade and investment between the EU and Japan”, 2009

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often continue to report under local Japanese Generally Accepted Accounting
Principles (J-GAAP) as published by the ASBJ for statutory reporting purposes andyet they must then perform reconciliations to IFRS for group reporting required bytheir parent. Any reduction in the need for such reconciliation and IFRS would
decrease the administrative burden on these subsidiaries.

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Recommendations fromJapanese industry to the EU
WP-1 / # 16 / J to E

Concern over Brexit

The BRT urges the EU and the UK to pay utmost attention to minimise the adverse
impact on businesses which the UK’s withdrawal from the EU may cause.
Needless to say, Brexit will impact both European and Japanese businesses. In
particular, Japanese businesses operating in Europe which have built up integrated
supply chain between the EU and the UK will be deeply impacted. Therefore, it is
crucially important for the Japanese businesses to maintain frictionless trade such as
no tariff and minimum custom procedures between the EU and the UK. Moreover,Japanese businesses operating in the EU has a strong need for free and open
business environment across Europe which include unfettered investment, smoothservices and financial transaction, harmonised regulation and standards, and accessto workforces with necessary skills.
Therefore, the BRT urges the EU and the UK to seriously consider such concern ofJapanese businesses, and through constructive negotiation, to find a solution tomaintain the current business environment to a maximum extent and to avoid any
radical changes that would potentially impact businesses.
< Recent Progress >This is a new recommendation.
< Background >Following the outcome of the referendum which the UK voted to leave the EU,
British Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty on 29
March 2017. As a consequence, the UK is going to leave the EU on 29 March 2019,
but there are concerns among businesses whether an orderly Brexit with open andfrictionless future economic relationship beween the EU and the UK could be
acheived.

WP-1 / # 17 / J to E

Chemical Regulations

17.1 REACH
1. The BRT requests that the Authorities of the EU should pay more attention to theimplementation of REACH. In particular: There should be more opportunities to take account of the views of non-EU
companies in updating guidance because a substantial part of articles on the
EU market is imported from outside the EU. In this regard, therepresentatives of non-EU companies should be allowed to register as thestakeholders of the ECHA same as the EU companies.
 If the thresholds of new SVHCs are too low, for example, in the units of ppb
rather than the units of ppm, there will be practical difficulties for
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

manufactures and importers to implement it effectively as it will be too difficult
to measure correctly.
The authorities of the EU should improve the enforcement of the thresholds
applicable to SVHCs once they are adopted. Otherwise the increasing
number of SVHCs with extremely low threshold will distort the competition
between strictly complying manufacturers/importers and less strictly
complying manufacturers/importers.

2. The BRT requests that the Authorities of the EU should further improve the
PACT-RMOA. In particular: The authorities of the EU should improve it in order to look after the needs of
SMEs because SMEs might still find it difficult to digest.
 The process of contributions by industries should be further developed.
 The transparency of the PACT-RMOA should be improved.
 The quality of evaluation by the evaluating authorities of the Member Statesshould be made more consistent through the standardisation of theevaluation process.
 The criteria for the selection of substances should be more transparent.
 At the very least, public consultations (minimum 12 weeks) should be
conducted in all Member States in order to provide fairer and more accurate
risk assessment.
3. The BRT requests to the authorities of the EU to mitigate the effect of thewithdrawal of the UK from EU on the implementation of REACH.
Quite a few companies which export chemical substances from Japan to EU
countries currently appoint consulting companies or affiliates incorporated in the
UK as the only representative (OR) and depute tasks to comply with REACH,
including registration of substances and operations related to tonnage band.
As the UK withdraws from the EU, these companies lose OR qualifications andmanufacturers outside the EU not only have to re-appoint new ORs but also haveto do the complicated work such as changing OR information for all existingregistrations or transferring the information on customers in the EU and on
hazardousness of substances to new ORs.
Therefore, in order to avoid huge amount of paperwork, the BRT urges theEuropean Commission to take bold measures to mitigate the impact, such as bycontinuing to grant OR qualifications to British corporations and to take sufficienttransition period.
4. European Commission is planning to review the REACH regulations, and it
includes the establishment of the registration rules for polymers which have riskfor human health and the environment. In the current REACH regulations, only
the monomers registrations of which polymer consist are required, and thepolymer registration is not. The BRT requests that European Commission
abolish the current monomer registration rules through the review, and change
rules into the polymer registration which has risk for human health and theenvironment. The monomer registration is required only by REACH regulationsin the world, and in the other nation’s rules such as the Chemical SubstanceWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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Control Law of Japan and TSCA of America, the notification of polymer which
has risk for human health and the environment is the main stream. After 10
years from REACH started, it has become evident that the monomer registration
has many problems. It spends much labor, time and cost of non-EU companies,
but it cannot provide for EU companies the enough information about hazard forhuman health and the environment and chemical exposure.
< Recent Progress >There has been a progress. The ruling of the EJC on the interpretation of Articles
has made the interpretation definitive. Further progress has been seen for therecommendation on SVHC by the introduction of PACT-RMOA.
< Background >REACH includes requirements that are practically very difficult to implement forbusinesses.
It is understood that the representatives of non-EU companies have been unable
to register as the stakeholders of the ECHA though the European Commission has
suggested to enable it. As the EU is an open economy and a substantial part ofarticles on the EU market is imported from outside the EU, it is for the benefit of the
EU that it has a system to take account of the views of non-EU companies on suchimportant issues.
It has been observed that the enforcement of REACH is not sufficient. As theresult, it is not implemented evenly. Some manufacturers or importers seem tointerpret the threshold as a reference – not as the limit not to cross. It seems thatsome manufacturers or importers do not measure SVHCs at all in the belief that it isunlikely to be found out.
The ECHA started a new website on the PACT-RMOA and publishes the result of
the assessment of an SVHC as carried out. The BRT appreciates that it has
increased the transparency of the identification of SVHC.
However, although the conclusion in the PACT-RMOA could lead to thedesignation of a substance as SVHC, the quality of the evaluation by the evaluating
authorities of Member States varies, and the criteria that a substance is selected forlisting in the PACT-RMOA are not transparent. Furthermore, as the PACT-RMOA is
voluntary activity, the responsibility of the authorities is not clear.

17.2 Appropriate approach to Endocrine disruptor
The BRT requests that the authorities of the EU should regulate endocrine disruptors
not by using the categorisation like CMR (carcinogenic, mutagenic or reprotoxic), but
by using the risk assessment based on sound science because endocrine disruption
is not the endpoint of toxicity. The hazard assessment should be conducted by
identifying adverse effect based on the endocrine mode of action defined by theWHO, and characterising with taking into account of potency, lead toxicity, severity
and irreversibility.

17.3 RoHS
The BRT recommends that the identification and assessment of substances for
RoHS inclusion should be done based on a robust and consistent methodology by
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taking account of the most appropriate risk management option. Going forward,
the principles of "REACH and Directive 2011/65/EU (RoHS) - A Common
Understanding should be duly applied and implemented to avoid overlap in
regulation.
The BRT requests that all new regulatory initiatives should provide the necessarylevel of legal certainty, transparency and predictability to allow for timely
implementation with regard to restriction, substitution and exemption requests.
< Recent Progress >Some progress has been made.
Upon the European Commission's initiative, a working group has been establishedto develop guidance on the methodology for the identification and assessment of
substances for inclusion in the list of restricted substances.
A Common Understanding paper has also been issued by the European
Commission which sets out scenarios on how to manage future regulatory action on
the same chemical substances under REACH and RoHS.
< Background >To identify and assess substances for potential inclusion in the list of restricted
substances under RoHS, the Commission has been working on a methodology. The
methodology should be further fine-tuned to provide clarity on the process andcriteria for substance review, offering a robust and consistent approach for all futureevaluations. The assessment of a substance does not necessarily lead to a
recommendation for inclusion in the list of restricted substances under RoHS as also
other risk management options may be considered.
Both REACH and RoHS regulate the use of chemical substances. The processesof authorisation, restriction and exemptions partially overlap between the tworegulations, adding to the complexity and burden for industry. The Common
Understanding specifies how these processes should be managed in the mostefficient and effective way while safeguarding the protection of human health and theenvironment.

17.4 CLP Regulation
To alleviate burden on both EU importers and non-EU exporters, the BRT requests
that the authorities of the EU should establish a common classification criterion
based on GHS through the discussion based on the sound science with theJapanese government, and harmonise the classification results.
The BRT requests, in addition, that the authorities of the EU should take GHS into
consideration from ATP (Adaptation to Technical Progress) stage.
< Recent Progress >Some progress albeit very limited and unsatisfactory for businesses has been seen
for the recommendation.
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CLP Regulation (Regulation (EC) No 1272/2008 on classification, labelling andpackaging of substances and mixtures) affects not only the EU manufactures andimporters but also exporters outside the EU. While CLP is comparable to UN GHS,
CLP does not take some of GHS classification but introduces the EU’s own
classification. As a consequence, the exporters to EU are forced to be compliant withboth GHS and CLP.

17.5 Nanomaterial
1.

General recommendations

The BRT requests that the authorities of the EU should implement the prospective
policy tools on nanomaterials by taking into consideration the degree of exposure ofnanomaterials released from a product.
2.

Specific recommendations(1) Definition of Nanomaterial
The BRT requests that the commission recommendation on the definition of
nanomaterial that is under the review in the European Commission should reflect theresults of the public consultations, which will be conducted shortly, and beinternationally harmonized.
(2) Standardisation of measurement method
The BRT requests that the authorities of the EU should standardise a practicalmeasurement method of nanomaterials. Such a measurement method should be
simple and internationally harmonised.
(3) Report and Registration System
The amendments of the Annexes to REACH for registration of nanomaterials was
released on October 2017, and the public consultations had been conducted forabout a month. The BRT requests the EU authority to fully reflect the opinions of the
public consultations, and to make the registration system which requires registering
only what have any risks. There are some materials which have no risks resulting
from nano size. Also, the nanomaterials, which have little possibility of exposure as it
is fixed in the matrix like incorporated within the resin, should be exempted from theregistration requirements which will be added in coming amendments.
The current report requirements for nanomaterials reportings are separated at each
Member States, and it becomes a significant burden for industries, especially SMEs.
So the BRT requests the EU authority to take an initiative in the establishment of theharmonized reporting system at the EU level.

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As to the reporting scheme, the European Commission has carried out public
consultation.
As to the reporting scheme, some Member States, such as France, Belgium,
Denmark and Sweden, have introduced their own regulation. A unified reporting
scheme is even more critical for industry.
As to measurement method, although the Joint Research Centre issued a report in2012 titled ‘Requirements on measurements for the implementation of the European
Commission definition of the term „nanomaterial’, there remain the issues ofpracticality and cost.
In June 2017, the European Union Observatory on Nanomaterials (EU-ON) has
been launched to provide the information on Nanomaterials.
< Background >The European Commission Recommendation on the definition of nanomaterial(2011/696/EU) was published on 18 October, 2011. Several EU Member States plan
to enact their own nanomaterial reporting schemes at a national level. It would oblige
their manufacturers and importers make multiple reporting in different formats, which
would not only be inefficient but also create confusion in their supply chains.
Different measurement methods are used in the measurement of nanomaterials tomeet regulatory requirements such as notification. As a result, there is a risk that theresults of measurement by different actors are not comparable.

17.6 Biocide Product Regulation
The BRT asks the authorities of the EU to evaluate, in due course, the effectivenessof measures for treated articles under the Biocide Product Regulation (BPR) in
reducing the risks posed to humans, animals and the environment by biocidal
products, and ensure that such measures are fit for purpose.
As the BPR is conceptual and not necessarily easy to understand, the BRT asks theauthorities of the EU to issue a practical and easy-to-understand FAQs for theimporters of active substance, biocide products or treated articles which illustrateproper procedures for actual cases.
< Recent Progress >There has been some progress.
< Background >The BPR (Regulation (EU) No 528/2012 of the European Parliament and of theCouncil of 22 May 2012 concerning the making available on the market and use of
biocidal products) requires that treated articles may not be placed on the market
unless all active substances contained in the biocidal products with which the articles
are treated or which they incorporate are approved. This requirement places large
burden and costs on industry, in addition to existing legislation mechanisms to restrict
and control hazardous chemicals (e.g. REACH, RoHS), resulting in possible
cessation of technologies, and consequent impact on competitiveness for
manufacturers or importers placing goods on the EU market. The BRT is concernedthat this is disproportionately impacting on non-EU manufacturers and importers
because such active substances to be regulated are often sourced from SMEs andWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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companies with limited sales to the EU which cannot afford to undertake therequirements of the BPR, resulting in a loss of functionality, and in turn limiting thetechnologies and potential innovations reaching the EU market. As a result the BRT
recommends an assessment of the impacts of this regulation via an evaluation ofsocio-economic versus human and environmental benefits for treated articles
measures under the BPR.
Although the competent authorities’ meetings produce many guidance documents,
the sheer amount of the guidance documents have increased the complexity of thesubject matter. The BRT requests the authorities of the EU to make guidance easierto understand.

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Common Consolidated Corporate Tax BaseThe European Commission re-launched the legislative proposals on the CCCTB on
26 October 2016. It proposes to legislate in two steps: first to agree on the rules for acommon tax base (CCTB) and, then to agree on the rules for consolidation (CCCTB).
The re-launched CCTB/CCCTB proposals make their application mandatory tocompanies belonging to a consolidated group with a total consolidated grouprevenue exceeding EUR 750 million.
Although there will be a substantial cost to companies in adapting themselves to a
new tax base, the BRT expects that a CCCTB would simplify tax compliance in theSingle Market. It would also introduce a mechanism of temporarily off-setting losses
in a subsidiary against profits at the parent, and would foster growth and investment
through participation exemptions and additional R&D deduction.
The BRT would like to note, however, that the substantial benefits to businesses aremostly in the second step.
 The consolidation would allow the totalisation of profits and losses.
 Goodwill transfer within a consolidated group would no longer be a tax issue.
 Transfer pricing within a consolidated group would no longer be a tax issue.
The BRT therefore urges the authorities of the EU to adopt the second step CCCTB
proposal swiftly after the adoption of the first step CCTB proposal.
The BRT hopes that, in the deliberations of the proposals in the Council, the Member
States will keep the tax system simple and sensible, and focus on fostering growthand investment.
The BRT would like to suggest that, if the Member States should find it difficult toagree on the CCTB/CCCTB proposals, they should move on to the enhanced
cooperation procedure swiftly so that CCCTB would be first implemented by theMember States that support them.
The BRT encourages the EU to aim at making the Best Practice corporate tax
system in the world to which countries around the world would aspire.
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< Recent Progress >There has been certain progress because the European Commission relaunched
the proposals.
< Background >The European Commission proposed a Council Directive on a Common
Consolidated Corporate Tax Base (CCCTB) in 2011. The Council has been unable
to agree on the proposal.
The European Commission re-launched the legislative proposals on the CCCTB
on 26 October 2016. The first step is a Proposal for a Council Directive on a
Common Corporate Tax Base (CCTB) COM(2016)685 and the second step is a
Proposal for a Council Directive on a Common Consolidated Corporate Tax Base
(CCCTB) COM(2016)683.
The relation between intra-group transactions and taxation is an important element
in decision making in a business. It is highly desirable that companies withinternational business should be allowed to compute the income of the entire groupaccording to one set of rules and establish consolidated accounts for tax purposes inthe EU.

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Sustainable European Future

Policy on CSR/RBC and SDGs
In its Communication on ‘’Next Steps for a Sustainable European Future’’ publishedon 22 November 2016, the European Commission laid down its plans to intensify thework on Responsible Business Conduct (RBC/CSR). BRT welcomes its direction
and recommends as follows;Integrate SDGs/CSR in the EU policy-making and take lead in policy discussions
on how to encourage the uptake of SDGs/CSR and promote actions to maximise
positive impacts while mitigating negative ones.
Build an open platform beyond EU Multistakholder Platform on SDGs: The
European Commission should open up dialogues and consultations beyond the
EU Multistakholder Platform on SDGs. The EU’s global partners such as Japan
would be particularly beneficial not only to exchange best practices with, but also
gathers views on the future discussion. The EU-Japan CSR Working Group, oneof the technical working groups set up by DG GROW and METI within the EUJapan Industrial Policy Dialogue is one of the existing platforms for a vital
bilateral dialogue to supplement other multi-stakeholder mechanisms.
Do not reinvent the wheel and build on the past experience: There exist many
frameworks and collaboration platforms on sustainability involving companies
and stakeholders following the EU CSR policy. We should focus on thesecollective achievements to identify best practices, knowledge for further
innovation and collaboration to achieve SDGs.

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Responsible supply chain management
The BRT welcomes the European Commission’s commitment to support theimplementation of internationally recognised frameworks such as the UN Guiding
Principles on Business and Human Rights and the OECD Due Diligence Guidance.
The BRT also values the Commission’s engagement with non-EU countries toadvance this agenda.
The BRT suggests that the authorities of the EU should take the following approach:








Promote internationally recognized frameworks in the EU that take a risk-based
approach instead of adopting the EU-specific conditions. This allows companies
to be globally consistent in taking meaningful actions. Such frameworks include
the UN Guiding Principles on Business and Human Rights and the OECD Due
Diligence Guidance;
Avoid creating unnecessary administrative burdens that would hamper
companies’ learning. There are more and more legal and non-legal requirementson due diligence and transparency emerging around the globe which makes
companies busy with meeting different requirements. The commission shouldplay a leading role to navigate the trend to focus more on what is really importantand meaningful to meet the objectives that is to mitigating the negative impacts.
Take leadership in closing the governance gap between countries and regions inorder to effectively address the fundamental problems on the ground. BRT
recognizes that the efforts of industry alone cannot ensure responsible sourcing
from such regions. It is crucial that national governments get involved andcollaborate. Here, the EU diplomacy has an important role to play. The BRT
supports dialogue and engagement with stakeholders. It is the best method for
driving collaboration across different cultures and systems and for creating value
for business and society.
Create an environment where companies are encouraged to establish
responsible supply chains. Companies which diligently tackle the issue should berecognised for their efforts and progress and the quality of their management
processes.

Disclosure and transparency
Disclosure of information is the first step for companies to communicate the value
which it creates and has a potential to create trust among stakeholders..
Regarding non-financial reports, they are a vital communication tool, provided thatthe reporting company retains discretion in determining to whom it intends to disclose
and what material is. Materiality differs for each company, depending on the nature ofbusiness, the perspective of top management and corporate culture. Due to thisvaried character of materiality, companies should be given the flexibility in deciding
what to report to express company’s value creation. Therefore, a principle-based
approach is the only viable way for companies to meaningfully explain their businessin a dynamic and changing environment.
The BRT recommends as follows:
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






Emphasize dialogue in policies as an equally valuable means for companies tostrengthen the trust of their investors and stakeholders, and leverage theimprovements of companies' internal practices by incorporating dialogue into the
PDCA management cycle. Dialogue is a powerful tool in fostering a culture of risk
management and innovation, whereby companies across different cultures can
exchange views on potential future risks as well as explore collaborative
opportunities;
Approach non-financial reporting not from a compliance mindset, but by building
meaningful channels for companies and investors to discuss value creatingprocesses.
Foster innovation and growth by motivating companies to integrate CSR/SDGs
into daily business to become more innovative and competitive in the global
context, including through open exchanges among stakeholders, partnercountries or regions, governments and suppliers;
Do not create and impose EU only monitoring/reporting mechanism oncompanies regarding the contribution towards SDGs. Monitoring is meaningful if
focused on the impacts and improvements which are important for companies.
EU should collaborate with other countries such as Japan in creating suchmonitoring mechanism.

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