Recommendationsof theEU-Japan Business Round Table
to the Leaders of the European Union and JapanTokyo, 20 April 2016
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
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
EU-Japan BRT 2016 Recommendations Report
Page 1 of 47

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 Transacion 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

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 2 of 47

JETRO
JIS
JR
KPIs
LED
LoA
MAFF
METI
NOL
OECD
OR
PPPR
PSE
R&D
REACH
RoHS
SDS
SIEF
SMEs
SVHC
UNECE
VAT
VICH
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
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
International Cooperation on Harmonisation ofTechnical Requirements for Registration of Veterinary
Medicinal Products
World Customs Organisation
World Health Organization
World Trade Organization
Working Party

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 3 of 47

Introduction
Japan is the EU’s seventh largest trading partner and the EU ranks as Japan’s thirdlargest trading partner. While already significant, this trade relationship has
considerable upwards potential and the benefits of the EU-Japan FTA/EPA, currently
under negotiation, will stretch beyond the many European and Japanese companies
already operating in each other’s home markets to all those, attracted to the newopportunities it creates. Working Party 1 stresses that any agreement must address
the specific concerns of European and Japanese businesses reflected in this andprevious reports. With so much at stake, we are urging the authorities on both sides toensure that the necessary progress is made. Many reforms are required to secure afair and competitive environment for business and have been identified from theextensive first-hand operational experience of Working Party 1 members in theJapanese and European markets. This report sets out concrete recommendations that
address the following key issues:

Creating a common regulatory environment, mutual recognition of regulations,standards and market authorisations to the extent possible and adoption ofinternational standards

Elimination of both tariff and non-tariff measures as well as unnecessary
bureaucracyEnsuring fair competition and equal treatment of all companies, domestic & foreignEnsuring fairer and more open competition in services, and procurement
markets

Improving conditions for foreign direct investment

Further enhancing incentives for growth of SMEs and for investment in R&D.
And finally,

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

Working Party 1 members reiterate that the EU-Japan FTA/EPA bilateral agreement
must be balanced, comprehensive and ambitious in order to dismantle these barriers
holding back EU-Japan trade and investment and significantly promote growth both
economies.
To highlight priority issues in the text that follows, one asterisk (*) indicates “priority”
recommendations and, two asterisks (**) indicate “top priority” Recommendations. (e.g.
WP 1/ # 01** / EJ to EJ)

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 4 of 47

Recommendations from both
European and Japanese industries
WP-1 / # 01** / EJ to EJ Strengthening the EU-Japan Economic Relationship
The BRT recognizes and welcomes the progress that the negotiators have made inmany areas under discussion, but is concerned that momentum will be lost as time
passes without an agreement. In view of the political calendar in 2017, the BRT
considers it difficult to maintain momentum beyond the end of 2016. The BRT stresses
that 2016 represents the best window of opportunity to conclude the negotiations of
the EU-Japan FTA/EPA.
For this reason, the BRT reiterates its call from last year, that “The BRT believes thatan aim of a speedy conclusion must come together with a high level of ambition.
Should a sufficiently high level of ambition seem difficult to achieve on the basis of thetechnical negotiations, the BRT urges, for the sake of our economies, political leaders
at the highest level to intervene to resolve the deadlocks and bring the negotiations toa timely and ambitious conclusion” .
The BRT is strongly convinced that the EU-Japan FTA/EPA will lead to an expansionof trade and investments, job creation and acceleration of growth in both economies,
as well as contributing to the creation of new opportunities for global growth. The BRT
highlights its request to the highest Authorities of the EU and Japan to focus onaddressing the remaining obstacles to the conclusion of a comprehensive, ambitious,
high-level, and mutually beneficial FTA/EPA as early as possible.
< Background >As major advanced economies and major global traders and investors, the EU andJapan can do more to unlock the enormous growth potential which their bilateral
economic relations can offer. They are now working on enhancing bilateral trade,investment and cooperation and building a closer relationship. As both strive toovercome global financial instability and economic uncertainties, it is crucial that theyjoin forces in tackling common challenges in order to attain a long-term, sound andstronger growth. The EU-Japan relationship should not be left behind

WP-1 / # 02** / EJ to EJ Call for effective and quick implementation of WTO‘Bali Package’ and work on a future WTO work program based on Nairobi
Ministerial Conference Declaration
It is evident that the WTO is to maintain its core role as the forum to create multilateral
trade rules, the EU and Japan should lead the member countries of the WTO and adapt
the organisation to the changing global trade environment better, for instance, by reevaluating its negotiating processes to make them more efficient, by facilitating thedelivery on the remaining DDA mandate and by agreeing to create new sets of rules
on issues beyond the DDA.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 5 of 47

The agreement on Trade Facilitation signed in November 2014 can serve as a boost
to global trade by reducing costs of trade by 10-15%. Its objectives are to speed up
customs procedures, make trade easier, faster and cheaper, provide clarity, efficiency
and transparency, reduce bureaucracy and corruption, and use technologicaladvances. The BRT therefore calls upon the authorities of the EU and Japan, together
with other WTO members to quickly ratify and implement the Trade Facilitation
Agreement.
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,
competition, investment, subsidies, the reduction of export restrictions and data flows.
Exploring these topics could reinforce the interest in the multilateral trading system andunderline 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 earn momentum in order tomove the DDA negotiations forward, as well as to facilitate timely conclusion ofplurilateral agreements such as expansion of the Trade in Services Agreement (TiSA).
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.
< Recent Progress >The informal WTO Ministerial gathering held in Davos on 24 January 2015 was a good
opportunity for WTO members to discuss the future work programme on the remaining
issues of the DDA. A number of WTO members expressed the following views:
 it is important to steadily and gradually operationalise the agreed items, based on
the MC9 outcome; for the remaining DDA items, the discussion of a work program to address suchitems should commence as soon as possible; and the WTO must not refrain from discussing potentially contentious issues suchas 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 now that the TFA has been passed.
The BRT welcomes the conclusion of the expansion of the Information Technology
Agreement (ITA) and the Agreement on export subsidies and export competition
elements at the WTO Ministerial Meeting in Nairobi in December 2015. For the future
course of DDA negotiation, however, two courses of its continuation and termination
have been set forth in parallel. The BRT expects further progress in WTO’s DDA
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 6 of 47

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 which
continue due to the lack of political will and the inability to bridge the gap in the market
access commitments 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 WTO Ministerial
Conference in Bali in December 2013. The so-called“Bali Package” that was agreed
consists of three main components: (1) a trade facilitation agreement; (2) anagreement on the agriculture sector; and (3) agreements on development (a package
for least developed countries and flexibilities for public food stockholding programmes).

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.
The BRT recommends the authorities of the EU and Japan to enhance their regulatory
cooperation. 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 together
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.
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.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 7 of 47

Taking into account the benefit of common regulatory environment, the BRT
recommends that the EU-Japan FTA/EPA should include a framework to promoteregulatory cooperation and to ensure that the authorities of the EU and Japan not takeunnecessary 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 FTA/EPA
will be a living agreement and will provide a solid and comprehensive framework forregulatory cooperation to address the sector-specific concerns of the business
community. In the recommendations of last year, the BRT welcomed the adoption of a
Joint Document for Regulatory Cooperation at the EU-Japan Industrial Policy Dialogue
between METI and DG GROW on 17 March 2015. As a long-standing advocate ofregulatory cooperation, and recognising that this is a key issue for the future, the BRT
hopes that this joint initiative will reinforce and complement the upcoming FTA/EPA
and set the frame for a solid, forward-looking and long-lasting regulatory cooperation.
The BRT is willing to support the EU and Japanese Authorities on regulatory
cooperation matters.
<Background>
The BRT believes that regulatory cooperation will be a key to the economic prosperityof the two economies. Once an FTA/EPA is concluded, it will be important not only toensure that new regulations do not nullify or impair the market access benefits accruing
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 8 of 47

to either party under the agreement or create new barriers to bilateral trade, but also
to expand and strengthen the relations between the two economies so that the benefitsof their cooperation will further increase and so that they will eventually be able toexpand such regulatory cooperation to other bilateral and multilateral relations.
In the meetings of the BRT on 8-9 April 2014, the Japanese side proposed that theauthorities of the EU and Japan together with key players such as the BRT should lookat future issues coming out of a long-range vision for the relationship for, say, the next
three decades.

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. 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 disruptor 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 concept of energy
efficiency including resource efficiency, using the right incentives, standardised
methodology, criteria and the format of environmental product declaration
between the EU and Japan and cooperate with each other so that such a policy
will be internationally 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
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
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 9 of 47

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.

Fight against counterfeited, pirated and contraband goods
The BRT would like to see the EU and Japan step up efforts to fight against
counterfeited, pirated and contraband goods, both inside and outside the EU
and Japan. For example, they should better cooperate with each other and withthe third country authorities to secure the closure of sites trading in fake goods.
The BRT requests that the authorities of Japan should make all trade with fakegoods illegal by closing the loophole by which individuals are allowed to bringin or import counterfeits for personal consumption.
The BRT reiterates its support of Regulation (EU) 608/2013 of the EP andCouncil of 12 June 2013 on Customs enforcement of Intellectual Property rights
which reflects to some extent the BRT’s key recommendations such as
simplifying the procedure. However, the BRT requests the authorities of the EUthat they should seek ways to mitigate the financial burden of the importers of
the authentic goods.
The BRT would like to see an enhanced role of the Observatory on
Counterfeiting and Piracy in line with the Regulation adopted by the European
Parliament and Council on 19 April 2012.
The BRT suggests that with increased cooperation by the manufacturers andimporters of authentic goods, including the provision of more information on
their products, on-site training of officials and training of officials on more
effective use of the WCO’s IPM (Interface Public Members), the customs
authorities should make inspection more efficient and raise the rate of its
coverage.

6.

Adoption of UN Regulations
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.
< Background for 6 >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

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 10 of 47

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 1-6 >Implementation of these recommendations will lead to a significant improvement in
the business environments of both the EU and Japan.

WP-1 / # 04* / EJ to EJ
1.

Supporting timely development of businessSocial security contributions (avoiding double contributions):

The BRT welcomes the conclusion of social security agreements between Japan and
11 EU Member States. Negotiations or preliminary talks are under way between Japanand 4 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 States 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 and Hungary
have entered into force. The agreements between Japan, and Italy and Luxembourg
have been signed. Furthermore, negotiations are underway between Japan, andSweden and Slovak Republic, and are at the preparatory stage between Japan, andAustria and Finland.
2.

Liberalisation of the movement of intra-corporate transferees in the frameworkof an FTA/EPAThe EU and Japan should realise far-reaching liberalisation of the movement of intracorporate transferees within the framework of an FTA/EPA. Such liberalisation should
aim at the following system:A framework agreement between the mother company, sending expatriates, andthe host country, stipulates the maximum number of expatriates. Within the agreed
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 11 of 47

limit, the mother company is free to send intra-corporate transferees to that country
without further obtaining individual work permits.
When the mother company concludes such an agreement with several Member
States in which its subsidiaries or branches have operations, movement of intracorporate transferees between those countries does not require a new work permit
as long as the total number in each agreement is respected.
Both sides should facilitate access to the labour market for accompanying family
members without any limitations in regard to regular working hours.

< Background >For the smooth and efficient running of international businesses, it is essential thatcompanies are able to dispatch key personnel, including directors without going
through red tape. Such transfers do not have any negative impact on the labour
market of the host country. On the contrary, they will expand employment in the hostcountry through the development of the business concerned. In addition, expatriates
themselves tend to pay high income taxes to the host country. The requirement toobtain work and residence permits for intra-corporate transferees between the EU
Member States and Japan is usually a formality. However, the burden on companies
as well as employees and their family members is substantial, and it constitutes an
obstacle to the swift development of business.
The EU has adopted Directive 2014/66/EU of the European Parliament ad of theCouncil of the 15 May 2014 on the conditions of entry and residence of third-country
nationals in the framework of an intra-corporate transfer. By 29 November 2016, thedirective should be transposed in the Member States. The directive will prove very
useful for Japanese companies sending their employees to the EU because, forexample, it will facilitate an assignment that involves several Member States andallow accompanying family members to have access to the labour market. However,
unfortunately, the new Directive will not be applied in the UK, Ireland and Denmark
due to the opt-out of those Member States. Japanese nationals in the UK, where
their number is the highest among the EU Member States, will not benefit from thisDirective. It is therefore imperative that such liberalisation is realised within theframework of an EPA/FTA so that it will be applicable to all intra-corporatetransferees between the Member States of the EU and Japan.

WP-1 / # 05* / EJ to EJ

Support for SMEs

The BRT calls on the EU and Japanese Authorities to develop measures to promote
and assist each other's SMEs within their own jurisdictions. Specific consideration
should be made to include such cross-support in FTA/EPA negotiations.
This would include:
1. Providing each other's SMEs the same general support and privileges asprovided to one's own SMEs.
2. Establishing permanent local assistance in language, paperwork, hiring local
personnel, legal and regulatory matters, as well as advice on financing andbanking, etc.
3. Providing tax breaks and incentives, tax deduction for total research expenses,
income tax breaks for foreign experts, tax exemption for doctoral students, tax
relief for R&D, tax deduction for joint and entrusted researches based on
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 12 of 47

industry-academic-government cooperation, as well as tax and other facilities
and incentives for investors.
4. Assisting and supporting SMEs with participation in local “Requests for
Proposals”, especially for renewable energy projects. This could include
streamlining and extending the proposal submission time frames which in manycases are too short for foreign SMEs to respond.
5. Helping graduates with international backgrounds find local jobs with the otherside's SMEs.
6. Conducting a feasibility study on creating a joint investment fund for both
Japanese and European SMEs.
7. Exchanging best practices and tested solutions in industrial policy for SMEs.
8. Expanding the SME-related programmes already run by the EU-Japan Centre
for Industrial Cooperation.
< Recent progress >The BRT welcomes the willingness of both Authorities to increase cooperation on
cross-support for SMEs.
< Background >SMEs are the most promising sources of growth and jobs in both Europe and Japan.
Their success in bilateral trade is a major factor in their development and also helps
to revitalise both Japanese and EU industries by disseminating new products andtechnologies. However, market access problems and various impediments noted inother BRT recommendations are even harder to tackle or manage for SMEs. While
the Japanese government, the European Commission and most EU Member States
have internationalisation programmes for their own SMEs, existing help programmes
for foreign companies are mostly geared towards large foreign direct investments inestablished industries and are inadequate for SMEs. Once a European SME hasestablished a footing in Japan, or a Japanese in the EU, using already available
government support programmes, it should continue to receive support from the hostregion. Such support cannot be expected as a unilateral measure but would only bepossible if agreed in a formal bilateral agreement. The BRT is aware of the major
work being done for both Japanese and European SMEs by the European
Commission and the Government of Japan through the programmes run by EUJapan Centre for Industrial Cooperation.

WP-1 / # 06** / 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 that authorities of the EU and Japanto ensure 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 andWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 13 of 47

multilateral relations between the EU Member States and Japan in a way that will
reduce the compliance costs and uncertainty significantly.
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 through Country-by-Country Reporting to be internationally coherent andin accordance with BEPS Action 13 in order to realise a level playing field.
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.
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 between 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
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>Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 14 of 47

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 / # 07** / 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.
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 awhole. 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. Due to the intricate discussion such as the scope of taxable
derivatives, implementation date has been postponed several times from initial
January 2014. According to the terms of the agreement disclosed in December 2015
by the EU Council, final agreement should be reached by June 2016.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 15 of 47

Recommendations from
European industry to Japan
WP-1 / # 08** / E to J
Harmonisation & mutual recognition of standards andproduct certifications; acceptance of international standards where applicable

Reluctance of the Government of Japan to accept imported products approved inaccordance with EN and ISO standards or CE marking delays the introduction of
innovative new products to the market and increases import costs. While accepting
the need to safeguard consumer health and safety, the BRT urges Japan to promote
the harmonisation of standards and certification procedures, the mutual recognitionof 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 FTA/EPA.
< Recent progress >There are still seven areas where Japan does not accept a UN approval as
demonstrating compliance with its national type approval requirements. The
reference to commercial vehicles is a new recommendation.
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
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 16 of 47

between ISO and JIS/JAS in its progress reports of April 2013, April 2014 and April
2015.
< 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.

Cosmetics
The BRT calls for common regulations on the certification of medicated cosmetics,
so-called quasi drugs (disclosure of approved ingredients, standard application
times); common regulations on efficacy claims and advertisements; a common
positive list of allowable ingredients in cosmetics; and establishment of joint
standards for alternatives to animal testing.
< Recent progress >While very little has been confirmed or decided, the BRT is pleased to see that theissue is reportedly under discussion in the FTA/EPA negotiations. Additionally, Japan
has taken the first step to revise the levels of fluoride in toothpaste and mouthwash.
The BRT views this in a positive light.
< Background >European cosmetics firms find it continuously difficult to expand their business inJapan due to the difference in standards for ingredients and permitted efficacy claims
between Japan and the EU and the Japan-specific product certification proceduresfor so-called quasi drugs.
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 Japan to establish a system whereby standards
and requirements are available openly so that European companies will have a better
understanding of what is needed in order to offer goods and services that meet or
exceed the safety measures in the Japanese market. While the BRT understands
that operators might have different performance requirements, the same safety
requirements and standards should preferably be used by all operators in Japan,
which currently is not the case as each individual operator can choose its own
standards and requirements. As a first step, test results and approvals by one
operator should be accepted by other domestic operators.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 17 of 47

The BRT, however, recognises the latest development and positively views the firstcall for tender by a Japanese operator The BRT recommends Japan to make betteruse of the tendering system as this leads to more competition and bettertransparency, while not negatively affecting safety.
< Recent progress >While some progress has been made, the core issue still remains that there is nocommon conformity assessment scheme in Japan to which all operators adhere. The
BRT takes note of the efforts of some operators in publishing a list of potential future
procurements, and views this as a good first step to improved market access.
< Background >Japanese safety standards and regulations are not publically available. There is,therefore, no possibility for foreign manufacturers to know exactly what requirements
must be fulfilled. Furthermore each operator can in principle have their own testing
requirements as there is no legislation on exactly what safety requirements need to
be fulfilled.

Veterinary Products
Animal health products already approved in the EU have to undergo further rigorous
reviews on market authorisation application dossiers and Japan-specific tests before
being approved in Japan, which increases costs and causes delays. Accordingly, the
BRT:a) The BRT requests the Government of Japan to take all measures available
to speed up product approvals, particularly for veterinary products intended
for use in food producing animals.
b) The BRT requests the Ministry of Agriculture, Forestry and Fisheries tominimise Japan-specific tests for market authorisation, such as theserological potency test for live vaccines, which is a unique requirement inJapan.

< Recent progress >On August 3, 2015, MAFF announced a drastic change in the review process underdiscussion for veterinary products intended for food producing animals. The current
step-by-step or sequential flow of reviews among MAFF, Food Safety Commission,and MHLW will shift to a parallel review process among those government bodies.
According to MAFF, this has the potential to shorten the review process toward MA
by one to two years when compared to the current process.
< Background >Japan is part of the Trans-Pacific Partnership (TPP), which is shaping up to become
the largest trade deal in history. If it passes, Japan may face more competition in
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 18 of 47

certain meat categories, such as the low- to middle-price range of beef and pork
imported from abroad. Therefore, the availability of innovative veterinary products forboth pharmaceuticals and biologicals for Japanese livestock producers are
considered critical to ensure their competitiveness.
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 >There has been no concrete progress, although the issue is under discussion in the
EU-Japan FTA/EPA negotiations. We note that the progress report of 2014 mentions
that the GOJ is considering setting “a standard time frame” for approval procedure
upon establishment of the Food Additive Design Consultation Center. We are verymuch looking forward to know more about this.
< 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.
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.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 19 of 47

< 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 Government of Japan should issue clarifying orders to provide retailers withflexible alternatives for providing Japanese consumers with globally sourced products
while taking full responsibility for the quality and safety of the products. A simple
example of an inflexible labelling rule that has substantial labelling cost implications
for European companies is that the dimensions of furniture must be expressed inmillimetres and not centimetres, although use of the latter is common practice inother countries using the metric system. There are also examples where theinformation required on the labels is too technical for the consumer to understand.
< 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 is said to be working on arevision, but has so far not presented anything concrete. This issue was not touched
upon in the GoJ progress report of April 2013.
< Background >The Household Product Quality Law and accompanying voluntary labelling
guidelines, “hyojikitei”, prescribe in extreme detail how household products should belabelled when sold in Japan.

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 from FY2015 is a welcome first step towards
reducing the discrepancy in the burden of taxation on compact cars and kei carsbut it
does not go far enough. In the FTA negotiations, the GOJ should commit to further

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 20 of 47

fiscal and regulatory changes so that European compact cars can compete on equalterms with kei-cars in the Japanese market.
< 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
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, but not yet
by Japan. Even when Japan has 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

Ensuring free and open competition in services

The BRT urges the Government of Japan to tackle the lack of free and open
competition in Japan’s services markets.
On the matter on postal reform, the BRT is disappointed with the decisions taken so
far by the Japanese Government. Japan has a duty to abide by its WTO obligations,
including the national treatment provision of the GATS. This means establishingequivalent conditions of competition between the Japan Post entities and EU andother private delivery companies, banks, and insurance companies. Specifically:a. Kampo insurance business should be subject to the same capital, solvency

margin, tax and policyholder protection funding requirements as private sector
insurers. Limits are needed on expansion of Japan Post’s services, including
the introduction of new products as well as caps on postal life insurance, until
competitive safeguards have been established to prevent cross-subsidies fromits existing dominant position. The BRT is particularly concerned by the recent
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 21 of 47

approval of the new or modified products offered by Japan Post Insurance. It isalso imperative that Japan Post remains under the jurisdiction of the FSA. The
above requests are well within the realm of the GPA. Similarly, the insurance
business of cooperative societies (kyosai) should be subject to the samerequirements as private sector insurers.
b. Japan Post and private postal delivery operators should be subject to the same

customs procedures and formalities. A level playing field for both Japan Postand private postal operators should be ensured in the requirements for
dedicated airway bills, obligatory customs, quarantine and security clearance
and the funding of these services, as well as in the issuance of parking tickets
for delivery vehicle parking infringements.
< Recent progress >While the issue is being discussed in the FTA/EPA negotiations, the WP A is notaware of any concrete improvements. Furthermore, on issues directly related toJapan Post very little change in either direction has been seen during the last year.
< Background >Since the Big Bang in the late 1990’s, Tokyo has seen its role diminish in the global
arena. This is partially due to the very few changes undertaken since that time. The
preferential treatment extended to Japan Post and its subsidiaries still exists, and has
unfortunately been expanded without private companies having access to the same
benefits.

WP-1 / # 12** / E to J

Freight and logistics

1. Further to the WP-A / # 03 / EJ to EJ, the BRT recommends that Japanrevises its AEO system to introduce real benefits for operators regardless ofwhether they are forwarders, customs brokers or importers. Furthermore, theadministrative load needs 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:-

Deregulated customs clearance beyond the local customs jurisdiction
territories-

Reducing the physical examination of shipments-

Being able to use alternative documentation for showing “direct shipment”
under free trade arrangements< Recent progress >Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 22 of 47

Japan Customs have announced a plan to deregulate customs clearance beyond the
local customs jurisdiction territory by 2017. The BRT looks forward to this change
which will be perceived by industry as a significant improvement.

< 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.

2. The BRT recommends that Japan introduces a comprehensive system of
remote filing and at the same time, strengthens alignment of the various
customs areas to avoid discrepancies between the regional customs
authorities. This would improve the situation not only for European companies,
but also for small- and medium-sized Japanese companies,

A long-term solution could be to consolidate the various jurisdictions. A first stepwould be to consolidate Tokyo and Yokohama, and Osaka and Kobe.

< Recent progress >This is a new recommendation.

< Background >Currently Japan has nine separate customs areas and no real central customs
authority. This leads to discrepancies between the treatments of imported goods
depending on the port of entry. The different interpretations of customs law inaddition to different HS code classification create costs for the importer This also
makes it difficult for European logistics companies, which lack multiple regional
offices in Japan to expand their regional coverage as licensing is per region, ie. thelicense given by Tokyo Customs is not valid in Yokohama.

WP-1 / # 13* / E to J

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
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 23 of 47

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.
In addition, Japanese rules on inheritance tax make foreigners liable for inheritancetax covering all global assets from day one of registration as a resident in Japan.
This differs from the application of both global income taxation, which applies only
after five years, and the recently introduced exit tax which will only apply to persons
with either permanent residence visas or spouse visa. This will serve as adisincentive to foreign direct investments. Moreover, while such improvement of thegeneric investment environment is a precondition, 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 theminimal level needed to serve the existing client base. Mutual recognition of market
certifications would be an important first step to improving investments in the medical
field. Mutual acceptance of principles governing the financial services industry andthe mutual acceptance of the home regulator as the core regulator would go a long
way to improving the investment environment in the financial sector.

< Recent progress >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 of the period.
< Background >Despite its position as the world’s second 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 OECD in 2013 inward FDI stocks was accounted for only 3.5 % ofGDP.

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 better defining or removing the “operational safety clause” within
the transport sector. Japan should also include more cities in the GPA as currently
only nineteen 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
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 24 of 47

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.

< 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 willhave.

< 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.

1

Copenhagen Economics, “Assessment of barriers to trade and investment between the EU and Japan”, 2009
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 25 of 47

Recommendations fromJapanese industry to the EU
WP-1 / # 15** / J to E

The importance of the Single Market

The BRT welcomes a roadmap published in October 2015 to deliver on President
Juncker’s political commitment to unleash the full potential of the Single Market andmake it the launch pad for Europe to thrive in the global economy. It proposes a numberof actions focused on three main areas:- Creating additional opportunities for consumers, professionals and businesses;- Encouraging the modernisation and innovation that Europe needs; and- Ensuring practical benefits for people in their daily lives
The BRT agrees that the Single Market is one of Europe’s major achievements and its
best asset in times of increasing globalisation.
The BRT would like to emphasise the importance of the following policy areas for theSingle Market:-

Further improvement and realisation of the true single market of chemical materials
Business environment
TaxationIntellectual property rights
Consumer empowerment
Services
Networks
The digital single market

In improving the Single Market, the EU and its Member States should not only aim at
the harmonisation of national rules at the EU level. They should also aim at better
regulation by eliminating duplicative legislative framework and at the liberalisation andderegulation.
The BRT would like to emphasise that the EU should make a policy throughRegulations in the areas in which the uniform application of policy throughout the EU
is crucial.
As it is estimated that in the next 10-15 years, 90% of the world’s growth will comefrom outside the EU, the BRT would like to emphasise that an internationally open
European Single Market is essential for Europe to thrive in the global economy.
The BRT supports the deepening of EU-Japan trade relations through an ambitious
FTA/EPA and fair market access that will contribute substantially to industrial growthand job creation.
The strength of the European economy is, furthermore, built on a set of values that willlead to a sustainable economic development. Corporate social responsibility is apivotal contributor to the EU’s objectives of sustainable development and highly
competitive social market economy. Considering the relationship with Japan, for
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 26 of 47

example, the BRT believes that fostering responsible business should be at the heartof the EU-Japan economic and political partnership.
< Recent Progress >There has been some progress since the European Commission is committed tounleashing the full potential of the Single Market.
< Background >President Juncker of the European Commission has made a political commitment tounleash the full potential of the Single Market and make it the launch pad for Europe
to thrive in the global economy.
The European Commission published a roadmap in October 2015 and proposed anumber of actions focused on three main areas.

WP-1 / # 16** / J to E
Revision of high customs tariffs on audio-visual
products and passenger cars
The authorities of the EU should immediately eliminate high customs tariffs, forexample, 14% for audio-visual products and 10% for passenger cars. In the absenceof a progress in global trade negotiations, such reduction should be realised throughbilateral negotiations, notably, through an EPA/FTA between the EU and Japan.
< Recent Progress >A progress has been seen for this recommendation because the EU-Japan bilateralnegotiations on an EPA/FTA are underway.
< Background >The EU is protecting some sectors of its industries by maintaining high customs
tariffs even though these industries are at the forefront of international competitionand need stimuli for competition rather than protection. Such protection will not help
enhance international competitiveness of those sectors. Furthermore, it is only theirusers and consumers in the EU who unfortunately have to pay the resulting higher
prices.

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, the representativesof non-EU companies should be allowed to register as the stakeholders of the
ECHA.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 27 of 47

 If the thresholds of new SVHSs are too low, for example, in the units of ppb
rather than the units of ppm, there will be practical difficulties for manufacturesand importers to implement it effectively as it will be too difficult to measurecorrectly.
 The authorities of the EU should improve the enforcement of the thresholds
applicable to SVHCs once they are adopted. Otherwise the increasing numberof SVHCs with extremely low threshold will distort the competition between
strictly complying manufacturers/importers and less strictly complying
manufacturers/importers.
 In the evaluation of a substance allocated to a Member State in the frameworkof CoRAP - Community Rolling Action Plan, a private business is often
requested to provide information on the substance which it holds. However, it
is sometimes requested at a short notice and/or a not-well-organised manner,which is not effective. The authorities of the EU should publish the bestpractice for the Member States so that private businesses can help them more
efficiently and effectively.
2. The BRT requests that the authorities of the EU should further improve the PACTRMOA. 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 the evaluation
process.
 The criteria for the selection of substances should be more transparent.
< 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 toregister 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 the result,
it is not implemented evenly. Some manufacturers or importers seem to interpretthe threshold as a reference – not as the limit not to cross. It seems that somemanufacturers or importers do not measure SVHCs at all in the belief that it isunlikely to be found out.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 28 of 47

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 the designationof 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 for listing 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 the WHO,and characterising with taking into account of potency, lead toxicity, severity andirreversibility.
The BRT is concerned that the European Commission has already sent a draft decision
to the WTO that applies to DEHP, DBP, BBP and DiBP without waiting for acommunication on the categorisation due to be published in July 2016.
< Recent Progress >Some progress has been made as the result of ongoing discussion including public
consultation.
< Background >Currently, the authorities of the EU are reviewing the current legislations such as
REACH, PPPR (Plant Protection Products regulation) and BPR (Biocidal Products
Regulation), and they are contemplating a policy measure. The European
Commission has announced that it will publish a communication on the
categorisation in July 2016.

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 bytaking account of the most appropriate risk management option. Going forward, theprinciples 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 necessary levelof legal certainty, transparency and predictability to allow for timely implementation
with regard to restriction, substitution and exemption requests.
< Recent Progress >Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 29 of 47

Some progress has been made.
Upon the European Commission's initiative, a working group has been established todevelop 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 samechemical 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 and criteria
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 processes ofauthorisation, restriction and exemptions partially overlap between the two regulations,adding to the complexity and burden for industry. The Common Understanding
specifies how these processes should be managed in the most efficient and effective
way while safeguarding the protection of human health and the environment.

17.4 CLP Regulation
 The BRT requests that, to alleviate burden on exporters, the authorities of the EUshould accept GHS classification and labelling at the custom clearances.
 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.
< Background >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
with both GHS and CLP.

17.5. Nanomaterial
1. Definition

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 30 of 47

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. 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. Reporting scheme
The BRT requests that the authorities of the EU should take an initiative and establish
a harmonised reporting system at the EU level.
Because the above 1 and 2 are not progressing, some Member States have started
their own reporting schemes. The EU should move more quickly on a harmonised
reporting system.
< Recent Progress >Little progress has been made: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, Denmarkand Sweden, have introduced their own regulation. A unified reporting scheme is evenmore 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 of practicality
and cost. .
< 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
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 31 of 47

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>
This has been some progress.
<Background>
The BPR (Regulation (EU) No 528/2012 of the European Parliament and of the Councilof 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 treatedor which they incorporate are approved. This requirement places large burden andcosts on industry, in addition to existing legislation mechanisms to restrict and control
hazardous chemicals (e.g. REACH, RoHS), resulting in possible cessation oftechnologies, and consequent impact on competitiveness for manufacturers orimporters placing goods on the EU market. The BRT is concerned that this isdisproportionately impacting on non-EU manufacturers and importers because suchactive substances to be regulated are often sourced from SMEs and companies withlimited sales to the EU which cannot afford to undertake the requirements of the BPR,
resulting in a loss of functionality, and in turn limiting the technologies and potential
innovations reaching the EU market. As a result the BRT recommends an assessmentof the impacts of this regulation via an evaluation of socio-economic versus human andenvironmental benefits for treated articles measures under the BPR.
Although the competent authorities’ meetings produce many guidance documents, thesheer amount of the guidance documents have increased the complexity of the subject
matter. The BRT requests the authorities of the EU to make guidance easier tounderstand.

WP-1 / # 18** / J to E
18.1

Resource Efficiency Policy

Circular Economy

A truly circular economy requires the involvement of actors in all stages of the ideal
economic cycle and should be based on life-cycle thinking. The BRT therefore
recommends the authorities of the EU to assess environmental benefits at the design
stage from the perspective of scientific evidence and to take into account trade-offs
between energy efficiency, resource efficiency, safety and performance of products.
Although framework conditions and enabling legislation at EU level exists, it requires
better implementation, harmonisation and enforcement. The BRT recommends theauthorities of the EU to ensure coherence in the development of the Circular Economy
Action Plan and avoid overlaps or contradictions between several pieces of legislation
which limit circular business models which may focus on recycling andrefurbishment/remanufacturing activities.
In particular, before proposing new
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 32 of 47

legislation at the production stage, the authorities of the EU should take into accountcoherence with ErP, Energy labelling, WEEE, RoHS, REACH, and ProductEnvironmental Footprint (PEF), amongst others. When new or revised legislative andpolicy proposals will be put forward, effective enforcement schemes should be
implemented in order to avoid unfair competition which would undermine the credibilityof new business models. On the other hand, the BRT recommends the authorities of
the EU to assess – e.g., through REFIT - whether existing framework/environmental
legislation poses obstacles to the Circular Economy, which can potentially be removed.
The BRT would like to stress the need for a greater harmonisation and simplificationof existing legislation and policies at EU level to overcome barriers posed by diverging
interpretation and implementation at Member State level. In this context, consistentdefinitions of waste and end-of-waste criteria would be needed in order to ensure freemovement of secondary raw materials within Europe or globally. In particular, the BRT
requests the authorities of the EU to closely monitor national implementation of such
criteria in order to identify potential barriers to the Circular Economy.
The BRT represents industries with highly complex and global supply chains. The
authorities of the EU and Japan should keep this in mind and therefore contribute toregulatory harmonisation at global level. Such harmonisation can be achieved throughthe development of technical standards in line with ISO standards and help industry tobetter implement circular models in the supply chain whilst creating a level playing field
for all market actors. In parallel, the authorities of the EU and Japan should consider
incentives for manufacturers to increase the use of recycled materials in products andfor producers of secondary raw materials to provide them in higher quality and quantity.
These would be necessary steps for the creation of a global and functional secondary
raw materials market.
<Recent Progress>
This is a new recommendation.
<Background>
The European Commission published a new Circular Economy Package in December
2015. The package includes revised legislative proposals on waste and an EU Action
Plan for the Circular Economy.

18.2

Ecodesign Product Lots

The BRT asks the authorities of the EU to uphold the Energy Related Products (ErP)
principle of setting Minimum Energy Performance Standard (MEPS) at the level ofLeast Life Cycle Cost (LLCC) so that consumers can buy affordable and efficient
products.
The BRT also asks that the authorities of the EU should carry out comprehensive
impact assessments before deciding to include components integrated into products
into the ErP product Lots scope and hence avoid inefficient “double” regulation
measures. It is essential that optimum efficiency is pursued at the level of the final
product not at the component level where there are no tangible benefits to theconsumers.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 33 of 47

The BRT suggests that “repair as produced” principle should be applied to spare parts
under ErP as it is the case in the RoHS Directive In order to avoid disposing off usable
parts prematurely and considering the resource efficiency aspects.
<Recent Progress>
There has been some progress as consultation is ongoing.
<Background>
When an impact assessment for components integrated into products is not carriedout like it is the case for instance with the revision of Lot 11 (fans), the benefits forenvironment and energy efficiency could be misleading. The lack of proper impact
assessment would lead to unaffordable products that no one would buy which in turnwould not contribute to the reduction of energy use. Additionally, this would cause thesetting of unrealistic MEPs leading again to unaffordable final products for the
consumer. ErP implementing measures should focus on removing the least efficient
products on the market and not set MEPs based on the 10% of most efficient products
which is covered by the Ecolabel regulation.
Using once again the Lot 11 (fans) example, when a product needs to be repaired, if
spare parts needed do not meet the most recent regulation requirements, the productcannot be repaired and a new product has to be bought, which is not resource efficient.
If regulation on a product takes spare parts into account, the product life can beextended by repair.

18.3

Energy LabellingWith respect to the ongoing Energy Labelling directive revision, the BRT urges theauthorities of the EU to avoid leaving the top energy classes empty as this will confuse
consumers and discourage innovation on the producers’ side to come up with moreenergy efficient products. The rules for rescaling the energy label should also be
tailored to the characteristics of the products in scope and generally speaking should
only take place when more than 50% of products on the market move to the top classes.
The BRT also cautions against setting a costly database for products’ information as
this will not substitute market surveillance in each Member State and risks that
confidential data are leaked to third parties.
<Recent Progress>
This is a new recommendation.
<Background>With regard to the Energy labelling directive revision, the European Commission’s draft(COM(2015)241) is proposing to leave the top classes (i.e. A and B) empty at the
moment of the introduction of the label so that the estimated time within which amajority of models falls into those classes shall be at least ten years, and remove thebottom classes (D, E, F or G) from the label where due to ErP implementing measures
products falling in these classes cannot be placed on the market anymore. This will
discourage innovation and confuse consumers from investing to buy the most energy
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 34 of 47

efficient products on the market and is counterproductive to the aim of Energy labelling.
The proposal to create a product database to be managed by the European
Commission will only add additional costs, burden and damage competitiveness for
SMEs with no added benefits in terms of market surveillance which needs to be
performed in the market by the Member States. Most of the product data requested to
be included in the database is already available on the producers’ free websites under
the ErP implementing measures.

WP-1 / # 19** / J to E

Taxation19.1 Common Consolidated Corporate Tax BaseThe European Commission intends to re-launch the proposal on the CCCTB in 2016.
It intends to split the proposal into two: first to agree on the rules for a common tax
base and, at a larger stage, agree on the rules for consolidation. It also intends the relaunched CCCTB to be a mandatory system.
The BRT regards that the CCCTB will be attractive for businesses in a sense that it will
strengthen the Single Market.
Although the BRT prefers the CCCTB to the CCTB, the BRT recognises that, if Member
States are unlikely to agree to the CCCTB immediately, a staged approach may be away forward.
The BRT would like to emphasise that cross-border loss relief, the carry-over of
unrealised good-will taxation in intragroup reorganisation and non-application of armslength principle within a group of companies that form CCCTB are the key
attractiveness of the CCCTB and that there should be temporary measures to realisesuch benefits at the stage of the CCTB. The BRT also recommends that a temporarymechanism for cross-border loss relief should be designed in such a way that crossborder loss relief can be exercised when the principal entity incurs losses on a standalone basis.
In addition to the mandatory application to a group of companies with a holding
company in the EU, a group of companies and branches in the EU directly held by aParent Company established outside the EU should have the possibility to apply therules of the system.
The BRT supports the EU’s priorities to restore growth, and promote investment andjob creation in a fairer and deeper Single Market. The EU therefore should focus ontax policies that will foster growth, investment and job creation. It will create afavourable environment beneficial to the economy and public finance of the EU
The BRT suggests that the CCCTB should be a simple, light and sensible tax system
so that it is by itself attractive to all companies including SMEs and even a single
company to use. It will also reduce an incentive to resort to aggressive tax planning.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 35 of 47

The BRT encourages the EU to aim at making the Best Practice corporate tax systemin the world to which countries around the world would aspire.
< Recent Progress >There has been some progress since the European Commission is trying to breakthe deadlock in the Council on the proposal.
< 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 published an Action Plan for a Fairer and Efficient
Corporate Tax System on 17 June 2015. The Action Plan calls for a renewed approachto the pending proposal whereby the main amendments will be the following:- The re-launched CCCTB will be a mandatory system.
- It will be deployed in 2 steps because the current proposal is too vast to agree in
one go; efforts will first concentrate on agreeing the rules for a common tax base,and consolidation will be left to be adopted at a later stage.
The European Commission carried out a public consultation on the re-launch of the
CCCTB from October 2015 to January 2016.
Many Japanese companies are implementing integration and rationalisation of their
European business organisations in order to remain competitive in the Single Market.
Examples are the centralisation of such functions as sales support and accounting.
The relation between intra-group transactions and taxation is an important element indecision making in a business. It is highly desirable that companies with international
business should be allowed to compute the income of the entire group according to
one set of rules and establish consolidated accounts for tax purposes in the EU.

19.2 Merger Directive
The scope of the Merger Directive (90/434/EEC) should be expanded to include thetransfer of real estates and other intangible assets in reorganisation. Furthermore, theshareholding requirements should be abolished.
< Recent Progress >No progress has been seen for this recommendation.
< Background >In the communication COM (2001)582, the European Commission referred to its
intention to extend the scope of the Merger Directive to tax on the transfer of realestates. The amendments to the Directive (2005/19/EC), however, do not include
provisions related to this issue.
By extending the scope of the Directive to the transfer of real estates and otherintangible assets in reorganisation, companies could reduce the cost of
reorganisation and increase competitiveness.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 36 of 47

The Merger Directive (90/434/EEC) provides for the deferral of corporate tax in thequalified cross-border restructuring of business. In certain EU Member States,
companies are required to hold shares that they have received in exchange ofcontributed assets for a number of years even if those holding companies cease tofunction as an operating company. There appears to be no ground in the Directive
to support such measures.
In addition to the cost of maintaining these empty companies, it increases the risk of
double taxation. Dividends paid by the subsidiaries do not qualify for Japanese
foreign dividend exclusion for the portion distributed through the empty holding
company if the shareholding of Japanese parent in it is below 25%.

19.3 The fundamental reforms of VAT regime under consideration
The BRT welcomes the strategy of the European Commission to fundamentally revise
the VAT system and to establish a simpler, more efficient and robust VAT system
tailored to the single market as described in Com (2011) 851. The BRT also welcomesthe publication by the Commission of options for simpler and more robust future VAT
regime. Furthermore the European Commission announced in its Work Programme
2016 to publish a Communication setting out the definitive VAT regime.
The BRT hopes that the new regime will be realised swiftly and in such a way that abusiness group could easily and cost effectively centralise VAT administration in theEU.
< Recent Progress >Some progress albeit limited has been seen for this recommendation.
< Background >Many Japanese companies are implementing integration and rationalisation of their
European business organisation in order to remain competitive in the Single Market.
Accounting functions including VAT administration are often targeted forcentralisation with the aim of reducing overall costs and increasing efficiency.
Although the VAT system in the EU is a common system, in reality, differencesamong Member States are significant mainly due to derogations. Presently,
therefore, the centralisation of VAT administration carries a high financial risk.
For example, if centralised accounting staff with limited country specific knowledge
makes a mistake in a repetitive transaction, the accumulated amount that should berectified could become high over a relatively short period. In addition, a penalty may
be imposed. To avoid such a high risk, businesses have to either leave accounting
staff in local operations or employ a number of accounting staff with country specificknowledge in a central location. In either case, cost-effective centralisation of
accounting functions is unlikely to be realised.

19.4 Country by country reporting (CBCR)
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 37 of 47

The BRT supports the creation of an internationally fair taxation framework and levelplaying field. The BRT would like to emphasise that, in implementing CBCR/BEPS
Action 13 in the EU, the EU should aim at realising an internationally level playing
field.
It is therefore important that information required to disclose in CBCR isinternationally coherent in order to realise a level playing field. The EU should,
therefore, limit information required to disclose to the tax authorities to BEPS Action
13 information.
Furthermore, information concerning a tax payer should be kept confidential by the
tax authorities. That is the reason that BEPS Action 13 demands that a legal
framework must ensure the confidentiality of exchanged tax information and limit its
use to appropriate purposes. By the extension of this principle, the BRT regards
mandatory public disclosure of tax-related information inappropriate.
The BRT understands the desire of the EU to combat aggressive tax planning. The
BRT would like to point out the importance of a tax system that is simple, light andsensible in order to reduce the necessity of tax planning and foster growth andinnovation friendly tax environment. When the enterprises view the EU introducing
simple, light and sensible tax systems to foster growth and innovation friendly tax
environment, it will create a favourable environment for investors far more beneficial
to the economy and public finance of the EU.
<Recent progress>
This is a new recommendation because there have been considerable changes in
the policy of the EU.
<Background>
The Directive 2014/95/EU of the European Parliament and of the Council of 22
October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial
and diversity information by certain large companies and groups requires theEuropean Commission to report on CBCR by 21 July 2018.
Due to the agreement to introduce CBCR from 2017 in the framework of the BEPs
Actions, the European Commission launched a public consultation in 2015 on thepossibility to introduce CBCR on a pan-European basis and expand its scope.

WP-1 / # 20** / J to E

Company Law / Corporate social responsibility

20.1 A new strategy on CSR Policy
Concerning a new strategy on CSR policy that the European Commission is currently
updating, the BRT recommends as follows:(1) Highlight innovation: The European Commission should articulate the proactive
nature of CSR that leads to innovation and opportunities.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 38 of 47

(2) Take a flexible, principle-based approach: The European Commission shouldtake a “principle-based” approach for evaluation and reporting. This approach willallow each company to meaningfully express their business in a dynamic andchanging environment.
(3) Build an open platform: The European Commission should take a proactive role increating an open platform.
(4) Create incentives to foster leadership for change: The European Commission
should create incentives for companies that take leadership in identifying,
preventing and mitigating the negative impact of businesses(5) Articulate policy linkages across the European Institutions<Recent progress>
There has been some progress as the European Commission is currently updating its
strategy (action plan) on CSR.
<Background>
The Communication of the European Commission in 2011 ‘A renewed EU strategy
2011-14 for Corporate Social Responsibility’ (COM(2011) 681) was an importantmilestone. Not only did it provide a modernised definition of CSR as the “responsibilityof enterprises for their impacts on society”, but it further set out the expectation thatcompanies should have a process to integrate social, environmental, ethical, humanrights and consumer concerns into their business operations and core strategy in close
cooperation with their stakeholders. Furthermore, it made clear that the developmentof CSR should be led by enterprises themselves.
In preparation for a policy revision, the European Commission carried out public
consultation in 2014 and sought stakeholders’ views on the impact of its CSR strategy
over the past three years and on the role that it should play in the future. The EU
Multistakeholder Forum on CSR was held in February 2015 as the final milestone of
the Commission’s multi-stakeholder review process. The European Commission iscurrently drafting an updated strategy (action plan) on CSR.
More background on recommendations(1) Much has been said of the improved definition of CSR since the publication of the
EU strategy (2011-2014). Now is the time for every stakeholder to take part anddesign actions for the future. Policy instruments therefore need to encourage theuptake of CSR as a driver for European industrial competitiveness. The
European Commission should lead policy discussions on promoting actions tomaximise positive impacts, while mitigating negative ones.
(2) Businesses need flexibility to choose how they reach their goal of sustainable
development, in a manner meaningful to their supplier relations. “Rule-based” or“tick the box” approaches do not reflect the real challenges multinational
companies face in today’s complex value chain, and sometimes do not
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 39 of 47

accurately reflect the ongoing efforts of companies at a local level. A compliancemind-set also has the effect of limiting thinking about longer term challenges.
CSR is a journey. The CSR policy tools must be designed to foster innovationand growth.
(3) Dialogue is a powerful tool to understand how our communities work. It is often
more useful in building lasting trust than forced transparency measures likenaming and shaming. Innovation is fostered through open exchanges among
stakeholders, partner countries or regions, governments, and suppliers. As
relationships develop, partners are more likely to care about sustainable growthamongst other stakeholders, and to look for common goals. The BRT would liketo commend the EU-Japan CSR Working Group set up by DG GROW and theJapanese Ministry of Economy (METI) as one of the technical working groups
within the EU-Japan Industrial Policy Dialogue. This Working Group has a lot of
potential not only to strengthen the relationship between the EU and Japan, butalso to create a new platform for dialogue.
(4) Done effectively, such incentives would give first adopters a competitive
advantage over the followers in terms of reputation and risk management. At
present, however, companies taking the lead, for example in tackling humanrights issues inside and outside companies, are undermined and sometimes
penalized. We would therefore welcome a mechanism in which the first adopters
receive more recognition, whereby efforts to improve both the positive andnegative sides of CSR are praised, not penalised.
(5) Since CSR is increasingly integrated into other EU policies, such as company
law, trade agreements, and public procurement, the European Commission andother European institutions should articulate such policy linkages whenpresenting new initiatives and communications. This way, companies can engage
in early discussion, highlight shortcomings, and more effectively integrate CSR incompany functions.

20.2 Conflict minerals
The BRT acknowledges that the proposal for a Regulation has taken up certain
feedback from businesses such as the promotion of internationally recognised
frameworks, the voluntary approach of self-certification and the publication of a list of
responsible smelters and refiners.
The BRT also acknowledges that two expert groups have been formed to define thelist of minerals and metals within the scope of the Regulation and to clarify the meaningof conflict and high risk areas. The BRT requests that their work should be carried out
in a transparent manner.
Without a well-established traceability scheme such as the iTSCi (ITRI Tin Supply
Chain Initiative), it would be extremely difficult to implement the conflict-freeaccreditation for smelters. The BRT thus requests that hasty expansion of thegeographical scope without reliable implementation of the existing traceability scheme
should be avoided.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 40 of 47

In order to effectively stimulate responsible sourcing, The BRT suggests that incentives
focusing on upstream operations should be further considered. Concentrating on
upstream supply chain operators and on facilitating the transmission of quality
information in the supply chain leverages the appropriate point in the supply chain, is
consistent with the OECD guidance and with industry initiative. Beyond the pinch pointof smelters/refiners, it becomes exponentially more difficult to identify the origins ofmetals.
The BRT further requests that clear criteria for the certification of Responsible
Importers, Smelters and Refiners should be set under a reliable, well-governed andfunctioning certification system. In order to avoid confusion in certifying importers, theBRT calls for the EU to set clear criteria for importers to become ‘responsible’. Suchcriteria should make use of the existing criteria such as CFSI (Conflict Free Sourcing
Initiative)’s Conflict Free Smelter Program and LBMA (London Bullion Market
Association).
Concerning Incentives laid down in the Joint Communication, the BRT requests a
clarification on the definition of equivalence to the OECD Due Diligence Guidance interms of Procurement and on the benefits and duties of a company that signs the Letterof Intent as to industry commitments.
The BRT also requests good internal
coordination in implementing Procurement Incentives.
<Recent progress>
There has been little progress. The proposal is currently subject to trilogue between
the Council, the European Parliament and the European Commission.
<Background>
The European Commission submitted on 5 March 2014 a Proposal for a Regulation of
the European Parliament and of the Council setting up a Union system for supply chain
due diligence self-certification of responsible importers of tin, tantalum and tungsten,
their ores, and gold originating in conflict affected and high-risk areas (COM(2014)111).
The proposed Regulation is accompanied by a joint Communication by the European
Commission and the High Representative to the European Parliament and the Council:
Responsible sourcing of minerals originating in conflict-affected and high-risk areas Towards an integrated EU approach (JOIN(2014) 8).
The informal meetings of experts have been established among the European
Commission, the Member States, the European Parliament, and experts to create ahand book to set the criteria of the ‘Conflict affected and high risk areas’, and to create
Guidelines for the competent authorities to be prepared for a harmonised accreditation.
The European Parliament adopted amendments on 20 May 2015 on the 1st reading.
The amendments change the voluntary nature of self-certification to an obligation andexpand the scope to downstream companies.

20.3 Non-financial disclosure

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 41 of 47

Concerning the non-binding guidelines for the reporting of non-financial information
under the Directive 2014/95/EU on disclosure of non-financial and diversity information
by certain large undertakings and groups, the BRT recommends as follows:
1. Be flexible and principle-basedNon-financial reports are a vital communication tool when reporting company retain
ownership in determining whom it intends to tell and what is material. Materiality differs
for each company, depending on the nature of business, the perspective of top
management and corporate culture. Due to the subjective character of materiality, theimposition of a specific and harmonised KPIs does not accurately reflect the ongoing
efforts of companies faced with complex challenges at a local level. Therefore, aprinciple-based approach is the only viable way for companies to meaningfully express
their business in a dynamic and changing environment.
2. Emphasise on dialogue
The guidelines should recognise dialogue as equally valuable means for companies tostrengthen the trust of their investors and stakeholders, and leverage theimprovements of companies' internal practices by making it part of the PDCA
management cycle. Dialogue is a powerful tool to foster a culture of risk management
and innovation, whereby companies can exchange views on potential future risks aswell as explore collaborative opportunities. Many private initiatives are in the making
at the international level to forge cost effective and meaningful collaborative dialogues.
3. Foster innovation and growth
Global companies are motivated to integrate CSR into daily business to become moreinnovative and competitive in the global context. Such innovation is fostered throughopen exchanges among stakeholders, partner countries or regions, governments andsuppliers. From this perspective, the guidelines should not push for compliance mindset, but foster meaningful channels for companies and investors to discuss value
creating processes.
4. Promote existing international reporting frameworks
The EU should promote internationally recognised frameworks that take a process
based approach, therefore give companies enough flexibility to take meaningfulactions without becoming an outcomes based tick-box exercise. Such frameworks
include the UN Guiding Principles on Business and Human Rights and OECD Due
Diligence Guidance.
<Recent progress>
There has been a progress. The European Commission carried out public consultationfrom 15 January to 15 April 2016 in the preparation of non-binding guidelines on
methodology for reporting non-financial information.
<Background>Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 42 of 47

The European Parliament and the Council adopted the Directive 2014/95/EU on 22
October 2014. According to the text of the Directive:

Large undertakings which are public-interest entities exceeding on their balance
sheet dates the criterion of the average number of 500 employees during thefinancial year shall include in the management report a non-financial statement
containing information to the extent necessary for an understanding of theundertaking’s development, performance, position and impact of its activity,
relating to, as a minimum, environmental, social and employee matters, respectfor human rights, anti-corruption and bribery matters.



The Commission shall prepare non-binding guidelines on methodology forreporting non-financial information, including non-financial key performanceindicators, general and sectoral, with a view to facilitating relevant, useful andcomparable disclosure of non-financial information by undertakings. In doing so,
the Commission shall consult relevant stakeholders. The Commission shall
publish the guidelines by 6 December 2016.

20.4 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.
The BRT suggests that the authorities of the EU should take the following approach:1) It ensures flexibility as well as global harmonisation;2) It is compatible and does not conflict with existing initiatives and legal instruments
not only in the EU but also in other regions;3) It does not create unnecessary administrative burden and incur supplementary costs
for companies which are not effective in solving the fundamental problem; and
4) It is globally comprehensive and encourages all governments (not only national but
also local governments), business, and civil society to foster responsible supply chains.
<Recent progress>
This is a new recommendation.
<Background>Responsible supply chain management is increasingly important as is shown by thereference in the Leaders’ Declaration of G7 Summit in June 2015.
The European Commission presented a new trade and investment strategy ‘Tradefor all - Towards a more responsible trade and investment policy’ in October 2015. In
this document, it states that responsible management of global supply chains isessential to align trade policy with European values.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 43 of 47

WP-1 / # 21* / J to E

Product Safety/Market Surveillance

21.1 Product safety and market surveillance package proposal
The BRT recommends that the authorities of the EU should amend the Article 7 of the
proposal for a Regulation on consumer product safety (COM(2013) 78) by which theindication of the country of origin would become mandatory because according to thefinal report on the ‘Implementation of the New Regulation on Market Surveillance:
Indication of Origin’ dated 6 May 2015, the mandatory indication of the country of origin
does not add much value. The BRT believes that the mandatory indication of thecountry of origin would not necessarily improve safety for consumers but that it would
place substantial administrative burden on manufacturers and/or importers. The BRT
therefore believes the mandatory indication of the country of origin should not be
included in the Package.
<Recent progress>
There has been some progress. A report on the indication of origin that the European
Commission was requested to produce by the Member States was published. The
proposal is under deliberation in the European Parliament and the Council.
<Background>
The European Commission proposed on 13 February 2013 the Product Safety andMarket Surveillance Package – A proposal for a Regulation on market surveillance of
products (COM(2013)75) and a Proposal for a Regulation on consumer product safety(COM(2013)78). The package is now at a final stage of deliberations in the Council.
The Article 7 of a Proposal for a Regulation on consumer product safety requires
manufacturers and importers to ensure that products bear an indication of the countryof origin of the product.

21.2 Market Surveillance under the New Legislative Framework
The BRT supports the general direction the European Commission and the Member
States are taking for harmonising market surveillance. This is an important step for fairmovement of products. The BRT requests the European Commission and the Member
States to disclose all the relevant information regarding the progress of this process
and the implementation of the market surveillance in each Member State. The BRT
also requests the European Commission and the Member States to give industry an
opportunity for contributing to developing the framework of harmonised market
surveillance.
The BRT would like to thank the Directorate General of the European Commission
concerned for the involvement of the industry and requests that it should continue toconsult stakeholders widely – preferably through public consultation when draft
guidance for the New Legislative Framework is ready.
< Recent Progress >Some progress has been seen for this recommendation.
< Background >Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 44 of 47

In 2008, the Regulation 765/2008/EC, setting out the requirements for accreditationand market surveillance relating to the marketing of the products, and the Decision
768/2008/EC, a common framework for the marketing of products, were adopted.
The Regulation has been applied as from 1 January 2010.
The Regulation and Decision address and complement missing elements, namely,
accreditation and market surveillance, in the existing sectoral legislations. The
existing legislations are being amended based on the Decision when they arereviewed. The objectives of the so-called New Legislative Framework are to
introduce harmonised and transparent market surveillance and accreditation for all
economic operators. The Decision provides definitions, the obligations of economic
operators, traceability provisions and safeguard measures. National authorities were
to develop their market surveillance programmes and communicate them to theCommission by 1 January 2010.
The European Commission published the guidance for the New Legislative
Framework in 2014.

21.3 Consumer protection
The new Directive, 2011/83/EU of the European Parliament and of the Council of 25
October 2011 on consumer rights, still maintains the discretion of the Member States
to set a guarantee period longer than 2 years set in the Directive 1999/44/EC, which
the BRT believes could constitute an obstacle in the single market. The BRT would liketo ask the European Commission to review the advantage and disadvantage of thisdiscretion to set a guarantee period longer than 2 years in the review of the Directive
1999/44/EC underway.
< Recent Progress >Some progress has been made for this recommendation because the fitness checkof consumer law started in the final quarter of 2015.
< Background >The BRT believes that, to maximise the benefit of the single market, any legislationthat affects cross-border transactions should be harmonised to the extent thatbusinesses and consumers do not have to be concerned about difference in
implementation among the Member States.
The European Commission started the fitness check of consumer law in the final
quarter of 2015. It is expected to finish in the second quarter of 2017. The roadmap
published by the European Commission in December 2015 states that thedifferences between national rules based on the minimum harmonisation nature of
the Sales and Guarantees Directive have created Single Market barriers that impede
businesses from offering goods across the entire EU and – as a result – consumer
detriment and that this issue will be examined.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 45 of 47

WP-1 / # 22* / J to E
Access of third countries goods and services to theEU’s Procurement Market
Concerning the amended proposal for a Regulation on the access of third-coundty
goods and services to the Union’s internal market in public procurement COM(2016)34, and any other public procurement related legislation, the BRT recommends thefollowing:
1. Non-legislative policy measures should be pursued in order to achieve theobjective of opening procurement markets internationally;
2. An effective mechanism to prevent the EU from arbitrarily excluding third-country
goods and services from its procurement market and to ensure legal stability andpredictability for businesses should be incorporated into the legislation;
3. Clear and transparent criteria for the scope and conditions of the application of thelegislation based on an appropriate and balanced analysis should be included in
the legislation.
4. Furthermore, the authorities of the EU and its Member States should increase
their efforts to facilitate better access to the respective public procurement
markets. In particular: The authorities of the EU and its Member States should make more
information available in English.
 The use of English when submitting tender proposals should be allowed or atleast partially allowed, especially for the technical specifications andcommunication.
< Recent Progress >There has been some progress.
< Background >The reform of the legislative framework of public procurement is one of the twelve
priority actions set out in the Single Market Act adopted in April 2011. As part of thisreform programme, the European Commission announced on 31 March 2012 a
proposal for a Regulation on the access of third-country goods and services toUnion’s internal market in public procurement and procedures supportingnegotiations on the access of Union goods and services to the public procurement
markets of third countries (COM(2012) 124). This initial proposal was opposed byseveral Member States because the possibility to close the EU public procurement
market was perceived as discriminatory measures.
The European Commission published on 29 January 2016 an amended proposal(COM(2016) 34). In the amended proposal, the possibility to close its market has
been replaced by price penalties called “price adjustment measures”.
The BRT appreciates that the EU has dropped its original idea of closing its
marketunilaterally. The BRT is still concerned, however, that the EU’s possible
actions could trigger a chain reaction of protectionist measures all over the world.
Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 46 of 47

Should it happen, the EU’s intention and objective of opening up international public
procurement markets would not be achieved.
The BRT welcomes the new initiative that Tenders Electronic Daily (TED) database
covering public procurement opportunities in the EU is now equipped with a freetranslation tool. It is a step forward to mitigate language constraints.

Working Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
EU-Japan BRT 2016 Recommendations Report
Page 47 of 47