Recommendationsof theEU-Japan Business Round Table
to the Leaders of the European Union and Japan
Brussels, 11 July 2017
Working Party 1
Trade Relations; Investment and Regulatory Cooperation; Financial
Services, Accounting and Taxation(Final Version)

Working Party Leaders:

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

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

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

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

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

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

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

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Introduction
Japan is the EU’s 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 Economic
Partnership Agreement will stretch beyond the many European and Japanesecompanies already operating in each other’s home markets to all those, attracted to
the new opportunities it creates. Working Party 1 stresses that any agreement must
address the specific concerns of European and Japanese businesses reflected in thisand previous reports. With so much at stake, we are urging the authorities on bothsides to ensure that the necessary progress is made. Many reforms are required tosecure a fair and competitive environment for business and have been identified fromthe extensive 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 Economic Partnership
Agreement bilateral agreement must be balanced, comprehensive and ambitious inorder to dismantle these barriers holding back EU-Japan trade and investment andsignificantly promote growth both economies.
To highlight priority issues in the text that follows, one asterisk (*) indicates “priority”
recommendations. (e.g. WP 1/ # 01* / EJ to EJ)

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Recommendations from both
European and Japanese industries
WP-1 / # 01* / EJ to EJ

Strengthening the EU-Japan Economic RelationshipTen years ago, the BRT “committed [itself] to creating the necessary conditions todeepen the full potential of EU-Japan economic relations, which are far from being
fully exploited” and called for the feasibility of a bilateral FTA to be considered. The
BRT welcomed the formal opening of Economic Partnership Agreement negotiationsin 2013 as “a new chapter in EU-Japan bilateral relations” to deepen the relationshipbetween EU and Japan and called for their completion as early as possible and withan outcome compatible with the high level of their ambition. The BRT's initial
optimism became tempered with concern given the pace of the negotiations.
Throughout the past four years the BRT has emphasised that the final outcome
should be “comprehensive, ambitious and mutually-beneficial”.
Now that an agreement in principle has been reached on the EPA, the BRT urges the
EU and Japan to begin looking beyond the EPA agreement and towards establishinga new high-level cooperation framework, which befits this innovation and digital age.
Firstly, industry seeks a voice in any post-agreement monitoring mechanism toenable industry to identify potential issues that may arise during implementation of
the Agreement. Even more critical will be how to handle new issues that arise after
the EPA has been concluded and pre-existing issues that were not covered in the
EPA. A monitoring mechanism for all these issues (non-tariff measures (NTM), tariffs,etc.) should be addressed in a binding manner within the overarching EPA framework
giving way to concrete outcomes and not just addressed through official 'dialogues'.
To ensure transparency and an effective implementation of the agreement, the BRT
calls on both Authorities to make public items as they are implemented and assess
their impact on business, showing how the implementation addresses the particularissue raised in the EPA and how it might address other related issues including those
not discussed in the EPA. We recommend that the respective lists be updated
regularly.
Secondly, the BRT reiterates its view that the upgrading of global value chains andsecuring the fruits of innovation require not only the adoption of global rules toeliminate non-tariff measures which may obstruct trade, but also forward- looking
creative regulatory cooperation including a convergence of standards.
For these reasons, the BRT calls on the Authorities of the EU and Japan to initiate
creative regulatory cooperation across the board and ensure the substantial
participation of industries from the EU and Japan in the process. We are ready tocontribute and provide input for the initiative.
Thirdly, in the realm of data security and data flow, the BRT emphasises the need for
resolute action and measures in order to ensure the coherence of data privacy andthe free flow of data between the EU and Japan. The BRT expects that the inaugural
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high level meeting and the expert meeting on Data Economy will be repeated, andhopes that the Authorities of both the EU and Japan will work on establishing aframework in the near future based on the dialogues.
Finally, the BRT calls on the Authorities of the EU and Japan to continue their efforts
to conclude an EPA in the near future, by building on last week’s agreement inprinciple and maintaining the momentum that both sides have worked hard toachieve.
< 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 thatthey join forces in tackling common challenges in order to attain a long-term, soundand stronger growth. The EU-Japan relationship should not be left behind

WP-1 / # 02* / EJ to EJ
Buenos Aires

Call for an ambitious WTO Ministerial Conference inUnder the growing pressure of protectionism in the world, including the new US
Administration’s approach to emphasize bilateral negotiations over multilateral trade,the EU and Japan must share with other WTO members the value of WTO
agreements as a basis of fair rules to maintain order in global trade and to promoteliberalization. The negotiating pillar of the WTO must be reinforced to better
disseminate the benefits of global value chains, while the EU and Japan shall play acentral role in this regard.
It is evident that the WTO is to maintain its core role as the forum to create
multilateral trade rules. In this context, the EU and Japan should lead the member
countries of the WTO and adapt the organisation to the changing global tradeenvironment better, for instance, by re-evaluating its negotiating processes to makethem more efficient, by facilitating the delivery on the remaining DDA mandate andby agreeing to create new sets of rules on issues beyond the DDA.
The BRT welcomes the entering into force of the Trade Facilitation Agreement,
which can serve as a boost to global trade by reducing costs of trade by 10-15% andadding $ 1 trillion. Its objectives are to speed up customs procedures, make tradeeasier, faster and cheaper, provide clarity, efficiency and transparency, reducebureaucracy and corruption, and use technological advances.
Additionally, the BRT suggests that the authorities of the EU and Japan should,
together with other WTO members, explore further topics that are essential for thesmooth functioning of global value chains. These could include, for example, digitaltrade and e-commerce, subsidies, the reduction of export restrictions, investment(facilitation) and competition. Exploring these topics could reinforce the interest in themultilateral trading system and underline the central role of the WTO in rule making.

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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 orderto move the DDA negotiations forward, as well as to facilitate the timely andsuccessful conclusion of plurilateral agreements such as the Trade in Services
Agreement (TiSA) and/or the Environmental Goods Agreement(EGA).
Furthermore, the BRT requests the authorities of the EU and Japan to exert theirutmost efforts to realise global free trade in goods and services under the auspices ofthe WTO, including environmental goods, so long as it does not discriminate unfairly
between products and sectors.
However, tariff liberalisation should not be limited to finished goods but include goods
over the whole value chain to have a real impact and to take into account the
globalisation of the value chains.
Finally, the BRT welcomes the expansion of the Information Technologies
Agreement (ITA) that was agreed during the 10th WTO Ministerial Conference in
Nairobi and anticipates the authorities of the EU and Japan to lead the discussion offurther expanding its membership to more countries and regions as well as its
product coverage, as agreed in December 2015.
< Recent Progress >The informal WTO Ministerial gathering held in Oslo on 21-22 October 2016 was agood opportunity for WTO members to discuss the future work programme of theorganisation, including potential outcomes to be achieved by the next WTO
Ministerial Conference that will take place in Buenos Aires on 11-17 December 2017.
A number of WTO members expressed the following views:


it is important to maintain political momentum and secure the negotiated resultsof the MC10;
it is crucial for the WTO and its members to take into account concerns
expressed against trade and globalisation, while ensuring that the multilateral
trading system remains relevant and is updated to better respond to current
challenges;
and the WTO must not refrain from discussing potentially contentious issues
such as agriculture and market access for non-agricultural goods and services.

The BRT hopes the negotiation on other agenda items such as non-agricultural
market access (NAMA), agriculture, non-tariff barriers (NTBs) and export subsidies
will make progress ahead of the MC11. For the future course of DDA negotiation,
however, two courses of its continuation and termination have been set forth inparallel. The BRT expects further progress in WTO’s DDA negotiation to reach a newstage in negotiation, which should result in mutually beneficial outcome for bothdeveloped and developing countries.
< Background >The BRT is a strong supporter of the multilateral trading system, whose corefunctions are trade liberalisation, rule-making and dispute settlement. However, toWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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liberalize multilateral trade, the initial high-level ambition of the Doha Round,launched in 2001, has not been maintained, resulting in the current deadlock ofnegotiations 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
only international organisation creating rules and setting standards on trade at themultilateral level, the WTO must remain a leader in this area and take more andstronger action. The existing legal framework provides an excellent basis for suchaction. However, it needs to be updated in order to respond to a changing global
economic landscape.
WTO members made partial progress in the DDA at the 9 th and 10th WTO Ministerial
Conferences held in Bali in December 2013 and in Nairobi in December 2015
respectively.

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 theirregulatory cooperation and to increase communication between the two economies.
The aim is to eliminate barriers to trade and investment in order to promote businessand to disseminate the experience of the EU and Japan to the rest of 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 andcertification procedures. The BRT recommends that the authorities of the EU andJapan 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 themutual approval of the import, sale or use of products that have been approved on
the basis of functionally equivalent requirements.
Taking into account the benefit of common regulatory environment, the BRT
recommends that the EU-Japan EPA should include a framework to promoteregulatory cooperation and to ensure that the authorities of the EU and Japan nottake unnecessary measures which act as an impediment to trade and investment.
The BRT recommends that the policy-makers of the EU and Japan should increase
their understanding of existing and upcoming regulations of the other side. Where a
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harmonised regulatory framework between the EU and Japan has not yet beendeveloped, the regulatory authorities of the EU and Japan should review theirdomestic technical regulations and conformity assessment procedures at regularintervals to determine the scope for further regulatory harmonisation. The outcomeof these reviews, 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,
they should agree to an early warning system for draft legislation to facilitate aneffective bilateral dialogue.
The policy-makers of the EU and Japan should develop a joint strategy to promotebetter regulation by learning from each other’s experience and adopting a common
system of good governance. Throughout the process, the two authorities should haveclose dialogue with businesses.
The BRT calls on the Leaders of the EU-Japan Summit to ensure that the EPA will
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 ofa 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 of regulatory cooperation, and recognising that this is a key issue for the
future, the BRT hopes that this joint initiative will reinforce and complement theupcoming 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.
Finally, the BRT would like to see a modernisation and updating of the MRAs thatwere signed at the beginning of the last decade for them to become truly Mutual
Recognition Agreements so that the products covered under these schemes do nothave to be tested and approved in accordance with both EU and Japan regulations.
<Background>
The BRT believes that regulatory cooperation will be a key to the economic
prosperity of the two economies. Once an EPA is concluded, it will be important not
only to ensure that new regulations do not nullify or impair the market access benefits
accruing 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 thatthe benefits of their cooperation will further increase and so that they will eventually
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be able to expand such regulatory cooperation to other bilateral and multilateralrelations.
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 shouldlook at 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 also establish a common list of restricted substances and a common
approach to the evaluation of risks and sharing of data. Such a common
regulatory environment will not only benefit industries through cost mitigation
but also benefit users and consumers 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 in cooperation 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 productdeclaration between the EU and Japan and cooperate with each other so thatsuch 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 aware that the two authorities are engaged in regular discussion
following the agreement 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 inthis regard to put emphasis on the simplification of import procedures where

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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 andwith the third country authorities to secure the closure of sites trading in fakegoods.
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
EU that they should seek ways to mitigate the financial burden of theimporters 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
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etc, which provides that vehicle components which have received typeapproval according to UN Regulations in one contracting country are exempt
from testing in any other signatory country where those regulations havebeen 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
12 EU Member States. Negotiations or preliminary talks are under way between
Japan and 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 State and Japan conclude a bilateral social
security agreement, it lessens the burden both on companies as well as theiremployees. So far, social security agreements between Japan and Germany, theUnited Kingdom, Belgium, France, the Netherlands, Czech Republic, Spain,
Ireland and Hungary have entered into force. The agreements between Japan and
Italy, the Slovak Republic and Luxembourg have been signed. Furthermore,negotiations are underway between Japan and Sweden, and are at the preparatory
stage between Japan and Austria as well as 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 EPA. Such liberalisation should aim
at the following system:
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





A framework agreement between the mother company, sending expatriates, andthe host country, stipulates the maximum number of expatriates. Within theagreed limit, the mother company is free to send intra-corporate transferees tothat 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 thehost country through the development of the business concerned. In addition,
expatriates themselves tend to pay high income taxes to the host country. The
requirement to obtain work and residence permits for intra-corporate transferees
between the EU Member States and Japan is usually a formality. However, theburden on companies as well as employees and their family members issubstantial, 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 thirdcountry nationals in the framework of an intra-corporate transfer. By 29 November
2016, the directive should be transposed in the Member States. The directive will
prove very useful for Japanese companies sending their employees to the EU
because, for example, it will facilitate an assignment that involves several Member
States and allow 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. Japanesenationals in the UK, where their number is the highest among the EU Member
States, will not benefit from this Directive. It is therefore imperative that suchliberalisation is realised within the framework of an FTA so that it will be applicable
to all intra-corporate transferees 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 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.
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3. Providing tax breaks and incentives, tax deduction for total researchexpenses, 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 industry-academic-government cooperation, as well as tax and otherfacilities 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 inmany cases 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 andJapan. Their success in bilateral trade is a major factor in their development andalso helps to revitalise both Japanese and EU industries by disseminating new
products and technologies. However, market access problems and various
impediments noted in other BRT recommendations are even harder to tackle ormanage 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 in established industries and are inadequate forSMEs. Once a European SME has established a footing in Japan, or a Japanesein the EU, using already available government support programmes, it should
continue to receive support from the host region. Such support cannot be expected
as a unilateral measure but would only be possible if agreed in a formal bilateralagreement. The BRT is aware of the major work being done for both Japanese andEuropean SMEs by the European Commission and the Government of Japanthrough the programmes run by EU-Japan 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
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BRT eagerly awaits coherent and successful implementation in the bilateral andmultilateral relations between the EU Member States and Japan in a way that will
reduce the compliance costs and uncertainty significantly. In this respect, there aresome countries who appear to be seeking the master file-CBCR report directly from
MNE’s subsidiaries situated therein, as opposed to the OECD suggested protocol
where the master file-CBCR report should only be filed by the MNE’s top parent
company with the tax authorities of the ultimate parent company’s jurisdiction, andany subsequent sharing of the master file-CBCR report between various countries
where the MNE’s subsidiaries are located shall be done under the exchange of
information clause of respective tax treaties. The BRT recommends that the OECDsuggested protocol should be adhered to by the countries where MNE’s subsidiaries
are situated.

The BRT recommends that the authorities of the EU, its Member States and Japan toalso aim at facilitating the conclusion of bilateral and multilateral APAs.
The BRT emphasises that it is important that the scope of information required fordisclosure to tax authorities of each country through Country-by-Country Reporting
be internationally coherent and in accordance with BEPS Action 13 in order to realisea level playing field. The BRT opposes to the European Commission’s proposal for
Public CbCR as it breaches confidentiality of information on taxpayers.
The BRT also would like to point out that information concerning a tax payer should
be kept confidential by the tax authorities as BEPS Action 13 demands.
In terms of Permanent Establishment (“PE”), BEPS Action 7 has not given any
specific consideration to the global trading business model broadly conducted by thefinancial services industry at all. The BRT requests that the tax authorities in
European countries shall give utmost consideration before making any tax
assessment based on the determination that a trader booking into an offshore
booking entity under the global trading business should qualify as dependent agent.
Such determination that a trader qualify as a dependent agent PE will become
significant obstacles for the global financial industry.
As was agreed by OECD/G20 countries in 2013, introduction of the measuresdeveloped by the BEPS Action Plan should not lead to unnecessary uncertainty forcompliant taxpayers and to unintended double taxation.
The BRT welcomes the commitment made by 20 countries including Japan and 13
EU Member States (Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Poland, Slovenia, Spain, Sweden and the UK) to provide formandatory binding MAP arbitration in their bilateral tax treaties as a mechanism toguarantee the resolution of treaty-related disputes within a specified timeframe. The
BRT recommends that this mechanism should be extended to include all the EU
Member States and Japan.
Furthermore, the BRT would like to recommend the authorities of the EU and Japan
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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>
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 (Now 10 Member States due to the exit of Estonia). Due tothe intricate discussion such as the scope of taxable derivatives, implementation date
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has been postponed several times from initial January 2014 As of today, no date has
been set for a final agreement.

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Recommendations from
European industry to Japan
WP-1 / # 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 EPA.
Moreover, the EU-Japan ETA should include a meaningful Automotive Annex
covering all kinds of vehicles (i.e. passenger vehicles and commercial vehicles) to
avoid the appearance of any future market access barriers.
< Recent progress >o Resolved: 8 items


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

o Resolved - Subject to confirmation: 4 items


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

o Outstanding: 4 items


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

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

Railways
Though standards are not so different and data generated at European researchfacilities are relevant for Japan, duplicate testing in Japan is required for theJapanese market. This has repeatedly been communicated by one operator.
Duplicate testing raises the costs of imports, making them less competitive thandomestic products. The Government of Japan and the EU authorities should work
toward establishing a mechanism through which test data and certification of railway
equipment provided by European organisations is accepted in Japan, and vice versa.
The BRT furthermore recommends the Japanese Government to take a more activerole in establishing a system whereby standards and requirements are available
publically so that European companies will have a better understanding of what isneeded in order to offer goods and services that meet or exceed the safety measuresin the Japanese market. While the BRT understands that operators might havedifferent performance requirements, the same safety requirements and standards
should preferably be used by all operators in Japan, which currently is not the caseas each individual operator can choose its own standards and requirements. As afirst step, test results and approvals by one operator should be accepted by otherdomestic operators.
The BRT, however, recognises the latest development and positively views the firstcall for tender by a Japanese operator, and hopes that this trend will continue. The
BRT recommends Japan to make better use of the tendering system as this leads tomore competition and better transparency, while not negatively affecting safety.
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< 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 >While the Japanese Government is active in various international standards fora,
these standards and regulations are not necessarily used by the Japanese operators
There is, therefore, no possibility for foreign manufacturers to know exactly what
requirements must be fulfilled. Furthermore each operator can in principle have theirown testing requirements as there is no legislation on exactly what safety
requirements need to be fulfilled.

Processed Food
For processed food, the combination of differences between EU and Japanesestandards and technical requirements as well as cumbersome border procedures
results in high costs for EU exporters. High conformity costs are incurred because
Japanese authorities do not accept evaluations made by the EU or international
bodies, and the FSC is constantly asking for tests to be carried out in Japan. The
market potential for European exporters would be greatly enhanced by:a) Substantially increasing the list of permitted additives and enzymes, inaddition to speeding up and fundamentally revising the approval processb) Introducing mutual recognition of conformity assessment procedures toeliminate the duplicate costs of evaluations.
c) Introduce deadlines for all parts of the application process. While there are
guidelines on timelines these only cover part of the application process.
Accordingly, it is difficult for an applicant to know how long the application
will take.
< Recent progress >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
mentioned that the GOJ was considering setting “a standard time frame” for approval
procedure upon establishment of the Food Additive Design Consultation Center. We
are looking forward to learning more about this, although three years later, no
specific information is available.
< 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
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Lack of harmonisation of international electrical safety standards, such as IEC, andJapanese standards and technical requirements, such as PSE/JIS/JET results inhigh costs and effectively prohibits entry to the Japanese market for EU companies.


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

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

WP-1 / #09* / E to J Self-verification and risk assessment
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The Japanese Government should expand the allowed use of self-verification.
Currently, in many cases, Japan requires approval to be obtained from either aGovernmental body or a third party. This puts both a cost and a time premium on theprocess when the relevant company trying to put the goods or services onto themarket. The latter aspect is of particular importance for sectors with short productcycles.
While it is understandable that Japan wants to protect the safety of human life, as
well as animals and plants, a proper risk assessment should be undertaken so thatthose products or services with controllable risk can use a self-verification procedure.
< Background >While Japan has introduced the concept of self-verification, third party or government
approval is often the norm. This means that the time to put the products onto themarket increases as well as the cost. This problem is particularly evident when test
methods are not harmonised.

WP-1 / # 10* / 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 cars, but
it does not go far enough. In the FTA negotiations, the GOJ should commit to further
fiscal and regulatory changes so that European compact cars can compete on equalterms with kei-cars in the Japanese market. Recently, both METI and JAMA havesuggested to reduce the level of discrepancy to the order of 1:2.
Nevertheless, for the time being, the discrepancy in the base level of taxation of keicars and subcompact cars at 1:3.3 remains unacceptably wide.
< Background >“Kei” or mini-cars are those vehicles legally restricted to a maximum length of 3.4m, awidth of 1.48m, a height of 2m, and to an engine displacement of 660cc and below.
Kei cars benefit from lower automobile related taxes, automobile liability insurance
and motorway tolls and are subject to less stringent overnight garaging requirements.
The continued existence of the privileges enjoyed by kei cars is an anachronism
which distorts the competition with compact and subcompact cars, which do not
enjoy the same prerogatives, even though their performance and specifications are
similarWP-1 / # 11* / 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 JapaneseWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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and EU Authorities should introduce flexible arrangements to allow
manufacturers/importers to demonstrate that HFCV’s meet each other’s requirements
and approval procedures< Background >UNR 134: Hydrogen and Fuel Cell Vehicles, Phase I of the UN Regulation for
HFCVs, entered into force in June 2015 and has been adopted by the EU and Japan.
However, despite Japan having implemented Phase I, HFCV tanks imported into
Japan would still need to meet Japanese unique national requirements concerning
metal materials. Whereas the EU uses a performance-based approach to approvehydrogen compatible materials, Japan’s approach is more prescriptive, in effectlimiting the choice of materials to very few specific types of stainless steel andaluminium.

WP-1 / # 12* / E to J

Ensuring free and open competition in services

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.
The BRT requests that the same benefits given to EMS are also given to
equivalent private alternatives to achieve a level playing field as is the case inEurope and the US.
< Recent progress >While the issue is being discussed in the EPA negotiations, the WP 1 is not aware of
any concrete improvements. Furthermore, on issues directly related to Japan Post
very little change in either direction has been seen during the last year.
< Background >Japan Post and EMS receive preferential treatment not awarded to private logistics
operators. While universal service is a concept present in both Europe and the USA,EMS is not part of this, but rather a service provided on equal terms with private
express alternatives.

WP-1 / # 13* / E to J

Freight and logistics

Further to the WP-A / # 03 / EJ to EJ, the BRT recommends that Japan revises its
AEO system to introduce real benefits for operators regardless of whether they are
forwarders, customs brokers or importers. Furthermore, the administrative loadneeds to be lessened if companies are to be truly attracted to the AEO status.

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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:-

Deregulating 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-

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

We are, furthermore, particularly interested in obtaining more specific information on
the information gathering that Government of Japan is carrying out in cooperation
with the private sector as mentioned in the progress report.
< Recent progress >Japan Customs have announced a plan to deregulate customs clearance beyond the
local customs jurisdiction territory by October 2017. The BRT looks forward to thischange 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.

WP-1 / # 14* / E to J

Aeronautics

Haneda D runway weight restrictions are an obstacle to the use of European-madeaeroplanes and an obstacle to further development of international traffic at Haneda.
These weight restrictions should be re-examined to allow the operations of new andlarger airplanes such as Airbus-made A380 and A350. We request the relevant
Authorities of both sides to cooperate in making the necessary verifications.
Additionally, for the newest mid-size A350 aircraft, operation could be possible withthe re-verification of the withstand load in regard to part of the construction.
< Yearly Status Report >No progress has been seen on this recommendation. However, the recent approvalof the 747-8i (Code F aircraft) for day-time operations at Haneda offers hope that theA380 (also a Code F aircraft) also will be approved soon for day-time operation as
there are some airlines looking at operating the A380 via Haneda.
< Background >With the purpose of expanding airport capacity in response to the increase in air
travel demand as well as to reduce congestion, a fourth runway (D runway) and aninternational terminal were opened in Haneda in October 2010. So far. the focus has
been on flights to and from Asian countries, but its use for long-haul international
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routes is expected increase in the future. The number of flights will grow together
with the demand but will be limited in the end by the capacity in terms of slots. The
recent dramatic increase in the number of foreign visitors to Japan, just under 20
million in 2015, has caused the GoJ to revise the target upwards to 40 million for2020. The average size of aircraft (230 seats) departing from Haneda is now lower
than it was in 1980 (240 seats) when 747s were used domestically. To see traffic
grow at Tokyo’s airports and more specifically Haneda, work needs to be done toensure that larger aircraft can be used at Haneda. In this regard, the use of new andlarger aircraft will be an important part of the airlines’ strategies. Under suchcircumstances, aircraft weight restrictions on the D runway could impede theconversion of Haneda Airport to the use of larger and newer aircraft. New aircraft
such as the A350 and A380 are significantly quieter and more environmentallyfriendly than older aircraft now in use at Haneda airport and, with plans to overfly thecity to increase flights to and from Haneda, it is essential that quiet aircraft are usedas much as possible. In order to avoid disturbing the flow of the Tama River, the D
runway was overhauled using a pier-like structure instead of a conventional landfill.
Due to this, weight restrictions have been placed upon the aircraft in use, and withthe entire lineup of Airbus’ newest A380 and A350 series exceeding the weight limit,
these aircraft could no longer be used as they currently are (cf. chart below).

Unit: tons
Total weight
Main gearload, t/gear
Wheel load

Weight limit

A380

A350-1000

A350-900 B747-400

400
139.5

571
161.6

308.9
146.9

268.9
126.0

396.0
92.8

B777200ER
286.9
134.9

26.2

26.9

24.5

31.5

23.2

22.5

WP-1 / # 15 / 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
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 for investments.
In addition, while Japan has indeed improved the inheritance tax legislationcompared to the previous legislation, it also introduced a so-called tail, whereby
foreigners subject to Japanese inheritance tax will continue to be so even after
having left Japan for up to five years. This is a clear disincentive to investing in Japanand will also make it difficult for industry to retain foreign talent long-term.
Moreover, while such improvement of the generic investment environment is aprecondition, regulatory reform is the best motivator for foreign companies to enter
the Japanese market. In the sectors where the formal barriers to foreign investment
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were removed some time ago, such as automotive and machinery, foreign
investment is relatively high. By contrast, two sectors where investments are low are
the financial and medical fields. Japan’s regulatory environment in these sectors
remains much more difficult than the rest of the world to allow for foreign companies
to set up any larger operation than the minimal level needed to serve the existingclient base. Mutual recognition of market certifications would be an important firststep to improving investments in the medical field. Mutual acceptance of principles
governing the financial services industry and the mutual acceptance of the homeregulator as the core regulator would go a long way to improving the investment
environment in the financial sector.
< 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 2015 inward FDI stocks was accounted for only 4.1 % ofGDP.

WP-1 / # 16* / E to J

Procurement< General Recommendations >The Government of Japan should increase its efforts to facilitate better access to the
procurement market in Japan. This could be achieved by lowering the threshold for
public tenders and removing the “operational safety clause” within the transport
sector. Japan should also include more cities in the GPA as currently 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
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.
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b. Single year budget procurement constraints should be relaxed.
Procurement of integrated systems of space ground equipment should be
encouraged.

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

The recent changes to the Operation Safety Clause should indeed lead tomore open calls for tenders in accordance with the WTO agreement on
government procurement. The BRT would be interested in knowing if theJapanese authorities have any data on the increase of open calls for tenders
due to the changes in the definition of the OSC.

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

WP-1 / # 17 / E to J Financial reporting
Recommendation:
The BRT recommends that the ASBJ give greater priority to attaining alignment of
JGAAP with IFRS, thereby reducing the need for cumbersome reconciliations. This
will contribute to reduced costs, improved data transparency and accuracy, and at
the same time strengthen the attractiveness of the Japanese financial market by
improving the comparability of Financial Statements.
The BRT further recommends that regulators consider adjusting tax and company
laws to facilitate financial reporting convergence where there are close ties between
them. That way companies can keep existing tax accommodations while obtaining
the aforementioned benefits of financial reporting alignment.
< Recent progress >1

Copenhagen Economics, “Assessment of barriers to trade and investment between the EU and Japan”, 2009
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New recommendation< Background >The global push to integrate financial reporting standards and enhance cross-bordercompatibility continues to gather steam with an increasing number of companies
adopting International Financial Reporting Standards (IFRS) in Europe and Japan.
However, challenges remain for multinational companies headquartered in Europe
with significant subsidiaries domiciled in Japan. This is because such subsidiaries willoften continue to report under local Japanese Generally Accepted Accounting
Principles (J-GAAP) as published by the ASBJ for statutory reporting purposes andyet they must then perform reconciliations to IFRS for group reporting required bytheir parent. Any reduction in the need for such reconciliation and IFRS would
decrease the administrative burden on these subsidiaries.

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Recommendations fromJapanese industry to the EU
WP-1 / # 18* / J to E

The importance of the Single Market

The BRT welcomes the progress made since the publication of a Single Market
Strategy in October 2015 to deliver on President Juncker’s 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 BRT agrees that the Single Market is one of Europe’s major achievements andits best asset in times of increasing globalisation.
The BRT would like to emphasise the importance of the following policy areas for thebusinesses operating in the Single Market:-

Business environment
TaxationIntellectual property rights
Standardisation
Consumer protection
Services
Networks
The Digital Single Market
Further improvement and realisation of the true single market of chemicalmaterials

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 BRT, therefore, welcomes that the
EU framework on consumer protection, such as a legal guarantee period, is moving
towards coherent implementation not only among the Member States but also
between online and offline sales channels.
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 aim at theliberalisation and deregulation.
The BRT would like to emphasise the importance, however, that the EU should makea policy through Regulations in the areas in which the uniform application of policy
throughout the EU is crucial.
The BRT would like to point out, moreover, that, when a rule is introduced at the EU
level, not only its implementation but also its uniform compliance and enforcement inall the Member States is increasingly important. The BRT, therefore, welcomes the
package of measures to enhance compliance and practical functioning of the Single
Market published on 2 May 2017 as a step forward.
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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 relations through an ambitious EPA
and fair market access that will contribute substantially to industrial growth and job
creation.
Regarding the UK’s withdrawal from the EU (Brexit), the BRT would like to draw theattention of the authorities to the statement of KEIDANREN “Keidanren’s view on
Brexit” on 14 March 2017. The BRT requests that utmost effort should be made tominimise the negative effect caused by Brexit.
The strength of the European economy is, furthermore, built on a set of values thatwill lead 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, forexample, 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 has made aseries of proposals to strengthen the Single Market.
< Background >President Juncker of the European Commission has made a political commitment
to unleash the full potential of the Single Market and make it the launch pad forEurope to thrive in the global economy.
The European Commission published a roadmap in October 2015 and has
proposed a number of actions since then.

WP-1 / # 19* / J to E

Chemical Regulations

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

The authorities of the EU should improve the enforcement of the thresholds
applicable to SVHCs once they are adopted. Otherwise the increasing
number of SVHCs with extremely low threshold will distort the competition
between strictly complying manufacturers/importers and less strictly
complying manufacturers/importers.

2. The BRT requests that the Authorities of the EU should further improve the
PACT-RMOA. In particular: The authorities of the EU should improve it in order to look after the needs of
SMEs because SMEs might still find it difficult to digest.
 The process of contributions by industries should be further developed.
 The transparency of the PACT-RMOA should be improved.
 The quality of evaluation by the evaluating authorities of the Member Statesshould be made more consistent through the standardisation of theevaluation process.
 The criteria for the selection of substances should be more transparent.
 At the very least, public consultations (minimum 12 weeks) should be
conducted in all Member States in order to provide fairer and more accurate
risk assessment.
3. The BRT requests to the authorities of the EU to mitigate the effect of thewithdrawal of the UK from EU on the implementation of REACH.
Quite a few companies which export chemical substances from Japan to EU
countries currently appoint consulting companies or affiliates incorporated in the
UK as the only representative (OR) and depute tasks to comply with REACH,
including registration of substances and operations related to tonnage band.
As the UK withdraws from the EU, these companies lose OR qualifications andmanufacturers outside the EU not only have to re-appoint new ORs but also haveto do the complicated work such as changing OR information for all existingregistrations or transferring the information on customers in the EU and on
hazardousness of substances to new ORs.
Therefore, in order to avoid huge amount of paperwork, the BRT urges theEuropean Commission to take bold measures to mitigate the impact, such as bycontinuing to grant OR qualifications to British corporations and to take sufficienttransition period.
< Recent Progress >There has been a progress. The ruling of the EJC on the interpretation of Articles
has made the interpretation definitive. Further progress has been seen for therecommendation on SVHC by the introduction of PACT-RMOA.
< Background >REACH includes requirements that are practically very difficult to implement forbusinesses.
It is understood that the representatives of non-EU companies have been unable
to register as the stakeholders of the ECHA though the European Commission has
suggested to enable it. As the EU is an open economy and a substantial part ofWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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articles 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 interpret thethreshold 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.
The ECHA started a new website on the PACT-RMOA and publishes the result of
the assessment of an SVHC as carried out. The BRT appreciates that it has
increased the transparency of the identification of SVHC.
However, although the conclusion in the PACT-RMOA could lead to thedesignation of a substance as SVHC, the quality of the evaluation by the evaluating
authorities of Member States varies, and the criteria that a substance is selected forlisting in the PACT-RMOA are not transparent. Furthermore, as the PACT-RMOA is
voluntary activity, the responsibility of the authorities is not clear.

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

19.3 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,
the principles of "REACH and Directive 2011/65/EU (RoHS) - A Common
Understanding should be duly applied and implemented to avoid overlap in regulation.
The BRT requests that all new regulatory initiatives should provide the necessarylevel of legal certainty, transparency and predictability to allow for timely
implementation with regard to restriction, substitution and exemption requests.
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< Recent Progress >Some progress has been made.
Upon the European Commission's initiative, a working group has been establishedto develop guidance on the methodology for the identification and assessment of
substances for inclusion in the list of restricted substances.
A Common Understanding paper has also been issued by the European
Commission which sets out scenarios on how to manage future regulatory action on
the same chemical substances under REACH and RoHS.
< Background >To identify and assess substances for potential inclusion in the list of restricted
substances under RoHS, the Commission has been working on a methodology. The
methodology should be further fine-tuned to provide clarity on the process andcriteria for substance review, offering a robust and consistent approach for all futureevaluations. The assessment of a substance does not necessarily lead to a
recommendation for inclusion in the list of restricted substances under RoHS as also
other risk management options may be considered.
Both REACH and RoHS regulate the use of chemical substances. The processesof authorisation, restriction and exemptions partially overlap between the tworegulations, adding to the complexity and burden for industry. The Common
Understanding specifies how these processes should be managed in the mostefficient and effective way while safeguarding the protection of human health and theenvironment.

19.4 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 withboth GHS and CLP.

19.5
1.

Nanomaterial

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

19.6 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
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reducing the risks posed to humans, animals and the environment by biocidal
products, and ensure that such measures are fit for purpose.
As the BPR is conceptual and not necessarily easy to understand, the BRT asks theauthorities of the EU to issue a practical and easy-to-understand FAQs for theimporters of active substance, biocide products or treated articles which illustrateproper procedures for actual cases.
< Recent Progress >There has been some progress.
< Background >The BPR (Regulation (EU) No 528/2012 of the European Parliament and of theCouncil of 22 May 2012 concerning the making available on the market and use of
biocidal products) requires that treated articles may not be placed on the market
unless all active substances contained in the biocidal products with which the articles
are treated or which they incorporate are approved. This requirement places large
burden and costs on industry, in addition to existing legislation mechanisms to restrict
and control hazardous chemicals (e.g. REACH, RoHS), resulting in possible
cessation of technologies, and consequent impact on competitiveness for
manufacturers or importers placing goods on the EU market. The BRT is concernedthat this is disproportionately impacting on non-EU manufacturers and importers
because such active substances to be regulated are often sourced from SMEs andcompanies with limited sales to the EU which cannot afford to undertake therequirements of the BPR, resulting in a loss of functionality, and in turn limiting thetechnologies and potential innovations reaching the EU market. As a result the BRT
recommends an assessment of the impacts of this regulation via an evaluation ofsocio-economic versus human and environmental benefits for treated articles
measures under the BPR.
Although the competent authorities’ meetings produce many guidance documents,
the sheer amount of the guidance documents have increased the complexity of thesubject matter. The BRT requests the authorities of the EU to make guidance easierto understand.

WP-1 / # 20* / J to E

Resource Efficiency Policy

20.1 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 oflegislation which limit circular business models which may focus on recycling andWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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refurbishment/remanufacturing activities. In particular, before proposing newlegislation 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 thecredibility of new business models. On the other hand, the BRT recommends theauthorities 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 bydiverging interpretation and implementation at Member State level. In this context,
consistent definitions of waste and end-of-waste criteria would be needed in order toensure free movement 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
through the development of technical standards in line with ISO standards and help
industry to better implement circular models in the supply chain whilst creating a levelplaying field for all market actors. In parallel, the authorities of the EU and Japan
should consider incentives for manufacturers to increase the use of recycledmaterials in products and for producers of secondary raw materials to provide them inhigher quality and quantity. These would be necessary steps for the creation of a
global and functional secondary raw materials market.
The BRT requests to the EU authorities to avoid implementing regulations or policies
that require companies outside the EU to implement difficult and/or costly measures
to comply with, in areas including location or other attributes of waste stream, andcertification and labelling of recycled materials, which would potentially work as nontariff barriers.
< Recent Progress >There has been some progress. In January 2017, the roadmap on the intended
work related to the chemicals, products and waste interface has been published.
< Background >The European Commission published a new Circular Economy Package inDecember 2015. The package includes revised legislative proposals on waste andan EU Action Plan for the Circular Economy.

20.2

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 ofWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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Least 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.
The BRT suggests that “repair as produced” principle should be applied to spareparts 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.
< 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, theproduct cannot be repaired and a new product has to be bought, which is notresource efficient. If regulation on a product takes spare parts into account, theproduct life can be extended by repair.

20.3

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 more energy 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 andrisks that confidential data are leaked to third parties.
< Recent Progress >There has been some progress.
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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 themost energy efficient products on the market and is counterproductive to the aim ofEnergy labelling. The proposal to create a product database to be managed by theEuropean 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 / # 21* / J to E

Taxation21.1 Common Consolidated Corporate Tax BaseThe European Commission re-launched the legislative proposals on the CCCTB on
26 October 2016. It proposes to legislate in two steps: first to agree on the rules for acommon tax base (CCTB) and, then to agree on the rules for consolidation (CCCTB).
The re-launched CCTB/CCCTB proposals make their application mandatory tocompanies belonging to a consolidated group with a total consolidated grouprevenue exceeding EUR 750 million.
Although there will be a substantial cost to companies in adapting themselves to a
new tax base, the BRT expects that a CCCTB would simplify tax compliance in theSingle Market. It would also introduce a mechanism of temporarily off-setting losses
in a subsidiary against profits at the parent, and would foster growth and investment
through participation exemptions and additional R&D deduction.
The BRT would like to note, however, that the substantial benefits to businesses aremostly in the second step.
 The consolidation would allow the totalisation of profits and losses.
 Goodwill transfer within a consolidated group would no longer be a tax issue.
 Transfer pricing within a consolidated group would no longer be a tax issue.
The BRT therefore urges the authorities of the EU to adopt the second step CCCTB
proposal swiftly after the adoption of the first step CCTB proposal.
The BRT hopes that, in the deliberations of the proposals in the Council, the Member
States will keep the tax system simple and sensible, and focus on fostering growthand investment.
The BRT would like to suggest that, if the Member States should find it difficult toagree on the CCTB/CCCTB proposals, they should move on to the enhanced

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cooperation procedure swiftly so that CCCTB would be first implemented by theMember States that support them.
The BRT encourages the EU to aim at making the Best Practice corporate tax
system in the world to which countries around the world would aspire.
< Recent Progress >There has been certain progress because the European Commission relaunched
the proposals.
< Background >The European Commission proposed a Council Directive on a Common
Consolidated Corporate Tax Base (CCCTB) in 2011. The Council has been unable
to agree on the proposal.
The European Commission re-launched the legislative proposals on the CCCTB
on 26 October 2016. The first step is a Proposal for a Council Directive on a
Common Corporate Tax Base (CCTB) COM(2016)685 and the second step is a
Proposal for a Council Directive on a Common Consolidated Corporate Tax Base
(CCCTB) COM(2016)683.
The relation between intra-group transactions and taxation is an important element
in decision making in a business. It is highly desirable that companies withinternational business should be allowed to compute the income of the entire groupaccording to one set of rules and establish consolidated accounts for tax purposes inthe EU.

21.2 Merger Directive
The BRT would like to draw the attention of the authorities of the EU that costassociated with intra-group reorganisation in the EU should be further reduced.
Although the Merger Directive provides the deferral of taxation on unrealised gains in
the qualified reorganisations, further improvements are needed to enhance thecompetitiveness of enterprises in the EU.
Merger Directive (90/434/EEC) covers only the change of legal forms – a more
substantial reorganisation that results in the cross-border transfer of goodwill istaxed even if gains are not realised.

Anti-Tax-Avoidance Directive (Council Directive (EU) 2016/1164) allows a five
year instalments of payment of goodwill taxation from 2020. Goodwill is in most
Member States depreciable over 10-20 years. Thus remaining timing mismatch
will result in the outflow of cash on unrealised gains that has to be financed bycompanies.

Council Directive 2008/7/EC allows Member States to charge transfer duties on
immovable property situated within their territory. Some Member States exempt
or apply reduced rates in case of intra-group reorganisation, but some Member
States apply normal rates. Transfer duties related to intra-group reorganisation
should be exempted throughout the EU.
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

There are shareholding requirements after reorganisation in some Member
States as an anti-abuse measure. It incurs unnecessary cost of maintaining an
empty company and is a potential source of double taxation.

The BRT is aware that a CCCTB could solve many of these issues.
Although the priority should be given to the CCTB/CCCTB proposal, the BRT
recommends that the authorities of the EU should resolve the remaining issues in a
medium term by expanding the scope of the Merger Directive to include the transfer
of real estates and other intangible assets in reorganisation, and by abolishing theshareholding requirements.
< Recent Progress >No progress has been seen for this recommendation.
< Background >The Merger Directive (90/434/EEC) provides for the deferral of corporate tax in thequalified cross-border restructuring of business. In the communication COM(2001)582, the European Commission referred to its intention to extend the scope ofthe Merger Directive to tax on the transfer of real estates.
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.
In certain EU Member States, companies are required to hold shares that they
have received in exchange of contributed assets for a number of years even if thoseholding companies cease to function 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 riskof 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%.

21.3 The fundamental reforms of VAT regime under consideration
The BRT welcomes the Action Plan on VAT – Towards a single EU VAT area
published by the European Commission on 7 April 2016. It provides clear
orientations towards a robust single European VAT area in relation to the definitive
VAT system. The BRT awaits a proposal for a definitive VAT system expected in
September 2017.
Although the BRT is aware that it would take many years to adopt a definitive VAT
system, it nonetheless hopes that the new regime will be realised swiftly and in sucha way that a business group could easily and cost effectively centralise VAT
administration in the EU.
The BRT would like to note that it remains to be seen that how destination VAT for
intracommunity transactions, on one hand, and more flexibility in rate setting by
Member States, on the other hand, can be reconciled and enable a group ofcompanies to centralise VAT administration in the EU easily and cost effectively.
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< Recent Progress >There has been no progress since the Action Plan on VAT was published in April
2016. The BRT hopes to see progress this year.
< 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.

21.4 Country by country reporting (CBCR)
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 and should not deviate from the internationally agreed and endorsed policy.
The proposal for a Directive COM(2016)198 as regards disclosure of income tax
information by certain undertakings and branches published on 13 April 2016 would
demand companies with consolidated global net turnover exceeding EUR 750 Million
to disclose country by country tax information publicly.
The proposal reflects certain aspects of the BEPS Action 13. However the BEPS
Action 13 demands that a legal framework must ensure the confidentiality of
exchanged tax information and limit its use to appropriate purposes. By theextension of this principle, the BRT regards the mandatory public disclosure of taxrelated information is against the spirit of BEPS Action 13. The EU should respect
the fact that G20 endorsed that CBCR should remain confidential.
The BRT is concerned that the mandatory public disclosure of CBCR would
encourage actions against corporations based on the subjective concept of fairtaxation of each interest group. Fair taxation could be very subjective depending on
the interest based on which an interest group is formed.
The BRT regards that it is the responsibility of governments to realise fair taxationand that it is the very reason that G20 endorsed the BEPS Actions in November 2015.

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Based on the above reasons, the BRT opposes to the proposed mandatory public
CBCR.
The BRT is also concerned that the proposed mandatory public CBCR would force
companies to disclose commercially sensitive information. The lower the threshold ofdisclosure, the higher the risk of disclosing commercially sensitive information
through CBCR.
For companies whose headquarters are located outside the EU, the proposed
threshold of a presence in the EU of a ‘medium or large’ company or branch, is too
low.
For example, if a company, headquartered outside the EU with a global turnover ofover EUR 750 million, has a single project worth more than EUR 8 million with theemployees of more than 50 people in an EU Member State in which it has no otherbusiness, it would have to disclose publicly the profitability of the project if it
constitutes a PE (a branch). Its competitors would be keen to look at such sensitive
information.
The BRT, therefore, recommends that the threshold of a presence in the EU should
be a ‘large’ company or branch for companies with their headquarters outside the EU
and with a consolidated global net turnover exceeding EUR 750 million.
The BRT also strongly requests that companies should be allowed to omit
commercially sensitive information from disclosure.
< Recent progress >This is a new recommendation on a new proposal.
< Background >The European Commission proposed on 13 April 2016 a Proposal for a Directive of
the European Parliament and of the Council amending Directive 2013/34/EU as
regards disclosure of income tax information by certain undertakings and branchesCOM(2016)198.
If adopted, the following parent companies would have to disclose publicly country
by country income tax information such as net turnover, profit and loss before tax,
accrued tax and paid tax.
 Ultimate parent companies located in the EU with a consolidated net turnoverexceeding EUR 750 million
 Ultimate parent companies located outside the EU: a consolidated global net
turnover exceeding EUR 750 million with a subsidiary in the EU that is medium ora branch. According to Directive 2013/34/EU, a medium or large company is acompany that exceeds the limits of at least two of the three following criteria on
its balance sheet data:(a) balance sheet total: EUR 4 million;(b) net turnover: EUR 8 million;(c) average number of employees during the financial year: 50
 According to Directive 2013/34/EU, the definition of a large company is acompany that exceeds the limits of at least two of the three following criteria on
its balance sheet data:
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(a) Balance sheet total: EUR 20 million;(b) Net turnover: EUR 40 million;(c) Average number of employees during the financial year: 250

WP-1 / # 22* / J to E

Company Law / Corporate Social Responsibility

22.1 A new strategy on CSR Policy
Concerning a new strategy on CSR policy that the European Commission isintensifying the work on CSR/RBC under the framework of its work towards the UN
Sustainable Development Goals (SDGs) to ensure these principles are reflectedacross all policy areas. The BRT recommends as follows:
1.

Take a leadership role in policy discussions on how to encourage the uptake of
CSR and promote actions to maximise positive impacts while mitigating negative
ones.

2.

Capitalise on the EU-Japan CSR Working Group, set up by DG GROW and
METI as one of the technical working groups within the EU-Japan Industrial
Policy Dialogue, as a useful bilateral platform to supplement other on-going multistakeholder dialogues.

3.

Highlight innovation: The European Commission should articulate the proactive
nature of CSR that leads to innovation and opportunities.

4.

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.

5.

Build an open platform: The European Commission should take a proactive rolein creating an open platform.

6.

Articulate policy linkages across the European Institutions and with international
agendas such as the SDGs and the OECD RBC (Responsible BusinessConduct) initiative.

< Recent progress >There has been no progress from the European Commission on updating its
strategy (action plan) on CSR as such, however the Communication Next steps for asustainable European future, European action for sustainability (COM(2016)739
clarifies that “The Commission will intensify its work on Responsible BusinessConduct, focusing on concrete actions to meet current and future social,environmental and governance challenges, building upon the main principles andpolicy approach identified in the Commission's 2011 EU Corporate Social
Responsibility Strategy”.
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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“responsibility of enterprises for their impacts on society”, but it further set out the
expectation that companies should have a process to integrate social, environmental,
ethical, human rights and consumer concerns into their business operations and core
strategy in close cooperation with their stakeholders. Furthermore, it made clear thatthe development of 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 milestoneof the Commission’s multi-stakeholder review process. The European Commissioncommitted to intensify its work on CSR within its new framework related to UN
Agenda 2030, building upon its previous approach introduced in its Communication
on CSR in 2011.

22.2 Conflict minerals
The BRT considers that responsible sourcing from conflict-affected and high-riskareas enables better living standards and economic progress in developing countries.
Yet the efforts of industry alone cannot ensure responsible sourcing from suchregions. It is crucial that national governments get involved and collaborate. Here, EU
diplomacy has an important role to play.
The BRT supports dialogue and engagement with stakeholders as the best solution
for driving collaboration across different cultures and systems to create value forbusiness and society.
The BRT recommends as follows; Ensure timely disclosure of the planned Handbook by the European Commission
on “conflict-affected and high-risk” (CAHR) areas to allow sufficient time for nonEU companies operating within the EU to implement it; Provide clarity regarding how the Commission’s non-exhaustive list of CAHR
areas aligns with outsourced projects and other initiatives that would define
CAHR;
 Synchronise the listing and delisting of responsible smelters/refiners with EUrecognized supply chain due diligence industry schemes. Difference in timing oflisting and delisting could be a source of confusion for companies;
 Focus on importers and set clear criteria for the certification of responsible
importers, smelters and refiners. The Commission’s intent to publish a list of‘responsible’ importers who publicly declare their due diligence obligations as set
up in the Regulation is positive in this regard. Such criteria should make use ofexisting schemes such as CFSI (Conflict Free Sourcing Initiative)’s Conflict Free
Smelter Program and LBMA (The London Bullion Market Association).
< Recent Progress >Regulation (EU) 2017/821 of the European Parliament and of the Council laying
down supply chain due diligence obligations for Union importers of tin, tantalum andWorking Party 1: Trade Relations; Investment and Regulatory Cooperation; Financial Services, Accounting and Taxation
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tungsten, their ores, and gold originating from conflict-affected and high-risk areas
was published on 17 May 2017.
The Regulation, which enters into force in 2021, aims to help EU companies
ensure they import minerals and metals from responsible sources only.
< 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 highrisk areas (COM(2014)111). The proposed Regulation is accompanied by a joint
Communication by the European Commission and the High Representative to theEuropean Parliament and the Council: Responsible sourcing of minerals originatingin conflict-affected and high-risk areas - Towards an integrated EU approach(JOIN(2014) 8).
Regulation (EU) 2017/821 of the European Parliament and of the Council laying
down supply chain due diligence obligation for Union importers of tin, tantalum andtungsten, their ores, and gold originating from conflict-affected and high-risk areas
was published on 17 May 2017.

22.3 Non-financial disclosure
Non-financial reports are a vital communication tool, provided that the reporting
company retains discretion in determining to whom it intends to disclose and whatmaterial is. Materiality differs for each company, depending on the nature of business,the perspective of top management and corporate culture. Due to this variedcharacter of materiality, the imposition of specific and harmonised Key Performance
Indicators (KPIs) does not accurately reflect the ongoing efforts of companies facedwith complex challenges at a local level.
Therefore, a principle-based approach is the only viable way for companies tomeaningfully explain their business in a dynamic and changing environment.
The BRT recommends as follows: Emphasise dialogue in policies as an equally valuable means for companies tostrengthen the trust of their investors and stakeholders, and leverage theimprovements of companies' internal practices by incorporating dialogue into the
PDCA management cycle. Dialogue is a powerful tool in fostering a culture of risk
management and innovation, whereby companies across different cultures can
exchange views on potential future risks as well as explore collaborative
opportunities;
 Foster innovation and growth by motivating companies to integrate CSR into
daily business to become more innovative and competitive in the global context,
including through open exchanges among stakeholders, partner countries orregions, governments and suppliers; Approach non-financial reporting not from a compliance mindset, but by building
meaningful channels for companies and investors to discuss value creatingprocesses.
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The European Commission on 26 June 2017 adopted non-binding guidelines on
non-financial reporting. These guidelines aim to help companies concerned underDirective 2014/95/EU to disclose non-financial information in a relevant, useful,consistent and more comparable manner. It aims also boost corporate transparency
and performance, as well as encourage companies to embrace a more sustainableapproach.
< Background >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 European Commission carried out public consultation from 15 January to 15
April 2016 in the preparation of non-binding guidelines on methodology forreporting non-financial information, held stakeholder meetings on 27 September
2016 and 16 February 2017. The European Commission on 26 June 2017
adopted non-binding guidelines on non-financial reporting pursuant to Article 2 ofDirective 2014/95/EU.

22.4 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 and the OECD Due Diligence Guidance.
The BRT suggests that the authorities of the EU should take the following approach:Promote internationally recognized frameworks in the EU that take a risk-based
approach instead of adopting EU-specific conditions. This allows companies tomaintain flexibility in taking meaningful actions without reducing their efforts tooutcome-based box-ticking exercises. Such frameworks include the UN Guiding
Principles on Business and Human Rights and the OECD Due Diligence
Guidance;
Encourage a ‘know and show’ mindset by incentivising companies to more
actively establish responsible supply chains. Companies which diligently tackle
the issue should be recognised for their efforts and progress and the quality of
their management processes;
Avoid creating unnecessary administrative burdens that would hamper
companies which are effectively addressing the fundamental problem on the
ground.

< Recent Progress>
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There was no major progress since last year.
< Background >Responsible supply chain management is increasingly important as is shown by
the reference 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.

WP-1 / # 23 / J to E

Product Safety / Market Surveillance

23.1 Product safety and market surveillance package proposal
The BRT recommends that the authorities of the EU should amend the Article 7 ofthe proposal for a Regulation on consumer product safety (COM(2013) 78) by which
the indication of the country of origin would become mandatory because according to
the final report on the ‘Implementation of the New Regulation on Market Surveillance:
Indication of Origin’ dated 6 May 2015, the mandatory indication of the country oforigin does not add much value. The BRT believes that the mandatory indication of
the country 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 theEuropean Commission was requested to produce by the Member States was
published. The proposal is under deliberation in the European Parliament and theCouncil.
< 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 productsafety (COM(2013)78). The package is now at a final stage of deliberations in theCouncil. 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 country of origin of the product.

23.2 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 forfair movement of products. The BRT requests the European Commission and theMember States to disclose all the relevant information regarding the progress of thisprocess and the implementation of the market surveillance in each Member State.
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The BRT also requests the European Commission and the Member States to giveindustry 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.
< Recent Progress >Some progress has been seen for this recommendation.
< Background >In 2008, the Regulation 765/2008/EC, setting out the requirements foraccreditation and market surveillance relating to the marketing of the products, andthe Decision 768/2008/EC, a common framework for the marketing of products, wereadopted. 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 2016.
23.3 Consumer protection – legal guarantee period
The BRT welcomes the outcome of the Fitness Check of EU consumer andmarketing law published on 29 May 2017. In particular, the review of the Consumer
Sales and Guarantees (CSG) Directive 1999/44/EC recommends the introduction ofa uniform two-year legal guarantee period for both online and offline sales channels.
The BRT also appreciates that the authorities of the EU are trying to fast-track its
introduction by expanding the scope of a proposal for a Directive on online anddistance sales of goods (COM/2015/635) to offline sales channels.
The BRT looks forward to the implementation of more aligned Single Market
legislation in consumer sales and guarantees.
< Recent Progress >Good progress has been made for this recommendation because the outcome of
the Fitness Check confirms the recommendation of the BRT and a change in the
Directive seems to be underway.
< 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 that
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businesses and consumers do not have to be concerned about difference in
implementation among the Member States.
Presently, the EU consumer law allows the discretion of the Member States to set
a legal guarantee period longer than 2 years.
The European Commission started the fitness check of consumer law in the final
quarter of 2015 and published its outcome on 29 May 2017.

WP-1 / # 24 / 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-country
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
the legislation based on an appropriate and balanced analysis should be includedin 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.
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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 market
unilaterally. The BRT is still concerned, however, that the EU’s possible actions
could trigger a chain reaction of protectionist measures all over the world. 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.

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