Position paper ofJapanese bio-business sector for submission
to the WGDSI-2

Japan Bioindustry Association (JBA)
Japan Cosmetic Industry Association (JCIA)
Japan Pharmaceutical Manufacturers Association (JPMA)
Japan Seed Trade Association (JASTA)
KEIDANREN (Japan Business Federation)

Position paper ofJapanese bio-business sector for submission to the WGDSI-2

Japanese bio-business believes that the conservation and sustainable use of biodiversity is a challenge
to be addressed by the international community as a whole, since all societies, including our own,
depend on biodiversity. Since DSI and its use is now indispensable for solving these challenges and isalso one of important sources of benefit-sharing, we strongly hope that the benefit-sharing mechanism,
rather than imposing benefit sharing obligations on specific users, will be designed in such a way as
to facilitate the use of DSI, together with physical genetic resources, and to create a broad contribution
base by building into the system incentives that are simple, easy to comply with, and ensure legal
certainty.
1.

General comments on the multilateral mechanism for benefit-sharing from the useof DSI;

We believe that benefit sharing from DSIs should meet the following conditions;(i)

Putting restrictions on the free exchange and use of DSI should be avoided;
In order to create value as a source of benefit-sharing, innovation should not be slow down
or stifled. Recent innovations/R&D depend on collecting, exchanging, analyzing large
amounts of data and using it as learning material. The free exchange and use of DSI makes
this possible. If innovations/R&D are delayed or suppressed by restrictions on the free trafficof information, people/citizens in the world cannot enjoy achievements/fruits that would
have been obtained through innovation/R&D in a timely manner. Therefore, any benefitsharing mechanism that places restrictions on the free exchange and use of DSI must beavoided.

(ii)

Linking the use of DSI to monetary benefit should be avoided;
Linking the use of DSI to financial benefits not only requires impractical tracking andtracing, but also induces the falsification of (meta)data based on malicious attempt to
artificially control benefit-sharing, and may jeopardize the credibility of public databases.
This would also lead to putting benefit-sharing obligations only on users of specific DSIs
and related technologies, thereby encouraging avoidance of their use, limiting the flow offunds, and eventually impeding bioeconomy-centered social transformation.

(iii)Do not bring bilateral mechanisms into the system;
If bilateral mechanisms are introduced into the system, in addition to the track and trace
requirements, there will be a risk of double payments and reduced legal clarity. Manycompanies, constantly looking for cost reduction and a legally stable business environment,
will be forced to spend their valuable efforts on jurisdiction shopping. This is not a world
we want to live in.

(iv)

The system should ensure legal certainty regarding the fulfillment of benefit sharing
obligations and the use of DSI:
We believe that contributions to the fund should be recognized by all countries as fulfilling
their benefit-sharing obligations under the CBD, and should provide assurance that there areno other ABS requirements with respect to the use of DSI. This is extremely important forbusinesses that value legal certainty and could be a strong and essential incentive forvoluntary contributions to the fund.

(v)

A fair business environment should not be distorted by DSI benefit-sharing schemes:
We also compete in some areas with companies that do not use DSI. How can we gaininternal understanding of contributions to the fund if it is clear that we are losing businesscompetitiveness to companies which do not use DSI or are outside the benefit-sharing
framework, while all companies benefit to a greater or lesser extent from biodiversity?
We believe that international efforts are needed to ensure that the implementation of benefitsharing obligations does not unfairly distort the level playing field.

(vi)

We call for a transparent management of the fund in coordination with otherinternational ABS frameworks:
We believe that our contributions must be used for conservation and sustainable use of
biodiversity. Purposes and plans for using funds shall be clarified, and annual review forstatus and update of using funds shall become mandatory. We also call for a high level oftransparency and international coordination in the management of the fund, as it would beinefficient for other international ABS instruments to establish their own funds and operate
under different rules, creating confusion in R&D and risking stacking of benefit-sharing
obligations.

2.

Specific comments on the “Synthesis of information for the further development of
the multilateral mechanism established under decision 15/9, including elements ofa draft recommendation”（CBD/WGDSI/2/2）

While Japanese bio-business hopes that the proposals from the CBD Secretariat and Co-Chairs willplay an important role in advancing future discussions leading up to COP16, we would like to sharesome of our concerns:

1). The method for determining which products and sectors are subject to benefit-sharing
must be based on information that accurately reflects business reality and is easily
understood by all potential contributors:
The idea of not daring to define the scope of “DSI” or the definition of “use of DSI” may
be a compromise to have as many contributors as possible and to minimize each financial
burden, but it is not acceptable to impose benefit-sharing obligations on specific products
or sectors without defining them.

Even if a list of “products subject to benefit-sharing” or “sectors highly dependent onDSI” were somehow created at this moment, such a list would not be future-proof tokeep up with future technological developments.

If users were required to identify their own products benefiting from the use of DSI, theresulting requirements to track and trace the use of DSI throughout the supply chain will
be extremely difficult and virtually impossible to identify.

There are many questions about the “sectors with high reliance on DSI” cited asexamples; the study report commissioned by the CBD does not provide a clear reason
why these sectors were identified. We and other related organizations have pointed out
in our peer review of the study report that while the companies comprising the sectors
are extremely diverse, it is questionable to identify them as subject to the benefit-sharing
obligation on the basis of only a few examples.

2). The method of determining the amount of benefit-sharing must also be satisfactory to
the contributors:
If companies are required to contribute X% of their revenue , depending on the businessportfolio, the profitability and/or growth potential of the business concerned, many
companies may use the implementation of the system as an opportunity to make abusiness decision to divest, close or withdraw from DSI-related businesses.

Given that the average ratio of operating profit to sales in the Japanese manufacturingindustry is about 4%, it is clear that if levies were imposed on 1% of sales, there could
be significant obstacles to business sustainability or continuity. It is a common perception
in the industry that the levy would inevitably be passed on to product prices, which could
result in a new inflationary pressure.

In addition to being a high-risk, high-return business, the pharmaceutical industry is anindustry in which it is virtually impossible to pass on the cost of benefit-sharing to thepolitically determined drug price, as is the case in Japan and many other countries. A
levy on sales in such a business model does not take into account the reality of theindustry and could threaten the continuity of the business. Further encouraging
companies to exit the business of using DSI raises concerns about increasing healthsecurity risks in areas such as infectious diseases, where many companies have alreadyexited due to the high business risks involved.



It is questionable to determine contributors and contribution targets based on numerical
data that do not correctly represent the profits generated by the DSI that are subject to
CBD benefit-sharing, including sales of products developed using human DSI and that
not even using DSI, for example. We are concerned that a system designed using such
inappropriate numerical data will lead to over-inflated expectations of benefit-sharing
from DSI. We should bear in mind that the Target 19 of the GBF indicates the need toclose the financial gap by utilizing all resource mobilization mechanisms, not solely
relying on benefit-sharing from the use of DSI.

3). Contributions to the Multilateral Benefit-Sharing Fund should be considered inconformity not only with benefit-sharing obligations from DSI under the CBD, but alsowith the requirements of countries with relevant national laws and other international
ABS fora:
It is common practice in current R&D today to treat DSI as big data. Grouping DSI ofdifferent international ABS instruments treaty by treaty, which leads to fragmentation ofDSI, cannot be allowed. All DSI should be treated across treaties and on a unified basis
for such purpose.

This would not only provide a strong incentive for contributors to the fund, but should
also help to avoid stacking of benefit-sharing obligations and promote international
collaborative research and co-development projects.

4). Disbursement from the Multilateral Benefit-Sharing Fund:Funding will be disbursed on the basis of projects (Option A, Annex para12,CBD/WGDSI/2/2) and should be explicitly used for the conservation and the restorationof biodiversity.