JAPAN'S REQUESTS AND COMMENTS REGARDING
EU REGULATIONS AND ACCESS TO EU MARKETS

November 4, 1998

1. Legal services
2. Business stays and work visas
3. Driving licences
4. Relaxation of plant quarantine requirements
5. Retail business, commercial laws, and business practices
6. Standards and certification
7. Tourism
8. Maritime transport services
9. Shipbuilding
10. Telecommunications
11. Fermented products
12. TSE
13. Pet foods
14. Financial services
15. Employment
16. Trade and Customs
17. Construction
18. Others

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[NOTE]
   The requests with *** at the end of the title are those added to the Requests and Comments of October 12, 1998 submitted at the last Japan-EU Ministerial Meeting in Tokyo.

1. Legal services

The establishment of a system in France whereby foreign lawyers are able to provide legal services with regard to their own country's laws (1. of Requests and Comments of March 2).

   Japan has made a request to the EU that France establish a system that would allow foreign lawyers to engage in the provision of legal services pertaining to their own country's laws without their having to undergo any special examination, as is duly permitted in Japan under the Special Measures Law Concerning the Handling of Legal Business by Foreign Lawyers.

   According to the Reaction from the European Union of June 30, 1998 (referred to as "the EU Reaction" hereafter), a qualified lawyer from a non-EU third country will be allowed to join the French bar, subject to passing an examination based on his/her knowledge of French law. This reply does not address Japan's request for exempting from the obligation of any special prior examination the foreign lawyers providing legal services pertaining to their own country's laws in France.

   Japan stands by its original request.

2. Business stays and work visas

(1) General comments ***

In many EU Member States, it takes a very long time indeed for Japanese applicants to obtain or renew work visas. Such delays cause considerable difficulties for Japanese companies operating in those countries assuring smooth and systematic employment or transfer of employees. Furthermore, in some Member States, the administrative procedures regulating the issuing and renewing of visas are not very transparent; different decisions depending on the official in charge, and a lack of clear guidelines for visa issuance have often been noticed. With the understanding that EU-wide cooperation in the field of justice and home affairs, including migration control, will be strengthened with the entry into force of the Schengen Agreement, Japan continues to request that the European Commission redouble its efforts to resolve such issues.

(2) Deregulation of requirements at offices of foreign concerns in Greece (2. (1) of Requests and Comments of March 2)

   In Greece, the following applies for the issuance of work permits to third-country nationals:

(3) Work visas and related problems in Italy (2.(4) of Requests and Comments of March 2)

   As a result of system changes in October 1997, all Japanese workers of firms incorporated in Italy shall have the status of employee (a CEO is the only exception). This would require those who have not had to do so to obtain working visas for their employment.

   According to the response provided by Italian authorities as relayed by the European Commission in June 1998, the issuing of business and work visas is conducted in conformity with the Schengen Agreement and procedures. Japan requires a more detailed explanation to clarify whether or not the Schengen Agreement explicitly stipulates that all the workers other than the CEO of a firm incorporated in EU Member State must have the status of employee. If such explicit provision does not exist in the Agreement, Japan requests the modification of the relevant Italian legislation to reduce the number of Japanese workers that must obtain working visas for their employment.

(4) Work visas and related problems in Spain (1. of Deregulation Requests of May 7)

   In Spain, an applicant for a work visa must present a certificate issued by the police authorities from all countries where the applicant has resided for five years up to the day of the application, certifying that he/she has never committed a criminal offense.

   However, such a requirement would be quite time consuming for a Japanese applicant who has lived outside of Japan. According to the EU Reaction, Spanish authorities do not foresee a modification to the currently applied legislation. Japan stands by its request that a Japanese applicant be required to submit only a non-criminal certificate from the relevant Japanese authorities.

(5) Abolition of the designation of hospitals authorized to issue medical certificates in Belgium ***

   In Belgium, the medical certificate necessary to obtain a work visa can be issued only in hospitals designated by the Belgian authorities. This regulation causes considerable difficulties for Japanese workers posted in an area where there is no such designated hospital in the vicinity. Japan requests this situation be remedied by allowing a medical certificate issued by any hospital to be considered valid in accordance with the checklist required by the Belgian authorities.

(6) Visa problems in Germany ***

   A Japanese to be posted in Germany applies in Japan for an entry visa, which is valid for three months after his/her arrival in Germany and can be extended upon his/her application within this three-month period.

   Previously, such visas entitled the visa holders to enter Germany more than once, and it was no problem for them to go abroad and return to Germany within the three-month period. However, since the spring of 1998, visas are issued only for single-entry purposes, thus a Japanese national arriving in Germany cannot go abroad until the procedures for the extension of his/her visa are completed. This means that Japanese personnel newly arrived in Germany cannot go abroad, even for business purposes and, in some cases, encounter difficulties in their business activities and daily life.

   Japan requests that multiple re-entry visas be issued on first application, as was the case before the spring of 1998.

3. Driving licences

(1) Requests concerning EC Directive on Driving Licences (3. (1) of Requests and Comments of March 2)

   On July 29, 1991, the Council of the European Communities adopted the Council Directive on Driving Licences (91/439/EEC) [hereafter referred to as the EC Directive], and the EU Member States were to make and amend their domestic laws based on the EC Directive. In some EU countries, as a result of the amendment of legislation and/or the enactment of new legislation, Japanese driving licence holders applying for a driving licence in those countries are treated differently from before.

   According to the explanation provided in the EU Reaction, the only obligation stipulated in the EC Directive is that a driving licence issued by a third country may be exchanged for a "Community model driving licence" only if the former licence has been surrendered to the competent authorities of the Member State making the exchange, and the recognition of driving licences issued by a third country is a matter of Member States competence. Such a legal scheme leaves room for great discretion among individual EU Member States, and thus some Member States have been treating Japanese driving licence holders in an arbitrary and disadvantageous manner regarding the issuance of driving licences. Japan continues to request that the situation be remedied.

(2) Treatment of Japanese driving licences in Italy and Spain (3. (2) of Requests and Comments of March 2)

   Italy and Spain have recently adopted domestic laws on driving licences in accordance with the EC Directive and contend that some kind of legal document, such as a bilateral agreement, must be concluded so that a Japanese driving licence may continue to be exchanged for a local licence. While justification for such an argument is not clear, Japan is prepared to find a solution through bilateral discussions. Japan asks that both countries be flexible in working out an equitable solution, allowing the continuation of the exchange of driving licences as in the past.

(3) Abolition of the procedures to get a driving licence in Greece (3. (5) of Requests and Comments of March 2)

   In Greece, according to the Presidential Decree issued in January 1995 in accordance with the EC Directive, non-EU country driving licences can no longer be exchanged for Greek licences. Now, in order for individuals holding a non-EU country driving licence to drive in Greece, they must either obtain an international driving licence or take and pass a local driving test to obtain a Greek driving licence. According to the EU Reaction, these provisions are in part designed to prevent the forgery of driving licences and apply to all non-EU countries. However, the total abolishment of the exchange of a foreign driving licence for a Greek driving licence on such grounds seems to be lacking reasonable justifications, considering that counterfeiting can be prevented effectively through close exchange of information with relevant authorities of other countries on the format of respective driving licence, etc. Japan requests that the system whereby Japanese driving licences can be exchanged for Greek licences be restored.

(4) Relaxation of medical requirements in the application for driving licences in Luxembourg ***

   When a Japanese national applies for the exchange of his/her Japanese driving licence for a local one or applies for the issuance of a new driving licence in Luxembourg, he/she is required to submit a medical certificate issued by a medical doctor. Such a requirement is time-consuming, in particular, because a Japanese applicant is subject to a range of medical checks. From the measurement of his/her height and weight to a check of beriberi check, which are not considered to be relevant to his/her driving capacity. Japan requests that the regulations be relaxed to cover the basic criteria (vision, hearing, color-blindness etc.) and that such examinations be conducted not only at medical institutions but also in more accessible places such as a neighborhood police stations.

4. Relaxation of plant quarantine requirements

(1) Shortening of the cultivation period of two years under quarantine conditions for bonsai plants (4. (1) of Requests and Comments of March 2)

   Based on the fact that the Anoplophora malasiaca has a life-cycle of up to two years, the EU has been requiring a cultivation period of two years under quarantine conditions for Japanese bonsai plants prior to their export. Since not all bonsai plants are a host for the Anoplophora malasiaca, Japan regards the application of the same quarantine period to all bonsai plants, whether they are host plants or not, as an excessive requirement. Japan requests that the two-year quarantine period should be required only for host plants. In particular, Japan requests that the European Commission take concrete actions to improve its quarantine regime, taking into consideration all the information that the Government of Japan has already provided to it.

(2) Elimination of the requirement that bonsai plants for export to the EU must be on shelves at least 50 cm above the ground (4. (2) of Requests and Comments of March 2)

   According to the explanations given in the EU Reaction, the Directorate-General for Agriculture (DG VI) is in the process of studying Japanese comments (submitted to the Commission in July 1997, in response to the Commission's comments of May 1997) regarding some details of the Japanese proposal. Japan requests that the European Commission take concrete actions to improve its quarantine regime at the earliest possible date.

(3) Elimination of limitations on the import of Japanese Pinus and other bonsai plants (4. (3) of Requests and Comments of March 2)

   The EU limits the authorisation period for imports of Pinus, Chamaecyparis and Juniperus bonsai plants to two years, and renews its authorisation on request from Japan. There is, however, no scientific basis for limiting the effective import period to two years, and Japan considers the restriction to be excessive.

   According to the EU Reaction, through such limitations on the import of conifer plants, experience can be gained on a possible review of the Community plant health regime under alternative conditions. Japan continues to request that the EU revise these import regulations to enable the continuous imports of such plants, unless any problems arise during the quarantine period.

(4) Relaxation of controls on the import of cherry trees from Japan (4.(4) of Requests and Comments of March 2)

   The EU began to prohibit the import of cherry trees from Japan on June 1, 1993, by an EC Directive on plant quarantine. Japan requests that the import of Japanese cherry trees be permitted as early as possible by the granting of an EC Directive that exempts Japanese cherry trees from quarantine.

   According to the EU Reaction, the Commission is currently preparing a reply to the comments and data that Japanese authorities submitted last December, which will set out the EU's concerns in greater detail. Japan is prepared to make every effort to find a solution that would allow the lifting of the import prohibition through intensive consultations with the European Commission, including the submission of additional data.

5. Retail business, commercial laws, and business practices

(1) EU response to the French move to strengthen the law regulating large-scale retailers (5. of Requests and Comments of March 2)

   In order to protect self-employed small- and medium-sized retailers, the French Government decided to strengthen the 1973 Royer Law that sets regulations regarding the opening of large-scale retail stores. The bill to amend the Law was approved by both chambers of the French parliament in June 1996.

   Although the European Commission explained in the EU Reaction its own understanding on the necessity and rationale for strengthening regulations on retail businesses in France, some points remain unclear. Japan requests further explanation from the Commission, with regard to the following points:

(a) While the Commission's reply clarifies the intended purpose of the amendment of the Royer Law, such a purpose alone would not necessarily ensure that the effective application of the amended legislation would not result in effective impediments to the opening of a new large-scale retail store. Can the Commission definitely confirm that the amendment creates no barriers to the opening of a new store?

(b) Have there been any claims or complaints to date from applicants against the French authorities' decisions concerning the authorization of the opening of a new store? If so, how has the French Government responded?

(c) Under the amended Royer Law, the stated criteria for judgment in determining whether authorization will be granted are:

(d) The 1996 amendment provides for reduction in the space in square meters of commercial facilities subject to approval. Isn't this considered as a strengthening of the regulation? Should not such an amendment be regarded inconsistent with the Stand-Still commitment in the framework of the GATS?

(e) It has been explained in the EU Reaction that the objective of the legislative reform in question is to "avoid ... disorderly growth of newer types of distribution." It is nevertheless unclear who would distinguish "disorderly" growth from "orderly" growth. What does "disorderly growth of newer types of distribution" concretely mean? (Give some specific examples.)

(f) In regard to the statistical data on large-scale retail stores provided by the European Commission in response to Japanese Requests and Comments of March 2, is there no other criterion used in the EU for distinguishing large-scale stores from small-scale stores than that of the space of commercial facilities being over 300 square meters? In addition, Japan would like to obtain data concerning the number of newly opened large-scale retail stores in France since 1995.

(2) Strengthening of regulations on retail businesses in the United Kingdom

   In the Japan-EU deregulation dialogue held in Brussels last May, Japan requested that the EU provide information on the recent move in the United Kingdom to strengthen its regulations on retail businesses, to which the European Commission presented its reply in June. In order to know the actual status of the regulations in the United Kingdom as accurately as possible, Japan asks additional clarifications on the following points:

(a) Does not the UK's Town and Country Planning Act (and Planning Policy Guidance) entail the economic needs test, which is prohibited under the GATS?

(b) Do not the regulations set forth under this Act have the effect of protecting existing small-scale stores by blocking the opening of new large-scale stores?

(3) Strengthening of regulations on retail businesses in Germany

   From the point of view explained in the preceding paragraph (5.(2)) regarding the United Kingdom, Japan asks for clarification on the possible favourable effects that the current German legislation (the Baugesetzbuch) could have on existing small-scale stores by blocking the opening of new large-scale stores.

(4) Treatment of accumulated losses in Spain (Article 260 of the Corporation Law) ***

   The Spanish regulation provides that, when accumulated losses of a company exceed the level of half of its capital, the company is forced into liquidation unless such losses are balanced by the use of a part of its capital or an increase in its capital. Japan requests the abolition of such an excessively strict regulation.

(5) Regulation on undercapitalization caused by accumulated losses in France ***

   Undercapitalization is so strictly regulated under the French Commercial Law that few options in business management are available for operating companies. If a company's capital falls below the level of half of its capital due to accumulated losses, the company is forced into liquidation by law. Companies assume various obligations in order to ensure that their capital level is kept above half of their capital. Japan requests France to relax this regulation.

(6) Improvement of the credit and debt system in Spain (Commercial Transaction Law) ***

   As the Spanish legal framework for regulating commercial transactions is weak, defaults on payments often take place and the settlement of disputes in the court takes long time. Delays in payment are not punished severely enough. For instance, checks are readily dishonored, and even those who repeatedly dishonor checks are not suspended from transaction with banks if they eventually pay. Japan requests that the regulations be amended to strengthen the legal framework for regulating commercial transactions, for applying stricter rules, such as observance of payment days and bearing the costs for delay in payment, and for implementing punishment by the authorities or the banks.

(7) Simplification of the application procedures provided in the Commercial Law in Austria ***

   In Austria, the signature certificate by an executive of the parent company is always required in the application under the Commercial Law (application for an amendment to the Statutes of the company, etc.) For example, the parent company's executive has to go to the Embassy of Austria in Japan to obtain the signature certificate each time the company changes the legal contents of its commercial registry (date of reckoning, etc.). This procedure is extremely time-consuming and burdensome. Japan requests the simplification of the procedure so that most applications for registration can be completed locally by a foreign company's branch once it is entrusted to do so by its parent company's executives.

6. Standards and certification

(1) Unification of the standards for plugs and sockets within the EU (6.(1) of Requests and Comments of March 2)

   Japan welcomes the progress being made, through the establishment of a voluntary European standard, etc., toward the harmonisation of standards for low-voltage plugs and sockets in the EU Member States, with the exception of the United Kingdom. Japan expects that further efforts will be made for the increased convenience for users.

(2) Driver's Helmets (6.(2) of Requests and Comments of March 2)

   Japan hopes that the competent European authorities will introduce the driver's helmet certification procedures that would allow Japanese helmets to be distributed more smoothly and at a lower cost throughout the EU area. In its Requests and Comments regarding EU Regulations and Access to EU Markets presented to the EU last March, Japan made certain requests, including, in particular, the application in the United Kingdom of Regulation 22 annexed to the UN/ECE Revised 1958 Agreement.

   According to the explanation provided in the EU Reaction, Regulation 22 does not currently apply to the United Kingdom, but will be applied to it from July 1, 2000, or, earlier if the European Community accedes to an amended UN/ECE Regulation on protective helmets and visors, which provides for higher standards.

   Although Japan welcomes the indications that the uniform technical prescription for driver's helmets defined under the UN/ECE Revised 1958 Agreement will be applied in the United Kingdom in the near future, some points remain unclear. Japan requests further information on the following points.

(a) As for the discussions in the WP 29 of the ECE for the amendment of the Regulation 22 (driver's helmets) of the Revised 1958 Agreement, what is the European Commission's appreciation on the current status of the progress achieved? Does the Commission have any information about a specific timetable for the current work in WP 29 on amending this Regulation?

(b) Does the amendment of Regulation 22 currently under discussion entail the strengthening of regulation which is likely to be accepted by the United Kingdom?

(c) How would be the concrete schedule for the United Kingdom to apply the Regulation 22 after the approval of its amendment in the ECE?

(3) Uniformity of sound pressure regulations for stereo headphones (6.(4) of Requests and Comments of March 2)

   With regards to regulations on sound pressure for stereo headphones currently under consideration in France and Belgium, these two countries are planning to introduce different regulatory standards.

   The EU Reaction states that Member States are allowed to enact regulations necessary to protect the health and safety of consumers, even if the regulations constitute obstacles to trade, thus trying to justify the introduction of discrepant standards in France and Belgium. However, it should be borne in mind that such divergence in regulations and standards within the EU will undermine considerably the merits of its Single Market.

   From this point of view, Japan requests either the harmonization of the regulatory standards between France and Belgium or the introduction of common standards in the EU as a whole.

(4) Consistency of the application of European directives to construction machinery (6.(5) of Requests and Comments of March 2)

   The UK's Health and Safety Executive has been enacted with excessive rules for the standards of visibility support equipment for construction machinery (large dump trucks etc.), which are neither required by any other EU country nor subsumed by the harmonized standard (EN474-1) for machinery. The response provided by the European Commission regarding this issue in June 30, 1998 merely explains the current status of the application for such regulations in the United Kingdom. Japan requests that such inconsistency in the application of directives on construction machinery be rectified.

   As for excavators, the Noise Limitation Directive (95/27/EC) stipulates that the period of validity for certificates of approval issued by a Notified Body be five years, while the Government of Germany has set a shorter period. According to the Commission's explanation given in the EU Reaction, German authorities deny the existence of such discrepancy, at least at the federal level. Japan will consider taking further actions after obtaining results of the hearings from relevant Lander authorities.

(5) Standard conformity certification procedures for radio equipment in the EU ***

   Almost all radio equipments are subject to the national standard and certification procedures of each EU Member State.

   Accordingly, the Japanese manufacturers applying for a certification of their products have to submit their application to the relevant national authorities and follow the national certification procedures in each EU Member State. The differences in such national practices may cause kind of confusion and could pose de facto obstacles for those manufacturers desiring access to the European market.

   Some examples of such problems are as follows:

   In Spain, Japanese manufacturers cannot be neither an approval holder nor an approval applicant in the application procedure for the immobilisers (an anti-robbery appliance for a car which allows the car motorization system to identify the original key by acknowledging with a sensor a specific wave emitted from an IC transponder incorporated in the key). In this case, they have to designate a Spanish agent. Some cases are reported in which it took more than half a year for a letter of procuration to be accepted by the agent, and another several months for the applicant to be notified of the incompleteness of the submitted documents.

   In Italy, there was a case in which the authorities refused to accept the test report issued by the ETSI accredited laboratory in Netherland and requested additional tests for certain test categories, while the test report had already been accepted smoothly in other EU Member States such as the United Kingdom, Germany, Switzerland. The laboratory certified by the ETSI, which issued the test report, insists that additional tests are not necessary.

   Japan requests that a new R&TTE Directive covering radio equipment be adopted as soon as possible in order to resolve such confusions.

(6) Application for CE marking on the products covered by the EMC Directive ***

(a) Manufacturers of certain products are obliged to meet the requirements for application and/or testing regarding CE marking which differ in EU Member States and often go beyond those laid down in the EMC Directive. These requirements impose excessive burden for manufacturers, especially for small-and medium-sized ones that deal with products in a small quantity. If there are rational reasons for applying these additional requirements, Japan requests their thorough harmonization by adopting new common rules stipulating them explicitly to be applied in the entirety of the EU, which would eliminate the risk of their arbitrary application.

(b) Japan requests that simple substitution tests be allowed for products manufactured in small quantities as well as products which are not liable to cause electromagnetic disturbance and those whose functions are not liable to be affected by such disturbance. If this request cannot be accommodated, it requests that both "emission" and "immunity" referred to in Article 4 (a) and (b) of the EMC Directive, or at least "immunity," be excluded from the scope of the Directive for these products.

   Japan also requests further information as to whether there is any apparatus or equipment which is excluded from the scope of the EMC Directive, such as those listed in 5.3 and 5.4 of the Guidelines on the EMC Directive.

(7) Conformity assessment procedures for the ISO standards ***

   As conformity assessment procedures for the ISO standards (on quality management, environment etc.) are different among EU Member States, Japanese enterprises manufacturing and marketing at the overall EU level are obliged to follow time-consuming procedures. Japan requests the simplification of such procedures through their harmonizing in the EU.

(8) Recycling and collecting obligations ***

   Obligations for manufacturers and/or distributors to put a recycle mark on products and collect recyclable products varies among the EU Member States. That causes considerable constraints for the Japanese companies operating at the overall EU level. Japan requests the harmonization of recycling, marking and collecting systems in the EU.

(9) Recycling and collecting obligation in Germany (Council Directive of 18 March 1991 on batteries and accumulators containing certain dangerous substances (91/157/EEC), (93/86/EEC), Verordnung zur Verwertung und Entsorgung Gebrauchter Batterien und Akkumulatoren, etc.) ***

   In Germany, regulations on recycle marking and collecting for Ni-Cd batteries are excessively strict. Respective EU Member States adopt their own national systems which override the general rules defined at the EU level, and such a situation may cause inefficiency and confusion. Japan requests the harmonization of the systems in the EU.

(10) Different type approval standards adopted in France ***

   With regard to technical standards for the facsimile terminals which are to be connected with telecommunication networks, France adopts unique standards different from those adopted in other EU Member States. Consequently, facsimile manufacturers have to design and produce a specific series of fax machines for France, which involves additional production and distribution costs. The similarity of standards of the other EU Member States allows those manufacturers to obtain the type approval for one single product model in all Member States except France. Japan requests that France adapt its national technical standards conformed to those adopted in all the other EU Member States, unless there are clear and rational reasons for maintaining national specificity.

7. Tourism

(1) Abolition of nationality requirements for tour guide licenses in Italy and Spain (7.(1) of Requests and Comments of March 2)

   According to the legislations on tour guides in Italy and Spain, only EU nationals can obtain tour guide qualifications. While the EU has explained that the nationality requirements for tour guides in these countries are covered by the GATS schedule of the EC and its Member States, Japanese tourists visiting these countries are compelled to hire both local guides, who do not speak Japanese, and Japanese interpreters, and thus must pay totally redundant cost.

   Although the EU Reaction holds that nationality requirements could be necessary for the Member States implementing a quality-oriented tourism strategy, Japan considers that the quality of tour guides can be adequately ensured by such means as a prior qualification examination. Japan stands by its request to abolish the nationality requirements contained in tour guide- related legislation of the respective countries. Although Italian authorities suggest that there may be the possibility for non-EU nationals to apply for the tourist guide qualification examination in some specific regions, Japan is of the view that such non-discriminatory opportunity should be provided in the whole EU without exception.

(2) Easing of excessive investigations of Japanese tour conductors by tourist police in Italy (7.(2) of Requests and Comments of March 2)

   Many Japanese overseas tourists (1,520,000 each year) travel on packaged tours. They are usually accompanied by tour conductors and interpreters. In Italy, tour conductors are often suspected of acting as tour guides. For example, when they brief their tourist groups on time schedules or meeting places, they are often mistaken for tour guides. This leads to excessive investigations by the local tourist police, hampering the tour conductors' activities, which should have nothing to do with those of tour guides.

   According to the EU Reaction, the Commission has drawn the attention of Italian authorities to this problem in order for Japanese tour conductors not to be disturbed by the excessive investigation by tourist police. Japan stands by its request until this problem is effectively resolved.

(3) Improvement of the licence system for tour conductors in Italy ***

   In Italy, a person intending to be a tour conductor has to take an examination organized by each province and obtain a courrier licence. Tour operators have to employ licensed tour conductors, even when escorting tourists from an airport to their hotel. However, as a consequence of the introduction of such a licencing system, the provision of tour-conducting services for Japanese tourists is not assured; Japanese-speaking tour conductors are unable to obtain courrier licences because examinations have not been given recently, and Italian licence-holders are not tested for their Japanese linguistic capability. Japan requests either that the qualification test for the courrier licence be resumed in Italian provinces, or that Italian authorities allow non-licenced tour conductors to assume at least peripheral tour-conducting activities, such as escorting tourists from an airport to their hotel.

(4) Deregulation for the operation of sightseeing buses and taxis in Italy ***

   In Italy, sightseeing bus/taxi operators are required to obtain a licence for each single vehicle in accordance with the regulation of each province, while new licences have rarely been issued recently. Japan requests that Italian authorities issue one licence for each operator, covering all, or at least five vehicles, as is the case in other EU Member States, and also that the issuance of new licences be resumed, which would promote efficiency and competition in the Italian tourism sector and reduce sightseeing tour costs.

8. Maritime transport services

(1) Problems with the Community Guidelines on State Aid to Maritime Transport (8.(1) of Requests and Comments of March 2)

   In July 1997, the EU officially announced the "Community Guidelines on State Aid to Maritime Transport." Japan is concerned that the introduction of a state aid regime could heavily distort international competition in maritime transport services and adversely affect free and fair practices in this sector.

    In this regard, Japan takes note of the fact that the Guidelines pose limits on state aid by stipulating that "the total amount of aid in the form of direct payments should not exceed the total amount of taxes and social contributions collected from shipping activities and seafarers", and requests that no aid that would distort competition in the maritime transport service sector not be provided in the EU.

(2) Abolition of the cargo reservation scheme for the import of coal into France (8.(2) of Requests and Comments of March 2)

   France contends that, for military reasons, 40% of seaborne coal imports must be carried on ships owned or operated by member nations of the EEA (European Economic Area). Japan has expressed concern with regard to this cargo reservation scheme considering its possible inconsistency with the GATS as well as its possible adverse effect on the liberalization of maritime transport, and duly requested the abolition of the scheme in its Requests and Comments regarding EU Regulations and Access to EU Markets of March 2, 1998.

   According to the explanation provided in the EU Reaction, this scheme is not actually applied in practice and, furthermore, the Commission considers it inappropriate to address the problem that Japan has referred to, on the grounds that the liberalization process for trade in maritime transport services has not resulted in the scheduling of specific commitments under the framework of GATS. However, Japan considers that the existence of such a scheme in itself is discriminatory and could seriously impede the liberalization of maritime transport. From the standpoint of liberalizing maritime transport services, Japan stands by its request to abolish the cargo reservation scheme.

9. Shipbuilding

Aid to the shipbuilding industry (9. of Requests and Comments of March 2)

(a) In April 1997, grant aid for shipyards in Germany, Spain, and Greece was approved at the Council of the EU Industry Ministers. Japan expressed its regret over this decision in its Requests and Comments regarding EU Regulations and Access to EU Markets of March 2, 1998, and requested that the European Commission provide a comprehensive and detailed explanation in this regard.

(b) In the EU Reaction, the European Commission expressed its view that the restructuring programmes entailing the grants in question pre-dated the signature of the OECD Agreement and were consistent with the standstill provisions of the Final Act of the Agreement. Japan considers that introducing price supports for ships and providing huge subsidies to specific shipbuilders clearly distort the fair competitive conditions in the shipbuilding market and thus, at the very least, go against the spirit of the OECD Shipbuilding Agreement, even though such supports were formally consistent with the Stand-Still commitment.

(c) With regard to the new company and investment subsidies approved for German shipbuilders, the EU explained that they were approved in June 1997 as compensation for the previously misallocated shipbuilding subsidies that had previously been approved. Japan does not share the EU's understanding that such a case should be considered as a decision predating the signature of the OECD Shipbuilding Agreement.

(d) In Spain's case as well, the EU explained that the subsidies in question do not constitute new aid but represent compensation for the cost of delay in the payment of aid predating the OECD Agreement. Japan considers such explanation does not justify the decision to provide additional grant aids.

(e) As no detailed explanation has been provided of the situation in Greece, Japan once again requests that such an explanation be provided.

10. Telecommunications

Requests regarding the proposed EC directives on licences COM (95)545 and on interconnection COM (95)379 (10. of Requests and Comments of March 2)

   The EU provided the EU Reaction in response to Japan's Requests and Comments regarding EU Regulations and Access to EU Markets of March 2, 1998. Japan will study further on the EU's regulations on telecoms sector, based on detailed information from the EU explaining how the EC directives are adopted by each Member State and how each Member State ensures conformity of such adoption measures with the EC's scheduled commitments within the GATS framework. The clarification given in the EU Reaction does not adequately address such concerns since it does not provide any information on concrete measures taken by each Member State but merely addresses certain procedural aspects. Thus, Japan continues to request the following:

(a) As to licencing and interconnections, Japan is paying close attention to the specific systems that EU Member States adopted up to January 1998 in accordance with the EC directives. Japan requests that detailed information be provided on the specific systems and their effective operation in each Member State.

(b) Licencing and interconnection procedures in each Member State should be applied without discrimination not only to companies established within the EU but also to those outside the EU. Japan is watching closely as to whether the commitment of the EU and its Member States in the GATS framework is being faithfully carried out, and requests detailed information on how, in concrete terms, each Member State fulfill this commitment, with the introduction or reform of specific systems and their effective operation.

(c) Provisions on licensing and interconnection procedures (including licensing standards, standard processing period, and specific interconnection regulations) of the domestic laws of each EU Member State based on the EC directives are publicized only in the official language of each Member State, not in English. For the convenience of enterprises outside the EU, Japan requests that all such procedures be published in English in the EU's Official Journal.

(d) Japan requests information to ascertain whether the interconnection tariff and methods for calculating interconnections fees of each EU Member State are actually made public, in accordance with the Commission Directive, and if so, the concrete channels and modalities of publication and the ways of getting the publicized information. As the current publication under the Commission Directive cover neither the opinions of carriers nor the government's way of thinking on the establishment of rules on interconnections or on the establishment of interconnection tariffs, Japan requests that those comments be also made public.

11. Fermented products

Strengthening of regulations concerning European Pharmacopoeia monographs (11. of Requests and Comments of March 2)

(a) Currently in Europe the safety of the manufacturing process and the quality of pharmaceutical products are maintained and guaranteed by a combination of "quality standards dictated by pharmacopoeia for individual products" applied through specific methods for various pharmaceutical products, such as amino acids, antibiotics, vitamins and raw materials for producing pharmaceuticals (including fermented products) and "process control" based on "good manufacturing practice" (GMP). Pharmaceutical products and raw material manufacturers in Japan have already been manufacturing their products following GMP and market their products in accordance with European Pharmacopoeia, and thus fulfill the "product standards" established by the Pharmacopoeia in each country in which such products are sold.

(b) In February 1997, it became known that the European Pharmacopoeia Commission (EPC, of which the EC is a member) is planning to establish new monograph requirements for substances that have been through fermentation processing. This new monograph approach to regulating pharmaceutical products and raw material is being directed at such substances only because they have been fermented during their manufacturing process, and therefore the new "production process rules" would only be applicable to fermented products.

(c) The traditional fermentation products and fermentation processes have a long history of safe usage. Therefore, there are no grounds for singling them out and subjecting them to additional new regulatory requirements without objective scientific reasons.

(d) With regards to this issue, Japan has concluded:

(e) In its Requests and Comments regarding EU Regulations and Access to EU Market of March 2, Japan requested that the European Commission intervene with regard to a move to adopt the monograph and to make sure that the above-mentioned problems be resolved, bearing in mind the exigencies of the situation, with the understanding that the EC will issue a directive on the basis of the EPC decision. According to the explanation provided in the EU Reaction, the EC is not issuing any directive based on the EPC decision, and the monograph proposal is being re-drafted in the EPC in the light of the discussions held last March between the representatives of the EPC and a delegation from Japanese pharmaceutical industry. Japan intends to pursue its request to avoid excessive additional regulations following the discussions between the EPC and the Japanese private sector. Japan would also like to request the European Commission to urge the EPC to forward expeditiously a written response to Japan Bio-Industry Association (JBA, which represented the Japanese pharmaceutical industry in the discussions with the EPC last March), including, in particular, the final draft of the monograph proposal as well as the findings on JBA's comments. (Although the EPC undertook to send such response last March, JBA has yet to received it.)

12. TSE

Prohibition of the use of TSE-risk materials (12 of Requests and Comments of March 2)

(a) According to the explanation provided in the EU Reaction, the entry into force of Commission Decision 97/534, which bans the use of SRMs, has been delayed until January 1, 1999, and the Commission will come forward with a new proposal to the Council (on the basis of the co-decision procedure with the European Parliament), which will be based on the advice of the relevant Scientific Committees and the recommendations of the OIE. Until a new Decision reached Member States may take their own national measures. Japan also understands that the determination of the countries that will be exempted from the regulations, including BSE-free countries, is currently under study (from June to December of 1998) by Scientific Committees, based on scientific data.

(b) The European Commission should carry out sufficient study based on scientific grounds, international standards and other resources in preparing new Decision proposal. In Japan, with the aim of preventing infectious diseases in domestic animals and ensuring the safety of meat, measures against such infectious diseases among others are being strictly enforced. For example, notification in case of the diagnosis of specifically designated animal infectious diseases such as TSE, etc. is mandatory in accordance with the Domestic Animal Infectious Diseases Control Law (under the jurisdiction of the Ministry of Agriculture, Forestry and Fisheries) and the Abattoir Law (under the jurisdiction of the Ministry of Health and Welfare). There has been no report of any incidence of BSE in Japan to date. This situation has been reported to the OIE. Moreover, in order to control risks, in addition to requiring other countries to conform to the conditions stipulated by the International Animal Health Code when exporting animals and animal products to Japan, Japan prohibits the feeding of bovines with meat and bone meal made from ruminants. Through these and other measures, Japan fully meets the conditions for being classified as a BSE-free country.

(c) Based on the situation described in section (b) above, Japan continues to request the EU to exempt from the ban tallow from Japan, where there has been no case of BSE to date, as well as products (foodstuffs, pharmaceuticals, medical devices, cosmetics, etc.) containing or derived from such materials.

13. Pet foods

Abolition of prohibition to import pet food into the EU (7. of Deregulation Requests of May 7)

   The import of pet food from Japan into the EU had been without any difficulties in the past. Recently, imports from Japan (including ornamental fish foods) have been abruptly prohibited on the grounds that Japan is not on the List of the Third Countries from which import of pet foods is allowed (under the EC-regulation 94/278/EC). In its Deregulation Requests for the EU (Additional List) of May 7, Japan requested the European Commission to place Japan on the aforementioned Third Countries List and to take provisional measures in order to enable a resumption of the import from Japan until Japan is formally added to the List.

   Japan welcomes the fact that in September, Japan was added to the List of Third Countries, and also understands that further consideration is being made to adding Japan to the list for other pet foods containing mammalian protein. Japan requests that the European Commission carry out its study as expeditiously as possible to allow Japanese pet foods exporters to resume the export of their products as in the past.

14. Financial services

(1) Large loan restrictions on banks (4.(1) of Deregulation Requests of May 7)

   Regarding the large loan regulations, the Japanese bank branches in Austria are not given the same treatment as applied to branches of the other EU Member State banks. Under the Austrian rules, the upper limit on loans that branches of EU Member State banks in Austria can extend is calculated on the basis of the total capital in their home countries. However, the upper limit on loans that the Japanese bank branches can extend is calculated only on the basis of the capital of the Austrian branches. Therefore, the amount of each loan the Japanese banks can grant is severely restricted and, thus, they are at a disadvantage against their EU-based counterparts. Among the EU Member States, only Portugal and Austria still have such regulations. (Luxembourg has comparable regulations for local subsidiaries of foreign banks.) Other EU Member States put the ceiling on large loans for foreign banks' branches on the basis of the amount of the capital of their head office, as they do for EU Member States' banks, under the condition that similar large loan regulations are applied in their home countries and that their head office is under the supervision of the reliable financial authorities.

   According to the EU Reaction, preferential treatment afforded financial institutions based in the EU Member States is justified by the existence of highly advanced level of both supervisory rule harmonization and cooperation between supervisory authorities among EU Member States. Such explanation, however, is not convincing in the light of the fact that, of all the EU Member States, only Austria, Portugal and Luxembourg still maintain discriminatory regulations on large-scale loans. Japan requests further clarification on the reasons why Austria, Portugal and Luxembourg maintain such regulations, and stands by its original request that the Japanese banks be subject to the same rules at those for banks of EU Member States.

(2) Restrictions on issuers and managers of bonds ***

   Restrictions regarding the issuer and leading manager exist for bonds denominated in major currencies, such as Deutsche Mark, Sterling Pound and French Franc. However, the current restrictions should not be maintained after the introduction of euro. For this connection, we would like to know which institutions - the ECB or national authorities of euro member States - will be responsible for supervision of issuance of bonds denominated in euro.

15. Employment ***

(1) General comments ***

   Employment regulations and labor practices in Europe are in many respects more burdensome for employers than those in Japan. In particular, many Japanese companies operating in Europe have difficulties in meeting requirements regarding the dismissal and transfer of their employees, as well as their work hours and wages. Although these difficulties may not be necessarily attributable to undue "regulation" or to discrimination against foreign countries, it is true that such difficulties may give rise to obstacles for Japanese companies operating in Europe. Japan requests a solution to these problems, which would improve the efficiency of labor markets and be beneficial to Europe itself.

(2) Reduction in legal paid leave or paid leave provided in the labor-management agreement in the banking sector in Luxembourg ***

In Luxembourg, national legislation as well as the labor-management agreements in the banking sector stipulate that companies have to pay their employees during vacations that do not exceed forty-four days and must guarantee 100-percent pay for sick leave that does not exceed three months. Such constraints result in considerable difficulties for Japanese companies with branches in Luxembourg, most of which are small-scale financial institutions with a limited number of employees in their human resources management. Japan requests a reduction of duration of such paid leave, provided either through the Luxembour national legislation or in the labor-management agreement in the banking sector of the country.

(3) Flexible application of dismissal procedures in Luxembourg ***

   The relevant provisions of the current labor law in Luxembourg make it extremely difficult for a company to discharge employees for its own reason, once they are formally employed. In general, competent employees tend to resign on relatively short notice for a better position, while less competent employees tend to remain. Such a situation creates difficulties for a company operating in Luxembourg to adopt a flexible employment strategy though keeping the quality of employees high is one of the most important prerequisites for a company to maintain its competitiveness. Japan requests the adoption of more flexible dismissal procedures.

(4) Problems related to employment in Spain (13. (3) of Requests and Comments of March 2) ***

   With regard to the Reaction from the European Union of June 30, 1998 (hereinafter referred to as "the EU Reaction"), Japan requests the following:

(a) With respect to Japan's request for deregulation of working hours, Spain argues that working hours can be flexibly organized in accordance with the Spanish Workers' Statute provision which stipulates that overtime compensated by hours of rest within the four months following the overtime worked will be deducted from the legal maximum overtime (80 hours a year). In all cases, however, the legal maximum overtime per year is fixed at eighty hours, and a company must always provide vacations for its employees if their overtime exceeds this threshold. Such a constraint makes it difficult for companies to flexibly increase their production and/or sales. Japan requests the introduction of a new flexibility clause in relevant Spanish legislation, which would allow overtime work hours to exceed the limit in certain circumstances.

(b) Regarding Japan's request for flexible adjustments of wages corresponding to position and skills, the Spanish authorities explain that a company has the possibility of reducing salaries of the workers whose skills decline or who fail to adapt to the work in accordance with Spanish labor law. However, Japan is of the view that the law should also allow companies to adjust wages of an employee who has moved to a new function which can be regarded as inferior to his/her previous function in terms of the work skills required.

(c) With respect to Japan's requirement for deregulation on the transfer of workers in a group, the Spanish authorities explain that an employer has the right to make a decision about a collective transfer following consultation with the employees who would be affected by the transfer, whether the employees totally agree to it or not. However, there is no such explicit provision in the Spanish Workers' Statute. In the actual implementation of the Statute, it is impossible for a company to effect a collective transfer without having the agreement of the labor union. If the Statute intends to implement a collective transfer scheme as explained by the Spanish authorities, it should be stipulated explicitly as such.

(d) Regarding compensation for dismissal, the Spanish authorities explain that the new law (63/1997) has reduced the amount of compensation for dismissal to 33 days' wages or salary per year of service. However, this provision applies only to employment contracts that have been concluded since the entry into force of this law in 1997 and afterwards. Japan considers that the amount of compensation for dismissed employees who concluded their employment contracts before 1997 should also be reduced to this level.

   Spain also states that the provision regarding compensation for dismissal is applied only to "unfair dismissal." However, it should be noted that dismissal for any reason undertaken by a company is usually regarded as "unfair dismissal" and thus the company must, in reality, always pay a high amount of compensation.

(5) Employment security in Sweden (2. (1) of Deregulation Requests of May 7) ***

   Swedish employment security law provides for the so-called "last-in, first-out" rule whereby the priority is given to guaranteeing the job of employees who have worked for a longer period when employers attempt to reduce their workforce. Many Japanese companies in Sweden have pointed out that this rule hinders them from employing capable employees and has thus contributed to the aging of their workforce, which might lead to the loss of their vitality. Japan requests that the situation be improved.

   According to the explanation provided by the Swedish Government, the labor law, amended in August, 1996, maintains all the main principles of the former law, and it does not contain any changes to the rules concerning the order of priority for dismissals. Japan stands by its original request, as we believes that the flexibility of labor market produces benefit to Sweden itself.

(6) Improvement of short-term employment scheme in Italy ***

   In Italy, the current scheme for the employment of temporary staff allows employers to renew an employment contract for only one year. Japan requests an improvement of the scheme, which lacks flexibility, in order for employers to be able to renew contracts for a longer period.

(7) Creation of a systematic framework for the prevention of absenteeism in Italy ***

   In Italy, employees who are absent from the work due to illness are entitled to the disease allowance of the INPS (Social Protection Institution) of the fourth day from the outbreak of the illness. However, the labor convention has a contradictory clause which allows the provision of the INPS's allowance from the first day of the outbreak of illness, and, consequently, all anti-absenteeism measures have failed to bring about their intended effect. Japan requests the improvement of such systems, including the amendment of the labor convention.

(8) Establishment of a strike-mediating institution in Italy ***

   In Italy, the strike mediation procedure is not too clear. In its practice, either national or local politicians or public institutions plays the role of mediator, depending on the company where the strike takes place, its type of business, specific background of the strike, and/or labor-management relations in the company. Even the designation of an appropriate mediator is so time-consuming that the current procedure would cause a negative impact on company management. Japan requests that an institution specializing in strike mediation be established, which will provide a systematic framework and make it possible to achieve a solution in an efficient and expeditious manner.

16. Trade and Customs ***

(1) Export permission in Belgium ***

   In Belgium, it takes more than one month for a company to obtain the Government's permission to export machine tools from Belgium to non-EU countries. Japan requests that such permission be granted within an appropriate period (one to two weeks), unless there are problems identified in the examination of the application.

(2) Certification of origin in Spain ***

   In Spain, the presentation of the original certification of origin is required for imports from any other country. Japan requests that such a requirement be imposed only for imports from countries enjoying preferential treatment.

17. Construction ***

Simplifying the procedures for operating a construction business in Belgium ***

   To carry on construction business in Belgium, it is necessary to obtain a certificate of business activities according to the categories of business as well as to register contractors by 28 categories of construction respectively. These two applications should be presented at different offices and in every category of business. These complicated procedures increase the entry cost. Japan requests that these applications be integrated or processed at the same office. Japan also requests that the number of the categories of business for the certificate and the registration be simplified.

18. Others ***

Patent registration system in Italy ***

   Because the payment of patent and registration fees is not promptly confirmed by the Patent Office, it takes a long time to obtain information on the status of patent rights and thus business opportunities to use patents may be lost. Japan requests that a relevant database be established as early as possible.

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