Japan's (Supplementary) Proposals and for Regulatory Reform in the EU and Related Japanese Comments

Note 1: This list of Japan's supplementary proposals was compiled by adding, to the list of Japanese proposals submitted in October 2000, modification in view of the development of events after October 2000 and newly submitted proposals. These proposals, and Japan's priority proposals (45 items in 16 areas) already presented at the Tokyo meeting of Oct. 23, 2001, jointly constitute Japanese proposals as a whole. This list of supplementary proposals contains 63 items in 14 areas. 19 of the 63 items are new items.

   Newly added proposals are marked with a star (*).

Note 2: Of the proposals included in this list, those related to taxation are included to introduce matters pointed out by Japanese private enterprises from the viewpoint of improving the business environment in the EU.

1. Business stays and work visas

(1) Improvement of procedures to obtain residence permits and work visas in Portugal

There seems to be no sign of improvement regarding the issuance and renewal of residence permits and work visas in Portugal. For example, the issuing of residence permits takes more than six months. As for work visas, applications cannot be made due to Portuguese measures against unemployment, causing great inconvenience in business.

In its reply in August 2001, Portugal stated work visas were being issued smoothly. However, according to our survey in October 2001, there was a case in which, a work visa, whose issuance was applied for in February 2001, has not yet been received, and another case in which a work visa and family visas, applied for in August 2001, had not yet been obtained. The GOJ continues to request improvement, centered on speeding up such administrative processes.

(2) Work visas in Austria

In Austria, work visa applicants have to wait at least one year after their application. These regulations make it extremely difficult for Japanese corporations to swiftly carry out personnel reshuffles. Therefore, the GOJ continues to request that the processing time should be shortened, the issuance of residence permits should be speeded up, and the validity of the visa should be extended to two or three years from the current one year.

(3) Issuance of work visas, etc., in Luxembourg

1. In Luxembourg, the problem of time-consuming and complicated procedures for obtaining and extending work visas has not yet been solved. The EU's reply in August 2001, did not include a reply from Luxembourg. The GOJ continues to request that Luxembourg improves its visa system.
2. Much time is required for resident registration, and purchasing of cars, etc., is hampered as a result. The GOJ, therefore, requests shortening of the issuance period.

(4) Work visas in the Netherlands

In Netherlands, Japanese work visa applicants are required to write their specialty, university education background, reason to work, and others. According to the Dutch reply in August 2001, work visas were delivered in about five weeks. In reality, however, a period of at least 3 months is needed. Accordingly, the GOJ requests simplification of procedures and shortening of the period to obtain work visas.

2. Driving Licenses

Issuance of international driving licenses in Belgium *

Belgium is a signatory to both the Geneva Convention and the Vienna Convention, but it issues international driving licenses solely based on the Vienna Convention. Since Japan is not a signatory to the Vienna Convention, Japanese residents in Belgium are not able to drive within Japanese territory on their temporary return. The GOJ has submitted requests to the EU for immediate return of Japanese driving licenses at the time of issuing the local licenses, and the introduction of a simplified exchange system as a temporary measure in its priority proposals. In the stage in which these measures are not yet realized, the GOJ considers that current inconvenience experienced by Japanese residents in Belgium will be mitigated if, as a provisional step, Belgium can issue international driving licenses based on the Geneva Convention. In this regard, the GOJ requests that Belgium enables the issuance of international driving licenses based on the Geneva Convention.

3. Commercial Laws, Business Practices, And Competition Policy

(1) Treatment of accumulated losses in Spain, France, and Italy

The EU Directive (71/91/EEC) requires companies to hold shareholders meetings and resolve the problem of accumulated losses of a company when the losses exceed 50% of the company's capital. Due to this directive, companies in some EU countries have no choice but liquidation or capital reduction in such cases. This situation could possibly be an obstacle to business operations of new entrants with smaller capital, such as venture businesses. The previous reply of the EU indicated that it would be difficult to change the figure, 50% of capital. The GOJ again requests examination of the abolition of this unique provision, which exists neither in Japan nor in the United States.

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

Since the Spanish legal framework for regulating commercial transactions is insufficient, defaults on payments often take place, and the settlement of disputes in court is time consuming. However, the punishment on delayed payment is not rigorous enough. For instance, checks are often dishonored, and the repeated dishonor of checks is not subject to suspension from bank transaction, if they eventually make payment. The GOJ continuously requests that the regulations be amended to strengthen and establish the legal framework for regulating commercial transactions, for applying stricter rules, such as observance of payment deadlines and cost bearing for delay in payment, and for implementing punishment by the authorities or banks.

According to the EU reply, EU directive on payment delays is going to take effect in August 2002. The GOJ requests information as to what specific legal amendment is going to be implemented in Spain, based on the said directive.

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

In Austria, a signature certificate by an executive of the parent company is always required in the application procedure 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 its subsidiary changes the legal contents of its commercial registry (date of reckoning, etc.). This procedure is extremely time- consuming and burdensome. The GOJ requests simplification of this procedure so that most applications for registration can be completed locally by the foreign company's subsidiary once it is entrusted by its parent company's executives.

In a previous reply, Austria explained that the procedure must be strict enough to prevent illegal manipulation of commercial registries as they are referred by a court of justice. The GOJ requests improvement of the system by abolishing at least the signature certificate requirement. Even without signature certificates, the personnel identification of executives is possible.

(4) Amendment of the corporate statute in Germany

When a limited-liability company changes its statute in Germany, it is necessary to obtain a certificate by a Germany notary or a German consul, or a certificate by a Japanese notary with an apostille affixed. In cases where major shareholders are corporations, a director representing the company that is the leading shareholder of that particular company is required to sign the document submitting the certificate of qualifications. In cases where it is done in Japan, the certificate of qualifications is also required to affix Apostille. It is quite troublesome for directors to go to a notary's office to sign before him or her and to affix an Apostille whenever the corporate statute is amended. Germany is requested to simplify this procedure.

4. Standards and Certification

(1) Uniformity of sound pressure regulations for stereo headphones

With regard 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 reply in June 1998 states that the Member States are allowed to enact regulations necessary to protect the health and safety of consumers, even if those regulations constitute obstacles to trade, thus trying to justify the introduction of discrepant standards in France and Belgium. However, such divergence in regulations and standards within the EU will undermine considerably the merits of the Single Market.

In its reply in August 2001, Belgium stated that if a new standard should be developed, it would be in due international collaboration with France but certainly also at European level, and the GOJ welcomes this. The GOJ continue to request that France and Belgium harmonize their standards, or that the EU establishes unified regulations concerning the regulating values, test methods, and methods of indication throughout the EU countries. At the same time, the GOJ would like to know the French position on this issue.

(2) Consistency of the application of related EU directives to construction machinery

1. The UK's Health and Safety Executive enacted an apparently excessive high standard on visibility support equipment for construction machinery (large dump trucks, etc.), which is neither required by any other EU country nor subsumed by the harmonised standard (EN474-1) for machinery. The GOJ continues to request that application of regulations not matching the EU directive related to earthwork machinery be corrected. The GOJ also requests the UK to explain the reason why the UK requires visibility support equipment, which is not required by any other EU Member States.
2. As for construction machinery to which the new directive will be applied, the grace period given to it is the same as that for machinery regulated under the current directive. However, the GOJ requests that the present grace period be extended to the end of 2002, so that manufacturers will be able to take necessary measures to adapt to the new regulation.
   
   Furthermore, the GOJ requests the European Commission to publish, as soon as possible, a guideline regarding uncertainties of Guaranteed Sound Power Level, which is required under the new directive.
3. With the enforcement of a new noise directive, certificates of approval valid until the end of 2002, which were issued under the former directive 95/27/EC, will be discarded midway. The EU reply of August 2001 said that no extension of the grace period will be made for machinery for new application, but no explanation was provided as to the reason for that.
   
   The GOJ continues to request that certificates of approval remain valid throughout the period, and that the grace period be extended up to the end of 2002. It also asks to be informed about the EU side's views on enterprises' burden resulting from non-approval of the aforementioned requests.
   
   Also according to the EU reply of August 2001, guidelines regarding uncertainties of the "Guaranteed Sound Power Level," to be demanded by the new directive, will be published during 2001, and the GOJ would like to be informed about the present state of the matter.

(3) Additional Italian regulation of TV imports *

In Italy, regarding the importation of TV sets produced outside the EU, it is obligated under the Ministerial Decree 26/03/1992 to obtain specification recognition different from the CE mark for such TV sets, including those already in circulation within the area. To obtain marks for the said specification recognition, it is required to pack a circuit drawing in the case for the product. Technological requirements for products, such as television receivers, are set by the EU Directive 73/23/CEE and the EU Directive 89/336/CEE, and if these requirements are met, the products concerned must be allowed to circulate freely within the EU market, in principle. Accordingly, the GOJ hereby requests abolition of the additional Italian regulation.

(4) Conclusion of the European Conformance Assessment Agreement (ECAA or PECA) between the EU and Central and East European countries

The GOJ requests early conclusion of the European Conformance Assessment Agreement (ECAA or PECA) with Central and East European countries. Some Central and East European countries require foreign companies to comply with their national legislation in addition to the EU directive, which results in increased costs for these companies. The EU stated, in its reply of August 2001, that the early establishment of a PECA is a political issue, and that the European Commission has no competence or interest in interfering in the candidate countries' third countries relationship as still fully sovereign states. If the affiliation in the near future is made a premise, it is important for an affiliation candidate country to adopt systems similar to those in the EU as soon as possible, or to faithfully conform to a PECA. In connection with the conclusion of the said agreement, the GOJ continues to request that the EU makes efforts to ensure that Central and East European countries would integrate the related EU directives with the same manner and in the same interpretation as EU countries.

(5) New Approach Directive *

Under the so-called New Approach Directive, harmonization standards are frequently modified. Under such a situation, particularly if an enterprise adopts a self-recognition system, frequent conformance reassessment becomes necessary. Taking into account the speed of technological renovation and requirements for safety, standard changes are considered to be unavoidable to a certain extent, but efforts should be made to avert excessive burdens being imposed on enterprises. The GOJ requests that the EU disclose its views on this matter.

5. Tourism

(1) Abolition of nationality requirements for tour guide licences in Italy and Spain

According to the legislation on tour guides in Italy and Spain, only EU nationals can obtain tour guide qualifications. While the EU 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 local guides who do not speak Japanese in addition to Japanese tourist conductors who speak Japanese and thus are forced to pay redundant costs.

In its reply in August 2001, made earlier this year, the European Commission commented that, because there are no EC-level rules regarding this matter, it is not appropriate to take up this case in the Dialogues. However, the GOJ understands that the Dialogues is understood to cover not only issues that fall under the jurisdiction of the European Commission but also those of individual Member States of the EU, and issues related to Member States or their local governments must be regarded as the topics of discussion. In this context, the GOJ requests that appropriate actions to be taken by the European Commission, as well as the EU Member States concerned.

1. The Spanish Government stated, in its reply in August 2001, that authority to regulate tourist guide services was basically accorded to individual local governments. It also stated that the Secretariat-General for Tourism, in the framework of its responsibilities, would inform the Autonomous Communities of the advisability of adapting their legislation to facilitate the reception of groups of Japanese tourists. The GOJ would like to receive more information about the content of above-mentioned communication and current status in local government.
   
   Furthermore, on a previous occasion, the GOJ requested that small groups with 9 or less people be exempted from employment of guides, which is currently forced irrespective of the number of tourists. This year's Spanish reply made no mention of this point, and we have not received information about Spanish acceptance of the Japanese request. Accordingly, the GOJ continues to ask for prompt Spanish steps regarding this matter.
   
   With regard to the Japanese tourist guide system, Spain stated that, in order to continue service as a guide, a guide must pass a qualification test every year, and that this system is an obstacle for foreigners. However, this statement is not correct, as in Japan a guide can continue tourist guidance activities after passing a single guide test.
2. The Italian Government stated, in its reply of April 2000, that the Presidential Order of August 31, 1999, suggested that it is legally possible for non-EU nationals to obtain tour guide licenses. Nevertheless, Japanese nationals are not yet able to obtain the qualifications in reality. The GOJ, therefore, requests an explanation on this matter.
   
   In its previous requests, the GOJ requested clear explanation about procedures and conditions for obtaining guide qualifications, but the reply in 2001 made no mention of this point. Accordingly, the GOJ continues to seek clear explanation about them.

(2) Easing of excessive investigations of Japanese tour conductors by tourist police in Italy

The number of Japanese overseas tourists amounts to 16.3 million annually (in 1999), and most of them travel on package tours. They are usually accompanied by tourist conductors, in addition to interpreters. However, for example, when these tourist conductors give explanations to Japanese tourist groups on time schedules or meeting places, they are often mistaken as tour guides. As a result, excessive investigations may be conducted and in some cases tour conductors were taken to local police offices and kept in detention, and these tour conductors' work is utterly hampered.

Regarding this issue, the GOJ asked, in its previous requests, for improvement by stopping the excessive local police investigation, but this year's Italian Government reply of this year made no mention of this point. The GOJ hereby reiterates its request for improvement regarding the said police investigation.

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

In Italy, to provide services as a tour conductor, it is necessary to pass examinations organised by each province and to obtain a courier licence. Under the current system, tour operators have to employ licenced tour conductors even when only escorting tourists from an airport to their hotels. However, the examinations organised by each province are held irregularly and infrequently. In addition, some provinces do not accept Japanese applicants. These facts cause great difficulty for Japanese nationals in obtaining courier licence.

Regarding this matter, the GOJ previously requested that either to make it possible for Japanese nationals to take regularly organised tests in all provinces or to make the escorting of tourists from the airport to their hotels an exception of licencing. and as a temporal measure, the submission of the future schedule (venue and date/time) of conductors' licence tests and a chart describing provinces that accept Japanese applicants and those that do not. Since the Italian Government made no mention of these matters in its reply made earlier this year, the GOJ continue to request improvement in the aforementioned points.

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

Sightseeing bus and taxi operators are required to obtain a licence for every single vehicle in accordance with the regulation of each province in Italy, and new licences have rarely been issued recently.

With regard to this matter, the GOJ previously requested that one licence cover all or at least five vehicles, as is the case in other EU Member States, in order to reduce sightseeing tour costs by improving efficiency and promoting competition in the Italian tourism sector, and also requested to promote the issuance of new licences. Because this year's reply of the Italian Government did not touch on these points, the GOJ continues to request on this field.

(5) Ensuring transparency in tourist guide fees in Spain

In Spain, tour guide fees are unilaterally fixed by local associations of tour guides. Accordingly, travel agents do not have any opportunities to negotiate the fees. The GOJ has requested that Spain take measures to ensure transparency in fixing tour guide fees.

In its reply in August 2001, the Spanish Government explained that guide charges are set by tourist guides themselves, based on the market economy principle, and that neither the central government nor local governments can interfere with setting of the charges. In reality, however, guide associations are in a position to be able to set charges in a unilateral manner, and it is pointed out that associations actually determine the charges unilaterally in some cases.

To ensure transparency in fixing tour guide fees, therefore, the GOJ continues to request that measure be taken such as presenting clear standards, providing opportunities for consultation with interested parties, and documenting the outcome of those consultations.

6. Marine transportation, Ship building

(1) Subsidies to the shipbuilding industry

The Government of Japan understands that the EU is currently studying the possibility of temporally re-introduction of a provisional protection measure, in which the ship price subsidizing system, to counter South Korean competitive low prices. In this connection, the GOJ would like to confirm its understanding that the adoption of such subsidizing arrangements is made only in the case where there is bilateral competition for receiving orders with the Republic of Korea.

(2) Review of the rule on sludge in Germany

Under the criterion that vessels are assumed to produce sludge (remains contained in fuel oil) amounting to 1% or more of the fuel oil they consume, Germany inspects the fuel oil of incoming oceangoing ships. In cases where the sludge left in the fuel oil is found to be less than 1%, they are penalised by a large fine, since they are regarded as having discharged sludge into the sea.

In its reply in August 2001, the German Government stated that the sludge 1% rule is the most suitable method to detect sludge discharge out of a ship, and that the rule is operated flexibly, as seen in the arrangement that exclusion of the application of the rule is admitted if equipment capable of limiting the sludge to below 1% is used. Because the sludge generation ratio differs depending on various conditions, such as ship facilities designed for environmental conservation and kind of fuel oil, however, the rule is not considered rational.

In this connection, the GOJ requests abolition of this rule. If its early abolition is difficult, the GOJ requests explanation of clear standards regarding equipment for which exclusion of application of the said rule is admitted.

7. Financial service

(1) Language proficiency of representatives of financial institutions in France

In France, French language proficiency of at least one of two representatives of financial institutions is required. Since this regulation impedes flexible personnel management, the GOJ requests the easing of the language requirement. The previous response states that certain level of French language proficiency is required to the branch manager, unless, he or she cannot fulfill the management responsibilities including submitting official papers required by the authorities. However, securing the compliance should be the work committed by a business organization as a whole and it does not necessarily rely on the language skills of the individual branch managers. Germany used to impose the similar regulation but has eased its language requirement recently. In addition, since there is no such requirement in Japan, in terms of reciprocity, the GOJ continues to make the request.

(2) Easing of the qualification of a branch manager in Germany *

In Germany, the banking law stipulates that a person has to serve in the capacity to make a loan-providing decision for three years and over before becoming a branch manager (a manager stipulated in the commercial code). Moreover, it says one year or over of the above capacity should be spent in Germany. It is unable for us to secure personnel flexibility at a branch manager or representative because of the above-mentioned regulation. Furthermore, there are substantial obstacles, including that a manger is not allowed to sign external papers until he or she is qualified even though the person is a branch representative. The GOJ requests the abolition of an operational standard that "A person should be in a position to make a loan decision for one year or over in Germany" or at least a change of the standard to that "A person should be in a position to make a loan decision for one year or over within the EU". (It is understood that there is a case where the equivalent experience within the EU was accepted for a bank of non-EU countries.)

(3) Calculation of the minimum reserve for the European Central Bank (ECB)

Money raised in the countries joining the European System of Central Banks (ESCB) is totally deducted from the reserve base that is a basis of the calculation of the minimum reserve. However, funds raised in the United Kingdom cannot be deducted. As the UK is the center of interbank transactions in Europe, and a large amount of money is raised in the UK, the GOJ requests the Netherlands that the money raised in the UK be deducted.

(4) Entries into credit card business in Austria

A banking licence is a prerequisite for starting a credit card business in Austria. In addition, the basic qualification for a banking licence is strict. (Capital must be no less than 70 million schilling, for example.) No other country has such a regulation. As the regulation serves to protect domestic card operators, the GOJ requests the abolition of the requirement.

(5) Obligation of publishing its head office-only and its consolidated settlement of accounts in an official gazette for the branch in Germany of banks of non-EU countries *

Based on the provisions of the German commercial code and banking law, a branch in Germany of foreign banks outside the EU is obliged to publish its head office-only and consolidated settlements of accounts in a German official gazette. The settlement of accounts is required to be in compliance with German accounting standard or equivalents. However, it is assumed that there are no foreign banks which originally base the settlement of accounts of the head office on this standard, and there arises a need to close the books separately only for this requirement. This is a discriminatory measure against banks outside the EU region and the GOJ request an early correction on it.

8. Automobile

Early decision of priorities regarding the preparation of global technical regulations *

Priorities of regulations are to be deliberated toward drawing up Global Technical Regulations based on the 1998 Global Agreement at UN/ECE/TRANS/WP. 29. Japan requests the EU to immediately decide on its policy regarding this matter and actively participate in the deliberation.

9. Employment

(1) Employment Problems in Luxembourg

a. Reduction of prescribed days of paid leave in national legislation in Luxembourg

In Luxembourg, national legislation as well as a labour-management agreement in the banking sector, stipulates that companies have to pay their employees during vacations that do not exceed 44 days (including 10 bank holidays) and must guarantee 100% 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. The GOJ requests a reduction of the duration of such paid leave, provided either through Luxembourg's national legislation or in the labor-management agreement in the banking sector of the country. According to the reply of the EU in April 1999 and also in April 2000, the government of Luxembourg does not plan to modify the legislation. The GOJ would like to point out again that this legislation constitutes a negative factor for the business environment, causing losses to the business operations of Japanese companies.

b. 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 better promotion, while less competent employees tend to remain. Maintaining a high quality of employees is one of the most important prerequisites for a company to maintain its competitiveness. According to the reply of the EU in April 1999 and also in April 2000, the government of Luxembourg does not plan to modify the legislation. The GOJ would like to point out again that this legislation constitutes a negative factor for the business environment, causing losses to the business operations of Japanese companies.

(2) Employment problems in Spain

a. Annual overtime work in Spain

With respect to Japan's request for deregulation of working hours, Spain argued in a reply of 1998 that working hours can be flexibly organized in accordance with the provision of the Spanish Workers' Statute, which stipulates that overtime work will be compensated by days-off within four months following the overtime work. Moreover, it says in the reply of the EU in April 2000 that even with the current overtime regulations, companies can cope with production increases by staggering work days while keeping the average weekly work hours at 40 hours on an annual base, which is allowed by the legislation. In all cases, however, the legal annual maximum overtime is fixed at 80 hours, and companies must always provide vacations for their employees if their overtime work exceeds this threshold. Such a constraint makes it difficult for companies to flexibly cope with a sharp increase of their production and sales. The GOJ reiterates its request for the introduction of a new flexible clause in relevant Spanish legislation, which would allow overtime work hours to exceed the limit in certain circumstances.

b. Compensation for dismissal in Spain

Regarding compensation for dismissal, the Spanish authorities explained in a reply in June 1998 that the new law (63/1997) has reduced the amount of compensation for dismissal to 33 days' wages or salary per year of past service. Also, according to the reply in August 2001, a new reform is under consideration so that the scope of eligibility would be enlarged to include employees under 30 and over 45. However, the number of employees to whom the low dismissal compensation applies still remains limited. Moreover, it can be applied only to new employment contracts, not to pre-existing employment contracts. Therefore, companies are required to pay high dismissal compensation in many cases. The GOJ continues to request reduction of the amount of the dismissal compensation.

(3) Employment Problems in Italy

a. Improvement of the short-term employment scheme in Italy

According to the reply of the Italian authorities in April 2000, it may be possible to renew an employment contract of temporary workers for one year or longer, and debates are underway to make the short-term employment scheme more flexible. Since the GOJ received no response from Italy in August 2001, it will continue to seek an explanation concerning the current condition of their study and future planned efforts.

b. Establishment of a strike-mediating institution in Italy

In Italy, the mediation procedure for strikes is not clear. In practice, either national or local politicians or public institutions play the role of mediator, depending on the company in which the strike takes place, the type of business of the company, the specific background of the strike, and labour-management relations in the company. Even the designation of an appropriate mediator is so time-consuming that the current procedure may cause a negative impact on company management. With the reply of the Italian authorities in April this year, the GOJ learned of the existence of the "Commisione di garanzia", which is responsible for suggesting ways of resolving conflicts. However, the commission's jurisdiction is limited to crucial public-service sectors, such as electricity, gas, water supply, transportation, and petroleum stations, and it would not be involved in strike mediation at Japanese companies.

Since there was no response from Italy in August 2001, the GOJ continues to request the creation of a framework that enables quick and efficient arbitration when disputes occur and the establishment of a specialized arbitration institution for processing disputes more efficiently.

c. The limitation on overtime work in Italy

The labour-management agreement of the Italian Bankers' Association sets maximum overtime at 150 hours a year. Because of this agreement, employers are unable to assign overtime work to employees even when it is needed, and this causes problems to business operation. In its reply in April 2000, the European Commission said that the issue cannot be taken up in the regulatory reform dialogue because it concerns an agreement by an organization in the private sector. Yet the GOJ continues to request that the Italian government holds some kind of talks with the bankers' association to ease the upper limitation of overtime, which is too restrictive.

(4) Employment Problems in Belgium

a. The wage system in Belgium

Under Belgian law, it is impossible to cut the salary of individual employees. In addition, while the Belgian government sets a ceiling on the rate of increase in wages, it annually mandates a minimum wage increase for the entire workforce.

The GOJ found that the reply of the Belgian authorities in April 2000 failed to fully explain about the nature of the obligation concerning the minimum rate of increase in wages. The GOJ reiterates its request that the determination of wages of individual workers should be made within the capacity of each company.

b. Work hours in Belgium

Belgian law restricts companies from letting employees work longer than the designated annual work hours. The law also obligates companies to compensate extra overtime work with additional holidays. Such an obligation makes it impossible for companies to adjust increased amounts of work by overtime work, but by new employment. Once they increase the workforce, they will face the problem of having an excessive workforce when the amount of work decreases. The restriction on designated work hours is an obstacle to timely management of the work load. The GOJ requests that the designated annual work hours be increased.

Starting in January 2000, weekly work hours were cut by one hour and annual paid holidays were increased by six days. Work hours are thus getting shorter in Belgium. The GOJ continues to point out that further reduction of work hours and increase of paid holidays could discourage foreign investment.

c. Dismissal system in Belgium

The dismissal of employees due to incompetence is regarded as firing for a corporate reason. Companies are legally required to give notice of three months or longer prior to the dismissal. In reality, however, there is a customary practice called "claeys formula", under which companies are required to give longer-than-one-year notices or to pay compensation tantamount to the payment for the advance notice period, depending upon the length of employment and annual salary of the employee to be dismissed. The GOJ requests that such a customary practice given priority to legal obligation be abolished and the longest advance notice period be cut to six months.

d. Laws and regulations concerning labor unions in Belgium

Corporate management is required to submit financial and business reports of their companies monthly, quarterly, and annually at the law-designated management-labor council. In making out an annual report, for example, dozens of items are to be covered: cost accounting, position in markets, and contents of research. This requirement places a great burden on Japanese companies. Since there was no response from Belgium in the August 2001, the GOJ continues to request the Belgian government that the items to be covered by reports should be simplified, limiting them to matters related to important changes of corporate organizations which might affect the settlement of accounts, labor conditions and employment, and that the frequency of the meetings should be decided at the discretion of each company.

(5) Regulations of personnel management in Denmark

In Danish law (Aktieselskabsloven), at least half of the members of the board of directors and members of the management board are required to live in the country. When a company is operating internationally, its subsidiary in Denmark may apply for exceptional treatment. However, the qualifications and content of the exceptional treatment are not disclosed. The Danish authorities usually decide if they give exceptional treatment to them at the time of registration. Such a regulation hampers the freedom of personnel management in a company's subsidiaries. Denmark is requested to ease this regulation.

Also, according to the response in August 2001, Denmark officials are verifying the details of corporate law, including with regard to this matter. The GOJ requests an explanation on their future schedule and how the requests of Japan are being taken into consideration in the verification process.

10. Trade and Customs

(1) Simplification of customs clearance process when Japanese move into Spain

When Japanese expatriates move to Spain, an English translation of a change-of-address certificate issued by Japanese municipal authorities is required in customs clearance of their freight. Since Spanish residency visa (or application for a residency visa) is also required at the same time, the change-of-address certificate mentioned above seems unnecessary. According to the EU reply of April 2000, a change-of-address certificate is not included in the list of required documents. However, the decree on the value added tax in Spain (1624/1992) requires a change-of-address certificate. The GOJ requests that Spain abolish the requirement of a change-of-address certificate.

Also, for customs clearance of freight, a residence permit must be presented to Spanish customs agents, and if the residence permit is not yet issued, a security fee or a letter of credit from a local bank must be deposited with Caja General De Deposito, Spanish ministry of economy, and that deposit slip must be taken to customs agents. The GOJ requests simplification of the process, such as making the security fee unnecessary or making a letter of guarantee from the local subsidiary sufficient.

(2) Improvement of the DETAX System

Although, under the current system, tourists to the EU countries can make duty-free declarations only at the final airport when departing from Europe, the procedure is claimed to be time-consuming, and it is often the case that tourists cannot complete the procedure when they do not have much time for transit. According to the EU response in August 2001, the declaration should not necessarily be made at the airport of transit and that the correct procedure depends on several circumstances. The GOJ would like to be informed in details which procedures are required in which cases.

(3) Tariff for copying machine toner

Regarding copying machine toner, the system is established in the EU as a measure for the promotion of information technology under which the import of toner cartridges is duty-free and the custom duties for the import of toner chemicals is exempted when applications are accepted. However, the process takes a considerable period of time, from one year to one year and a half, and, moreover, it is difficult to prove that there are no competitors in the European Union, which is required in application. Therefore, it is difficult to use this provision in reality. The GOJ requests simplification of the application and shortening of the period for processing application for custom duties exemption, from the standpoint also of promoting industry in the EU.

11. Information and Intellectual Property

(1) Copyright Law in Germany

In Germany's copyright law, basically copying for personal use is legal, as an exception to the copyright law. However, compensation is levied on "machines" (Section 54 and 54a) and "image and sound carrying media" (Article 54a). In the reply received from Germany in response to our previous request, in accordance with the above articles, for personal computers and peripheral equipment, (1) the charge of 30 euros per CPU is levied from January 1, 2001, and (2) the charge of 12 DM is levied on "CD writers." However, a provisional agreement has been reached with Hewlett-Packard that exempts "CD writers" with a copy guard features from payment of the charge.

Germany asserts that personal computers are included in the "machines" and "image and sound carrying media" for which the charge for copyrights is required. However, we consider it irrational to levy compensation on personal computers, which are not considered to be copy machines or devices dedicated to recording, and the GOJ requests improvement of this system.

Furthermore, the GOJ would like to request that information be provided promptly as soon as the final result becomes known concerning the provisional agreement with Hewlett-Packard and the authors' rights societies. Also, we would like an explanation of the effects that agreement will have on other companies.

(2) Patent Registration System in Italy

The Patent agent in Italy takes time to confirm patents and patent registration fees. Consequently, it takes a long time to confirm the status of a patent, and Japanese companies may lose business chances utilizing their patents. According to the reply of the European Commission in April 2000, a new system was supposed to start operation in 2001, but there was no reference to this in the reply of the European Commission in August 2001. Therefore, the GOJ requests information concerning the current status.

(3) Membership in the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks *

Together with welcoming the adoption of the "Modification of the Common Regulations under the Madrid Agreement" in February 2001 at the Council, the GOJ requests that the EU become an member of the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks at an early stage.

12. Pharmaceuticals

(1) Deregulation of Labeling *

The European Medicinal Evaluation Agency (EMEA) rigidly regulates the company names that can be shown on the enclosed information (package insert) and on the packaging, and basically only the names of companies that have obtained marketing approval are permitted. The only exception is that the local representative may be printed in cases where marketing approval has been obtained through the Central (Review) Procedure . Consequently, even if co-marketing or co-promotion is conducted in the European Union, it cannot be understood from the labeling that such activities are conducted since the names of the companies engaged in such activities cannot be printed on the label or the box.

This kind of regulation is nonexistent in both the United States and Japan, where it is possible to print various information including sales partners, cooperative partners, the importer, etc., as far as the content is not against the fact. The GOJ requests deregulation in labeling.

(2) Acceptance of Test Data According to JP Standards *

When, Japanese companies conduct tests for acceptance tests, most are preformed according to JP standards (i.e., standards involving monographs of regents, test methods, chemical compounds in the Japanese pharmacopeia).

In the European Union, test data in accordance with EP standards (European Pharmacopoeia) or USP standards (US Pharmacopoeia) is required, in addition to test data derived in accordance with JP standards. This creates an obstacle to business operations. The GOJ requests that data obtained through tests performed in accordance with JP standards be handled the same as those obtained from tests performed in accordance with EP standards or USP standards for import-export of pharmaceutical raw materials and products.

(3) Establishment of a new DMF system which will accept DMFs for not only drug substance but bulk pharmaceuticals, inactive ingredient and packaging *

Common Technical Document (CTD), which is intended for sharing a single marketing authorization application dossier among the three parties, has already been implemented, though not mandatory for the time being. However, the difference in the DMF system between the United States and Europe makes it impossible that the Quality part of the CTD is common between the United States and Europe when a manufacturer of bulk pharmaceuticals or a new inactive ingredient , or a packager of pharmaceuticals are different from the applicant. The GOJ requests that a new DMF system which will accept DMFs for not only drug substance but also bulk pharmaceuticals, inactive ingredient and packaging be established.

(4) Clarification of Cases Where Placebos May be Used in Comparative Clinical Trials *

The GOJ requests that consistency be ensured between the actual guidance of the examiners (EMEA/CPMP) and the regulations of the law (Council Directive 75/318/EEC) with regard to the cases in which placebos may be used in comparative trials. Considering the protocol of the most recent Helsinki Declaration, it should be clearly agreed that placebo controlled clinical trials may be conducted only in cases involving areas where treatment methods are not established, while in all other cases it is desirable to use an active control.

(5) Abolishment of GMP Certificate Requirement for Bringing Trial Medicines Into Germany *

GMP certificate is required for bringing trial medicines into Germany, though the certificate is not required for exporting trial medicines to the United States, etc. The GOJ requests that this regulation be abolished

13. Telecommunications

Telecom Package (proposals for new directives related to telecommunications regulation)

In July 2000 the European Commission published the proposals for some new directives, a regulation and a decision to establish a new package of telecommunications regulation, in light of simplifying and clarifying the existing framework of telecommunications regulations.

The GOJ has been requesting the European Union to develop its market environment to enable Japanese carriers to take part in fare competition with the EU sphere. The GOJ makes the following requests with regard to the new package.

a. Regulation on unbundled access to the local loop *

-Annex D. 1
Regarding the "Lead time for responding to requests for supply of services and facilities," the GOJ requests the EU to clarify whether "lead time" means the longest time or the standard time for the period concerned and to make sure that the required time up to the actual commencement of interconnection be included in the Reference Interconnection Offer (RIO). In addition, the GOJ requests that the required time is reasonable one.

b. Proposal for a Directive on a common regulatory framework for electronic communications networks and services *

- Article 10
The GOJ requests that transparent and non-discriminatory procedures be applied to any providers, when they request other providers to install their facilities on public or private property on which the other providers have already been granted rights to install their facilities.

- Article 11. 2 and 3
In Japan, a type I telecommunications carrier installing Category I designated telecommunications facilities is obliged to provide colocation. The proposed directive on access to, and interconnection of, electronic communications networks and associated facilities, the national regulatory authorities "may" impose colocation on an undertaking operating on electronic communications network. On the other hand, according to the

- Article 12. 1(e) of the proposed directive for joint connection, it states that the regulatory authorities may impose colocation on operators with significant market power (SMP). The GOJ requests that the national regulatory authorities impose colocation on at least operators with SMP.

- Article 13. 2
(i) This clause prescribes "affording it the power to behave to an appreciable extent independently of competitors, customers, and ultimately consumers." Clearer standards should be established so that the national regulatory authorities' latitude for discretion is not too large.

(ii) It states that an undertaking who possesses the above-mentioned power "shall be deemed" to have SMP. If there is any case where it can be acknowledged not to have SMP even though it enjoys this kind of power, the criteria should be explicitly included in the text.

When judging whether or not plural undertakings have "collective dominance" stipulated in paragraph 86 of the draft guideline on market analysis and the calculation of significant market power, the GOJ requests that the criteria be further clarified. For example, the figures should be clarified for the share of each carrier (see note for paragraph 88) and for the total share.

- Article 14. 4
The proposal for the directive says that where a national regulatory authority concludes that the market is effectively competitive, it shall not impose or maintain sector specific regulatory obligations. The GOJ requests that the clear criteria be established at the EU level for determining whether or not the market is effectively competitive.

- Article 16. 1
It is stated that when a national regulatory authority chooses not to follow the Recommendations from the European Commission, it shall publish its reasoning. The GOJ requests that measures to be taken by the Commission after the publication be clarified.

- Article 17. 1
The GOJ requests that it is ensured that the national regulatory authorities are able to conduct dispute settlement within two months.

c. Proposal for a Directive on the authorization of electronic communications networks and services *

- Article 12. 1(a)
According to the proposal for the directive, the administrative costs covered by the administrative charges imposed on undertakings are stipulated in the directive. Are the operating expenses of the regulatory authorities of EU Member States paid from general revenue (collected taxes) or from special income such as licensing fees? If an equivalent portion of fixed expenses including personnel expenses is paid from general revenue, then it is too broad to include not only license (general authorization) and enforcement of granting usage rights but also management and control, in the scope of the administration costs covered by the special income. The scope should be limited to license and enforcement of granting usage rights. Through this, large differences in licensing fees among the Member States will be eliminated and actualization of a unified EU market will be promoted.

(ii) If license (general authorization), enforcement, management and control of the granting of usage rights are included as objects of administrative charges, then the GOJ requests that it is ensured that these are calculated on the cost basis and in a transparent manner.

- Article 13
The proposed directive sets out that the Member States may allow the assigning authority to impose fees for the rights to use number or rights of way. The GOJ requests that it is ensured that these fees do not become an excessive burden to the development of business. In Article 6. 4(b) in the General Agreement on Trade in Services (GATS) in the WTO, to which the European Commission has committed, it is stated that standard of license is "not more burdensome than necessary to ensure the quality of the services."

d. Proposal for a Directive on interconnection *

- Article 9. 2
It is stipulated that RIO shall include some components according to market needs. On the other hand, in the regulation on unbundled access to the local loop and this proposal for a directive, it is not clear whether or not the term necessary to the commencement of interconnection should be stated in RIO. The required term is regarded as a business need of new entrants in the market and should be obliged to record in RIO as a component according to market needs. The GOJ requests that the Commission to add the phrase "and delivery times necessary for interconnection" at the end of this Article and to stipulate clearly in the directive that the term necessary to the commencement of interconnection should be mentioned in RIO.

e. Proposal for a Directive on universal service and users' rights relating to electronic communications networks and services *

- Article 3. 1
With regard to the phrase "the services set out in this Chapter," the GOJ requests that it be clarified which services are targets of universal service. In Chapter 2, for example, the terms including telephone, facsimile for Internet access, data communications, public pay phones, emergency calls and telephones for the disabled users are mentioned, but it is not clear which among these correspond to "the services set out in this Chapter."

- Article 8. 1
In the proposed directive, it states that Member States may designate one or more undertakings to guarantee the provision of universal service. The GOJ requests that clear standards for designation be stipulated at the EU level. If that is not done, the standards of the EU Member States will not be in harmony.

- Article 12. 1
This article states that "where necessary, national regulatory authorities may assess whether the provision of universal service represents an unfair burden and for that purpose, may calculate the net cost of the obligation or use an objective and transparent allocation mechanism." On the other hand, the Article 3 of the reference paper in the WTO, to which the EC is committed, sets out, "such obligations...are not more burdensome than necessary for the kind of universal service defined by the Member." In this regard, it shall be assessed whether the universal service obligation is regarded as unfair burden or not. The GOJ requests that the assessment be made obligatory.

- Article 13. 1(b) and 2
In the case that the operators share the cost of universal service obligations, according to the proposed directive, Member States shall establish a sharing mechanism to determine the size of the burden of each operator. The GOJ requests that the standards of the sharing be regulated at the EU level.

- Annex IV(i)
The GOJ requests that the calculation methods in terms of "at a loss" and "cost conditions" be clarified. For example, is a calculation method like LRIC to be used? If so, that should be stated clearly.

14. Construction

Regulations for Emission of gaseous and particulate pollutants from Internal Combustion Engines to be installed in non-road mobile machinery *

Currently in EU Member States, it is understood that, based on the exhaust gas regulations for non-road combustion engines (EU Directive 97/68/EC), a standard level is set for each output range for exhaust gas expelled from engines of construction machinery, and certification is granted to engines that clear those standards.

However, despite the fact that both the output range classifications and the standards for each range that are used in Japan are exactly the same as those used in the European Union, engines that have been certified in Japan are obligated to receive the similar inspection again when exported to EU member countries. The redundant work and the cost of the inspection are a large burden for manufacturers. The GOJ therefore requests that this directive be revised so that engines that have received certification in Japan be exempt from inspection in the European Union.

Note: Taxation

General comments:

It is hoped that the EU will establish middle- and long-term prospects for tax coordination. Although the harmonisation of prices is gradually in progress after the introduction of the euro, manufacturers might face pressure to lower their prices unless taxes, including VAT, are coordinated. In light of completing the Single Market in a real sense, steady efforts for completion of tax coordination, including unified interpretation of definition clauses of the Member States' taxation laws and the taxation bases are crucial.

(1) Abolition of capital tax in the three Benelux countries

The three Benelux countries impose capital tax at the time of incorporation or increase of capital. Such tax, being an impediment to investment, should be abolished to promote firms investment. According to the previous reply from the EU, it conforms to the EU directive if the tax rate is 1% or lower. Since the business environment of the Benelux countries is excellent, with business infrastructures well-established and English language widely used, abolition of the capital tax would make the three countries over more attractive for investment. It is, therefore, requested that the capital tax be abolished.

(2) Tax on payment of interest on overseas loans in Portugal

In Portugal, a 5% gift tax (SGIT) is levied on the payment of dividends to shareholders, including those to parent companies. The Portuguese taxation authorities acknowledge that this violates the EU directive, since there is a ruling of the European Court of Justice against it. There still remain claims from Japanese companies about this taxation. Information on the detailed schedule for abolishing the tax is requested.

(3) Improvement of the consolidated tax payment system

There is no EU directive nor any other rule concerning the consolidated tax payment system or combined tax payment system, and we learned that no discussion has so far been made on the introduction of these systems. As many companies are operating groups of affiliates and subsidiaries within the EU, although their headquarters are outside the EU, it is considered necessary to establish EU common rules. The GOJ hopes that the European Commission will actively address this issue.

1. Portugal
   Under the current tax system, the definition of a group of companies is different between the two systems, the consolidated tax payment system and consolidated accounting system. In cases where a parent company owns 60% of shares of subsidiaries or more, it is subject to consolidated accounting. Eligible for the consolidated tax payment are those companies owned by a parent company that holds 90% or more. In cases where one company in a group does not meet the 90% rule, the group cannot enjoy the benefits of consolidated tax payment. It is hoped that the definition of subsidiaries should be harmonised between these two systems, and the 60% rule should be applied also to consolidated tax payment.
2. Belgium
   There are neither consolidated nor combined tax payment systems in Belgium. The United Kingdom has a combined tax system, and under this system, profit and loss of group companies can be combined even if the parent company is registered abroad. Belgium is requested to establish the system as soon as possible.
3. France
   There is no combined tax payment system in France, although the consolidated tax payment is already available. France is requested to establish the combined tax payment system.

(4) Salaries of Japanese expatriates in Germany

There have been some cases in which salaries paid to Japanese expatriates from a parent company in Japan working at its subsidiary have been regarded by German tax authorities as "hidden dividends to the parent company" for the part that exceeds the level of salaries for local employees and is not accepted as a loss in corporate tax calculation.

It is inappropriate that salaries to expatriates are not regarded as a loss just because they are higher than locally recruited employees. Germany is requested to explain in concrete terms the basis of its judgement.

(5) Tax system for excessive capital loss in France

In cases where a 100% subsidiary receives loans from its parent company, the interest for a loan exceeding 1.5 times as much as its capital cannot be regarded as a loss for calculating tax payment in France. For companies with relatively small operations, it is unrealistic to increase the capital to avoid such a taxation system. France is requested to either implement the system flexibly or thoroughly revise it. The similar system exists in Germany, and the GOJ requests improvement there as well.

(6) Provision of Information Related to Each Country's Taxation *

The GOJ requests well-advanced provision of information on the direction and timetable of the tax system reforms scheduled in each EU country. It will be beneficial not only to existing Japanese companies but also to the entry of new companies into the European Union.

(7) Taxation of Foreign Bank Branches in France Based on the Reason of Insufficient Capital Adequacy

In the event that the capital adequacy ratio calculated on the basis of the fictitious capital of a foreign bank branch is lower than the capital adequacy ratio of the bank overall (i.e., if the ratio of the "fictitious capital/total assets" of a foreign bank's Paris branch is lower than the given bank's capital adequacy ratio according to BIS standards on a consolidated basis), then French tax authorities will levy a tax on funding profit (artificial profit) of an amount equivalent to the insufficiency in capital adequacy. There is no example anywhere else in the world of tax authorities establishing standards for the capital adequacy ratios of financial institutions. Also, even if an artificial capital tax system is applied, the BIS capital adequacy ratio on a consolidated basis was originally a standard for maintaining the soundness of financial institutions. Moreover, it is being used as a base for taxation despite the fact that fictitious capital is already separately regulated, which is strikingly lacking in rationality as well as being unprecedented in the world. Therefore, the GOJ requests that it be improved. Moreover, it is conspicuously unfair when compared to the treatment of local subsidiaries of ordinary companies (i.e., only the interest on borrowings from certain parent companies, etc., is non-deductible). Also, in Japan, artificial capital tax is not applied to the branches of foreign banks, and so it would be appropriate to correct this regulation from the standpoint of fairness as well.

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