IV. REGULATORY REFORM BY
THE GOVERNMENT OF JAPAN

A. General Principles

1. The Government of Japan will initiate deregulation of the auto parts aftermarket through full and effective implementation of the measures set out below. The purpose of these deregulation measures is to improve market access for competitive foreign auto parts suppliers in the Japanese auto parts aftermarket, while maintaining appropriate automotive safety and environmental standards.
2. In addition to the specific measures below, the Government of Japan will continue to review its regulations affecting the auto parts aftermarket, and will evaluate and respond as soon as possible to requests brought forward by foreign vehicle manufacturers and auto parts suppliers to improve market access for them in the automotive parts aftermarket.

Deregulation of Disassembling Repair Requirements (Critical Parts Requirements)

3. The Government of Japan will implement the following measures with respect to the administrative definition of "disassembling repair". Under paragraph 1 of Article 64 of the Road Vehicles Act, disassembling repairs must be inspected by MOT if not performed at a certified or designated garage. The definition of disassembling repair is determined administratively by MOT, and includes certain parts replacement operations that involve the dismounting of one or more of the following seven vehicle systems: engine system, power train system, running system, steering system, brake system, suspension system, and coupling devices. Auto parts replacement operations outside the definition of disassembling repair can be performed by anyone without requiring MOT reassembling inspection.
   1. The Government of Japan will increase the transparency of the definition of disassembling repair in order to improve understanding by Japanese consumers, repair and service businesses, and foreign and domestic auto parts suppliers regarding the legal alternatives for automotive repair and servicing at certified garages or other repair and service businesses. In this regard:
      1. Annex A indicates the current status under the definition of disassembling repair of certain commonly performed parts replacement operations.
      2. Upon request by an interested person, MOT will inform the interested person, in principle within 30 days, whether a specific parts replacement operation is or is not within the definition of disassembling repair, and will inform repair and service businesses and auto parts wholesalers and retailers. If the request is submitted in writing, MOT will respond in writing, if so requested.
   2. The Government of Japan will conduct a broad and full review of the definition of disassembling repair. The purpose of the review will be to increase alternatives for automotive repair and servicing in Japan to the fullest extent possible, through removing from the definition of disassembling repair all parts replacement operations which are not necessary to include in the definition in order to ensure safety and environmental protection. The review will be completed within one year from August 23, 1995.
   3. In the review, the Government of Japan will specify each parts replacement operation which no longer will be within the definition of disassembling repair, and will inform designated, certified, and other repair garages as well as auto parts wholesalers and retailers of each decision to remove a parts replacement operation from the definition as soon as such decision is made. In this regard, the Government of Japan is pleased to note that changing shock absorbers, struts, power steering systems and trailer hitches will be removed from the definition of disassembling repair within two months from August 23, 1995.
   4. In conducting the review, the Government of Japan will bear fully in mind the purpose of the review as stated in paragraph b. and will give due consideration to the progress of motor vehicle technology, regulations in other countries regarding the replacement and inspection of the particular parts under review, and requests and comments submitted by interested parties including foreign and domestic auto parts companies.
   5. The Government of Japan will set up a contact point in MOT which deals with requests and complaints with regard to the definition of disassembling repair, and will establish and publish a procedure in which MOT responds to the requests and complaints, in principle within one month from receiving them. If the response of MOT is not favorable to those who made the request, MOT will provide them with the specific reason for the response and give them an opportunity to request a review of the response. The request or complaint may be submitted orally or in writing. If it is submitted in writing, MOT will respond in writing, if so requested. The review of the response will be completed in principle within one month from receiving the request for review. Any documents or materials associated with the request and complaint are open for public review, if those who made such request agree.

Deregulation of Certified and Designated Garages

4. The Government of Japan will implement the deregulation below regarding certified and designated repair garages that will create opportunities for new certified and designated repair garages.

   Space Requirements

   1. Effective on July 1, 1995, MOT reduced the minimum floor space required for certified garages, so that the space requirement for servicing ordinary-sized cars is the same as for servicing small-sized cars (i.e., 72 square meters as compared to 82 square meters previously for ordinary-sized cars).

   Machinery and Tool Requirements

   2. Effective on July 1, 1995, MOT reduced the number of tools and equipment items required for certified and designated garages, from 41 to 30 and 61 to 44, respectively. Following this reduction, MOT will continue to review the possibility of further reduction of the remaining number of tools and equipment items.

   Mechanic Requirements

   3. Within one year from August 23, 1995, MOT will reduce the number of government-qualified mechanics required for certified and designated garages from two to one, and from three to two, respectively. (Note: Certified garages still will be required to have two mechanics, but only one government-qualified mechanic. For designated garages, the current requirement is to have five mechanics, three of which must be government-qualified. Upon implementation of this measure, the total number of required mechanics will remain five, but the number of required government-qualified mechanics will be reduced to two.)

Special Designated Garages

5. In order to increase opportunities for repair businesses in Japan to become designated garages, the Government of Japan will implement the following measures within eighteen months from August 23, 1995.
   1. Certified garages that meet all other requirements for becoming a designated garage except the requirement of having an inspection facility, will be eligible to become special designated garages. Special designated garages will be allowed to perform repairs for shaken inspections, and perform the inspection at the inspection site of another designated garage.
   2. Special designated garages may form a cooperative and jointly operate an inspection site. Such garages may be eligible for Government of Japan low interest loan programs, and tax incentives for cooperatives.

Specialized Certified Garages

6. In order to allow repair and service facilities to specialize in only certain types of activities, within eighteen months from August 23, 1995 the Government of Japan will provide the option for a repair or service facility to be certified to perform "disassembling repair" under paragraph 1 of Article 64 of the Road Vehicles Act for one or any combination of the seven vehicle systems to which the reassembling inspection requirement applies.
7. Examples of specialized repair and service facilities include certified brake repair and service facilities and certified transmission repair and service facilities. The decision of what repair or service operations to specialize in will be the decision of individual businesses. The Government of Japan will approve specialized certification for any combination of repair or service operations within the definition of disassembling repair, provided the applicant meets the appropriate requirements.
8. Specialized service and repair facilities will not be required:
   1. to have more than one government-qualified mechanic;
   2. to have floor space greater than the minimum space directly required to conduct the disassembling repair that the facilities are certified to conduct;
   3. to have tools and equipment items other than the minimum tools and equipment items directly required to conduct the disassembling repair that the facilities are certified to conduct; or
   4. to have any inspection by MOT of its certified repair work.

Deregulation of Modification Inspection Requirements

9. Within three months from August 23, 1995, the Government of Japan will deregulate requirements regarding modification inspections pursuant to Article 67 of the Road Vehicles Act. For any minor modification of the vehicle structure or configuration, the Government of Japan will eliminate the requirements to:
   1. submit the vehicle to modification inspection conducted by the MOT Land Transport Office;
   2. present the vehicle certificate of inspection to the MOT Land Transport Office; and
   3. pay the weight tax.

   "Minor" modifications of a vehicle's structure or configuration include automotive accessories attached by means other than welding or riveting. Examples of automotive accessories involved in minor modifications include those listed in Annex B.

10. The standards for passing a regular shaken inspection will be applied equally to motor vehicles that have, and to those that have not, undergone a "minor" modification within the meaning described in paragraph 9.
11. The Government of Japan will set up a contact point in MOT which deals with requests and complaints with regard to modification inspection and alteration to the information on the motor vehicle inspection certificate, and establish and publish a procedure in which MOT responds to the requests and complaints, in principle within one month from receiving them. If the response of MOT is not favorable to those who made the request, MOT will provide them with the specific reason for the response and give them an opportunity to request a review of the response. The request or complaint may be submitted orally or in writing. If it is submitted in writing, MOT will respond in writing, if so requested. The review of the response will be completed in principle within one month from receiving the request for review. Any documents or materials associated with the request and complaint are open for public review, if those who made such request agree.

Notification of regulatory Changes and Non-discrimination against Foreign Auto Parts

12. The Government of Japan will immediately implement an active campaign to inform automotive repair and service facility owners, mechanics, consumers, and MOT Land Transport Offices of the regulatory changes described in paragraphs 3 through 11 above and to emphasize the non-discriminatory application of regulatory requirements. Among other things, the campaign will strongly emphasize to car dealers, repair and service facility owners, mechanics, and consumers that motor vehicle inspections and other regulatory requirements pursuant to the shaken inspection or other regulations do not and will not discriminate against vehicles equipped with foreign or "non-genuine" parts. In this regard, the Government of Japan will inform the public, and specifically in writing will instruct MOT Land Transport Office inspectors as well as repair garages certified by MOT that their inspections pursuant to shaken inspection or other regulations are not to discriminate against vehicles equipped with foreign or "non-genuine" parts.

Import Promotion

13. The Government of Japan will issue guidance encouraging the Japan Automotive Parts Association (JAPA) to endorse foreign auto parts as "superior parts" (yuryou buhin) based on the same criteria and evidence that is applied to Japanese auto parts.
14. To further enhance access for foreign-made aftermarket auto parts, the Ministry of International Trade and Industry sent memoranda through business associations to their members providing guidance to auto parts distributors that:
    1. they refrain from any form of discrimination when handling foreign-made parts;
    2. they indicate the options available to repair businesses and customers (such options to include foreign-made parts), and that they provide their customers with opportunities to choose such parts;
15. With regard to parts purchasing by repair and service businesses, MOT sent memoranda through business associations to their members providing guidance to repair and service businesses that:
    1. they refrain from any form of discrimination as to whether parts are foreign- or Japanese-made when choosing replacement parts to be used for servicing and repairs; and
    2. when possible, they indicate to customers the options available (such options to include the use of foreign-made replacement parts), and that they provide their customers with opportunities to choose such parts.
16. The Government of Japan is pleased to note the statements by the replacement parts distributors groups (JAPA, the Japan Federation of Auto Parts Sales Association, and the Japan Auto Accessories Manufacturers' Association) and the Japan Automobile Service Promotion Association which declared, in compliance with the guidance referred to in 14 and 15 above, their policies:
    1. to be impartial with regard to parts (whether foreign- or Japanese- made) when choosing replacement parts for servicing and repairs; and
    2. to indicate to their customers the options available, these options to include the use of foreign-made replacement parts.
17. The Government of Japan is pleased to note that the automotive manufacturers (including members of JAMA and the Japan Automotive Parts Industries Association) will make it fully clear to parts sales companies and joint sales companies with whom they have dealings that the handling of parts (other than genuine parts) and the handling of foreign parts are, as a general rule, to be conducted freely by each company, without adverse discrimination based on capital affiliation; that business decisions are left up to them; and that neither they nor their customers should be concerned about their business relationships with the automotive manufacturers or the parts sales companies and joint sales companies based on their decision to carry foreign parts.
18. In addition to the measures described above, the Government of Japan intends to consider or implement other possible import promotion measures related to auto parts. Among other measures, the Government of Japan will:
    1. welcome and support the establishment of contact points by auto parts distributors, auto parts sales companies and joint sales companies or related vehicle manufacturers for the purpose of facilitating contacts between foreign auto parts suppliers and those companies regarding potential opportunities in the Japanese auto parts aftermarket; and
    2. support the creation of a database and information network with such information as data matching motor vehicle types with compatible foreign replacement parts, and technical data for use by repair garages. Until the database and information network are created and working effectively, the Government of Japan will actively support foreign auto parts suppliers' activities in the aftermarket to provide information about their products through other measures such as publishing notice in automotive journals published by relevant associations and holding seminars.

B. Japanese Government Procedures in the Area of Standards and Certification

1. While most automotive standards already have been coordinated among Japan, the United States and Europe, the Government of Japan continues to play an active role to achieve further international harmonization of standards.
2. The Government of Japan intends to reach a conclusion in good faith under the consultations with the Government of the United States on the standards and certification issues raised by the Government of the United States (see Annex C) to mutual satisfaction within a period of nine months from August 23,1995. In this regard, the Government of Japan intends to hold standards and certification expert consultations with the Government of the United States. When additional issues are raised in the future, the Government of Japan intends to reach a conclusion by mutually acceptable deadlines in the same manner.
3. The Government of Japan will continue to facilitate importation of foreign vehicles by dispatching officials to the dealer sites to conduct inspection of automobiles imported under the Preferential Handling Procedure (PHP), and will continue to dispatch such officials on a timely basis to meet foreign vehicle manufacturers' requests.
4. To assist efforts by foreign vehicle manufacturers to obtain Japanese Type Designation Approval (TDA), the Government of Japan is ready to study the possibility of carrying out examinations according to Japanese testing procedures in a foreign country concerned, where appropriate, by means of utilizing official motor vehicle testing institutions of such country, or stationing an official who is in charge of conducting those examinations at the Japanese Embassy or a Consulate General in the country. In this regard, the Government of Japan will continue to station a technical official of the Ministry of Transport on a full-time basis at the Japanese Consulate General in Detroit as necessary within the limits of budgetary appropriations.

C. Anticompetitive Practices

1. The Government of Japan affirms its commitment to prevent and eliminate anticompetitive practices in all industries including the automotive sector.
2. The Government of Japan will support the voluntary efforts by Japanese firms to develop and implement internal AMA compliance programs and is willing to provide advice when requested by such firms.
3. The Government of Japan recognizes that the JFTC issued the Antimonopoly Act Guidelines Concerning Distribution Systems and Business Practices on July 11, 1991 (the "Guidelines"). The Guidelines are applicable to all industries including the automotive industry, and specifically describe types of conduct with respect to Japanese distribution systems and business practices that may impede free and fair competition and violate the AMA.
4. The JFTC affirms its commitment to effectively enforce and strictly apply the AMA in accordance with relevant guidelines to address anticompetitive practices in all industries including the automotive sector.
5. In June 1993, the JFTC published the results of its survey on the passenger car industry and its survey on the auto parts industry. Although the JFTC did not find any AMA violations, it pointed out several practices to be addressed from the point of view of competition policy. The JFTC recognizes the serious efforts of the relevant companies to address these practices and will observe so that the practices continue to be addressed by such companies.
6. Any person, including foreign vehicle manufacturers and Japanese vehicle dealers, may report to the JFTC suspected violations of the AMA. Suspected violations may be reported to the newly enhanced and expanded Information Management Office of the JFTC. Any information regarding suspected violation of the AMA may be reported in writing or orally. The confidentiality of such report or information will be strictly protected and such report or information may be provided anonymously. The JFTC will review such report or information promptly and will take appropriate steps to address such suspected violations depending on the content and reliability of the information.
7. Under Article 28 of the AMA, the JFTC is to perform its duties independently.

---

Back to Index