Trade policy review report by the secretariat

5.6  Transport

5.6.1  Maritime transport

1.1.  Japan depends on maritime transport for its trade with 88% of imports and 71% of exports by value carried by sea and 967 million tonnes are transported by ocean-going vessels. Furthermore, reflecting the fact that Japan is made up of numerous islands, coastwise shipping accounts for a significant proportion of domestic cargo transport with 366 million tonnes of cargo transported by coastwise shipping in 2012.²⁰⁶ According to the Japan Federation of Coastal Shipping Associations, coastal shipping accounted for 32% of the tonne-kilometres for domestic transport in 2009.²⁰⁷

1.2.  According to UNCTAD, the relatively high proportion of high-value vessels in the Japanese-owned fleet means that, in value terms, it is probably the highest in the world at nearly US$100 million. According to UNCTAD's report, on 1 January 2013, the fleet of Japanese flagged vessels and beneficially-owned vessels sailing under foreign or international flags was the second largest in the world in tonnage terms at 223.8 million tonnes for nearly 4,000 vessels.²⁰⁸ According to the Japanese authorities, the fleet of Japanese-flagged and owned vessels greater than 2,000 tonnes was 2,848 vessels for a total tonnage of 190.8 million tonnes (Table 4.21)

Table 4.52 Maritime transport, main economic indicators, June 2012

Fleet	Vessels (number)		Tonnage (DWT)
			(million tonnes)		(% of world tonnage)
National flag	150		18.61		..
Of which foreign controlled	0		0		..
Beneficially owned fleet under foreign flags	2,698		172.18		..
Merchandise trade	Volume ('000 tonnes, except for containers: '000 TEU) 2012		Value (¥ billion) 2012		% of Japan's international trade (all mode of transport) FY2009
	Imports	Exports	Imports c.i.f.	Exports f.o.b.	Imports	Exports
International maritime freight trade	988,103	280,917	70,689	63,748	88.1	71.0
Of which containers	8,770	8,750	24,330	29,368	39.9	43.9
Of which transhipped	130	135	..	..	..	..
Of which dry bulk	338,687	74,583	10,469	7,545	15.3	11.3
Of which liquid bulk	378,805	25,358	24,582	3,100	31.6	1.7
Domestic maritime freight trade	705,939	721,417	..	..	..	..
Of which conducted under a waiver regime	..	..	..	..	..	..
Privately managed terminals	Type of cargo	Managing company(ies)/ Nationality			Volume (TEU)	Date & duration of the contract
Tokyo (some)	Container	Tokyo Port Terminal Corporation /Japanese			4,510,778 (volume 2013)	01.04.2008
Hakata (some)	Container	HAKATA PORT TERMINAL Co. Ltd /Japanese			772,123 (volume 2013)	20.02.2014
Ibaraki Port Hitachinaka District (some)	Container	Ibaraki Port Authority Corporation /Japanese			7,605 (volume 2012)	06.2000

.. Not available.

Source: Information provided by the Japanese authorities.

1.3.  Although the Japanese-owned fleet may be the most valuable and one of the largest in the world, it declined significantly from 1995-2005. To address the decline, the government has introduced several support measures, including tax incentives and shared purchase programmes, (see below) and, since 2005, the rate of decline in the number of vessels has slowed while the total tonnage has increased.²⁰⁹

1.4.  Maritime shipping policy and national legislation are the responsibility of the Maritime Bureau in the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). The Maritime Bureau represents Japan at the International Maritime Organization. The Bureau is responsible for setting standards, security, regulation, etc.

1.5.  Under the MLIT is the Japan Transport Safety Board, which was formed in 2008 with the merger of the Japan Marine Accident Inquiry Agency and the Aircraft and Railway Accidents Investigation Commission. The National Maritime Research Institute, an incorporated administrative agency under MLIT is a research centre for maritime technologies.

1.6.  The Japan Maritime Center, which is described as a public interest incorporated foundation, contributes to policy formation through research and consultation with different stakeholders. The Center was established in April 2007 with the merger of the Japan Maritime Foundation and the Japan Maritime Development Association with funding from the Japanese Shipowners' Association and the Japan Federation of Pilots' Associations.²¹⁰

1.7.  The main laws covering maritime transport of goods are: the Basic Act on Maritime Policy of 2007, the Carriage of Goods by Sea Act of 1992; the International Carriage of Goods by Sea Act of 1957; the Maritime Traffic Safety Law of 1972; the Port and Harbour Act of 1950; the Port Regulations Act of 1948; and the Ship Safety Law.

1.8.  In March 2012, MLIT established the Ocean Policy Panel to implement the Basic Plan on Ocean Policy of 2008.²¹¹ The Plan and Panel address many aspects of marine policy including exploration and exploitation of minerals, fisheries, and the environment, as well as maritime transport. On maritime transport, the Policy recognises the challenges facing maritime transport in Japan, particularly the decline in the number of Japanese-flagged vessels, the aging of the maritime workforce, and the increasing competition in the region.²¹²

1.9.  Japan does not discriminate against foreign participation in international maritime services and accords national treatment (Table 4.22). However, cabotage restrictions mean only Japanese flag carriers may carry goods and passengers from one Japanese port to another although, under treaties of friendship, commerce and navigation, Japan allows ships to access cabotage services on a reciprocal basis by obtaining permits from MLIT.

1.10.  In 2008, a tonnage tax system was introduced which gave oceangoing shipping companies the option of switching away from tax on profits to a tax system based on tonnage (Table 4.22). The scheme was to operate until end-FY2013 but it has been extended until end-FY2018 and the scope extended to included foreign-flagged vessels operating by Japanese shipping firms and their overseas subsidiaries, provided the flag can be changed to Japan following a navigation order under maritime transport law.

1.11.  The Japan Railway Construction, Transportation and Technical Agency (JRTT) provides support to coastal shipping by sharing the cost and ownership of vessels, with JRTT taking 70-90% of costs and ownership. The domestic shipping company pays a usage fee to JRTT for the period of joint ownership which is 7-15 years. JRTT is an independent administrative agency which was created in 2003 by integrating the Japan Railway Construction Public Corporation (JRCC) and the Corporation for Advanced Transport and Technology (CATT – which had incorporated several other entities including the Maritime Credit Corporation and the Association for Structural Improvement of the Shipbuilding Industry). At the end of FY2013, JRTT owned 347 ships with a joint-ownership value of ¥365.3 billion. JRTT also provides subsidies to coastal shipping companies for the take up of new technologies, such as electric propulsion systems, as well as support for ferry services to remote islands. In FY2012 and FY2013, subsidies for Practical Application of Advanced Ship Technologies were ¥95.7 million and ¥45.7 million respectively.²¹³

Table 4.53 Trade-related maritime transport policies

Competition policy

Scope of the anti-trust immunity: Marine Transportation Law, Article 28 item (4) Immunity "to conclude an arrangement or agreement or to conduct concerted act concerning the fares or charges and other transportation conditions, routes, allocation of ships as well as sharing of shipping between a ship operator and other ship operators on routes between ports in Japan and a territory other than Japan", i.e. conferences, agreements, discussion agreements, stabilization agreements and vessel sharing agreements and consortia in liner shipping and tramp pools in bulk shipping.

Filing requirements: Marine Transportation Law Article 29-(2) "Any ship operator shall, if he/she intends to engage in the act provided for in Article 28 item (4) or to alter the content thereof, notify beforehand Minister of Land, Infrastructure, Transport and Tourism to that effect". Marine Transportation Law Article 50 "Any person to whom any of the following items applies shall be liable to a fine of not more than one million yen, item (24) Anyone who has taken action under item 4 of Article 28, or has altered the content of such action, without submitting notification under the provisions of Article 29-(2), Paragraph 1, or who has made a false notification under the same provisions".

Last review concluded: FY2010, by the MLIT in consultation with JFTC, no changes.

Next planned review: FY2015

Tonnage tax: Introduced in 2008 until the end-FY2013 (March 2014); characteristics unchanged corporate tax rates but net profit deemed to be: - for vessels less than 1,000 NT, ¥120/100 NT; - for vessels over 1,000 and up to 10,000 NT, ¥90/100 NT; - for vessels over 10,000 and up to 25,000 NT, ¥60/100 NT; and - for vessels over 25,000 NT, ¥30/100 NT. The tonnage tax system has been extended to end-FY2018 (March 2019) and the scope expanded to cover "deemed-Japanese-flagged-vessel"* with tax rates of one and a half times those for Japanese-flagged vessels. (* "deemed-Japanese-flagged-vessel" means a foreign-flagged-vessel operated by Japanese shipping firm and owned by their overseas subsidiaries which can change its flag to Japan immediately in case of issuing order of navigation in accordance with maritime transport law.)

Other support measures: - Additional depreciation of 18% can be applied to Japanese-flagged vessels; may opt for either declining- balance method or the straight-line method. - "roll over relief" i.e. deferred taxation of capital gains in case of sale of old vessels replaced by new vessels; system extended in 2014 until the end of FY2017. - Coastal Shipping Tentative Measures Program: scrapping incentives FY2013: Not applicable. - Coastal shipping joint ownership scheme under JRTT.

International ship regime (ISR): Ship registration tax under the ISR regime and the Japanese ordinary register (for a 85,000 GT bulker) (1) ISR vessels – ¥38.8 million (2) non-ISR vessels – ¥44.3 million In order to receive tax relief, an ISR vessel must correspond (1) and (2) of the following requirements, and must meet at least (3) or (4) of the following: the vessel must be more than 2,000 GT; the vessel must navigate in the ocean-going sea areas; the vessel must board non-Japanese seafarers with a certificate issued by the Minister of Land, Infrastructure, Transport and Tourism; the vessel must be LNG or RO-RO type. Companies may apply for the ISR scheme as long as they are established under Japanese law, regardless of their shareholders.

Passenger transport: Remote island sea routes are subsidised by regional public transport for management and improvement projects and passenger fares. 300 sea routes were in service at the end of FY2011, 120 of which are subsidised.^a According to the authorities, the government subsidizes the Projects for Securing and Maintaining Regional Public Transport for secure and maintain bus and demand-responsive transport and remote island sea and air routes, which are optimal means of transport that fill regional needs are supported in those regions where the continued availability of networks of regional transport is endangered. The total value of subsidies is ¥30.6 billion.

a MLIT (2012), p. 138.

Source: Information provided by the Japanese authorities.

1.12.  Entry into the port transport sector requires permission from MLIT, and port transport charges are subject to prior notification procedures. However, licensing requirements and an economic needs test were abolished in 2006 and replaced by a permission requirement system based on technical and financial abilities.²¹⁴ Under the Port and Harbour Act, port development, management and operation are entrusted to local public organizations²¹⁵ although private management of port terminals is allowed and open to foreign investors.