Trade policy review report by the secretariat

4.1.4  Tariffs

4.1.4.1  MFN applied tariff

1.1.  Goods imported into Japan may be subject to customs tariffs, consumption tax (VAT), and excise duties on products such as liquor, tobacco, gasoline, LPG, and automobiles (section 3.3.1).

1.2.  The structure of Japan's MFN applied tariff has remained largely unchanged over the last few years. In FY2014, Japan's tariff schedule comprised 9,151 lines (down from 9,168 in FY2012) at the HS nine-digit level (Table 3.1).⁴⁶ Of all tariff lines, 93.3% involve ad valorem rates (including duty free lines which are 40.4% of all lines). The remaining 6.7% (i.e. 613 lines) are non-ad valorem: specific rates are applied to 2.6% of the lines; 3.1% have alternate specific duty or ad valorem; 0.6% have compound rates; and other types of tariff (differential duties and sliding duties) apply to 0.3% of tariff lines (Chart 3.1).⁴⁷

Table 3.8 Structure of MFN tariffs, FY2010, FY2012 and FY2014

(%, unless otherwise indicated)

	MFN applied			Final bound^a
	FY2010	FY2012	FY2014
Bound tariff lines (% of all tariff lines)	98.8	98.3	98.3	98.3
Simple average rate	5.8	6.3	5.8	5.9
WTO agricultural products	15.7	17.5	14.9	15.2
WTO non-agricultural products	3.5	3.7	3.7	3.7
Duty free tariff lines (% of all tariff lines)	41.4	40.5	40.4	38.7
Simple average rate of dutiable lines only	10.0	10.7	9.9	9.8
Domestic tariff "peaks" (% of all tariff lines)^b	6.6	6.6	6.6	6.7
International tariff "peaks" (% of all tariff lines)^c	7.4	7.6	7.4	7.5
Overall standard deviation of tariff rates	16.0	20.5	14.3	14.5
Coefficient of variation of tariff rates	2.7	3.2	2.4	2.4
Tariff quotas (% of all tariff lines)	1.8	1.8	1.8	1.8
Non-ad valorem tariffs (% of all tariff lines)	6.6	6.7	6.7	6.3
Non-ad valorem tariffs with no AVEs (% of all tariff lines)	2.0	1.5	1.8	1.5
Nuisance applied rates (% of all tariff lines)^d	1.3	1.5	1.5	1.4
Number of lines	8,826	9,168	9,151	8,992
Ad valorem rates	4,590	4,839	4,840	4,875
Duty free lines	3,652	3,714	3,698	3,542
Non-ad valorem rates	584	615	613	734
Specific	207	236	236	228
Compound	56	57	57	58
Alternate	289	290	288	289
Other	32	32	32	0

a Final bound rates are based on the FY2014 tariff schedule in HS12 nomenclature. Calculations are based on bound rates only.

b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate.

c International tariff peaks are defined as those exceeding 15%.

d Nuisance rates are those greater than zero, but less than or equal to 2%.

Note: All tariff calculations exclude in-quota lines and include AVEs, as available, provided by the Japanese authorities. In case of unavailability, the ad valorem part is used for compound and alternate rates. FY2010 tariff schedule is based on HS07 nomenclature and FY2012 and FY2014 are based on HS12.

Source: WTO calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

1.3.  The non-ad valorem rates apply mainly to fats and oils, followed by footwear, prepared foods, mineral products, vegetables, live animals and animal products, and textiles and clothing (Chart 3.2).

Chart 3.3 Tariff distribution by type of duty, FY2014

Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

Chart 3.4 Share of non-ad valorem duties, by HS section, FY2014

Note: Each bar depicts the percentage of tariff lines within each HS section that carry non-ad valorem duties; the figures in parentheses show the corresponding number of lines. In-quota rates are not included (lines subject to state trading are included).

Source: WTO Secretariat estimates, based on based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

1.4.  In FY2014, Japan's overall simple average applied MFN tariff rate was 5.8% (down from 6.3% in FY2012) (Table A3.1). This reduction is due to lower average ad valorem equivalents (AVEs) of non-ad valorem duties. The authorities provided for 450 out of 613 AVEs based on import data for 2012.⁴⁸ Consequently, the tariff analysis is based on 98.8% of the 9,151 tariff lines. The simple average rate for all the AVEs supplied is 29.7%⁴⁹; however, the highest rate is 298.6%, for certain semi-milled or wholly milled rice. Of the 104 highest tariffs, 96 had non ad valorem rates.

1.5.  Import duties on agricultural products are higher than duties on non-agricultural products: the simple average for agriculture (WTO definition) is 14.9% (17.5% in FY2012), compared with 3.7% for non-agricultural products (same as in FY2012). Simple average applied MFN tariffs are also relatively high for footwear and headgear, prepared foods, vegetables, live animals, hides and skins, arms and ammunition, and textiles and clothing (Chart 3.3).

Chart 3.5 Simple average applied MFN tariff rates, by HS section, FY2012 and FY2014

Note: Excluding in-quota rates (lines subject to state trading are included). Including ad valorem equivalents (AVEs) provided by the Japanese authorities, as available. The ad valorem part of compound and alternate rates are used where AVEs are not available.

Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

1.6.  There are 161 tariff lines (1.8%) subject to MFN tariff quotas: 150 out-of-quota tariffs and 11 out-of-quota tariffs of state trading (in-quota lines are excluded). The out-of-quota rates for 38 tariff lines are ad valorem. The average rates differ considerably: in-quota rates average 18.1%, while out-of-quota rates average 67.1%. The quota allocation method and process remains somewhat intricate (section 4.1).⁵⁰

4.1.4.2  Bound tariff

1.1.  Japan has bound 98.3% of lines (159 lines are unbound) (Table 3.1); unbound lines relate mainly to fisheries (fish, crustaceans, seaweed), petroleum oils, and wood and articles thereof. Ad valorem rates account for 8,417 bound lines (93.6%), of which 3,542 lines are duty free. The difference between the average bound MFN tariff (5.9%) and the average applied MFN tariff (5.8%) in FY2014 was negligible, which reflects a high degree of predictability in the tariff.⁵¹ Japan has not used this gap to raise tariffs during the last few years. However, the average bound rate (WTO definition) is considerably higher for agricultural products (15.2%) than for non-agricultural products (3.7%).

4.1.4.3  Preferential tariff

1.1.  Japan offers preferential tariff rates to 138 developing countries and 7 territories under the GSP; least developed countries (48 in 2014) receive additional preferences. China remains the largest beneficiary of preferential access to the Japanese market; it accounts for over three quarters of all preferential imports under the GSP scheme.⁵² Japan also grants preferential access under its RTAs/EPAs for imports from ASEAN, Chile, Brunei Darussalam, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Singapore, Switzerland, Thailand, and Viet Nam (section 2.3.2).

1.2.  Simple average tariff rates under all preferential arrangements (GSP, LDC, and EPAs) are lower than the simple average applied MFN rates. However, the rates vary widely from one product group to another. The overall simple average preferential rates range from 0.5% to 4.8%, while agriculture is subject to rates from 1.5% to 13.9% (Table 3.2). Tariffs under these arrangements are also high for certain processed and industrial goods, such as leather, rubber, footwear and travel goods, and textiles and clothing imports (under GSP); items such as dairy products, some footwear, and textiles and clothing are not included in the GSP scheme for developing countries and are therefore subject to applied MFN rates of duty.

Table 3.9 Summary analysis of Japan's preferential tariffs, FY2014

	Number of preferential lines^a	Total		WTO agriculture		WTO non-agriculture
		Average (%)	Duty-free rates (%)	Average (%)	Duty-free rates (%)	Average (%)	Duty-free rates (%)
MFN		5.8	40.4	14.9	25.9	3.7	44.0
GSP	2,987	4.8	58.1	13.9	34.6	2.6	63.9
LDC	5,264	0.5	97.9	1.5	96.7	0.2	98.2
Economic Partnership Agreements
Singapore	4,225	3.1	83.4	11.9	49.1	1.1	91.9
Mexico	4,149	3.1	84.9	13.0	40.4	0.8	95.9
Malaysia	4,419	2.6	84.7	11.5	49.5	0.5	93.4
Chile	4,317	2.8	83.1	12.1	49.0	0.6	91.5
Thailand	4,487	2.6	85.1	11.6	49.6	0.5	93.8
Indonesia	4,333	2.8	81.4	12.3	43.4	0.6	90.7
Brunei Darussalam	4,162	3.3	80.9	12.5	42.0	1.1	90.4
ASEAN	4,500	2.8	80.9	12.3	41.5	0.6	90.6
Philippines	4,574	2.6	83.1	11.5	46.2	0.5	92.2
Switzerland	4,339	3.0	80.5	12.5	41.8	0.7	90.0
Viet Nam	4,468	2.8	82.0	12.4	42.6	0.6	91.7
India	4,314	3.2	78.8	13.0	40.6	0.8	88.3
Peru	4,479	3.0	80.4	12.8	41.6	0.6	89.9
Memorandum^b
Singapore	4,519	2.7	83.9	11.8	49.3	0.6	92.5
Malaysia	4,523	2.6	85.2	11.5	49.5	0.5	94.0
Thailand	4,567	2.6	85.1	11.5	49.6	0.5	93.8
Indonesia	4,510	2.7	82.3	12.0	43.4	0.5	91.9
Brunei Darussalam	4,506	2.8	81.5	12.1	42.0	0.6	91.2
Philippines	4,639	2.6	83.7	11.5	46.2	0.5	92.9
Viet Nam	4,568	2.7	82.1	12.0	42.6	0.5	91.9

a The number of preferential lines includes only lines on which the rates are lower than the corresponding MFN applied rate. The 2014 MFN tariff consists of 9,151 tariff lines out of which 3,698 lines bear a duty-free rate.

b Based on lowest rate applied from country's EPA and the ASEAN EPA.

Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.