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[Country of Origin Labeling System]

■ Concept

Country of Origin System refers to a series of regulations systems concerning Rules of Origin, Country of Origin Labeling, issuance of Certificate of Origin, and various effects thereof, etc.

Country of Origin Verification System refers to the system that origin of trading commodities is verified by a certificate, which is basically issued by institutions of exporting country to benefit from preferential treatment on tariffs(for example, FTA, EPA, GSP, etc.). Issuing certificate of origin isn't mandatory, but, without it, preferential treatment may not be enjoyed.

Country of origin labeling system refers to the system specifying matters concerning whether marking country of origin is mandatory, and labeling requirements, and the effects of non-labeling, etc. in export and import or domestic distribution. The system mainly aims at establishing transaction order, etc., regardless of preferential treatment.

Rules of origin refer to the criteria determining the country where specific commodities, which are internationally trading, have been produced.

Hereinafter, country of origin labeling system in Japan will be outlined.

■ Characteristics of Country of Origin Labeling System of Japan

It's very difficult to gain understanding concerning country of origin labeling system of Japan. It's considered fair enough to outline as below.

1) Country of origin labeling at the stage of import clearance shall not be questioned.

Where any goods are imported to Japan, country of origin labeling issue doesn't matter at the stage of import(specially, customs clearance). Accordingly, goods without country of origin labeling shall not be obstacles to customs of entry. (Contrary interpretation of Article 71 of the Customs Act of Japan)

※ Whether country of origin labeling is pertaining to one of requirements for import clearance depends on national systems.

ㅇ Countries which make country of origin labeling for all sorts of items compulsory(The U.S. etc.)

ㅇ Countries which take item by item basis for compulsory country of origin labeling(Korea, Taiwan, etc.)

ㅇ Countries free from country of origin labeling in terms of import clearance(Japan, etc.)

2) But, once decided to indicate country of origin, such labeling shall be exact.

Country of origin labeling isn't compulsory, but such labelling shall be authentic once it was marked. Goods with false labeling or labeling which has the potential to mislead general people shall not be imported. (Article 71 of the Customs Act of Japan)

Customs will order for the rectification on goods falsely marked or having risks of misleading to make them pass import clearance, or send back them to abroad.

3) In the distribution phase in Japan, there are some items with compulsory marking country of origin.

In the distribution of imported goods to Japanese market, representative items which make it compulsory to mark country of origin by law are food.

Also, there are items which make it compulsory to mark country of origin by fair competition rule in same industry.

In theory, it's not required to marking country of origin at the time of importation, but country of origin may be marked separately for the distribution in Japan. However, where there are a lot of items to be marked, it's very cumbersome process, and cost burden is very high. So, it's better to do works on labeling at the time of importation. From such a perspective, for specific items, marking country of origin at the time of importation is mandatory actually.

4) There are industry voluntary rules.

There is a system which enterprises handling same kinds of items conclude fair competition rule "voluntarily", and pledge to marking country of origin for specific items, which is a rare system in other countries.

But, in reality, government has certified such rule, and if violating the terms, practical disadvantages entail such as imposition of penalty, withdrawal from association, etc. which is very compulsive.

■ Items Subject to Compulsory Country of Origin Labeling(applied in the phase of sales and distribution in Japan)

1. Food - applicable goods by JAS 

☉ Base

ㅇ JAS(Japanese Agricultural Standard) refers to the Law Concerning Standardization, etc. of Agricultural and Forestry Products. It used to be called Act on Standardization and Proper Quality Labeling of Agricultural and Forestry Products, but has been amended to this name since April 1st, 2018.

 ㅇ JAS is providing legal foundation for labeling of the name, raw materials, country of origin, etc.(Article 19-13 of this Act, Article 19-13-(2) of this Act), and based on JSA, Public Notice of Consumer Affairs Agency or of The Ministry of Agriculture, Forestry and Fisheries prescribes detailed quality labeling including country of origin.

ㅇ According to these Public Notice, importers(including manufacturers, processors, packing business operators, sellers) are required to indicate matters concerning quality such as the name, name of raw materials, and place of origin(country of origin). Such Notice, without doubt, directly aims at compulsory labeling in domestic distribution phase.

ㅇ Based on above Notice, the fact that there isn't any provision of the Customs Act that marking country of origin for import clearance is compulsory may be questioned. But, above Notice doesn't suggest that imported food shall be marked with country of origin at the phase of import clearance, and such Notice is subordinate Act compared to the Customs Act. Accordingly, it's fair to say that marking country of origin isn't compulsory at the phase of import clearance.

ㅇ But, in reality, where goods without country of origin labeling, which are required to be marked country of origin at the phase of domestic distribution, are imported to Japan, import clearance of Customs may be complicated. Therefore, it's beneficial to import goods by labeling country of origin on them in the first place.

☉ Labeling requirements and labeling place

Place of origin(country of origin) of imported goods may be marked by generally known country name or place name. In the case of domestic products, not imported products, the words, "local products" or Prefectures(ToㆍDoㆍFuㆍKen) may be marked.

Labeling requirements other than marking country of origin depend on items, but commonly applied requirements include item name, name of raw materials, contents, expiration date, name of the seller, and whether genetically modified food, etc.

Labeling may be placed on containers, packaging, bottles, cans, etc. of relevant goods in a clearly visible manner.

☉ Items Subject to Compulsory Country of Origin Labeling

1) Perishable Food (Quality Labeling Criteria on Perishable Food - Public Notice of The Ministry of Agriculture, Forestry and Fisheries)

① Agricultural products

(Articles, coordinated, screened and washed after harvests, and simply cut, and cold and frozen, etc.)

ㅇ Rice

ㅇ Barley

ㅇ Grains

ㅇ Beans

ㅇ Vegetables

ㅇ Fruit

ㅇ Mushrooms, edible wild plants, bamboo, etc.

ㅇ Other agricultural products (sugar crop materials, potatoes, unprocessed beverage crops, raw spice, other unclassified agricultural products, etc.)

② Livestock products

(Including articles simply cut, sliced cut, simply cold and frozen)

ㅇ Meats

ㅇ Milk

ㅇ Edible Birds' eggs

ㅇ Other livestock products

③ Marine Products

(cold, frozen, alive, sashimi, cut into pieces, in pillet, etc.)

ㅇ Fish

ㅇ Shellfish

ㅇ Marine products

ㅇ Marine mammals

ㅇ See algae

2) Processed Products (Quality Labeling Criteria on Processed Products- Public Notice of Consumer Affairs Agency)

ㅇ Refined barley

ㅇ Farina

ㅇ Starch

ㅇ Processed Vegetables

ㅇ Processed Fruits

ㅇ Tea, coffee and cocoa preparations

ㅇ Spices

ㅇ Noodles, breads

ㅇ Processed grains

ㅇ Confections

ㅇ Soy preparations

ㅇ Sugar

ㅇ Other Agricultural Processed

ㅇ Meat product

ㅇ Dairy products

ㅇ Processed egg products

ㅇ Other processed livestock products

ㅇ Honey and other animal foods

ㅇ Processed seafood

ㅇ Processed algae

ㅇ Other Fish Processed Food

ㅇ Seasonings and soup

ㅇ Edible fats

ㅇ Cooked foods

ㅇ Other processed foods

ㅇ Drinks, etc.

3) Genetically Modified Food(Processed Products Labeling Criteria on Genetically Modified Food - Consumer Affairs Agency)

ㅇ Beans (including peas and bean sprouts)

ㅇ Corns

ㅇ Potatoes

ㅇ Rape seed

ㅇ Cotton seed

ㅇ Alfalfa

ㅇ Sugar beet

ㅇ Papaya

2. Marking Country of Origin by Fair Competition Rule

☉ Base and concept of fair competition rule

According to Article 12 of Act against Unjustifiable Premiums and Misleading Representations, An entrepreneur or a trade association may, upon obtaining authorization from the Fair Trade Commission pursuant to the Rules of the Fair Trade Commission, with respect to the matters relevant to premiums or representations, conclude or establish an agreement or a rule, aiming at prevention of unjust inducement of customers and securing fair competition.

Under fair competition rule, businessmen of same industry voluntarily make the pledge to abide by the terms with respect to the offering of premiums or products labelling, etc.

Currently, there are the terms of labeling covering around 70 items, certified by government.

☉ The meaning of fair competition rule

Fair competition rule isn't technically related to the obligation to marking country of origin because it's determined voluntarily by businesses, certified by government, and its accession and withdrawal are also free.

But, many businesses are getting involved in such rule because it has considerable influence over substantial market in that leading companies of same industry acceded to such rule, and companies joined of the rule may perform sales activities with confidence because they have privilege to be excluded from the application of the Antitrust Act, etc. and they may attract confidence of consumers thereby, etc.

In addition, if companies which acceded to the rule violate related terms, such violator may be under sanctions such as investigation, alert actions, penalties imposed, withdrawal, investigation by Consumer Affairs Agency, etc. which means it has a binding power(This system is a rare and unique one which may not be found in foreign countries.)

☉ Fair competition rule and compulsory marking country of origin

ㅇ Even goods required for compulsory country of origin marking by such rule may not necessarily mark country of origin to go through customs clearance. The rule is less than voluntary pledge between businesses.

ㅇ But, after importation, if companies joined of the rule fail to abide by compulsory country of origin marking during the distribution of Japanese market, such companies shall be subjected to sanctions such as imposition of penalty from the relevant association.

☉ Items subject to compulsory country of origin marking by fair competition rule

Currently, items with the terms for marking country of origin are as below, and labeling requirements and obligation of labeling by each term are specified.

※ You can find detailed information on fair competition rule by each industry at < http://www.jfftc.org >, a homepage of Federation of Fair Trade Conferences

■ Labeling Methods, etc. of Country of Origin

Japan doesn't specify labeling methods because marking country of origin isn't compulsory in Japan. Provided, That specifications for marking country of origin are represented by suggesting unjustifiable labeling cases or justifiable cases in various Acts.

1) Labeling Methods by the Customs Act

The Customs Act specifies passively labeling methods in the Notice about basic tariff system. Where it's likely to mislead a good whose country of origin is one of foreign countries as a domestic product, country of origin of such good shall be represented in Japanese. The correction of false or misleading labeling shall be represented firmly.

2) Labeling Methods by the Export and Import Transaction Act

Where false country of origin labeling is found, country name(place name) of such goods shall be cancelled and corrected, and brand name and country of origin shall be represented together. In this case, labeling which is able to be removed easily after import clearance shall not be allowed.

3) Labeling Methods by the Act against Unjustifiable Premiums and Misleading Representations

This Act specifies comparatively detailed standards concerning unjust representations, and among them, labeling methods may be summarized as below.

ㅇ Labeling medium : There isn't any restriction on that. Provided, That it's recommended to use same medium as such labeling where there are misunderstanding-causing labeling.

ㅇ Labeling place : There isn't any restriction on that. Provided, That it's recommended to mark on easily visible places of products, containers, packaging or attached goods(label, tag, etc.) where there are misunderstanding-causing labeling.

ㅇ Labeling language : There isn't any restriction on that. Provided, That it's recommended to mark country of origin and its relationship with relevant products in Japanese, where there are misunderstanding-causing labeling, and difficulties to figure out country of origin even though it was labelled.

4) Labeling Methods of Ordinary Country of Origin

Whether labeling is right or not is determined by whether final consumers may be misunderstood and misled. The domestic goods shall be labelled by the name of Prefectures(ToㆍDoㆍFuㆍKen), or labeling <domestic>. General labeling methods for foreign products are as below, and usually they are labelled in Japanese, Chinese letter and English.

ㅇ Country of origin: country name or product of country name

ㅇ Made in country name or Product of country name

ㅇ Made by Goods Manufacturer's Name, Address and Country

ㅇ Country name only may be labelled where it's impossible to mark country of origin of the relevant products in above-mentioned way because such goods are too small.

ㅇ Labeling methods which aren't concerned to cause confusion to final consumers may be allowed as follows: Brewed in Country, Distilled in Country, Manufactured by Country, Produced in Country, Fabricated in Country, etc.

ㅇ In the case where country of origin for main parts of goods are different from each other, country of origin by each part may be labelled.

ㅇ In the case where there aren't any risks to cause confusion to final consumers, country name or place name, etc. which are commonly used may be labelled(US, USA, Swiss, Holland, UK, etc.).

ㅇ Colony or special area which exercises autonomy from state shall use separate country of origin labeling(ex: Hong Kong, Macao, Guam, Samoa Islands, Virgin Islands, etc.).

ㅇ Regional and economic alliance, not each individual country, shall not use such names as country of origin labeling(ex: EU, NAFTA, ASEAN, MERCOSUR, COMESA)

5) Examples for False Labeling of Country of Origin, Misleading Representation, etc.

False labeling of country of origin is clearly discerned as false or true, but misleading representations are difficult to be discerned because allowance range is determined on case by case basis. Some of examples for false labeling or misleading representations are as follows.

ㅇ Marking country of origin of fabric on clothing : Fabric made in England

ㅇ Marking exporting country of raw materials only : Material, imported from France

ㅇ Where simply marked with Italy/Japan, etc.

ㅇ Where marked with country name, etc., not actual country of origin, displaying Imported from France, Licensed by US, etc.

ㅇ Where country of origin marking is replaced by national flag of a country which isn't actual country of origin

■ Regulations for False Labeling of Country of Origin, etc.

Even though country of origin labeling isn't compulsory, once it was marked on products, labeling which may cause misunderstanding or misleading may be restricted stringently.

As for Japan, regulations for false labeling, etc. of imported goods are specified by the Customs Act, and false labeling, etc. of exported goods are specified by the Export and Import Transaction Act.

1) Regulations for False Labeling of Imported Goods, etc. by the Customs Act

Regulatory goods by the Customs Act refer to <foreign goods which are falsely labelled country of origin directly or indirectly, or misleadingly labelled country of origin>, whether consumer products or raw materials.

The Customs may instruct the selection of options among the cancellation of labeling, or correction of labeling, or return of relevant goods which contain false labeling or misleading representations(Article 71 and Article 78 of the Customs Act). In addition, in the case where an import declarant fails to abide by such instruction, the relevant goods shall be forfeited for separate storage(Article 78), and shall be cancelled its false or misleading labeling and auctioned off(Article 88).

2) Export Regulations for False Labeling by the Export and Import Transaction Act

The Export and Import Transaction Act specifies export transaction of goods with false country of origin labeling as one of four unfair export transaction types, and if found to violate such regulations, under this Act, the Minister of Economy, Trade and Industry may give an order for less than 1 year-long export suspension(Article 4).

In the case where exported goods with false country of origin labeling are found, the names of country and place for such goods shall be cancelled, corrected, and such goods shall represent brand name and country of origin together. Labeling which is able to be removed easily after import clearance shall not be allowed.

3) Export Regulations for False Labeling by the Foreign Exchange and Foreign Trade Act

Under the Foreign Exchange and Foreign Trade Act, the Minister of Economy, Trade and Industry may prohibit export of goods with false country of origin labeling, and an export who exported such goods without an approval from the said Minister shall be subjected to punishments such as imprisonment or penalty.

4) Regulations by the Unfair Competition Prevention Act

The Unfair Competition Prevention Act specifies false country of origin labeling and misleading representations of sources as the one of unfair competitions, and expectant victims who may be infringed on the interests of business may request such infringer to suspend the relevant behaviors and take measures to prevent them. Such infringer is liable for damages.

5) Regulations by the Act against Unjustifiable Premiums and Misleading Representations

This Act prohibits unjust labeling in transactions of goods and services, designated by the Fair Trade Commission, and specifies that operators who violated such regulation shall discontinue such behaviors, or take measures to prevent recurrence.

In addition, if fair competition rule(labeling rules) has been established based on above Act, sanctions such as warning action, the imposition of penalty, etc. may be imposed to false country of origin labeling. etc.

■ Rules of Origin

☉ Outline

Criteria is required to determine country of origin to force place of origin(country of origin)labeling, and to discern false labeling, misleading representations, etc.

However, unified rules of origin(specially, country of origin) don't exist over the world. Nevertheless, it's very important to determine country of origin of export-import goods not only for the benefits of countries but the benefits of exporters or importers the concerned. Accordingly, every country needs to determine each own criteria, or through international treaties.

Rules of origin may vary depending on whether for preferential treatment purpose according to country of origin, and the purpose of regulatory Acts, terms of agreement between nations, characteristics by item. Rules of origin which are generally used under the WTO convention are as follows. These rules are well reflected in various Acts such as the Customs Act of Japan.

☉ Wholly obtained goods rule

According to the rule, the country where a good has been wholly obtained or produced shall be country of origin of such goods(for example, minerals, plants, marine products, etc. which are caught and gathered in a country).

☉ Substantial Transformation rule

In the case where more than two countries are involved in production, a country which made substantial transformation to the relevant goods shall be recognized as country of origin. Sub-criterion is as below.

1) Change in Tariff Classification rule

Under this rule, the change in HS code is recognized as substantial transformation. But, there is a problem that the number of code unit which may be recognized as substantial transformation may vary depending on countries, but as for Japan, change in 4 units of HS code is recognized as substantial transformation(ex: change in 6 units for Korea).

2) Value added rule

As for specific items, the value added to a good through its procurement, production, processing, etc. may become criteria to determine whether a substantial transformation happens. Detailed percentage of value added to be qualified as country of origin may be different depending on each item.

3) Specific Process rule

For specific items, when specific manufacturing or processing operation is applied to non-originating materials, the goods produced by such materials are qualified as originating goods even though there isn't any change in HS code. Textile products, alloys, metal processing, etc. are influenced by this criteria.

■ Others

It's difficult to gain clear understanding on country of origin labeling system in Japan.

The most desirable way in trade with Japan is to conduct prior-research on whether relevant items are subject to compulsory country of origin labeling at the phase of domestic distribution, or whether relevant items are subject to the terms of fair competition rule, and to represent country of origin in an authentic and exact manner as possible as you can.