86/42
FOR IMMEDIATE RELEASE
October 6, 1986
STATEMENT BY AMBASSADOR YEUTTER ON JAPAN TOBACCO
The United States and Japan have reached an agreement on the importation and sale of U.S. tobacco products in Japan that will reduce the burden on U.S. firms of Japanese trade practices which have restricted the access of the U.S. tobacco industry to the Japanese market.
For many years, U. S. cigarette exporters have faced significant barriers in the Japanese market, including high tariffs and excise taxes, discrimination in favor of the Japanese tobacco monopoly regarding the payment of excise taxes, and restrictions on distribution. Despite intensive efforts by U S exporters, who are highly competitive in other countries, the U.S. market share has remained at less than three percent as a result of those barriers .
Last year, the President instructed me to initiate an investigation, under Section 301 of the Trade Act of 1974, of the practices that restrict entry of U.S. tobacco products into the Japanese market. Following lengthy negotiations with the Government of Japan, we have reached an agreement that will accomplish the President's goal of obtaining increased access for U.S. tobacco firms to Japan's $21 billion retail cigarette market. We appreciate the responsiveness of the Government of Japan on this issue, and all the effort that was expended to find a solution acceptable to both sides.
The Government of Japan will suspend the import tariff, reducing it to zero. Japan has also agreed to end the discriminatory deferral of excise tax payments by its tobacco monopoly by April 1, 1987. In addition, the Japanese Government will modify its price approval system to shorten the application period and make the process transparent and virtually automatic. The Japanese Government also is committed to address certain distribution problems which remain of concern to us.
The President has instructed that the pending Section 301 proceeding be suspended until the agreement is fully implemented, at which time the case will be terminated.
October 6, 1986
His Excellency Nobuo Matsunaga
Ambassador of Japan to the United States
Embassy of Japan
Washington, D.C. 20008
Dear Ambassador Matsunaga:
I would like to acknowledge the receipt of your letter of today's date on the tobacco issue that states that:
1. The Government of Japan intends to take the measures stated below:
(1) The Government of Japan intends to take measures, subject to necessary domestic procedures, to reduce the tariff rate on manufactured cigarettes to zero as from April 1, 1987. The Government of Japan has no intention to bind the new tariff rate.
(2) (a) With regard to the fixed retail price approval system, the Government of Japan intends to introduce a formula for automatic approval as described in the Attachment so that in practice the system will be managed in a manner consistent with the GATT anti-dumping code.
(b) The Government of Japan intends to shorten the minimum application period from 60 days to 30 days effective as from January 1, 1987. Confirmation by customs of the CIF price also will be given speedily enough to make the price change become effective in thirty days. The Government of Japan expects the Tobacco Haiso to take necessary steps based upon agreement between the applicant and the Tobacco Haiso to facilitate flexible price changes under the new system with the shortened application period.
(c) After reviewing the actual operation of the measures in this subsection for a period not to exceed two years, if there should be found any problems, the Government of Japan is ready to examine the system, including its institutional aspects, such as the question of introducing a prior notification system.
(3) (a) The Government of Japan intends to terminate, subject to necessary domestic procedures, at the end of FY 1986, the transitional measure for JTI on the time limit for its excise tax payment.
(b) The Government of Japan will ensure smooth approval for an additionl 30 days beyond the maximum period normally allowed under the law for the excise tax payment when an application for such approval satisfies the requirements under the law.
2. The Government of Japan notes that the parties concerned have addressed the distribution problems, and supports the agreed upon new distribution arrangements. The Government of Japan expects that distribution issues should be resolved in accordance with the arrangement on fair and mutually advantageous commercial terms, and will continue to encourage such resolution.
3. The Government of Japan understands that the Government of the United States, in response to the intention of the Government of Japan described herein, suspends immediately the case under Section 301 of the "Trade Act of 1974", and will terminate the case when the Government of Japan implements the measures stated herein.
4. The statement of the Government of Japan in this letter shall, by no means, affect rights and obligations of the two countries under the GATT, and shall be consistent with laws and regulations in the two countries.
5. After implementing the measures stated herein, the Government of Japan is willing to have consultations with the Government of the United States with respect to problems, if any, in relation to the implementation. Such consultations should begin promptly and, should these consultations identify any problems, they should be resolved in a timely manner.
6. The above measures constitute the final settlement of the tobacco issue so long as their implementation is and continues to be carried out as stated in this letter.
Formula
(applied retail price) _> (import price, in normal case cif) / (customs
duty, if any) /
(excise tax) /10% (applied retail price)
Note: the above formula is to be used to judge whether the applied retail price is unreasonably low or not. Any proposed retail price satisfying this formula will be automatically approved by the Ministry of Finance. Approval also may be given on a case-by-case basis, even if the applied retail price does not satisfy the formula.
Sincerely,
[signature]
Clayton Yeutter
October 6, 1986
Mr. Muneo Ohashi
Director General
Customs and Tariff Bureau
Ministry of Finance
Tokyo, Japan
Dear Mr. Ohashi:
I am writing to seek your confirmation that the Government of Japan maintains the same interpretation as the United States Government regarding one element contained in the letter of Ambassador Matsunaga to Ambassador Yeutter of October 6, 1986 regarding Japan's imports of manufactured tobacco products. Paragraph 3(b) of that letter states that "the Government of Japan will ensure smooth approval for an additional 30 days beyond the maximum period normally allowed under the law for the excise payment when such an application for such approval satisfies the requirements under the law.
My Government understands that the relevant authority in your Government will grant to an importer an additional period of up to 30 days for payment of the excise tax beyond the 30 days normally permitted when the importer provides a statement satisfying such authority that there is a delay in payment by Tobacco Haiso Incorporated or other distributors of the sales proceeds beyond the first thirty day period. We understand further that proof of such delay in sales proceeds payments will not require undue paper work or administrative burdens on the importers.
Sincerely yours,
[initial]
Michael B. Smith
Ambassador Michael B. Smith
Deputy United States Trade Representative
Office of the United States Trade Representative
Washington, D.C. 20506
Dear Ambassador Smith:
I am writing in response to your letter of October 6, 1986 regarding the deferral of excise tax payments for imported cigarettes pursuant to Ambassador Matsunaga's letter of October 6, 1986 to Ambassador Yeutter. I am happy to confirm that the Ministry of Finance will grant an additional period of up to 30 days for payment of the excise tax beyond the 30 days normally permitted when the importer provides a statement satisfying the relevant authority that there is a delay in the payment by Tobacco Haiso Incorporated or other distributors of the sales proceeds beyond the first thirty day period. I also confirm that satisfactory proof of such a delay in sales proceeds payments will not require undue paperwork or administrative burdens on the importers.
Sincerely yours,
[signature]
Muneo Ohashi
Director General
Customs and Tariff Bureau
Ministry of Finance