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I would like to broadcast IINO san’s Logistics Radio.
Today, I would like to talk about, “Japan Fair Trade Commission considers the issue of tariff refunds to be problematic.”
Daily Logistics Radio by IINO san in 30th May 2022
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Customs Agents’ Advance Payment of Customs Duties
JFTC, Japan Fair Trade Commission, in its survey of transactions between shippers and logistics providers released last week, warned that the practice of shippers having customs agents advance customs duties and consumption taxes may lead to problems under the Antimonopoly Law.
The practice of paying customs duties and consumption taxes in advance has long put pressure on the management of customs agents.
There is a growing momentum among the parties concerned to utilize Japan Fair Trade Commission’s document in negotiations with shippers to dispel this bad practice.
Burden on Customs Agents
For customs agents, the burden of collecting customs duties on behalf of importers is very heavy.
The period from payment to collection can take from several weeks to several months, and depending on the company, the monthly payment can range from millions to tens of millions of dollars.
Shift from Advance Payment
Although there has been a recent improvement mainly between major shippers and major customs agents, according to a survey conducted last year by Japan Customs Brokers Association, the percentage of customs agents that make advance payments for customs duties and other charges has reached 89%.
While this is a business practice that customs agents have no choice but to adopt in order to compete with other companies, one major customs agent has taken the time to lobby shippers to pay in advance.
The company has been promoting the use of real-time account transfers, in which customs duties and other payments are automatically made from a pre-designated general account.
An official said, “We were fortunate to have a good customer base. However, it is not difficult to imagine that it is difficult depending on the commercial products and customers.”
A representative of a medium-sized customs agent said enthusiastically, “I have never heard of any other industry forcing customers to pay taxes in advance. We would like to expand our campaign to eliminate this old and evil practice.”
Problem of Replacement
JFTC is stepping up its monitoring of violations of the Anti-Monopoly Law and the Subcontract Law in response to government measures taken last December to pass on higher energy costs, raw material costs, labor costs, and other costs.
According to JFTC, if a shipper and a logistics provider agree to make a payment in advance and there is no “direct benefit” to the logistics provider from an objective view of the transaction, for example, by obtaining interest from the shipper for the period until the logistics provider collects the payment in advance, it may lead to problems.
Customs clearance services are difficult to differentiate, so some contractors may take work on a replacement basis.
However, this is not good business practice.
Need for Change
Personally, I believe that, essentially, this is where digitalization needs to come in first.
I believe that general trade works is a commodity.
Assigning and declaring HS Codes, this kind of work is very difficult to differentiate.
An Israeli start-up company previously informed me that they have created a customs clearance system that uses AI to assign HS Codes.
I think this kind of trend will become mainstream in the future.
As mentioned in the article, it is essentially paid by the importer, and customs agents are not banks.
Considering tax advances from the beginning and using the cash flow to do business is wrong, and is not a viable business.
It is not a viable business because it does not generate value.
The logistics industry is an old industry, so I would like to see improvements in this aspect.
That’s all for today. Thank you.
