Memorandum on United States Tobacco Exports to Japan
October 6, 1986
for the United States Trade Representative
Determination Under Section 301 of the Trade Act of
to Section 301 of the Trade Act of 1974, as amended (19 U.S.C. 2411), I have
determined that the agreement between the Governments of Japan and the United
States of America is an appropriate and feasible response to the policies and
practices of the Government of Japan with respect to the manufacture,
importation and sale of tobacco products in Japan. These policies and practices
have been investigated by the United States Trade Representative in response to
his initiation of an investigation on September
at my direction.
direct you as the United States Trade Representative to notify the Government
of Japan of my approval of the agreement and to take any actions necessary to
implement and monitor it. Since the Government of Japan must take steps to
implement the agreement, I direct that the Section 301 proceeding on Japan's practices with
respect to manufactured tobacco products be suspended until the agreement is
fully implemented, at which time I direct you to terminate the proceeding.
years the United States Government has expressed concern about the Government
of Japan's trade barriers that have unfairly restricted American cigarette
producers' access to the Japanese market. Despite some improvements, the market
share of U.S. cigarette exporters in Japan remains less than three
percent despite their competitiveness. Looked at as a whole,
the Japanese Government's laws, policies and practices insulate an inefficient
monopoly from competition and shift to imports and Japanese consumers the costs
of maintaining a highly uncompetitive domestic tobacco leaf industry.
The specific unfair Japanese Government practices include: (1) the combination
of a significant trade barrier (a 20 percent tariff and a high, largely ad valorem, excise tax) and an unreasonable, absolute
investment barrier (a manufacturing monopoly), (2) the current discriminatory
deferral of excise tax payment favoring the Japanese tobacco monopoly, (3) a
price approval system that protects the Japanese tobacco monopoly against
foreign competition, and (4) discriminatory or unreasonable practices by the
government-controlled distribution instrumentality. All of these unfair
practices burden or restrict U.S. commerce.
of the Governments of Japan and the United States held a series of
consultations concerning increased access to the Japanese cigarette market. As
a result of these consultations, we reached an agreement regarding actions that
Japan will take to improve
our firms' access. The Government of Japan will suspend the tariff, reducing it
to zero. It also will end the discriminatory deferral of excise tax payment by
its tobacco monopoly by April 1, 1987, and modify its price
approval system to shorten the application period significantly and to make the
process transparent and virtually automatic. In addition, the
government-controlled distribution instrumentality has satisfactorily addressed
the major existing distribution problems. When implemented, these measures
should accomplish our goal of obtaining increased access for U.S. firms to Japan's cigarette market.
determination shall be published in the Federal Register.
with the Office of the Federal Register, , October
The memorandum was printed in the ``Federal Register'' of October 8.