Hello, this is Hamamoto from TIMEWELL.
Today I want to take a slightly different approach. Rather than introducing a tech service, I want to address a practical topic for those involved in procurement at manufacturers and trading companies: "Japan's import trade management."
When people hear "trade management," most think of security trade control (export control) — the strict regulations designed to prevent technology and products with potential military applications from reaching countries of concern. This is a topic that appears regularly in the news and is always covered in internal compliance training.
But Japan also has an extremely strict and complex trade management framework for importing components, raw materials, and finished goods from overseas. This is a fact that is surprisingly underappreciated.
"I found a good, affordable component from an overseas supplier — let me order some samples to check." This kind of action happens routinely in procurement. But lurking behind it can be significant compliance risk. This article explains the full picture of "import trade management" — which tends to be overshadowed by export controls — along with the pitfalls procurement professionals commonly fall into and the impact of the latest geopolitical risks.
Why Import Trade Management Deserves Attention Now
The increasing complexity of global supply chains and rising geopolitical risk have dramatically changed what is required of procurement professionals. The role has shifted from pure cost reduction and lead time management to managing compliance across entire supply chains.
In particular, each country's trade regulations have been changing at a dizzying pace in recent years from an economic security perspective. A component that has been imported without issue can suddenly become a regulated item overnight and get detained at customs. This kind of situation is no longer unusual.
Japan's import trade management is built around two core laws — the Foreign Exchange and Foreign Trade Act (FEFTA) and the Customs Act — interwoven with dozens of related statutes in a complex framework. This complexity is precisely what leads to a steady stream of well-intentioned "inadvertent violations." In my view, this overly complex legal structure is the biggest bottleneck.
The Full Picture of Japan's Import Trade Management: The Dual Structure of FEFTA and the Customs Act
To understand the basic structure of import trade management, it helps to grasp two frameworks: regulation under FEFTA (via the Import Trade Control Order) and other-law verification under the Customs Act.
Regulation Under FEFTA (Import Trade Control Order)
FEFTA is the foundational law governing Japan's external transactions. Under the Import Trade Control Order based on this law, importing specific goods requires advance approval or quota allocation from the Minister of Economy, Trade and Industry [1].
The system is divided into the following schemes:
| Scheme | Overview | Examples of covered goods |
|---|---|---|
| Import Quota (IQ) | A system that caps import volumes or values to protect domestic industries | Fishery products (herring, squid, etc.), ozone-depleting substances |
| No. 2 Approval (Specific Area Restrictions) | Regulates imports from specific countries of origin or ports of loading | Alcoholic beverages, crude oil, timber, and machinery from Russia (in principle prohibited) |
| No. 2-2 Approval (Global Restrictions) | Regulates imports of specific goods regardless of origin | Weapons, explosives, specific chemical substances, CITES-regulated species, Basel Convention waste, etc. |
| Prior Confirmation and Customs Confirmation | A scheme under which approval is not required when specified documents are submitted in advance or at the time of customs clearance | Tuna, crab, rare wild flora and fauna, pesticides, etc. |
Procurement professionals should pay particular attention to No. 2 Approval and No. 2-2 Approval. As discussed below, economic sanctions against Russia have dramatically expanded the categories of goods covered by No. 2 Approval. When importing chemical substances or specialized materials, a prior determination of whether No. 2-2 Approval is required is essential.
"Other-Law Verification" Under the Customs Act (Article 70)
In import management practice, the area most frequently encountered and most prone to problems is this other-law verification.
Article 70 of the Customs Act provides that when another law requires a permit, approval, or the like in connection with an import, the importer must present proof to the customs office and obtain confirmation — otherwise the import will not be permitted [2].
Even if no violation of FEFTA or the Customs Act itself exists, goods cannot clear customs if they do not meet the standards established by various laws designed to protect the safety, sanitation, and environment of Japan. These laws are collectively referred to as "other laws."
The main other laws verified at customs are as follows:
| Law | Purpose of the regulation | Examples of covered goods |
|---|---|---|
| Food Sanitation Act | Protecting public health; preventing sanitation hazards arising from food and drink | All food and beverages, food additives, tableware, cooking utensils, baby toys |
| Plant Protection Act | Preventing the entry and spread of harmful organisms | Plants, seeds, fruits, timber, used agricultural machinery |
| Pharmaceuticals and Medical Devices Act (PMD Act) | Ensuring the quality, efficacy, and safety of pharmaceuticals, etc. | Pharmaceuticals, quasi-drugs, cosmetics, medical devices |
| Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc. (Chemical Substances Control Act) | Preventing environmental pollution from chemical substances | New chemical substances, Class I specified chemical substances, etc. |
| Industrial Safety and Health Act | Ensuring the safety and health of workers | Products containing asbestos, hazardous substances |
You might think, "We're a machinery manufacturer — the Food Sanitation Act and the PMD Act don't apply to us." But if you import tumblers or tableware from overseas as employee gifts, the Food Sanitation Act applies. And if a sensor incorporated into an industrial robot is also used as a component in medical devices, you may be asked to demonstrate compliance with the PMD Act.
Identifying in advance which laws cover what you are procuring and obtaining the necessary permits and certificates from overseas suppliers before shipping — this is the lifeline of smooth procurement operations.
How to solve export compliance challenges?
Learn about TRAFEED (formerly ZEROCK ExCHECK) features and implementation benefits in our materials.
Examples of "Inadvertent Violations" That Happen in Procurement
Now that the complexity of import trade management is clear, let's look at some examples of failures that actually occur in procurement practice. These are not someone else's problem.
Food Sanitation Act Violation on Sample Imports
A procurement professional at an electronics manufacturer found some novelty mugs at an overseas trade show and tried to import just 10 as samples to check their quality. Thinking the small quantity meant no special procedures were required, the samples were sent by international courier. They were detained at Japanese customs for requiring a declaration under the Food Sanitation Act.
Because tableware comes into contact with the mouth, it must be inspected to confirm that no harmful substances are present in the materials or coatings. Ultimately, the cost and time for inspection was deemed prohibitive and the goods were disposed of (destroyed).
Plant Protection Act Violation on Packaging Material (Wood)
When a company imported precision components from an overseas supplier, the components themselves had no issues. The problem was the wooden crates used to protect the components — they were caught by the Plant Protection Act.
Untreated wood can harbor pests, so wood packaging must have been heat-treated or fumigated in accordance with international standards (ISPM No.15) and marked with the appropriate stamp. Because the wooden crates lacked this stamp, import was refused, and the company incurred significant additional cost and delay for fumigation at the port. As a side note: wooden crate problems really are frequent. Telling your suppliers about wood packaging treatment standards in advance is all it takes to prevent this — worth keeping in mind.
Chemical Substances Control Act Oversight
To develop a new product, a company imported a new adhesive from an overseas startup. They obtained the MSDS (Material Safety Data Sheet) and confirmed the composition, but at the time of customs clearance it emerged that a trace additive contained in the adhesive qualified as a new chemical substance regulated under Japan's Chemical Substances Control Act. Because the required prior notification and review had not been completed, import was refused, resulting in a development schedule delay of several months — a disaster.
What these cases share in common is that procurement professionals focused solely on the specifications and price of the goods, and lacked the perspective of how those goods are treated under Japanese law.
Geopolitical Risk and the Latest Developments in Import Management: The Ripple Effects of Russia Sanctions
In recent years, the environment surrounding import trade management has changed dramatically. The primary driver is economic sanctions accompanying geopolitical risk.
Following Russia's invasion of Ukraine in 2022, Japan has enacted powerful economic sanctions against Russia in lockstep with Western nations. The impact extends not only to exports but also to imports.
Using the No. 2 Approval (Specific Area Restrictions) framework under FEFTA, imports of a wide range of goods originating in Russia are in principle prohibited. The covered categories include alcoholic beverages (vodka, etc.), crude oil and petroleum products, timber (chips, logs, veneer), machinery and electrical machinery, and non-industrial diamonds.
What procurement professionals must be aware of is that even if you are not importing directly from Russia, goods originating in Russia are subject to the restrictions. Timber imported via a third country, or products processed in a third country, may still be covered if the raw materials originated in Russia.
Tracing back through the supply chain to prove the true origin is extremely difficult work. But if this diligence is neglected and a sanctioned item is imported, the result is a serious legal violation.
Penalties for Violations
"I didn't know" and "it was an oversight" are not defenses in the eyes of the law. Companies and individuals who violate import trade management laws face severe penalties.
For importing goods without the required FEFTA approval, the criminal penalties can include imprisonment of up to 10 years, or fines of up to 1 billion yen for corporations or up to 30 million yen for individuals [3]. Administrative sanctions can include an import/export prohibition order of up to three years.
Falsifying documentation for other-law verification under the Customs Act is also a Customs Act violation, subject to imprisonment of up to five years or fines of up to 10 million yen [4].
One point that is often overlooked: even if customs procedures are delegated to a customs broker (freight forwarder), ultimate legal responsibility lies with the importer (the consignee). A freight forwarder's mistake does not absolve the importer of responsibility. If you are importing under your company's name, you bear all compliance responsibility. Maintaining this awareness is the starting point.
Compliance Measures Procurement Professionals Should Be Implementing
So what can be done to navigate the complex net of import trade management safely and smoothly? I believe the following four points are key.
Thoroughly Conduct Classification Starting from HS Codes
The starting point for identifying which laws apply to goods you are importing is the HS code (Harmonized System code). The HS code is a universally used product classification number. Cross-referencing against Japan Customs' published tariff schedule provides not only the applicable tariff rate but also a guide to which other laws may be relevant. When importing a new product category, always build a process into your workflow to first identify the HS code and then identify the associated regulations.
Dense Communication with Suppliers and Proactive Information Requests
Other-law verification requires detailed information from overseas suppliers — composition lists, manufacturing process descriptions, quality certificates, and more. Clearly communicate before placing an order that "these documents are required to import to Japan" and make this a condition of the transaction. The ability to decline procurement from suppliers who cannot cooperate is what prevents downstream problems.
Using Customs' "Prior Consultation System"
When in doubt, do not interpret things on your own — use the customs prior consultation system. This system allows you to query customs in advance about the HS code, tariff rate, and other-law applicability of goods you plan to import and receive an official determination. Using this system can prevent problems at the time of customs clearance.
Ensuring Supply Chain Transparency (Traceability)
As the Russia sanctions example illustrates, the importance of proving origin has never been greater. Building a framework capable of identifying the source of raw materials not just at the primary supplier (Tier 1) level but back to Tier 2 and Tier 3 suppliers is an urgent priority. Honestly, this traceability work is a high bar for small and medium-sized enterprises — but counterparty demands are becoming stricter every year, and I believe it is a path that cannot be avoided.
Addressing the Complexity of Trade Management with Technology
Both import and export management create a significant burden on those responsible, given the complexity of the regulations and the need to keep up with frequent amendments. TIMEWELL's export control AI agent TRAFEED (formerly ZEROCK ExCHECK) uses AI to support efficient export classification and regulatory monitoring.
If you are looking to integrate your import and export management frameworks, or improve your ability to keep up with regulatory changes, please feel free to reach out.
Closing Thoughts
Import trade management can look like an unglamorous, behind-the-scenes function. But when a legal violation occurs, a company's reputation collapses and the entire supply chain faces potentially fatal disruption.
Procuring legally and safely matters just as much as procuring cheaply and quickly. That is the core of what modern procurement professionals are expected to deliver. I hope this article serves as a useful prompt in your day-to-day work and contributes to building more resilient, compliance-strong supply chains.
References
[1] Ministry of Economy, Trade and Industry, "List by Import Approval System," https://www.meti.go.jp/policy/external_economy/trade_control/04_kamotsu/02_import/import_seido.html
[2] Japan Customs, "1801 Overview of Import-Related Other Laws Verified at Customs (Customs Answer)," https://www.customs.go.jp/tetsuzuki/c-answer/imtsukan/1801_jr.htm
[3] Thomson Reuters, "Why Do FEFTA Violations Happen? Understanding the Causes and Appropriate Export Management Frameworks from Case Studies," https://insight.thomsonreuters.co.jp/business/resources/resource/violate-foreign-trade-law
[4] Japan Customs, "Customs Act Penalty Provisions," https://www.customs.go.jp/shiryo/batsujo.htm