While ample attention has been paid to BRIC countries and a new focus is developing on MINT countries the fact is that Japan has long been one of America’s largest trading partners. In 2012 U.S. exports to Japan totaled US$116 billion and with a combined 2 way trade volume of $204 billion, Japan stands as America’s 4th largest trading partner as well as the 4th largest market for U.S. exports.
As we had highlighted in this recent post Japan is the 3rd largest market for U.S. medical devices and equipment exports and in fact, according to some estimates may even be the largest market for these U.S. manufactured products. Not surprisingly then, products classified as “Optical and Medical Instruments” account for the largest amount of U.S. exports to Japan. Additionally, U.S. exporters will find strong demand in Japan for aircraft and parts thereof, machinery, electrical machinery and meats. Collectively these five categories account for the majority of U.S. exports to Japan.
While the value of Japan as an export market has been well documented and established for decades, U.S. exporters need to look beyond market size and pay attention to key aspects of the trade process including logistics infra structure and trade practices and the implications of these matters on landed cost.
As a country with significant land and size constraints, as well as a dearth of natural resources, Japan faces very high costs of real estate and raw materials. As a result costs of warehousing, labor, fuel and other inputs of the logistics process are high. U.S. exporters should be aware of this, especially when selling goods on a Door-to-Door basis. While Japan has excellent infrastructure, services such as trucking are very expensive and can have a significant impact on order profitability.
Similarly, with warehousing, Japan lacks the square footage that American companies are used to and this makes itself evident in terms of high storage costs. U.S. businesses who are required to arrange storage of raw materials or finished goods inside Japan must carefully consider these costs when evaluating the viability of an export sale to this market.
U.S. exporters must also be aware of Japanese customs regulations. While Japan is a great market with significant potential, it has also been traditionally highly protective of its local industries. As a result, exporters must ensure proper compliance procedures are being followed not only by themselves but also by buyers, distributors or their subsidiaries in Japan.
In order to maintain compliance with Japanese customs regulations, U.S. exporters must ensure that their customer has secured the necessary import permits from the Director-General Japanese Customs. Once an import permit has been established, exporters must ensure that all shipments are accompanied by a Commercial Invoice, Bill of Lading or Airway Bill, Certificate of Origin and Packing Lists.
For exporters dealing in goods that are licensed, a copy of such licensing and/or original documentation is required. Similarly, goods that qualify for duty exemptions or rebates should be accompanied by statements of reduction and any supporting paperwork that may apply to WTO trade, non-WTO trade and the General System of Preferences. Failure to comply with these requirements can result in goods being detained or even confiscated upon arrival in Japan which can have a severe impact on order profitability and repeat or long term export sales in the country.
Fortunately, Japan has world class transportation infrastructure. Hence while the cost of doing business may be high, the ability to physically access all major markets exists, and is highly efficient. Japan’s ports, and in particular Yokohama are amongst the biggest in the world in terms of container shipping volume and offer state of the art handling. Japanese airports, similarly boast world class handling, and both Tokyo (Narita) and Osaka (Kansai) are amongst the biggest airports in Asia in terms of cargo throughput.
Japan’s market size and spending power, as well as recent government initiatives to boost consumer and public spending will ensure it’s position as a growth market for U.S. exporters for years to come. With this potential comes a great number of opportunities to meet market need and with nearly four decades of exporting experience to Japan, Crescent Air Freight has consistently ranked amongst the premiere logistics service providers on the U.S. to Japan trade lanes. We welcome the opportunity to put our considerable experience in Japan to work for your export and import business in this dynamic market.