Foreign companies generally sell goods to consumers in Japan in one of two ways:

1. Import the goods into a warehouse in Japan before selling them.
2. Ship the goods directly from overseas to consumers each time an order is placed.

This article explains the first method: importing goods into Japan in advance and selling them through services such as Amazon FBA.

Overview of the Process

1. Who is the Importer

When a foreign company owns the goods and sells them in Japan, the foreign company itself should generally be declared as the importer.

If a third party is declared as the importer, the foreign company may be unable to claim an input tax credit for the import consumption tax, even if it ultimately bears the cost of that tax.

2. Appoint an ACP

A foreign company without an address or office in Japan must appoint an Attorney for Customs Procedures, or ACP, in Japan when it intends to act as the importer itself.

The ACP serves as the foreign company’s domestic point of contact with Japan Customs. Its responsibilities include responding to inquiries from Customs, receiving and submitting documents, and handling administrative matters related to the payment of customs duties and import consumption tax.

In October 2023, the meaning of the “person intending to import goods”—that is, the party that must make the import declaration—was clarified under Japan’s customs rules. This clarification confirmed that foreign companies acting as importers need to appoint an ACP.

Yamaguchi Consulting has been involved in consumption tax compliance for approximately 600 foreign companies annually. Based on this experience, only a small proportion appear to have appointed an ACP. Many instead use the name of a third party in their import declarations.

A foreign company that does not appoint an ACP and is not declared as the importer cannot generally claim an input tax credit or refund for the import consumption tax. This results in an economic loss. Because import consumption tax is generally 10% of the customs value of the imported goods, the amount can be substantial.

3. A Freight Forwarder Transports the Goods to Japan

Foreign companies usually engage a freight forwarder to arrange international logistics.

A freight forwarder coordinates services such as overseas pickup, export customs clearance, sea or air freight, import customs clearance, and domestic delivery. Major examples include Nippon Express (NX), Kintetsu World Express, Yusen Logistics, and DHL Global Forwarding.

The freight forwarder may not perform every part of the process itself. However, it generally serves as the foreign company’s primary point of contact for overall logistics operations.

4. A Customs Broker Files the Import Declaration

When the goods arrive at a Japanese port or airport, they are first placed in a bonded area. They cannot be freely removed and distributed within Japan until an import declaration has been filed and import permission has been granted.

The import declaration is usually prepared and filed with Customs by a licensed customs broker. If a major freight forwarder has been engaged to handle the entire logistics process, the declaration may be filed by its in-house customs clearance division or an affiliated customs broker.

5. Customs Duties and Import Consumption Tax Are Paid

Once Customs has completed its examination and the importer has paid the applicable customs duties and import consumption tax, import permission is granted. The goods can then be removed from the bonded area.

The importer—the foreign company—is legally liable for the taxes. In practice, however, a freight forwarder or customs broker will often temporarily advance payment and subsequently invoice the importer. This payment arrangement does not change the identity of the importer.

Many foreign companies currently appear to import goods without appointing an ACP. In such cases, a third party residing in Japan may be named as the importer and may pay customs duties and import consumption tax through the customs broker.

6. The Goods Are Delivered to a Warehouse in Japan

After import permission has been granted, a domestic carrier transports the goods to an Amazon FBA fulfillment center or a third-party logistics warehouse.

3PL stands for “third-party logistics.” A 3PL provider may handle storage, inspection, labeling, repackaging, shipping, and returns.

When goods must be prepared in accordance with Amazon’s specific delivery requirements, they may first be sent to a 3PL warehouse rather than being delivered directly to an Amazon fulfillment center.

7. The Goods Are Sold to Consumers in Japan

When Amazon FBA is used, the goods are registered at an Amazon fulfillment center. Once a consumer places an order, Amazon handles functions such as payment processing, delivery, and returns.

However, even when Amazon handles logistics and payments, the foreign company generally remains the seller of the goods. The foreign company therefore remains responsible for matters such as product quality, product safety, labeling requirements, and compliance with Japanese consumption tax.

8. File Japanese Consumption Tax Returns

When a foreign company sells goods in Japan, those sales are generally subject to Japanese consumption tax.

However, determining whether the foreign company is required to file and pay consumption tax requires careful analysis. The Japanese consumption tax rules contain general exemptions, exceptions to those exemptions, and special provisions applicable to foreign businesses. Please refer to this article for further details.

When Amazon FBA is used, Amazon’s policies may require the seller to register as a Qualified Invoice Issuer. By contrast, when a foreign company sells directly to consumers without using Amazon, a small business with annual sales of JPY 10 million or less may reduce its tax burden by not registering as a Qualified Invoice Issuer. Please refer to this article for further details.

To claim an input tax credit or refund for import consumption tax, the foreign company must appoint an ACP and be properly declared as the importer.

9. Appoint a Tax Agent

A foreign company without an office in Japan must appoint a tax agent in Japan when it is required to undertake Japanese tax procedures.

While an ACP serves as the point of contact with Japan Customs, a tax agent serves as the point of contact with the Japanese tax authorities. A licensed tax accountant often acts as the tax agent, although the tax agent is not legally required to be a licensed tax accountant.

Summary

When a foreign company holds inventory in Japan and sells goods to Japanese consumers, the following structure is commonly used:

A freight forwarder coordinates the overall logistics process, while a customs broker prepares and files the import declaration in the foreign company’s name. An ACP serves as the foreign company’s domestic point of contact with Japan Customs. After importation, Amazon or a 3PL provider stores and delivers the goods. A tax agent and a licensed tax accountant support the foreign company’s compliance with Japanese consumption tax.

The most important practical point is to ensure that the foreign company itself is properly declared as the importer.

If the wrong party is named as the importer, the foreign company cannot claim an input tax credit for the import consumption tax, potentially leaving it with a substantial, unrecoverable tax cost.