As novel coronavirus infections continue to rise in the People’s Republic of China, there are growing concerns over the impacts of the coronavirus on Japan’s production activities. In light of this, the Ministry of Economy, Trade and Industry (METI) will request, through 1,129 related industrial associations, that main subcontracting companies not force their subcontracting SMEs to accept improper trade conditions and to take appropriate care in trading with them against the backdrop such impacts of the epidemic.
1. Overview
As novel coronavirus infections continue to rise in China, the resulting impact on trade among Japanese companies may expand not only to main subcontracting companies but also to their subcontractors across Japan, such as negative impacts on supply chains in the Japanese manufacturing industry caused by the stagnation of production activities in China or the imports of machine parts and other equipment behind schedule.
To address this situation and minimize the negative impacts on subcontractors and other SMEs that may be particularly vulnerable to such adverse conditions, METI, under the name of the METI Minister, will request the representatives of the 791 industrial associations to encourage main contracting companies to take necessary care of their subcontractors in order to prevent main contracting companies from forcing such subcontractors to accept improper trading conditions (see the Appendix).
From February 14, 2020, METI will also start, in sequence, requesting the same of representatives of 338 industrial associations under the jurisdiction of other ministries and agencies in joint names with the Competent Ministers.
2. Details of the request
- Main subcontracting companies should take into full consideration the importance of not imposing burdens on their subcontractors in accordance with the occurrence of the novel coronavirus, including to not [i] set subcontract proceeds at a price lower than the price ordinarily paid for the same work or [ii] demand quick delivery of orders or commission services to procure parts without paying appropriate costs involving the delivery or services.
- If their subcontractors are affected by the novel coronavirus and they intend to continue or resume their business activities, main subcontracting companies should strive to take care in continuing the conventional trading relationships with such subcontractors as far as possible or placing orders with them on a priority basis.
Reference:
The Act on the Promotion of Subcontracting Small and Medium-sized Enterprises aims to promote subcontractors’ business activities in cooperation with their main subcontracting companies. The preamble explaining the standard activities for such promotion, which is stipulated under the Act, defines provisions for cooperation that main subcontracting companies should provide and those for efforts that subcontractors should make.
