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Saturday, March 25, 2006

New rules to doom used electrical goods shops?

METI law will hold retailers of pre-'01 products as liable for safety as manufacturers


By YUMI WIJERS-HASEGAWA and ERIKO ARITA
Staff writers

The phones at the Ministry of Economy, Trade and Industry have been ringing off the hook since early February when it suddenly and quietly changed its enforcement of a 2001 law on electrical appliance safety.

The change has outraged the 300,000 businesses nationwide that trade in secondhand electrical goods, and METI has been fielding more than 100 calls a day from people demanding to know why, as of April 1, retailers can no longer sell old electrical products without special safety certification.

After a five-year moratorium, the Electrical Appliance and Material Safety Law now requires that 259 types of electrical products, including most home appliances, only be sold if they meet METI's Product Safety of Electrical Appliance and Material (PSE) standards.

Manufacturers have been aware that restrictions were coming and, for the past five years, have put PSE stickers on most of their products.

However, this has not been the case for shops selling secondhand goods.

Without warning, METI on Feb. 10 put a notice on its Web site announcing that products made before April 2001 and circulating in the secondhand trade will also be banned from the market if they are not PSE certified. The ministry then began informing retailers of used goods one week later -- giving them little more than a month before the ban goes into effect.

These often small family businesses will still be able to sell used products, but they will have to bear the heavy expense of conducting safety checks and certifying them themselves, and they will be held liable for the safety of items they sell.

The PSE law, enacted five years ago, does not mention old products, and the handling of goods made before 2001 was never discussed when the law was passed.

Impossible demands

"I was astonished when I heard about it from another retailer, especially when I found out how it works," said Koichiro Ogawa, a secondhand dealer in Tokyo's Minato Ward who formed a citizen group to deal with the new rules.

METI's Web site notice says retailers of secondhand goods can only sell electrical products with PSE certification. Electrical products are a large segment of their trade.

While the PSE law allows those retailers to do safety checks on non-PSE products for resale, they must register with METI as manufacturers and bear the same responsibility as the makers for product safety, the ministry said.

The law, introduced partly as a deregulatory step, states that manufacturers can conduct safety checks on products and certify them, as long as they follow government procedures. Under the previous Electrical Appliance and Material Control Law of 1961, state-designated bodies certified the safety of products.

But many used-goods retailers are small, and the new legal procedures are expensive and the process to certify items is labor intensive. On top of that, any breach of the law could mean up to a 100 million yen fine for businesses, and up to 1 million yen for individuals.

METI says, however, that it is simple for secondhand shops to follow the safety check procedures: Just buy the test equipment -- which cost about 500,000 yen each -- and zap each product they sell -- not just a sample model -- with 1,000 volts of electricity to ensure there are no power leaks.

Following the announcement, retailers of used goods and their customers, many of whom are of limited means, lashed out.

"The wish of the poor like us is, at the very least, to be able buy secondhand goods," Yoshihide Irie, a college lecturer who said he lives on 40,000 yen a month and other income from part-time jobs, told a March 9 meeting about the new rules held by the Democratic Party of Japan.

METI claimed it distributed 190,000 pamphlets to manufacturers and large retailers when the law was enacted in 2001. However, the literature did not mention whether the law applied to products made before 2001.

During a March 9 news conference, METI's administrative vice minister, Shuji Sugiyama, said the law was intended to cover old products from the very beginning, although he admitted the government had not publicized that part of the law very well.

Other METI officials said they had believed retailers of used goods were aware of the law's implications.

Hiroshi Kawauchi, a DPJ lawmaker and a strong opponent of the PSE law, has said METI is just trying to bury the fact that it changed the rules recently, causing a situation in which dealers in used goods must assume the same level of safety liability as manufacturers.

How the new rules fit in with other laws is also an issue.

"It has created chaos in connection with other laws, including the Product Liability Law, Patent Law, Trade Mark Law and the Unfair Competition Prevention Law," Kawauchi said.

This is because a shop's safety test on a used product and its resale could violate a trademark or patent held by the manufacturer. And holding the shops responsible for safety could also conflict with the current rules on product liability.

METI has not explained how the PSE law fits in with related laws.

The technical requirements and legal contradictions suggest the law should be for manufacturers only, Kawauchi said.

Safety the real issue?

Although METI has repeatedly emphasized product safety in its explanations of the new rules, Kawauchi said it had no grounds to claim that was the reason for the changes.

"When the old law was revised, its safety provisions were not changed, so safety standards have not been strengthened in any way," he said, adding METI officials stopped mentioning safety in their assertions after he pointed that out.

Kenichi Tanaka, an editor at Asuka/Recycle Bunkasha, an Osaka-based publisher of guidebooks covering shops selling used goods, suspects the PSE law is meant to protect manufacturers.

"If I were to guess (who will profit from the changes), as more and more shops are selling quality (used) products at low prices, makers might be finding it difficult to sell new products," he said, noting that making it harder to sell used products will tip the balance in favor of manufacturers.

The PSE requirements are much easier for manufacturers to fulfill than for small shops.

Mototsugu Goto, an official at appliance maker Fujitsu General, said the simplified process under the PSE law benefits manufacturers.

"Of course, we had machines for the (safety) checks and conducted tests" under the old law, he said, adding the new law will not spell any extra costs or labor for the company.

The law change, however, has put the survival of retailers of used goods in jeopardy. Some have been forced to unload their old products at bargain-basement prices.

Tadashi Sugiyama, who owns two outlets of the Seikatsusoko used-product chain in Tokyo's Adachi Ward, said his shops have sold most of their old TVs, fearing losses once the ban kicks in.

The ban also could have wider economic impact.

It could affect small manufacturers, as many of them put up their electrical equipment as collateral for bank loans. After April 1, banks could assess the non-PSE equipment as valueless.

Ayako Kimura at the Ota Ward branch of the Tokyo Chamber of Commerce and Industry said her organization feels a crisis is brewing.

"Ota Ward has many small factories and family-run businesses. The new law can cause problems for some business with loans," she said.

More confusion

On March 14, METI made another change in the rules, saying it will exclude some "vintage" electrical goods -- although METI has not yet listed them -- from the ban.

METI also announced that for six months, it will offer free safety checks for retailers and lend out testing equipment.

The decision to exclude old musical instruments came after the Japan Synthesizer Programmers Association, led by musician Ryuichi Sakamoto, submitted a petition bearing about 75,000 signatures.

However, the change has only created more confusion.

"How do you define what is vintage and what is not?" the DPJ's Kawauchi asked. "And whose money will be used for the free checks? It's people's tax money."

Seikatsusoko President Kyuichiro Horinouchi meanwhile wondered why his 1950s American refrigerator, which as a vintage model has a high list price, is not exempt.

With all of these issues to deal with, METI has been under fire.

METI's Product Safety Division's switchboard has had to deal with a sudden onslaught of 100 to 150 calls a day for the last two months.

"We still have ammunition," Kawauchi said. "We will fight until the fundamental contradiction of this law is resolved."

Ditching doomed goods

Where will all the refrigerators, washing machines and other home appliances without PSE marks go once they have been banned from trade next month? Here are some possibilities:

* Internet auction

Private trade in non-PSE products will be allowed in Internet auctions, but businesses will not be able to participate, according to the Ministry of Economy, Trade and Industry.

Yahoo Japan Corp., a major Internet auction service provider, has posted a notice on its auction site, asking users to follow the new METI rule. However, determining which users are businesses will be tricky.

It probably will be determined by the number of deals in non-PSE products a user account has. Businesses may attempt to disguise themselves as private citizens, however, by using different user accounts.

* In your own backyard

It would be nice if businesses pay the fees to have the new junk picked up by local governments. However, Japan already has a large problem with massive amounts of illegal dumping, and waste sites nationwide are reaching capacity.

Environmentalists have criticized METI, which is responsible for promoting recycling, for creating a whole new category of garbage.

* Going overseas

Since many non-PSE appliances still work -- they have only been labeled worthless by the government -- some businesses will sell the stock they cannot trade here to other parts of Asia.

Recyclemaster Japan Inc., a used-appliance wholesaler that supplies secondhand shops here, is planning to ship old appliances to other parts of Asia because the PSE law does not apply to exports.

As the company does not have any connections with recycle shops overseas, it is asking several trading houses for help, Recyclemaster official Yasuo Yamada said.

Some appliances could end up in North Korea, where used Japanese electrical products are coveted.



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