Corrective Recommendations and Name Publications are Not Just for Transport Companies: Consignees Become Violating Entities, Shippers Making Orders Directly Subject to Regulations

In the revision draft of the "Logistics Special Designation" promoted by the Japan Fair Trade Commission, a policy was indicated that "consignees," who have been placed outside of regulations until now, will be newly added as regulated entities liable for violations.

With this revision, the ordering practices of shipper companies—instructions to logistics companies, contract conditions, and operational realities—will themselves be included as subjects to be held legally responsible.

This revision marks a turning point where the center of gravity of regulations shifts from the "problem of transport companies" to the "responsibility of shipper companies."

Administrative Scrivener Corporation Transportation Traffic Legal Center (Kita-ku, Osaka; Representative: Koichi Kusumoto), which specializes in logistics legal affairs, submitted public comments on this revision draft and started offering the "Logistics Subcontracting Law Risk Diagnosis" to visualize compliance violation risks for shipper companies.

After the revision, ordering practices that have not been considered problems until now may become targets for administrative guidance and corrections. In particular, if a company continues ordering and operations based on conventional practices, they may face unexpected citations after the revision.

1. What will change?
The meaning of establishing consignee regulations

Under the current logistics special designation, "sending shippers" who have a direct business relationship with logistics companies have been the main target of regulations.

In this revision draft, discussions are underway to extend responsibility as a violating entity to "consignees," who are the delivery destinations of the cargo.

Instructions for long waiting times by consignees, forcing inspection work, and demanding auxiliary tasks for free.

These have been happening on a daily basis in the field.

This revision is the first move to directly fill this "regulatory blank area."

These acts were previously handled as the "scope of on-site operations," but after the revision, they may be evaluated as legal violations.

2. Submission of public comments to the Japan Fair Trade Commission
Opinions on two points regarding the effectiveness of system design

Koichi Kusumoto, the representative of our corporation, submitted a public comment on this revision draft. The main points of the opinion are the following two:

(1) Exclusion of "direct instructions"—the biggest loophole in the revision draft

In the revision draft, acts by consignees are subject to regulation "only when they cause transport operators to perform acts via sending shippers." However, in actual logistics operations, the majority of cases involve personnel at the consignee or their outsourced warehouse companies directly instructing transport operators and drivers without going through the sending shipper or prime contractor. Even though these direct instructions are the core of the on-site burden, they may be excluded from regulation under the text, raising concerns about a gap with actual practice.

(2) Defects in the mechanism of retaliatory measures and enforcement

The reporting system in the revision draft is structured so that sending shippers report to the Japan Fair Trade Commission. However, for a sending shipper, the consignee is a "customer," and reporting means destroying the business relationship. As a result, reporting does not become a rational choice, and violations are left unaddressed. Furthermore, consignee demands are mostly made orally, making proof extremely difficult.

Unless enforcement mechanisms such as anonymous reporting systems from transport operators and drivers, and obligations for the consignee side to save instruction records are established, the legal text will not function.

As experts familiar with the practice of the Subcontract Act (formerly Subcontracting Law) in the logistics field, our corporation submitted opinions aiming for a system designed in a "form that reaches the field."

3. Why is it a problem for shipper companies?
Looking at the 4-layer model of logistics governance makes the essence of the problem clear

Legal violations regarding logistics tend to be treated as "on-site problems." In reality, however, the cause of the violations is not in the field, but in its upper structure.

Our corporation captures logistics through the following "4-layer structure":

- Layer 1: Ordering structure—who is ordering what, and how
- Layer 2: Contract governance—whether contracts and operations match
- Layer 3: Logistics operations—what is happening in the field
- Layer 4: Legal system—Subcontract Act, Logistics Special Designation, Antimonopoly Act, etc.

The important point is that violations always occur in Layer 1 or Layer 2. The problems of waiting for cargo and auxiliary tasks are merely results. In other words, the problems occurring in the field are "results," and the causes lie in the design of orders and contracts.

Many companies try to respond only through on-site improvements (Layer 3), but this will not resolve the structure of violations. It is necessary to trace back to Layer 1 and Layer 2 and review the design.

The ordering structure itself becomes the "cause of violation"

The most important aspect of this revision is entering an era where not only individual transactional acts but the "ordering structure" of shipper companies itself is questioned.

In many shipper companies, the selection of logistics contractors, the design of contract conditions, and the chain of command to the site are divided by different departments and personnel.