Product safety and liability

Safety and environmental

What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?

The RTVA is the fundamental statutory source of product compliance, safety and environment regulations. The RTVA requires every vehicle to achieve the Safety Standards as a condition of registration for driving on public roads (see question 2). Guidelines prepared by the MLIT provide detailed numerical standards for each component of the vehicle as well as the testing methodology. Driving a non-conforming automobile may result in administrative and criminal charges. In addition to these standards, the National Agency for Automotive Safety and Victims’ Aid conducts automobile assessments (JNCAP) to protect consumers and improve safety technologies, and publishes the results of the assessments, including crash testing and pre-crash safety assessment.

Environmental standards

Fuel economy

The standards for fuel economy are regulated by the Act on the Rational Use of Energy (the Energy Saving Act). This Act has provided the unique ‘top runner programme’ fuel economy standards since 1998, which takes the fuel consumption of the most fuel-efficient vehicle in the segment currently in the market, and sets that consumption level as the standard for the next generation of vehicles. The standard requires OEMs to keep the average fuel consumption of their products below the standard established by the MLIT and METI for a certain period depending on vehicle weight. Underachievement is publicly announced. The most recent standard was announced on 29 March 2019 with 2025 as the target year.

In addition to the ‘top runner programme’, the MLIT will introduce the ‘corporate average fuel efficiency’ (CAFE) regime where OEMs are required to keep the CAFE value, which is calculated through the weighted average of fuel economy achievement in each category of vehicle weight, above the CAFE standards calculated through the weighted average of fuel economy standard in each category of vehicle weight.

The weight, type of engine, fuel consumption (in four testing modes: WTLP, urban, suburban and motorway) and other specifications are required to be stated in the catalogue for each vehicle. Vehicle owners are entitled to receive preferential tax treatment and incentives depending on the achievement of standards by their vehicles; however, vehicles that do not comply with the standards are not prohibited from being driven.

The testing method for compliance with environmental standards for passenger vehicles is the Worldwide-harmonised Light Vehicles Test Procedure, which replaced the previous ‘JC08’ mode from October 2018 onwards, applicable to vehicles with a weight of less than 3.5 tons. The test consists of several driving cycles representing real-world vehicle operations on urban and suburban roads and motorways. Although the fuel consumption tested under the WLTC usually indicates a lower score than that tested under the JC08 procedure, some manufacturers have already started to indicate fuel consumption of their vehicles in the WLTC mode.

Fuel consumption was not traditionally regulated by the RTVA, but after a series of worldwide fuel consumption scandals, the MLIT included fuel consumption under the prescribed testing methods in the Safety Standards, and the type approval can be revoked if the OEM falsifies the fuel consumption. False or misleading statements regarding emissions may also trigger enforcement under advertisement regulations including administrative surcharges of up to 3 per cent of the relevant sales. In 2017, the Consumer Affairs Agency imposed an administrative surcharge of ¥480 million on an OEM for false representation of fuel consumption in its advertisement materials. The Consumer Affairs Agency also imposed an administrative surcharge of ¥3.17 million on another OEM for selling the OEM-badged version of virtually the same model procured from a different OEM; however, interestingly, the OEM later challenged this enforcement and was successful in having it overruled in December 2018.

Emissions

The regulation of emissions consists of three components.

  • Individual regulation: this applies only once when the new vehicle is registered, and regulates CO, non-methane hydrocarbon, NOx and particulate matter (PM), based on the RTVA and the Safety Standards. With regard to heavy-duty vehicles, the Safety Standards have incorporated the worldwide harmonised heavy duty certification procedure and off-cycle emission testing, which from 1 October 2016 are gradually being applied to each class.
  • Vehicle type regulation: this applies to vehicles with diesel engines and prohibits the operation of underachieving vehicles in designated zones to prevent diesel air pollution in metropolitan areas pursuant to the Amendment Act on the Reduction of the Total Amount of Nitrogen Dioxide and Particulate Matter Originating from Automobiles in Designated Areas (Act No. 70 of 1992 as amended, the PM/NOx Act).
  • Traffic regulations: some local governments respectively provide emission control rules. For example, Tokyo and three surrounding prefectures have by-laws restricting diesel vehicle PMs under stricter standards than the above-mentioned regulations.

After the emissions scandal in 2015, the MLIT and the Ministry of Environment conducted a series of real-world driving emission tests for eight models with diesel engines via a portable emission measurement system (PEMS) and published the results; however, the MLIT has decided not to impose mandatory testing via PEMS for all vehicles because of difficulties in homogenising test conditions to account for variations in weather and traffic.

Recycling

End-of-life automobiles are mandatorily recycled pursuant to the Act on Recycling of End-of-Life Vehicles (Act No. 87 of 2002 as amended (the Automobile Recycling Act)). Vehicle owners pay a recycling fee when purchasing a new vehicle and the fee is pooled by the Japan Automobile Recycling Promotion Centre (JARC), as designated by the government. The scrapping work is conducted by a wrecker registered with a relevant local authority, and the manufacturer and importer are required to take over and destroy or recycle the shredder dust, airbags and chlorofluorocarbons using funding from JARC. A breach of recycling procedures, such as scrapping by an unauthorised wrecker; failure to collect airbags, batteries, waste oil and fluid; wrecking without sorting hazardous materials; and unauthorised export of automobile wreckage, may result in criminal liability. (Waste Management and Public Cleansing Act (Act No. 137 of 1970, as amended, Customs Act (Act No. 61 of 1954, as amended, Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended).

Recall of automobiles

Recalls of automobiles are governed by the RTVA and are separate from the general rules of recall for other consumer products. Manufacturers and importers of vehicles with type approval must conduct recalls pursuant to an order of the MLIT or on a voluntary basis. In many cases, the manufacturers choose to conduct a voluntary recall rather than waiting to receive an administrative order.

Based on the Automobile Type Approval Guidelines and Guidelines for the Notification of Recalls (Ordinance No. 96 of 1994 of the Vehicle and Component Approvals Division, Engineering and Safety Division, Road Transport Bureau, the MLIT), manufacturers or importers are required (in principle) to specify the cause of a defect and the solution, as well as the scope of the targeted vehicles, in a report to the MLIT. They must also notify the MLIT, in the format provided by the MLIT, with an explanation of the defect, the solution, specifications, a photograph of the target vehicle and a recall summary in English. Also, manufacturers need to make the recall public by notifying users by mail or in person, and publish the fact in the gazette of the Japan Automobile Service Promotion Association. Information about a recall is also publicly available on the MLIT website.

Once a manufacturer makes a notification of a recall, it is required to immediately implement the recall work. A breach of these regulations may result in up to one year’s imprisonment and a ¥200 million fine.

Recall of automobile parts

With regard to defective automobile parts, the defect should be dealt with by way of a recall of the entire vehicle by the car manufacturer, except for two categories of parts.

As exceptions, tyres and child safety seats are subject to an independent recall procedure pursuant to the Order for Enforcement Regulations for RTVA (Ordinance No. 185 of 1 June 1951) and parts manufacturers are to carry out the recall process rather than the car manufacturer.

Technically, car manufacturers can claim compensation for loss or damage incurred as a result of conducting a recall due to defective parts from a supplier. However, this type of litigation has historically been relatively rare in the keiretsu structure. Therefore, it was surprising to many in Japan when a Japanese car manufacturer sued one of its major tier 1 suppliers in 2014 claiming more than ¥15.6 billion as compensation for damage incurred as a result of a recall caused by a defective power steering device produced by the parts manufacturer.

Product liability and recall

Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?

Product liability is an important subject in the automotive industry. Customers who incurred losses owing to the vehicle may bring claims against the OEM and the dealer based on a tort or warranty theory under the Civil Code. In the tort claim under the Civil Code, coupled with the Product Liability Act , if the product has a defect, or lacks the level of safety that the product ordinarily should have, and if such a defect has caused damage to the life, body or property of others, then the manufacturer or importer shall be liable for such damage. This regime imposes strict liability, regardless of whether the manufacturer or the importer has been negligent; however, where the defect could not have been discovered given the state of scientific or technical knowledge at the time of delivery, the manufacturer would not be liable for the defect. Dealers, rent-a-car companies, repair service providers, and suppliers of parts are not subject to strict liability and may be held liable only when they have been found to have been negligent. The judgement is solely made by the judge (or a board of three judges and in cases of severe criminal offence, a board of three judges and six citizen judges). There is no jury trial in the Japanese litigation system. The parties to the case as well as the court may request expert witnesses to testify or produce documents regarding the analysis of issues in the case, but the judge is not bound by the expert’s opinion. The plaintiff may claim actual damages, as well as consequential or incidental damages attributable to the defect or negligence; however, the court does not grant punitive damages, and an award for punitive damages in other jurisdictions is not enforceable in Japan. Overall, however, product liability claims for a defective vehicle or a recall are relatively rare.

Since 1 October 2016, a new ‘class action’-like regime has been introduced in Japan (Special Provisions for the Civil Procedure for Collective Recovery of Loss of Assets of Consumers (Act No. 96 of 2013)). This class action-like regime is two-tiered. At Tier 1, a qualified consumer organisation must prove that the relevant manufacturer owes common liability to a number of consumers. Then, at Tier 2, each consumer can have a consumer organisation file its claim with the summary court. The Tier 1 action may only be taken by a qualified consumer organisation (QCO) which has received the required designation to act from the prime minister pursuant to the Consumer Contract Act Consumer Contract Act (Act No. 61 of 2000, as amended). As at March 2019, there were only three QCOs (out of a total of 19 QCOs in Japan) which had designation from the prime minister.

This class action-like regime does not cover strict product liability. Furthermore, it only entitles the recovery of actual losses and specific performance and does not extend to an indemnity for any consequential losses, loss of profits, injury or bodily harm. The action can only be made against a defendant who has direct privity of contract with consumers - not against third-party car manufacturers, importers or parts suppliers. Thus, this class action-like regime has limited application, and it does not significantly impact the automotive industry in Japan.