By Richard Dean Sr.
American network marketing companies would do well to establish their Far Eastern base in Japan. Japan is a democracy, which affords reliable legal recourse, as opposed to a number of other Pacific Rim countries. Japan is the Gateway to the entire Pacific Rim and many Japanese leaders already have distributor connections in a number of these other markets.
The only legal, long-term and proper way to establish in Japan is to incorporate as a Japanese corporation. This allows your company the legal right to market here. Secondly, you need to obtain the Japanese Ministry of Health’s approval for whatever products you intend to market. Many Japanese leaders have grown suspicious of off-shore MLM companies that market their products without government approval.
With an on-ground operation you will want to provide full customer service and a fulfillment center. One of the most important concerns of Japanese network leaders is not how generous your compensation plan is, or even how cutting-edge your products may be (as long as they work). Their biggest concern is your company’s assurance that you will make a long-term commitment to remain in Japan. This is an “Obligatory Market”, as opposed to an “Opportunity Market”. Japanese leaders will obtain a quick commitment from their down-line provided the leader in question is willing to take responsibility for the MLM he represents, and suffer the consequences if the company pulls out of Japan for whatever reason.
This brings us to the NFR method of doing business in Japan. NFR stands for “Not for Resale”, and refers to a regulation that permits Japanese citizens and alien residents to order products from abroad through the mail. This is, provided the item or items are for personal use only and not for resale. Furthermore, the total shipment must not exceed $100.00 in value in order to be tax exempt. There is no supplement product approval requirement for packages sent NFR.
The Foreign Network Marketing Community has for many years used this system to ship products into Japan for its distributors. Although the legality of such a system can be questionable, the Japanese Government tends to look the other way as long as they feel that the MLM in question is sincerely applying for incorporation and product approval, and, that utilizing the NFR is only temporary. When foreign MLM companies try to take advantage of the system by sending much more than the declared value of the shipment, the packages are often discovered and the distributor must pay a high tax or have the package returned. This also puts risk of exposure on the distributor, who technically is obligated to collect consumption tax if reselling the product. The distributor is also responsible for tax levied on domestic and international profits he makes.
Product approval can take more than a year in some cases, or may never be granted without major modifications to the product’s ingredients. The average time of approval for supplemental products is around 90-120 days. Your company’s NFR period should immediately terminate as soon as product approval has been granted. It is possible to continue sending other products within the company’s line that have not yet been granted approval, but if the product is not going through the process it is advisable not to sell the product in Japan. Distributors appreciate companies making products available for leaders to promote during the interim period, but no one wants to pay the high shipping rates and suffer the downtime any longer than necessary. Creditability and trust from Japanese distributors is given to a foreign company establishing properly and indicates to the distributors that the company intends to be on-ground for the long-term. ++++++++++++++++++++++++++
Richard Dean Sr. has been active in network marketing for over thirty five years; as a distributor, MLM company owner and consultant. He came to Japan in 1992 and soon established Paradigm World Marketing the following year, in 1993. Paradigm was the first market-entry agency in Japan to exclusively cater to multi-level marketing and direct-sell firms. Over the last 16 years Paradigm has successfully helped establish operate and promote for over 4 dozen foreign based MLM companies in Japan. Paradigm represents the MLMIA in Japan. He can be reached at firstname.lastname@example.org and toll free, international 888-817-2514.