Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors


Published: 2005

Subscribe to a Global-Regulation Premium Membership Today!

Key Benefits:

Subscribe Now for only USD$20 per month, or Get a Day Pass for only USD$4.99.

Act against Delay in Payment of Subcontract

Proceeds, Etc. to Subcontractors

(Act No. 120 of June 1, 1956)

(Purpose)

Article 1 The purpose of this Act is, by preventing a delay in payment of

subcontract proceeds, etc., to ensure that transactions between main

subcontracting entrepreneurs and subcontractors are fair and, at the same

time, to protect the interests of the subcontractors, thereby contributing to the

sound development of the national economy.

(Definitions)

Article 2 (1) The term "manufacturing contract" as used in this Act means an

entrepreneur's contract with another entrepreneur of the manufacture

(including processing, the same shall apply hereinafter) of goods or its semi-

finished components, parts, accessories or raw materials or metal dies used in

the manufacture thereof which are the object of sales conducted as a regular

business or manufacturing contracted as a regular business; or manufacture of

parts or raw materials which are necessary for repair of goods conducted as a

regular business; or an entrepreneur's contract with another entrepreneur of

the manufacture of goods or its semi-finished components, parts, accessories or

raw materials or metal dies used in the manufacture thereof when the said

entrepreneur is engaging in the manufacture of the said goods which it uses or

consumes itself as a regular business.

(2) The term "repair contract" as used in this Act means an entrepreneur's

contract with another entrepreneur of all or a part of the repair of goods which

the said entrepreneur contracted as a regular business; or an entrepreneur's

contract with another entrepreneur of part of the repair of goods when the

entrepreneur is engaging in the repair of the said goods which it uses itself as

a regular business.

(3) The term "information-based product creation contract" as used in this Act

means an entrepreneur's contract with another entrepreneur of all or part of

the creation of information-based products which are the object of provision

conducted as a regular business or creation contracted as a regular business; or

an entrepreneur's contract with another entrepreneur of all or part of the

creation of those information-based products when the entrepreneur is

engaging in the creation of those information-based products which he himself

uses as a regular business.

(4) The term "service contract" as used in this Act means an entrepreneur's

1

contract with another entrepreneur of all or part of the provision of a service

which is the object of provision conducted as a regular business (excluding any

contract by a person conducting a construction business (meaning a

construction business as prescribed by Article 2 paragraph 2 of the

Construction Business Act (Act No. 100 of 1949); the same shall apply in this

paragraph) of all or part of the construction work it contracts as a regular

business (means construction work prescribed in paragraph 1 of the same

article) to other parties conducting a construction business of all or part of the

construction work it contracts as a regular business ).

(5) The term "manufacturing or other contract" as used in this Act means

manufacturing contract, repair contract, information-based product creation

contract and service contract.

(6) The term "information-based product" as used in this Act means any of the

articles described in the following items.

(i) programs (which shall mean those that are instructions to a computer and

arranged to achieve a result);

(ii) films, broadcast programs, and other products composed of images or voice

and other sounds;

(iii) products composed from letters, figures or symbols or from their

combination, or from a combination of them and colors;

(iv) in addition to what are stipulated in the preceding three items, those that

are similar thereto and are stipulated by a Cabinet Order.

(7) The term "main subcontracting entrepreneur" as used in this Act means any

entity that falls under any of the following items:

(i) Any entrepreneur of juridical person (excluding persons provided for in

Article 14 of the Act on Prevention of Delay in Payment under Government

Contracts (Act No. 256 of 1949) with capital or total contributions exceeding

300 million yen that concludes a manufacturing or other contract (in case of

an information-based product creation contract and a service contract,

limited to contracts concerning an information-based product and service,

respectively, stipulated by a Cabinet Order; the same shall apply to the

following item and items (i) and (ii) of the following paragraph) with any

individual or with any entrepreneur of juridical person with capital or total

contributions of not more than 300 million yen; or

(ii) Any entrepreneur of juridical person (excluding persons provided for in

Article 14 of the Act on Prevention of Delay in Payment under Government

Contracts, etc.) with capital or total contributions exceeding 10 million yen

but not 300 million yen that concludes a manufacturing or other contract

with any individual or any entrepreneur of juridical person with capital or

total contributions of not more than 10 million yen.

(iii) Any entrepreneur of juridical person (excluding persons provided for in

2

Article 14 of the Act on Prevention of Delay in Payment under Government

Contracts, etc.) with capital or total contributions exceeding 50 million yen

that concludes an information-based product creation contract or a service

contract (respectively excluding any contract concerning any information-

based product or any service stipulated by a Cabinet Order of item 1; the

same shall apply to the following item and items (iii) and (iv) of the following

paragraph) to any individual or any entrepreneur of juridical person with

capital or total contributions of not more than 50 million yen.

(iv) Any entrepreneur of juridical person (excluding persons provided for in

Article 14 of the Act on Prevention of Delay in Payment under Government

Contracts, etc.) with capital or total contributions exceeding 10 million yen

but not 50 million yen that concludes an information-based product creation

contract or a service contract with any individual or any entrepreneur of

juridical person with capital or total contributions of not more than 10

million yen.

(8) The term "subcontractor" as used in this Act means any entity that falls

under any of the following items:

(i) An individual or any entrepreneur of juridical person, with capital or total

contributions of not more than 300 million yen that receives a manufacturing

or other contract from a main subcontracting entrepreneur provided for in

item (i) of the preceding paragraph; or

(ii) An individual or any entrepreneur of juridical person with capital or total

contributions of not more than 10 million yen that receives a manufacturing

or other contract from a main subcontracting entrepreneur provided for in

item (ii) of the preceding paragraph.

(iii) An individual, or any entrepreneur of juridical person with capital or total

contributions of not more than 50 million yen that receives an information-

based product creation contract or a service contract from a main

subcontracting entrepreneur provided for in item (iii) of the preceding

paragraph; or

(iv) An individual, or any entrepreneur of juridical person with capital or total

contributions of not more than 10 million yen that receives an information-

based product creation contract or a service contract from a main

subcontracting entrepreneur provided for in item (iv) of the preceding

paragraph

(9) When an entrepreneur of juridical person, the appointment and dismissal of

officers or the conduct or existence in business of which is controlled by

another entrepreneur of juridical person whose capital or total contributions

exceeds 10 million yen, receives a manufacturing or other contract from the

said entrepreneur and subcontracts of all or a considerable part of the act of

manufacture, repair, creation or provision pertaining to such manufacturing or

3

other contract with a third entrepreneur (excluding the cases where a person

coming under items (i) or (ii) of Paragraph 7 above concludes the

manufacturing or other contract with another person who falls under items (i)

or (ii) respectively of the preceding paragraph and cases where a person falling

under items (iii) and (iv) of the paragraph above concludes an information-

based product creation contract or a service contract with another person who

falls under items (iii) and (iv) respectively of the preceding paragraph), and

when the entrepreneur who receives such subcontract would fall under the

items of the preceding paragraph if he were to receive the said manufacturing

or other contract directly from the said entrepreneur who controls the

appointment and dismissal of officers, or conduct or existence in the business,

the entrepreneur who concludes such subcontract shall be deemed, in the

application of this Act, to be a main subcontracting entrepreneur and the

entrepreneur who receives such subcontract shall be deemed to be a

subcontractor.

(10) The term "subcontract proceeds" as used in this Act means the charges to be

paid in case of service contract; that same shall apply hereinafter) by the main

subcontracting entrepreneur for work performed by the subcontractor in cases

where the main subcontracting entrepreneur concludes a manufacturing or

other contract.

(Date of payment of subcontract proceeds)

Article 2-2 (1) The date of payment of subcontract proceeds shall be fixed within

sixty days, and moreover within as short a period as possible, from the day on

which a main subcontracting entrepreneur receives the work from a

subcontractor (the day on which a subcontractor provides the service entrusted

in the event of service contract. The same shall apply in the next paragraph),

regardless of whether or not the main subcontracting entrepreneur inspects

the work in detail.

(2) The date of payment of subcontract proceeds shall be deemed to be the date

on which a main subcontracting entrepreneur receives the work from a

subcontractor when the date of payment was not fixed, or the day prior to the

date on which sixty days from the day on which a main subcontracting

entrepreneur receives the work from the subcontractor have elapsed when the

date of payment of the subcontract proceeds was fixed in violation of the

preceding paragraph.

(Delivery of documents, etc.)

Article 3 (1) A main subcontracting entrepreneur shall, in cases where it has

concluded a manufacturing or other contract with a subcontractor, immediately

deliver to the subcontractor a document setting forth, pursuant to the

4

provisions of the Rules of the Fair Trade Commission, the details of work of the

contract, the amount of subcontract proceeds, the date of payment, the method

of payment and other matters; provided, however, that if the description is

justifiably unable to be provided because the above details cannot be

determined, the main subcontracting entrepreneur shall deliver to the

subcontractor a document setting forth the said matter immediately after the

determination of the details.

(2) In lieu of delivering the document prescribed by the preceding paragraph, a

main subcontracting entrepreneur may, with the agreement of a subcontractor

and as provided by a Cabinet Order, provide matters to be set forth in said

document by information and communications technology means including

electronic data processing system means provided by the Rules of the Fair

Trade Commission. In this case, the main subcontracting entrepreneur shall be

deemed to have delivered the necessary document.

(Compliance by main subcontracting entrepreneurs)

Article 4 (1) No main subcontracting entrepreneur shall, in cases where it

concludes a manufacturing or other contract with a subcontractor, effect any

one the acts listed in the following items (excluding item (i) and (iv) in cases

where it concludes a service contract):

(i) Refusing to receive the work from a subcontractor without reasons

attributable to the subcontractor;

(ii) Failing to make payment of subcontract proceeds after the lapse of the date

of payment;

(iii) Reducing the amount of subcontract proceeds without reasons attributable

to the subcontractor;

(iv) Causing a subcontractor to take back the goods relating to its work after

receiving the work from the said subcontractor without reasons attributable

to the subcontractor;

(v) Unjustly setting subcontract proceeds at a level conspicuously lower than

the price ordinarily paid for the same or similar content of work;

(vi) Coercing the subcontractor to purchase designated goods or to use

designated services except in such cases where it is necessary to standardize

or to improve the content of the work performed by a subcontractor or where

there are other justifiable grounds; or

(vii) Reducing the volume of transactions, suspending transactions or giving

some other disadvantageous treatment because the subcontractor informed

the Fair Trade Commission or the Director-General of the Small and Medium

Sized Enterprise Agency of such a fact, where a main subcontracting

entrepreneur is effecting such acts as mentioned in item (i) or item (ii), or

has effected such acts as mentioned in items (iii) to (vi) inclusive, or where

5

there exists a fact falling under any one of the items in the following

paragraph as to the main subcontracting entrepreneur.

(2) No main subcontracting entrepreneur shall, in cases where it concludes a

manufacturing or other contract with a subcontractor, unjustly injure the

interests of the subcontractor by effecting any one of the acts listed in the

following items (excluding item (i) in the case of service contract):

(i) In cases where the main subcontracting entrepreneur has caused the

subcontractor to purchase from oneself semi-finished goods, parts,

accessories or raw materials (hereinafter referred to as "raw materials, etc.")

necessary for the work performed for the main subcontracting entrepreneur,

without reasons attributable to the subcontractor, deducting all or part of the

price of the said raw materials, etc. from the amount of the subcontract

proceeds to be paid, or causing the subcontractor to pay all or a part of the

price of the said raw materials, etc. at a time earlier than the date of

payment of the subcontract proceeds for the work in which the said raw

materials. etc. are employed: or

(ii) With respect to the payment of subcontract proceeds, delivering a

negotiable instrument which is found difficult to be discounted, by the date

of payment of the subcontract proceeds, by a general financial institution

(this term refers to a person who receives deposits or savings and lends funds

as a business).

(iii) Causing a subcontractor to provide cash, services or other economic gains

for oneself.

(iv) Causing a subcontractor to change the content of the work, or to re-work

after the receipt of the work (after provision of service by the subcontractor

in the case of service contract), without reasons attributable to the

subcontractor.

(Interest for delay)

Article 4-2 When a main subcontracting entrepreneur has not paid the

subcontract proceeds to the subcontractor by the date of payment, he shall,

with respect to the period from the day on which sixty days from the day on

which he received the work from the subcontractor (the day on which a

subcontractor provided the service entrusted in the case of service contract.) to

the day when the payment is made, pay as interest for the delay the amount of

money obtained by multiplying the said unpaid amount by the rate provided

for in the Rules of the Fair Trade Commission according to the number of days.

(Preparation and preservation of document etc.)

Article 5 A main subcontracting entrepreneur shall, in cases where it concludes

a manufacturing or other contract with a subcontractor, prepare and preserve,

6

in accordance with the Rules of the Fair Trade Commission, document or

electromagnetic record (meaning a record created in a form that cannot be

recognized through one's sense of perception such as in an electronic form or

magnetic form that is used for information processing by computer. The same

shall apply hereinafter.), setting forth the work of the subcontractor, the

receipt of work (effecting the act of service provision by the subcontractor in

the case of service contract), payment of the subcontract proceeds and other

matters.

(Request by Director-General of Small and Medium Sized Enterprise Agency)

Article 6 The Director-General of the Small and Medium Sized Enterprise

Agency may investigate whether or not a main subcontracting entrepreneur is

effecting such acts as provided for in item (i), item (ii) or item (vii) of

Paragraph (1) of Article 4 (Compliance by main subcontracting entrepreneurs),

whether or not it has effected such acts as provided for in items (i ii) to (vi)

inclusive of the said paragraph or with respect to the main subcontracting

entrepreneur whether or not there exists a fact falling under any one of the

items of Paragraph 2 of the said article, and when he/she finds that such facts

exist, he/she may request the Fair Trade Commission to take appropriate

measures in accordance with the provisions of this Act.

(Recommendation)

Article 7 (1) The Fair Trade Commission may, when it finds that a main

subcontracting entrepreneur is effecting such an act as provided for in item (i),

item (ii) or item (vii) of Paragraph (1) of Article 4 (Compliance by main

subcontracting entrepreneurs), recommend to the main subcontracting

entrepreneur that it promptly receive the work from a subcontractor, pay the

subcontract proceeds or the subcontract proceeds and interest for delay

pursuant to the provision of Article 4-2 (Interest for delay), or cease the

disadvantageous treatment and take other necessary measures.

(2) The Fair Trade Commission may, when it finds that a main subcontracting

entrepreneur has effected such acts as provided for in items (iii) to (vi)

inclusive of Paragraph (1) of Article 4, recommend to the said main

subcontracting entrepreneur that it promptly pay the amount so reduced,

accept the goods pertaining to the work of the subcontractor, increase the

amount of such subcontract proceeds or take back the goods that the

subcontractor was forced to purchase and take other necessary measures.

(3) The Fair Trade Commission may, when it finds that with respect to the main

subcontracting entrepreneur, there exists a fact falling under any of the items

of Paragraph (2) of Article 4 (Compliance by main subcontracting

entrepreneurs), recommend to the main subcontracting entrepreneur that it

7

promptly take the measures necessary to protect the interests of the

subcontractor.

(The relation with the Act on Prohibition of Monopolization and Maintenance

of Fair Trade)

Article 8 In the event the Fair Trade Commission has rendered a

recommendation under the provisions of paragraphs (1) to (3)

(Recommendation) inclusive of the preceding article, and to the extent that the

main subcontracting entrepreneur has complied with the recommendation, the

provisions of Article 20 (Elimination measures against unfair trade practices)

of the Act on Prohibition of Private Monopolization and Maintenance of Fair

Trade (Act No. 54 of 1947) shall not apply to the act of that main

subcontracting entrepreneur pertaining to the recommendation.

(Collection of reports and inspection)

Article 9 (1) When it finds it necessary to make transactions with respect to a

manufacturing or other contract of a main subcontracting entrepreneur with a

subcontractor (hereinafter simply referred to as "transactions") fair, the Fair

Trade Commission may cause a main subcontracting entrepreneur or a

subcontractor to submit a report on its transactions, or may cause its officials

to enter an office or place of business of a main subcontracting entrepreneur or

a subcontractor and to inspect books and documents and other materials.

(2) The Director-General of the Small and Medium Sized Enterprise Agency may,

when he/she finds it particularly necessary to protect the interests of a

subcontractor, cause a main subcontracting entrepreneur or a subcontractor to

submit a report on its transactions, or may cause his/her officials to enter an

office or place of business of a main subcontracting entrepreneur or a

subcontractor and to inspect books and documents and other materials.

(3) The competent minister having jurisdiction over the business in which a main

subcontracting entrepreneur or a subcontractor engages may, when he/she

finds it particularly necessary to cooperate with the investigation pursuant to

the provision of Article 6 (Request by Director-General of Small and Medium

Sized Enterprise Agency) by the Director-General of the Small and Medium

Sized Enterprise Agency, cause a main subcontracting entrepreneur or a

subcontractor engaging in the said business under his/her jurisdiction to

submit a report on its transactions, or may cause his/her officials to enter an

office or place of business of these entrepreneurs and to inspect books and

documents and other materials.

(4) The officials who enter pursuant to the provisions of the preceding three

paragraphs shall carry their identification cards and produce them to relevant

persons.

8

(5) The authority to enter and inspect under the provisions of paragraphs (1) to

(3) inclusive shall not be construed as granted for criminal investigation.

(Penal provisions)

Article 10 A representative, agent, employee or any other worker of a main

subcontracting entrepreneur who has committed a violation that falls under

any of the following items shall be punished by a fine not more than five

hundred thousand yen.

(i) In cases where a document is not delivered in accordance with the

provisions of paragraph (1) of Article 3 (Delivery of documents, etc.) or,

(ii) In case a document or electromagnetic record under the provisions of

Article 5 (Preparation and preservation of document and the like etc.) is not

prepared or preserved, or a false document or electromagnetic record is

prepared.

Article 11 A person who has failed to submit a report under the provisions of

paragraphs (1) to (3) inclusive of Article 9 (Report and inspection) or submitted

a false report, or refused, disturbed or evaded inspection shall be punished by a

fine of not more than five hundred thousand yen.

Article 12 When a representative of a juridical person, or an agent, employee or

any other worker in the service of a juridical person or of an individual, has,

with regard to the business of the said juridical person or individuals,

committed a violation under the preceding two articles, not only the offender

shall be punished but also the said juridical person or the said individual shall

be punished by the fines as described in the respective articles.

9