Once a Japanese distribution partner is chosen and terms move to the negotiating table, the discussion usually turns to price, minimum volume and the scope of exclusivity. For regulated goods, however, there are items that become immovable if they are not settled first.

1. Does the licence scope match your intended customers?

A pharmaceutical distribution licence fixes who may be sold to, according to its category. Wholesale distribution reaches pharmacies, medical institutions and businesses; store-based retail reaches general consumers.

A plan to “start with pharmacies, then expand to e-commerce once we see the response” sounds natural, but those two cannot be covered by the same licence. The reach of your partner’s licence needs to be checked against the whole intended trajectory, not just the first step.

For medical devices, the required licence changes depending on whether Classes III and IV are included. A product line in which only part of the range falls under highly-controlled devices is not unusual.

2. Who bears responsibility for placing the product on the market?

The distributing company and the marketing authorization holder are separate roles. Sometimes one company covers both; sometimes they are two companies.

A contract that says only “distribution in Japan is entrusted to the partner” leaves that distinction unresolved. Who holds the approval, certification or notification in their name determines whether the product can remain on the Japanese market when the relationship ends. If the name belongs to the partner, terminating the arrangement means withdrawing from the market.

3. If a recall becomes necessary, who does what?

Not a pleasant subject, but with regulated goods it is an item to settle before it happens.

  • Who decides on a recall
  • Who reports to the authorities
  • Who runs the practical work — withdrawing stock, notification, disposal
  • How costs are apportioned

Statutory responsibility rests with the marketing authorization holder. But who moves the operation and who carries the cost is a matter for the parties to agree. Leaving it blank means the response itself is delayed when something happens.

4. Who performs the final check on labelling and copy?

Japanese labels, packaging, product pages, advertising — what may be written is fixed by law according to classification. Using quasi-drug expressions on a cosmetic is a violation; claiming drug-like efficacy for a food changes the classification itself.

There is no problem with production happening on the overseas side and the Japanese side reviewing it. But where responsibility for that review is not written down, a state arises in which both sides assume the other is checking.

Responsibility for labelling shifts depending on whether one line exists in the contract.

5. Stock, and the conditions for ending exclusivity

Where exclusive distribution rights are granted, setting termination conditions in figures matters in practice. Wording such as “shall use best efforts” or “shall cooperate” gives no basis for a later judgment.

  • Minimum purchase volume within the period — and what follows if it is not met
  • Scope of exclusivity — territory, channel, or product line
  • Where the partner holds stock, its treatment on termination (buy-back, permitted sell-through, or a deadline)
  • For goods with a shelf life or expiry date, who bears expired stock

The last point becomes a live dispute particularly often with food and cosmetics.

Do not reverse the order

These belong before the price negotiation. The reason is simple: if points 1 and 2 do not hold, no price makes the transaction possible.

If it emerges after terms are agreed that the intended customers cannot be served under that licence, what has to be rebuilt is not the price but the structure. Exchanging copies of the licence certificates at the first meeting avoids that.

INCAPE holds a wholesale distribution licence for pharmaceuticals, a licence for highly-controlled medical devices and a store-based retail licence, and operates both distribution and sales channels in-house. We also advise from the term-structuring stage on exclusive distribution and authorised-distributor agreements.