[2025 Legal Revision] Compliance in Light Cargo Transport Outsourcing: What Shippers and Prime Contractors Must Reconsider

Why Compliance Is Important Now

In April 2025, Japan's logistics industry reached a turning point.

This is because a legal revision was enacted that imposes strict safety management obligations, comparable to those for general cargo, on light cargo transport businesses, which had previously been considered a 'lightly regulated area'.

About a year has passed since then, but many shipper companies and prime contractors still do not understand the new laws. Therefore, I would like to summarize the points that these companies should keep in mind from their perspective (and from the viewpoint of compliance).

Note that the term 'shipper company' here refers to businesses (manufacturers, retailers, wholesalers, etc.) that request (outsource) logistics operations such as transport, storage, and packaging of their own products or raw materials to transport companies or logistics providers. Furthermore, this includes businesses that effectively determine the transport method, regardless of the ownership of the cargo or whether they are the sender or recipient.

Also, 'prime contractor' refers to a transport company that accepts transport work from a shipper (or another transport company) and bears responsibility for the overall transport. Please understand that this includes not only large transport companies but also small and medium-sized light cargo transport businesses that subcontract transport activities to several individual driver contractors (who are themselves independent transport operators).

The 2025 legal revision... to be precise, the 'Revision of the Safety Regulations for Light Cargo Transport Business, etc.', but shippers and prime transport contractors should have a greater sense of crisis regarding this legal revision.

This is not a mere 'effort obligation'; it is a legitimate law that was promulgated by the Ministry of Land, Infrastructure, Transport and Tourism in October 2023 as 'Strengthening Safety Measures for Light Cargo Transport Business' and fully enforced from April 2025 (after a preparation period, the provisions of the enacted/revised laws and regulations became effective).

This legal revision is not just about changing administrative procedures. It involves 'business continuity risks' for the shippers/prime contractors themselves, such as the application of the shipper recommendation system, damage to brand value, and even disruption of the supply chain if the outsourced light cargo operator (including individual driver contractors) commits a compliance violation or causes an accident.

However, one should not fear compliance more than necessary. Shippers/prime contractors should reframe it as a 'new value standard' for selecting high-quality partners and building a sustainable delivery network.

Context of the Legal Revision for Light Cargo Transport

Over the past decade, the macro environment of the light cargo transport industry has changed drastically due to the explosive growth of the EC market. As of 2023, the BtoC market for physical goods exceeded 14 trillion yen, and the number of individual light cargo operators reached approximately 230,000 as of 2024, continuing to increase at a pace of about 10,000 per year. However, in the shadow of this rapid expansion, the number of serious accidents, such as deaths and severe injuries involving commercial light vehicles, increased by 39.6% between 2016 and 2021.

Taking this situation seriously, the Ministry of Land, Infrastructure, Transport and Tourism took steps toward fundamental strengthening of regulations, such as making it mandatory to appoint a 'Light Cargo Safety Manager (a person responsible for safety management in light cargo operations)'. This also includes strengthening the 'Shipper Recommendation System (a system where the government recommends and publishes the prevention of recurrence to shippers when the cause of a transport operator's violation lies in the shipper's instructions, etc.)'.

What must be highlighted here is that the 'shipper recommendation' also includes 'prime contractors' (not just shippers) regarding subcontractors. For example, operations that involve setting unreasonable arrival times or constant waiting times (loading/unloading wait times) are considered acts that force drivers to drive while fatigued or exceed speed limits. If the subcontractor receives administrative punishment due to these causes, shippers and prime contractors will also be punished in a chain reaction, and their company names will be published. In today's logistics market, neglecting the assurance of safety and quality can ultimately become a major risk for shippers/prime contractors.

1. Actions that Shippers/Prime Contractors Should Take

What must shippers/prime contractors do? First, I will list the specific actions required of shippers/prime contractors by this legal revision. In particular, be aware that


if you neglect guidance and education for 'specific drivers (newly hired, accident-prone, elderly)', you will be subject to a vehicle suspension order of 10 to 20 days per vehicle, which can cause significant damage to operations. For freelance outsourced drivers, I recommend adopting a stance of sharing best practices regarding operations after establishing a management ledger for the actual transport system.

• Re-inspection of the safety management system: Shippers/prime contractors should confirm whether their subcontractors have appointed a safety manager who has completed the 'Light Cargo Safety Manager Training'. Furthermore, taking periodic training every two years is also mandated by law.

• Maintenance of driver ledgers (for directly employed drivers): You must record the address, name, date of hire, date of health checkup, accident history, and the results of aptitude tests (initial diagnosis, accident-prone driver diagnosis, and aptitude diagnosis for those 65 and older) in a ledger and keep it for three years.

• Maintenance of the actual transport system management ledger (for outsourced drivers): A ledger where the prime contractor who accepted the transport from the shipper records the names and contact information of the subcontractors (including individual contractors) who are actually in charge of the transport. In principle, there is an obligation to keep it for one year from the date the transport work is completed.

• Preservation of education records: Records of guidance and supervision must be kept for three years. A management system using digital tools is recommended.

• Reporting obligation in case of accidents: It has become mandatory for light cargo transport (black license plate) operators to submit an 'Automobile Accident Report' to the Minister of Land, Infrastructure, Transport and Tourism within 30 days via the Transport Branch Office for 'accidents of a certain scale or larger'. (Furthermore, in the case of serious accidents, it is mandatory to provide a preliminary report by phone, etc., within 24 hours.)

2. Elimination of Unfair Clauses in Contracts with Individual Contractors

Many light cargo drivers are sole proprietors, and contracts with them are protected by the "Freelancer Protection Act (Act on Improvement of Transactions between Specific Entrusted Business Operators and Other Parties)" and the "Subcontract Act (Act against Delay in Payment of Subcontract Proceeds, Etc.)." Furthermore, if a company exercises the right to direct and supervise while using an outsourcing format, it may be classified as "disguised contracting", which can lead to charges of "violation of the Labor Standards Act", and carries the risk of developing into labor disputes such as "retroactive payment of social insurance premiums" and "claims for unpaid overtime", while also potentially damaging the company's brand image.

In such cases, it is crucial for shippers/prime contractors to eliminate the following prohibited items from their contracts (with sole proprietors) and manage operations on the ground to ensure that such practices do not occur outside of those contracts.

• Prohibition of unreasonable penalty clauses: Setting high compensation amounts in advance for early resignation or minor vehicle damage can be considered an unfair clause that evades the intent of the Labor Standards Act.

• Prohibition of price squeezing: Unilaterally setting fees significantly lower than those for similar services. This is subject to recommendations as a violation of the Subcontract Act and other laws.

• Optimization of excessive notice periods: When terminating or refusing to renew a continuous outsourcing contract of 6 months or more, providing at least 30 days' notice is now mandatory.

3. Strict Rules for Terminating or Refusing to Renew Contracts with Sole Proprietors

Contract termination is the phase most prone to disputes. With the enforcement of the Freelancer Protection Act, in addition to the "
30-day notice requirement for terminating continuous contracts (6 months or more)", there is now an "obligation to disclose reasons" if requested by the other party.

What is important here is not just stating a reason, but providing evidence to show that the reason is objectively reasonable. If you terminate a contract due to "declining delivery quality" without records of prior guidance and requests for improvement, it could be subject to a claim for damages as an unfair contract termination.

Since the legal revision now mandates recording guidance and supervision details in a ledger and storing them for three years, you should utilize this to keep records of corrective instructions for daily operational deficiencies and "special guidance (totaling 5 hours or more according to legal standards)" provided to drivers who cause accidents. This serves as risk hedging for the company itself in the event of an emergency.

4. Best Practices for Verifying Residence Status of Foreign Drivers

In recent years, the number of foreign drivers has increased with the diversification of delivery services. The biggest concern here is the "crime of promoting illegal employment". If the outsourcing party allows illegal employment due to a lack of verification, the shipper/prime contractor will also be held legally liable in a chain reaction.

• Verification of residence card authenticity: Use an IC chip reading app to eliminate counterfeit cards.

• Verification of work restrictions: Check for the presence of "Permission to Engage in Activity other than that Permitted under the Status of Residence Previously Granted" on the back. International students, in particular, have a work restriction of "within 28 hours per week." Allowing them to work beyond these hours is a clear illegal act.

If an accident occurs while these checks are insufficient, the shipper/prime contractor will also be held responsible for management oversight.

There is no doubt that complying with compliance (which includes not only laws but also social morality) comes with a certain cost. However, companies that consider this a waste will eventually be weeded out. Japanese society as a whole is now moving in the direction of compliance.

Conversely, companies that view these costs as an "investment" and demand highly transparent operation management from their partners are the ones that will attract high-quality drivers and build robust supply chains... In other words, this will become their armor for surviving in the increasingly competitive transportation industry.

Reference Links

• Ministry of Land, Infrastructure, Transport and Tourism: Electronic Vehicle Inspection Certificate Special Website

• Ministry of Land, Infrastructure, Transport and Tourism: Standard Terms and Conditions for Light Cargo Transport

• List of Registered Training Institutions for Light Cargo Transport Safety Managers

• List of Institutions for Guidance and Aptitude Diagnosis for Specific Drivers (Ministry of Land, Infrastructure, Transport and Tourism)

• Freelance Protection Act Reporting Desk (Japan Fair Trade Commission)

• Freelance Protection Act Consultation Desk (Small and Medium Enterprise Agency)

• List of Prefectural Labor Bureau Locations (Ministry of Health, Labour and Welfare)

• Act on Improvement of Transactions between Freelancers and Business Operators: Reporting Desk for Alleged Violations (Ministry of Health, Labour and Welfare)