Export Control in Japan and CISTEC 2016.11.21-22 …...Re-export of goods imported for repair A...

Copyright CISTEC(C) 2016 All Rights Reserved1

Export Control in Japan and CISTEC

Theory and Practice of Export Regulations -2nd Edition-

International Trade Law and Export Regulations

21-22 November 2016Caen

H.RIKOCISTEC


1949: The Foreign Exchange and Foreign Trade Control Act was promulgated

1952: Japan joined COCOM 1987: Toshiba Machine Co. incident happened 1989: CISTEC was established 2002: WMD catch-all control was introduced 2007: Brokering control and transshipment control were

introduced 2008: Military catch-all control was introduced 2014: The policy of the Three Principles on Transfers of

Defense Equipment and Technology was set out

1. Historical Background

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Law The Foreign Exchange and Foreign Trade Act

(the Act) Cabinet Orders

The Export Trade Control Order (ETCO) The Foreign Exchange Order (FEO)

Subordinate Legislations Numerous Ministerial Ordinances, Notices,

Notifications, and Guidances

2. Legal Structure

Note: This complex, multi-layer structure characterizes the Japanese legal system, making it quite difficult for exporters to understand the legal system.

Copyright CISTEC(C) 2016 All Rights Reserved

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The Act is the only law in Japan that states the basic framework and the principles of the control on exports of both arms and dual-use items.

It was originally promulgated back in 1949, when Japan was to start its economic recovery after the war under the policy of foreign trade promotion.

The Act is a principal economic law concerning trade and foreign exchanges covering broad areas of cross-border transactions, and export controls just account for a small portion of the Act.

3. The Foreign Exchange and Foreign Trade Act



The Act, for the purpose of maintaining peace and security in Japan and in the international community, requires a license when a person intends to export or transfer listed goods or technologies to a foreign country.

4. The Control Principle

Articles 48 and 25 require a license when exporting or transferring controlled goods or technologies to foreign countries.

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5. Regulatory Framework


The Law The Foreign Exchange and Foreign Trade Act

Article 48 (Exports of goods) Article 25 (Transfer of technologies)CabinetOrders

The Export Trade Control Order The Foreign Exchange Order

ControlLists

The Attachment List No.1(Controlled goods)

The Attachment List(Controlled technologies)

Cat. 1 to 15(List Control)

Category 16(Catch-All Control)

Cat. 1 to 15(List Control)

Category 16(Catch-All Control)

Itemssubject tothe control

Arms andDual-use items

Non-controlleditems

Arms andDual-use items

Non-controlleditems

Destinationssubject tothe control

All destinations All destinationsexcept for specific27 countries (theWhite Countries)

All destinations All destinationsexcept for specific27 countries (theWhite Countries)

The Ministry of Economy, Trade and Industry(METI)

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Trade and Economic Cooperation Bureau

Security Export Control Policy

Division

Trade Control Department

Security Export Control Administration

Division

6. Administrative Authority

Security Export Licensing Division


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The List Control Export of listed goods Transfer of listed technologies

The Catch-All ControlWMD Catch-AllMilitary Catch-All Brokering Control (C-All element is adopted) Transshipment Control (ditto)

7. The Types of the Control


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The export of listed goods to foreign countries/regions requires a license issued by the Minister of Economy, Trade and Industry.

Controlled goods are listed in the Attachment List No.1 to the Export Trade Control Order

8. The List Control: Goods


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The transfer of listed technologies requires a license if: It is from Japan to a foreign country It is from a resident to a non-resident

Controlled technologies are listed in the Attachment List to the Foreign Exchange Order

9. The List Control: Technologies


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Cross-border transferAny person, resident or non-resident, shall obtain a license

when transferring listed technology from Japan to a foreign country.

Transfer within JapanAny resident shall obtain a license when transferring listed

technology in Japan to a non-resident.

Transfer within a foreign countryAny resident shall obtain a license when transferring listed

technology in any foreign country , except when the technology was sourced in a foreign country and the transaction is completed only in a foreign country.

10. Transfer of Technology


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11. The Listed ItemsJapaneseCategorynumber

Controltypes

Classification of the Items InternationalRegimes

1

List Control

Militaryitems

Arms WA/ML

2Dual-useitems

WMD-related

Nuclear items NSG

3 Chemical weapons AG

3-2 Biological weapons AG

4 Missiles MTCR

5Conventionalarms-related

Advanced materials WA Cat. 1

6 Material processing WA Cat. 2

7 Electronics WA Cat. 3

8 Computers WA Cat. 4

9 Communication/Information security

WA Cat. 5

10 Sensors and lasers WA Cat. 6

11 Navigation/avionics WA Cat. 7

12 Marine WA Cat. 8

13 Aerospace/propulsion WA Cat. 9

14 Other ML items Except for WA/ML

15 Sensitive items WA very sensitive

16 Catch-AllControl

Items other than those under Categories 1 - 15


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WMD Catch-All and Military Catch-All Category 16 items (Those subject to the Catch-

All control) “Informed” condition and “Objective” condition The End User List (entities of WMD concern) The 27 “White Countries” (license is exempted) The Commodity Watch List The catch-all elements are also adopted in the

Brokering Control and Transshipment Control

12. The Catch-All Control


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13. The WMD Catch-All Control

Conditions thatinvoke the control

A license is required:

“Informed” condition If an exporter is instructed by METI to apply for a license.

“Objective”Condition

(“Know” condition is objectified)

End-usecondition

If an exporter is aware, through written information heobtained, that the item will be used for the development,manufacture, use, or storage of WMD (WMD activities).If an exporter is aware, through written information heobtained, that the item will be used for specific NCB-relatedactivities listed by the authority.

End-usercondition

If an exporter is aware, through written information heobtained, that the end-user has been engaged, or used to beengaged, in the WMD activities.If the end-user is on the End User List published by METI,unless it is apparent that the item will not be used for the WMDactivities.

Note: Exports to the 27 White Countries are not subject to the Catch-All control – both WMD and Military.


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14. The Military Catch-All Control

Destination Condition A license is required:Countries underUNSC ArmsEmbargo

“Informed”condition

If an exporter is instructed by METI toapply for a license.

“Objective”(end-use)condition

If an exporter is aware, through writteninformation he obtained, that the item willbe used for the development, manufacture,or use of conventional weapons.

Other countries “Informed”condition

If an exporter is instructed by METI toapply for a license.


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The End User List is a list published by METI that contains entities which are suspected of being involved in WMD activities.

Exporters are required to check the end-use very carefully when exporting any items to an entity on the list.

As of October 2015, a total of 527 entities in eleven countries/regions are listed.

15. The End User List

Note: The current list is published at the following site:http://www.meti.go.jp/press/2015/04/20150415001/20150415001-2.pdf


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A list of 40 goods with high risks of diversion to WMD applications. (In addition, 12 more items are designated specifically for the exports to Syria)

Example:1.Tributyl Phosphate (TBP) (N)2.Carbon fibre･Glass fibre･Aramid fibre( N, M)3.Titanium alloy (N, M)4.Maraging steel (N, M)

Exporters are required to check and verify the end-use and end-user very carefully when exporting any items on the list.

When exporting any items on the list to any entity on the End User List, a license is required should the attached WMD symbols agree to each other.

16. The Commodity Watch List


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Brokering of arms and related technology under Category 1 of the Control List requires a license.

Brokering of other items requires a license if: The person conducting the transaction has been

informed by METI, or The person knows, through written information he

obtained, that the item will be used for WMD activities.

This control does not apply, however, if the item moves to or from any of the 27 White Countries.

17. The Brokering Control


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Transshipment is defined as an act to transship foreign goods at seaports or airports in Japan.

Transshipment of arms requires a license. Transshipment of other goods requires a

license if: The person conducting the transaction has been

informed by METI, or He knows, through written information he obtained,

that the item will be used for WMD activities. Transshipment control does not apply if the

destination is any of the 27 White Countries.

18. The Transshipment Control


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19. The Licensing System

Category No. Name of the licenses

IndividualLicense

1 Individual Export License

Bulk License

2 General Bulk Export License

3 Special General Bulk Export License

4 Special Bulk Export License

5 Special Bulk Export License for Repair orReplacement

6 Special Bulk Export License for OverseasSubsidiaries


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No. Eligible items Eligible destinations Other conditions ICP Pre-audit by METI

2 Controlled but less sensitive

27 countries(White countries)

Electronic application only

Not Required

Not Required

3 Same as above

Except Iran, Iraq, DPRK,UN arms embargo Countries

Reference to matrix table which defines certain conditions

Required Required

4 Specific itemsrepeatedly ordered

Specific Customers with repeated orders

Export record report to METI

Required Required

5 Arms and arms related

27 countries(White countries)

Only to original exporter

Required Required

6 Specific itemsrepeatedly ordered

Except Iran, Iraq, DPRK,UN arms embargo Countries

Subsidiarieswith majority share

Required Required

20. The Bulk Licenses


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Low value goods Re-export of goods imported for repair A controlled item incorporated into an end

product as a non-principal element Technology in public domain or related to basic

scientific research Technology transfer in association with an export

of listed goods Technology transfer in association with an export

of listed software

21. License Exemptions


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A person who conducts exports of controlled items is legally required: To place a person ultimately responsible for export

controls in the organization, To establish a proper export control organization, To establish proper product classification procedures,

transaction screening procedures, and shipment control procedures,

To conduct auditing and training, To keep related documents properly for certain years, To report any violation cases to the authority.

22. Exporters’ Compliance Standard


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An ICP is beneficial for both companies and the government.

A company can register its ICP with METI if it meets certain standard set by the authority.

Further, if the company so wishes, METI publishes its name on the Website.

Currently, about 1,500 ICPs are registered, of which 603 company names are published.

23. The ICP Registration System


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24. Penalties

Violations PenaltiesAn export or brokerage ofcontrolled goods or technologyrelated to WMD without license.

Imprisonment for not more than tenyears or a fine not more than tenmillion yen, or not more than fivetimes of trade amount ,or both.

An export or brokerage of othercontrolled goods or technologywithout license.

Imprisonment for not more thanseven years or a fine not more thanseven million yen, or not more thanfive times of trade amount ,or both.

An export or transmission ofdocuments, drawings orrecorded media that containcontrolled technology withoutlicense.

Imprisonment for not more than fiveyears or a fine not more than fivemillion yen, or not more than fivetimes of trade amount ,or both.


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Since 1967 until recently, Japan, as a peace-loving nation, had maintained its policy of blanket ban of arms exports (but with some exceptions) based on the policy guideline called the “Three Principles on Arms Exports.”

However, on 1 April 2014, the Japanese government changed its arms export control policy, replacing the 47-year old principles with the new guideline called the "Three Principles on Transfers of Defense Equipment and Technology.”

The government now allows arms exports under the new guideline, which is nonetheless as strict as ever.

25. Japan’s Arms Export Control Policy


1. A transfer is prohibited if it:(1) violates Japan’s obligations under international treaties, etc.(2) violates UN Security Council Resolutions.(3) is to a country involved in armed conflicts.

2. A transfer is permitted if it:(1) helps promote Japan’s peace-building and international cooperation.(2) serves Japan’s national security.

(a) International joint development/production(b) Enhancement of defense/security cooperation(c) Support of SDF’s overseas operations (d) Safety assurance of Japanese nationals abroad

3. Proper control(1) Permission is granted only when the government of the recipient country can assure proper control over an unauthorized use and a third‐country re‐transfer.(2) The recipient country is required to get a prior consent of the Japanese government if it intends to do the above.

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26. The New Principles



Internationalization of the classification numbering system

Create a single set of export control law and regulations, replacing the current system (future)

Raising awareness of STC in Academia and SME

27. Challenges

About CISTEC

Founded in April 1989 non-profit, non-governmental organization

dealing with security export control issues comprehensively.

Associated members: 436(as of Nov.7 2016) Associated University members:35( ditto )


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28. CISTEC

CISTEC Organizationconsisted of

members from

Industry

Chair


Export Control Research Committee

‐ Policy, Rules and Procedures Board and related Committees of1. Export control policy2. Rules and procedures3. International research4. International relations

‐ Goods and Materials Board and related Committees of1. Dual-use items for WMD 2. Advanced materials 3. Industrial machinery 4. Electronics 5. Information technologies 6. Sensors, lasers, navigations & avionics



NOTE : The Sectors are as Specified by the Securities Identification Code Committee (SICC), and the Sectors in “Others” include Transportation Equipment, Chemicals, Services, Glass & Ceramics etc.

(NOTE)

Electric Appliances Machinery Wholesale Trade

Information & Communication Precision Instruments Others

29. CISTEC Members Proportion by Sector


Academia

Government Industry

CISTECLinkage Channel

30. Linkage Channel among Industry, Government and Academia

Linkage Channel Organigram

Government

CISTEC

Industry Standard

Explanation, Practical RequestRecommendation

Policy Proposal,Understanding,Amendment of Policy, Respect of Industry Standard

Industry

Exchange of Information and Opinions

Agreed

Agreed Output

Model ICP

Product Classification Guidance

Academia

Committees


Linkage Function of CISTEC For the Government, CISTEC

・provide professional technical/commercial advices

・sound industry out on new policy plan of METI・explain views/thoughts of industry/academia

For Industry/Academia, CISTEC・integrate opinions from Industry/Academia into

common one ・recommend it to METI on behalf of whole

industry/Academia・provide occasion of dialogue with METI officers


1.Research , Integrate Comments and Recommendation to the Government Collect and Analyze Fundamental Data on Goods and Technologies Research and Study for Domestic and International Export Control Regulations Integrate comments from Industry and Recommend them to the Government

2. Support Industry /Academia to establish Export Control System Provide individual Consultation Assist to establish Internal Compliance Program (ICP) Assist commodity/technology classification and provide tools for classification Provide various Training Seminars for Industry Hold Exams for Security Trade Certification

3. Provide information on security trade control Publish Journals and other publications Provide DB services of updated Information on concerned End-Users etc.

4. International cooperation on security trade control Hold annual Asia Export Control Seminars Networking with Foreign Governments, Industrial Associations and Research

Institutions etc.


31. Four Major Activities of CISTEC

- Guidance, Manuals, Handbooks

- Parameter-sheets for Commodity Classification

- Commodity Guidance

- CISTEC Journal

Publications


Conventional Seminars (FY 2015, 34times) - Basic Courses (Procedures, License, Classification)- Course for Top Management/ Executives - Theme-Oriented Courses

(US Re-Export Controls, EU Export Controls, etc.)- Specific sector Course (Machine tool, Carbon fiber etc.)

Web Seminars - DVD with video-recorded conventional seminars- e-learning

Dispatching Instructors (FY 2015)- On-site and order-made seminars (88 times)


32. CISTEC Seminars

Classification Assistance・assisting exporters to make proper commodity

classification for license application Audit Assistance/STC System Establishment Assist.

STC Certification Programs・CISTEC provides certification of Expert, Advanced and Associate(Associate:26,603 Advanced:781 Expert:847)

Database Service (Fee-Based)・ Consolidated Parties List of Reference Information・Parameter Sheet for Commodity Classification・Japanese Export Control Laws and Regulations

Copyright CISTEC(C) 2016 All Rights Reserved 39

33. Other Services

Classification Assistance Service

CISTEC Started the 2 types of Commodity /Technology Classification Assistance Servicesince April 2012

General Service: Verify the classificationdone by customer and issue the Verification CertificateFull Support Service: Instruct customer basicshow to make classification and issue theVerification Certificate

Copyright CISTEC(C) 2016 All Rights

Reserved40

STC Certification Program

NOTES :- The “ONLY” Certification of Knowledge and Skills on STC- “Good Motivation” for examinee- “Incentives” for STC Certification holders- Advantageous to promotion, change of job etc.- Regarded as an Effective Capacity-building tool

Type of Qualifications No. of Holder(Nov.2016)

Strat time.No. of

ExecutionSTC-Expert 408 Since 2005

Once a yearSTC-Legal expert 311

STC-Semi-Legal expert 128

STC-Advanced 781 Since 2015 Twice a year

STC-Associate 26,603 Since 20043 times a year


Reserved41

- Started from 2009 (35Members as of Nov. 201６)

- Free supply of various basic Guidance - Free Basic Seminars up to 5 persons - Free Dispatch of Instructor for In-House

Training (once a year)- Free Consultant service upto15 times a year - Community site for university on CISTEC HP

and More…

University Membership Program


Reserved42


Thank you!

Export Control in Japan and CISTEC 2016.11.21-22 …...Re-export of goods imported for repair A...

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