New Policy on Defense Equipment Transfer English translation is now available on METI web site

Official English translation of "
Three Principles on Transfer of Defense Equipment and Technology" is now available on METI web site.  The English translation covers basic policy, and the Notification with details guideline.

(Basic Policy)
http://www.meti.go.jp/policy/anpo/law_document/tutatu/t11kaisei/boueisoubiitensangensoku_honbun_english.pdf

(Implementation Guideline)
http://www.meti.go.jp/policy/anpo/law_document/tutatu/t11kaisei/boueisoubiitensangensoku_unyoushishin_english.pdf

 

New Three Principles of Defense Equipments Transfer

On April 1st, 2014, Japanese government announced the new "Three Principles of Defense Equipments Transfer" as the joint press release from Cabinet Secretariat, Ministry of Foreign Affairs ("MOFA"), Ministry of Economy, Trade and Industry ("METI"), and Ministry of Defense ("MOD").  This new policy is replacement of old policy so-called the "Three Principles of Arms Export Prohibition", which have been held by Japanese government since 1976.  Apparently, world political and economic situation have drastically changed since then, Japanese government's stance is now to cope with "Proactive Contributor to Peace" following international collaboration.  The old policy was to prohibit arms export to communist countries or the area of hot spot, and its exemption has been authorized only by Cabinet's discretion in case by case basis.  The new principle is instead, more flexible, comprehensive and transparent in terms of rules and procedures.  Here's brief summary of the new policy.

1. Made transparent criteria in prohibition of transfer of defense equipments.
   Overseas transfer is not allowed if:
   a) The transfer is against world treaty or agreement Japan committed.
   b) The transfer is against the obligation imposed by UNSCR.
   c) The transfer is likely to be in the country where armed conflict happens.
2. Limited permission of transfer, strict review of license, and make the judgement publicly transparent.
   In case the transfer is other than above case in first rule 1, Japanese government may give permission of transfer with strict review of licence application, whether the transfer is, a) to cope with peace contribution and international collaboration, or b) to contribute to national security in Japan.  In addition, if the transfer is very critical or sensitive case to national security or world peace, the permission is discussed in National Security Council which is the top tier of Japan's national security decision.  The discussion there is publicly disclosed following the existing relevant law.  (Act on Access to Information Held by Administrative Organs)
3. Secure appropriate control of end-use and prevent re-transfer to third countries.
   In order to satisfy the above case in second rule 2, the permission is only granted to the transaction which is appropriately controlled in end-use.  This means, basically, thorough end-use confirmation is required and the usage for other purpose is not allowed.  Also, the re-transfer to third country is required pre-approval of Japanese government.  (This obligation is to be imposed to the government who is first and original importing country.)

The more detailed rules, procedures and Q&A are available in METI and MOFA web site below, however, at this point of time, I don't find any English translation or English guidance of it.
http://www.meti.go.jp/policy/anpo/law09.html#424
http://www.mofa.go.jp/mofaj/press/release/press4_000805.html


Comment:  The impact of this policy change would be rather limited to large Japanese companies who have manufactured defense equipment for Japan Self-Defense Forces.  They will enjoy more flexible collaboration with overseas counter partners by exchanging related technology or samples (easier than past) in designing or developing defense equipments.  The likely permissible transaction is basically government to government project, e.g. with US and allied countries.  The licence review would be very severe and lead time would not be predictable.  My personal feeling is the "basic idea is still prohibition with certain exemptions". 

Note to export control professionals: The definition of "Defense Equipment" under this principle.
The "defense equipment" is defined as arm and its technology.  "Arm" is among the items under Category 1 of Export Trade Control Order ("ETCO") Appendix 1, and to be used by military directly for battle.  Its technology is the technology pertaining to the arm's design, manufacturing or use.  (more broad meaning than "necessary to")
This means the definition of arms under this principle is narrower than simply Category 1 of ETCO, and dual use items are, off course, not defined as defense items.  Even if the item is classified under Category 1, certain items may be excluded from defense equipments, namely, all items of Category 1 is not automatically regarded as arms under this new principle.  For example, rifle gun used for sporting purpose is likely to be excluded from the review of this new principle. 

Malaysia update controlled items list

According to e-federal gazette of Malaysia, new controlled items list is published on 28 Feb, 2014 as "STRATEGIC TRADE (STRATEGIC ITEMS) (AMENDMENT) ORDER 2014".

http://www.federalgazette.agc.gov.my/eng_main/main_carian_tajuk.php?key=strategic&tarikh_pewartaan1=&tarikh_pewartaan2=&Cari=Search

It comes into operation on 1 April 2014.  (However, according to FAQ of STA 2010, Malaysia MITI stated in the past, they will have 3 months grace period for implementation of updated list.)

Malaysia implemented its export control scheme since 2011, and this is their first control list update ever.  The new list looks in tandem with current EU list.

Singapore enhance STS effective from 1 April 2014

According to Circular No: 04/2014 dated Feb 26, 2014 issued by Singapore Customs, they enhance Strategic Trade Scheme ("STS") effective 1 April 2014, but with 6 months grace period.
In short, export license system will be changed, especially Tier 2 and Tier 3 bulk licenses.
It looks bulk permit system is simplified and easier to understand and handle for traders.if
See details in:  http://www.customs.gov.sg/NR/rdonlyres/6B9EA876-92CF-41D7-8758-25916F32D8C2/0/STSCircularFinal.pdf

Third Round of Negotiations for RCEP

According to the MOFA news release on Jan 24, the third round of negotiations for Regional Comprehensive Economic Partnership ("RCEP") was held in Kuala Lumpur, Malaysia, from January 20 to 24. 

In this round of negotiations, the meetings of the Trade Negotiating Committee, in which senior officials participated, and of working groups concerning issues such as Trade in Goods, Trade in Services and Investment were held. Also, the scope and method of negotiations, amongst others, were discussed, and it was decided to establish the new working groups on Competition, Intellectual Property, Economic and Technical Cooperation and Dispute Settlement.

The next round of negotiations will be held in China in April, 2014.

Overhaul of the BIS Unverified List

Effective January 21, 2014, a new rule issued by BIS have significant impact to traders.  It is overhaul of BIS Unverified List ("UVL") screening requirement.  The bullet points of changes are as follows.

• UVL is reshuffled.  All parties listed on the current UVL will be removed, and subsequently be added to a new UVL.  (as of today, I don't find new UVL on the BIS web site, though.)
• Exporters will need to file an AES records (customs declaration in US) for all exports to the entities on UVL.  This is nearly no exception.
• No license exceptions will apply for exports, re-exports, and transfers (in-country) of items subject to the EAR to the transaction with UVL entities.
• For no license required transaction under the EAR, exporters must obtain a signed and dated written statement from UVL entities before the transactions.

See news letter from Bryan Cave LLP in;
http://www.bryancave.com/files/Publication/a061fbc1-d778-4c73-bd82-553bfab0316c/Presentation/PublicationAttachment/45281c4e-2dc0-471d-bf0c-57c8a8145d69/IRB516.pdf

Japan, Turkey agree on EPA negotiation to start

Japan and Turkey agreed on Jan. 7, 2014 to begin talks on an economic partnership agreement ("EPA").  Japanese Prime Minister Shinzo Abe and his Turkish counterpart, Recep Tayyip Erdoğan, agreed during talks in Tokyo to launch negotiations on the partnership pact.

(Source:  MOFA web site  http://www.mofa.go.jp/mofaj/kaidan/page3_000616.html )

TPP ministerial session in December 2013 ends without final agreement

On December 10, 2013, the Trans-Pacific Partnership (“TPP”) free trade talk was wrapped up a ministerial negotiation session without a full agreement in Singapore.  At the end of the meeting, the statement of the ministers and heads of delegation for the TPP countries announced that they have made “substantial progress” toward completing the TPP.  Although the trade talk missed the December 2013 target for ending the talk, they expressed the member countries identified potential “landing zones” for the majority of key outstanding issues in the text.  They decided to continue their “intensive work” to finalize the agreement and expressed the intention to follow up negotiation work and meet again in January 2014.

 

The key issues to prevent the whole negotiation was the conflict between Japan and the United States, which have had trade in goods issues including Japanese tariffs on farm products as well as auto import in the United States.  They failed to fill the gaps during the key session in Singapore.  In addition to tariff issues, the TPP member states have also agreed to carry over to next year on other remaining issues such as intellectual property rights and reform of state-owned firms.

The TPP has now 12 member states, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, which represent about 40 percent of world GDP and one-third of world trade. 

The Fifth Round of Negotiations for the Japan-Mongolia EPA

The Fifth Round of the Negotiations for the Japan-Mongolia Economic Partnership Agreement ("EPA") will be held from December 16 to 19, and 24,2013 in Ulaanbaatar, Mongolia.

In this round, negotiations in areas including Trade in Goods, Investment,　E-commerce, Rules of Origin, Customs Procedures, Competition, Cooperation, Dispute Settlement, Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) are scheduled to be held.

Third Round of Negotiations on a FTA among Japan, China and Korea

The third round of negotiations on a Free Trade Agreement (“FTA”) among Japan, China and Korea was held in Tokyo, Japan from November 26 to 29.  In this round of negotiations, wide range of areas such as Trade in Goods, Trade in Services, Investment, Competition Policies, Intellectual Property, amongst others, were discussed.  While these three counties have certain political tension in area of territorial disputes and interpretation of wartime history, a Japanese trade ministry official said “The three countries are cooperating and the political discord has not adversely affected the negotiations.”  According to major newspapers, the work plan of the negotiation was presented to three countries, however, customs tariff negotiation in Trade in Goods was not significant progress this time, as the gap of opinion among the countries is still large.  The three countries will work towards holding the next round of negotiations in Korea, around February 2014.

Tokyo, Beijing and Seoul announced the launch of the FTA negotiation in 2012 and held the first meeting in Seoul in late March 2013. The second meeting was held in Shanghai from July to August 2013.  It is targeted to reach substantial agreement of the negotiation by the end of 2014.

U.S. Export Control Reform: First Final Rules Go Into Effect on Oct 15, 2013

To refer press release of Department of State.

http://www.state.gov/r/pa/prs/ps/2013/10/215428.htm

Third Round of Negotiations on the Japan EU EPA

Press release by Ministry of Foreign Affairs on October 15 announced that the third round of negotiations on the Japan-EU Economic Partnership Agreement ("EPA") will be held in Brussels, Belgium from October 21 to 25.

At the meeting, discussions were conducted on areas such as trade in goods, trade in services, investment, intellectual property rights, non-tariff measures, government procurement and others.

Japan and EU decided to start EPA negotiation on March 2013, and had first and second round of negotiation in April and June this year respectively.
The next round of negotiations is scheduled to take place in the week of January 27, 2014.

China Imposes Embargo Against North Korea

My colleague in Bryan Cave International Consulting Shanghai office posted the useful & interesting article regarding China's embargo list to North Korea.  Here is the one. 
http://www.bryancaveconsulting.com/uploads/files/BCIC_Asia%20Trade%20Bulletin%20Sep-%20Oct%20%202013.pdf


China and other UN member states had, in the past, refused to support a complete embargo against the Democratic People’s Republic of Korea (“DPRK”). The United Nations said that had made it hard for its regulatory agencies to determine whether the Chinese government was imposing substantive sanctions on the DPRK.  Since the DPRK conducted its third nuclear test in February 2013, China has adjusted its export policies toward North Korea, including a complete ban on the export of dangerous goods.

For the implementation of UN Security Council resolutions and according to the Foreign Trade Law, China published an export embargo list of dual use items to the DPRK in an announcement made on September 23, 2013, officially announcing to the public that it is imposing sanctions on the DPRK.

http://exportcontrol.mofcom.gov.cn/article/t/z/201309/20130900319092.shtml

 

The list is promulgated in accordance with UN Security Council Resolution No.1718, 2087, 2094; INFCIRC/254/Rev.11/Part 1, INFCIRC/254/Rev.8/Part 2 published by the International Atomic Energy Agency; S/2012/947、S/2006/853、S/2009/364 published by the UN Security Council; as well as appendix C of UN Security Council Resolution No.2094.

The 236-page list covers the ban on dual-use items and technologies in four major areas including nuclear, missiles, chemicals and biological. While nuclear dual-use items in the embargo list are almost similar to those listed in the Catalog for the Administration of Import and Export Permit for Dual-Use Items and Technologies which is part of China’s export control system, the new list covers more items and technologies related to missiles, chemicals and biological, with more detailed technical specification. 

As the DPRK list is not based on HS code and could potentially have broader coverage, exporters should verify to see if their products for export to North Korea are subject to control.
This is the first time China has issued an embargo list against a specific country.

US export & re-export control seminar on Nov 5 - 6

Please be noted, unfortunately, this seminar is postponed due to the US federal government shut-down.  The new schedule will be discussed when the operation is back to normal.  (as of Oct 11)


On November 5 - 6 in Tokyo, US export and re-export control seminar will be held by US Embassy in Hotel Okura.  Traders who are involved in export compliance should attend this useful seminar.
The details are available in US Embassy web site:

(Seminar brochure in Japanese)
http://japan2.usembassy.gov/pdfs/wwwf-20131105-trade-j.pdf

(Seminar brochure in English)
http://japan2.usembassy.gov/pdfs/wwwf-20131105-trade-e.pdf

Second Round of Negotiations for RCEP

According to press release issued by Ministry of Foreign Affairs on September 27, the second round of negotiations for Regional Comprehensive Economic Partnership ("RCEP") was held in Brisbane, Australia, from September 24 to 27.

In this round of negotiations, the meetings of the Trade Negotiating Committee, in which senior officials participated, and of working groups concerning issues such as Trade in Goods, Trade in Services and Investment were held, and the scope and method of negotiations were discussed.

The next round of negotiations will be held in Malaysia between January 21 and 24, 2014.
RCEP trade negotiation is expected to finalize by the end of 2015.

Japan METI amends control list of dual-use items - Update

METI announced today Sept 10 that the final version of updated control list of dual-use items, and the implementation date is October 15, 2013.

http://www.meti.go.jp/press/2013/09/20130910004/20130910004.pdf

Japan METI updated Foreign User List

On August 30, 2013, Japanese Ministry of Economy, Trade and Industry ("METI") announced its update of Foreign User List, which is WMD proliferation concerned entities list as restricted users.
The list update is just slight modification, adding another possible names of existing restricted entities of North Korea, and add one new entity in China.

http://www.cistec.or.jp/export/express/130830/userlistpress.pdf

One additional entity is supposed to be in China, its name is DCB Finance Limited.  The quick google search shows this entity is front company of Daedong Credit Bank in North Korea.  They are also sanctioned by US Department of Treasury.

Japan METI amends Control List for dual-use items

On July 31, 2013, the Japan Ministry of Economy, Trade and Industry (“METI”) announced the public comment draft that Japan will update control list of dual-use items to reflect the latest changes of international regimes, such as the Wassenaar Arrangement, the Australia Group, the Missile Technology Control Regime, and the Nuclear Suppliers Group.  The draft of control list is for public comment and its comment due date is August 30, 2013.  The implementation of the final updated list is expected within a few months after the due date of public comment according to the past practice.

http://search.e-gov.go.jp/servlet/Public?CLASSNAME=PCMMSTDETAIL&id=595113039&Mode=0

Japan’s current and last control list was implemented in August 1^st, 2012 and covers the revisions adopted by the international regimes in their respective control lists. 

The changes made this time in 2013 reflect the ongoing relaxation of control on dual-use items which are mainly used for industrial purposes and applied to military uses at the same time, covering commonly traded dual-use items, such as electronics, computers, telecommunications and information security products etc.  On the other hand, there is a strengthening of control on more sensitive items, such as certain scroll-type compressors (Japanese category 2), or spray-drying equipment (Japanese category 3-2), etc. for which they may be used for development, manufacturing and use of nuclear supply item or chemical weapon.

METI will conduct public seminar end September through early October in Tokyo, Osaka and Nagoya to explain the details of the list update to traders. 

* Date & place of the seminars here: http://www.cistec.or.jp/service/seminar/index.html#kaiseisetumeikai

FTA utilization ratio of JP companies 36%

According to the JETRO 2013 World Trade & Investment Report, the FTA utilization ratio of Japanese companies in 2012 was 36.9%, which is 3% increase last year.  The difference is shown depending on scale of companies.  Large companies ratio is 49.6%, while ratio of SME is 31.5%.

The definition of 'utilization' means among the companies who conduct trade with countries Japan implemented FTA, the ratio shows at least using one FTA either in exporting or in importing.

The interesting point is significant increase of Asean-China FTA utilization ratio increased 4.5% to last year and reached 29.6%.  This shows Japanese companies move to utilize the FTA between third countries.

Second Round of Negotiations on a FTA among Japan, China and the ROK

The second round of negotiations for a FTA among Japan, China and the Republic of Korea (ROK) was held in Shanghai, China from July 30 to August 2.
In this round of negotiations, areas such as Trade in Goods, Trade in Services, Customs Procedures, Competition Policies, amongst others, were discussed.

The next round of negotiations will be held in Japan, and the date is TBD.