Singapore update export control list on April 2010

On February 12, 2010, Singapore Customs announced a planned update of Strategic Goods Control List. To be in line with international practice, Singapore Customs need to update this export control list regularly. As such, the Strategic Goods (Control) Order 2009 will be rescinded and replaced with a new Order 2010, which will incorporate the latest revision adopted by the four multilateral export control regimes such as NSG, MTCR, Australia Group and Wassenaar Arrangement. The new Order will take effect on 01 Apr 2010.

The Strategic Goods (Control) Order 2010 will include new entries, some deletions, as well as some addition of exemption notes. As per dual-use items, the control list will be based on the updated list of Wassenaar Arrangement in December 2008, which are incorporated also into the latest revisions of the European Union (EU)'s List of Dual-Use Items and Technology (updated in May 2009), US EAR (update in December 2009), Hong Kong Dual-use Goods list in Schedule 1 (implemented in February 2010), and Japan export control list (will be implemented in April 2010).

Examples of changes in the list of IT/electronics commodities are as follows:

• Electronics: 3A001.a.7 (Field Programmable Logic Devices) – Due to a change in technical specifications, control over certain field programmable logic devices is eliminated. The new control parameters are clearer and take into account advances in technology.

• Information Security: 5A002 (Encryption) – Control is relaxed over certain wireless personal area network equipment devices with published or commercial cryptographic standard (including home entertainment systems, peripherals for PC, cell phone headsets etc.), reflected through two additional exemption notes (h) and (i).

While the parameter change of controlled list requires traders to review their items classification, good news is to have “re-synchronize” the classification again with US EAR. Since US EAR implemented updated Wassenaar 2008 parameter in December 2009, traders in Singapore who refer US ECCN to their items have experienced classification disparities between US ECCN and Singapore control list. For example in 5A002 items, the cryptography item has been decontrolled by new exemption note (h) or (i) under US EAR since December 2009, but same item is still controlled under DL5A002 under Singapore regulation. From April 2010, such disparities will be resolved for Wassenaar dual-use items. Traders are encouraged to review their classification again based on new list parameter.

Enhancement of Customs Penalty in Japan

On February 9, 2010, Ministry of Finance ("MOF") announced on Customs web site that they will increase penalty amount of customs compliance violation by amending Customs Law.
The draft of the amendment law have been through Cabinet Decision and submitted to the National Diet. The amendment of the law will be on April 01, 2010. (*)
Followings are the quick outline of the penalty enhancement.

• Penalty of Customs Duty evasion
  Amendment of: Customs Law Article 110.
  Current: Imprisonment with work for not more than five years or a fine of not more than five million yen, or both
  Amendment: imprisonment with work for not more than ten years or a fine of not more than ten million yen, or both
  Reason: With the growing complexity of global trade, and with more vicious and skillful duty evasion method, MOF decided to increase the penalty amount. Also, considered being in line with the penalty amount of other economic crime or domestic tax evasion penalty.
  

• Penalty of violation of prohibited export/import items (for Narcotic, marijuana etc.)
  Amendment of: Customs Law Article 108-4, and 109.
  Current: imprisonment with work for not more than seven years or a fine of not more than thirty million yen, or both
  Amendment: imprisonment with work for not more than ten years or a fine of not more than thirty million yen, or both
  Reason: Increase of illegal import of Narcotic. To have reasonable balance with other relevant crime related laws, and with the Customs Duty evasion.
  
  
• Penalty of violation of prohibited export/import items (for Intellectual Property Infringement items etc.)
  Amendment of: Customs Law Article 108-4, and 109.
  Current: imprisonment with work for not more than seven years or a fine of not more than seven million yen, or both
  Amendment: imprisonment with work for not more than ten years or a fine of not more than ten million yen, or both

(Source: http://www.customs.go.jp/kaisei/horitsu.htm#kz220209 )

(*) According to MOF officer, the implementation of the penalty provision is likely to be in June 2010, as it is required to have certain period to make known to the public.

Japan partly implement Wassenaar 2009

On Jan 28, METI announced export control list update for seeking public comment on the web site. Looking at the new list, it include some latest Wassenaar list which was agreed on Dec 2009. Below is the example of digital computer, Category 4.

• "Digital computers" having an 'Adjusted Peak Performance' ('APP') exceeding 1.5 Weighted TeraFLOPS (WT);
  --> In current list, APP is 0.75WT. This is relax of technical specification, and APP 1.5 is according to Wassenaar 2009 list.
  
• Equipment specially designed for aggregating the performance of "digital computers" by providing external interconnections which allow communications at unidirectional data rates exceeding 2.0 Gbyte/s per link.
  --> In current list, the rate is 1.25 Gbyte/s. This is relax of technical specification, and this rate is according to Wassenaar 2009.

I looked into the list more closely whether Category 5 parts Note 4 (exemption like Ancillary encryption) is there or not, but I don't find it.

I'm a bit surprised to see this list update, because it is very early to incorporate Wassenaar list change. Generally, it takes 1 year later or more. In addition, the Wassenaar 2008 list will be implemented from April 2010 in Japan. The public comment list is not reflecting fully of Wassenaar 2009 agreement. It looks like "early harvest" of dual-use items decontrol. As long as I know, no other country implement Wassenaar 2009 so soon.

As this announcement is public comment stage, I will keep monitoring this list change.

(Source: http://search.e-gov.go.jp/servlet/Public?CLASSNAME=Pcm1010&BID=595110005&OBJCD=&GROUP= )

All exporters in Japan require CP implementation???

I happen to get trade bulletin which explain Japan's recent export control regulatory development, but provide apparently wrong information. This bulletin was provided by one of big prestigious consulting firms. The topic and content is as follows.

Japan
Implementation of internal export control compliance programme (CP) requirement for all exporters.
Under existing practices, only exporters who wish to obtain bulk export licenses are required to submit a CP to the Ministry of Economy, Trade and Industry (METI) for approval.
However, in the revision of the Japanese Foreign Exchange and Foreign Trade Law (FEFTL), effective from 1 April 2010, all exporters will be required to implement CP..... (continue)

Above statement provide wrong information. For those who follow the recent FEFTL revision in Japan, it is easy to guess the author of this article apparently confuse the CP and "Exporter Compliance Standard" which was newly set forth in the FEFTL article 55-10.
Article 55-10 do NOT require all exporters to implement CP, but follow the compliance "Standard" which METI sets separately in Ministerial Ordinance. Otherwise, Guidance, Advice, Recommendation, Order and otherwise Penalty will be forced by METI. Exporter Compliance Standard just describe very very basic matters to be followed by exporters to be compliance to export control regulation. Normal CP (e.g. sample recommended by CISTEC) generally covers such basic export compliance matters, therefore CP holders do not need any additional new requirement after April 2010.

Just think with some common sense, you can find above information is rather strange.
FEFTL Article 1 states the purpose of FEFL as "on the basis of the freedom of foreign exchange, foreign trade and other foreign transactions, ....... through the minimum necessary control or coordination of foreign transactions", it may be against this purpose.
Also from practical operational point of view, if government force "millions of" all exporters in Japan to implement and submit CP to METI, that will jeopardize their operational capacity.

The trade bulletin provided by big consulting firm is really really excellent one, only except this Japanese export control topic. I won't disclose the name of this firm, but keep in my mind as a lesson, that I also should be careful to provide correct information.

ASEAN-6 Achieves Zero Tariffs

Starting the first day of 2010, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand can import and export almost all goods across their borders at no tariff.

As of 1 January, for ASEAN-6 an additional 7,881 tariff lines will come down to zero tariffs, bringing the total tariff lines traded under the Common Effective Preferential Tariffs for ASEAN Free Trade Area (CEPT-AFTA) to 54,457 or 99.11%. Additionally, with the reduction, the average tariff rate for these countries is expected to further decrease from 0.79% in 2009 to just 0.05% in 2010. In 2008, intra-ASEAN import value of commodities for these 7,881 tariff lines amounted to US$ 22.66 billion, or 11.84% of ASEAN-6 import value within ASEAN.

The tariff lines include final consumer products such as air conditioners; chilli, fish and soya sauces; as well as intermediate materials such as motorcycle components and motor car cylinders. Other products include iron and steel, plastics, machinery and mechanical appliances, chemicals, prepared foodstuff, paper, cement, ceramic and glass sectors.

The elimination of tariffs by ASEAN-6 underscores ASEAN’s commitment to dismantle tariffs and keep intra-ASEAN trade open. It will also serve as a catalyst for the development of the single market and production base projected by the ASEAN Economic Community (AEC) Blueprint.

The actual impact and how much this final instalment will be translated as savings for consumers will depend on the market dynamics of the respective ASEAN-6 countries. The Secretary-General of ASEAN, Dr Surin Pitsuwan, said that “We sincerely hope that all parties will act to ensure that the man on the street will benefit from these reductions in tariffs.”

As for the business community, especially the downstream producers, Dr Surin said that they also stand to gain. “Lower cost of inputs will allow the business community a wider choice of goods, and in the process, they will move towards becoming more competitive globally, as envisaged in the AEC Blueprint,” he added.

The CEPT-AFTA covers the whole range of products traded by the ASEAN Member States and provides for the gradual reduction in tariffs of these products, which has been ongoing since 1993. Under the CEPT-AFTA schedule for tariff reduction, each ASEAN Member State is allowed to place their products in the normal track, where the commitment is for the tariffs to be reduced to zero by 2010 for ASEAN-6 and 2015 for the remaining four countries, namely Cambodia, Lao PDR, Myanmar and Viet Nam. In 2010, these countries will also see tariff reductions under the CEPT-AFTA commitments to 5%, where the average tariff rate will decrease from 3% in 2009 to 2.61%.

Under the CEPT-AFTA, agricultural products such as tobacco, coffee, live animals and animal products, which come under the Sensitive List (SL), will have their tariffs reduced to 5% on 2010 and to zero tariff by 2015. The Highly Sensitive List (HSL), comprising rice, will have their tariffs capped on a specified date. As for the General Exclusion List (GEL), the tariffs will remain based on factors such as national security and morals/health/aesthetic/archaeological grounds (e.g.: weapons and opium). As of today, 487 tariff lines or 0.89% of tariff lines for ASEAN-6 still remain in the SL, HSL and GEL categories.

Besides tariff liberalisation, ASEAN is also embarking on parallel initiatives in trade facilitation to complement tariff reduction. ASEAN is also actively working on formulating streamlined and simplified customs procedures for clearance of goods, eliminating non-tariff measures, developing the ASEAN Single Window and the ASEAN Trade Repository, improving investment protection, providing for dispute settlement and better Intellectual Property Rights regime and removing the obstacles hindering the movement of professional and skilled workers.

(Source: http://www.aseansec.org/24146.htm )

Thailand Implements ASEAN-India Free Trade Agreement on 1 January 2010

On 29 December 2009 Thailand has issued the MOF Notification regarding the implementation of tariff reduction and exemption under the ASEAN-India Free Trade Agreement (“AIFTA”). The tariff reduction started on 1 January 2010 and is, at present, being applied to goods originating from India, Malaysia, and Singapore, which are the countries which have also implemented the pact. Goods originating from other ASEAN countries will be eligible for the AIFTA tariff reduction and exemption privileges when they have completed their internal procedures for the ratification of AIFTA and informed the Thai government in writing. The list of countries which have completed such procedures will then be announced by the Thai Customs.

In order to claim the tariff reduction and exemption privileges under AIFTA, importers must comply with the criteria and procedures set in the Customs Notification No. 105/2552 (http://www.customs.go.th/Declaration/DeclarationResult.jsp?Docidt=A01261&tlechk=1), as well as obtain a certificate of origin Form AI, issued in accordance with AIFTA rules of origin, at the time of importation. The AIFTA rules of origin require goods to meet the following rules.

1) General Rule: Regional value content (RVC) of at least 35% of F.O.B. value and a change in 6 digits Tariff Sub-Heading (CTSH);
or
2) Product Specific Rules (PSRs): At present, ASEAN and India are still to finalize the PSRs.

In addition, AIFTA does facilitate the trading through ‘third party invoicing’ and ‘Back-to-Back Form AI’ schemes.

Under AIFTA, Thailand, as well as India and other 4 ASEAN countries (i.e. Brunei, Indonesia, Malaysia, and Singapore) commits to the tariff reduction modality as shown below. Please note that the tariff reduction of the rest of ASEAN countries (i.e. the Philippines, Cambodia, Laos, Myanmar, and Vietnam) follows a different reduction modality.

• Normal Track 1: Tariff on about 71% of total traded goods to be gradually reduced to 0% by 31 December 2013.
• Normal Track 2: Tariff on about 9% of total traded goods to be gradually reduced to 0% by 31 December 2016.
• Sensitive Track: Tariff on about 10% of total traded goods to be gradually reduced to 5% by 31 December 2016.
• Standstill Items: Tariff on goods not exceeding 50 items will be maintained at 5%.
• Highly Sensitive List: Tariff on certain number of goods (14 in case of Thailand, and 5 in case of India) will be reduced by about 25-50% to agreed rates by 31 December 2019.
• Exclusion List: In case of Thailand, there will be no tariff reduction for 463 items while India has put 489 items in the Exclusion List.

Thailand’s tariff rates under AIFTA for each tariff line can be found at the Thai Customs website at http://www.customs.go.th/Declaration/DeclarationResult.jsp?Docidt=A01259&tlechk=2.

US companies failed to screen restricted Chinese entities

An interesting case study of trade compliance violation is posted in Wall Street Journal on January 5th.
http://online.wsj.com/article/SB126256626983914249.html?mod=googlenews_wsj

Many US companies failed to screen trade with restricted Chinese entity, China Precision Machinery Import-Export Corp ("CPMIEC"), which is listed in Specially Designated Nationals List issued by OFAC, and imported various products from the affiliated companies in China.
For most US companies, it looks no willful violation intention, and just missed the screening.
The cause of screening failure is that the company name is not exactly match by using similar name or affiliated name, or a unit of CPMIEC with different name, etc. There are so many aka (also known as) names in one entity. It is easy to rename or make front company. OFAC added one more aka name for CPMIEC in SDN list on Dec 31, but it is like a endless race.

I understand the difficulty of this kind of screening, as I have similar experience in screening failure when I worked in US computer company. For example, there are some Japanese individuals who are listed on US Denied Persons or Debarred list. Call center happen to receive the call from one of these restricted entities in Japan and provided verbal technical service. Call center of this US company have capability to check such restricted entities by using the list in database, however the name of the person is always recognized in Kanji (Chinese character).
US government don't provide the name of restricted entities in local language, but provide only in alphabetical words. Japanese name expressed by alphabetical words often lead to so many types of Kanji names, so it is really difficult to exactly find the entity only by alphabetical name.