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 )