FCPA - US cracks down on corporate bribes

A bit apart from customs and trade matters, but getting important for companies which operate globally, it is enforcement of FCPA (Foreign Corrupt Practice Act).

The FCPA prohibit US companies from paying or offering to pay, foreign-government officials or employees of state-owned companies to gain a business advantage. It covers non-monetary gifts or offers in addition to cash payments. The gray area of the law sometimes apply to actions, for example, the giving of seasonal gifts that is common in Japan or some other Asian countries.

This law applies not only US nationals but also for other foreign nationals working for US companies, or foreign companies which issue ADR (American Depository Receipts) in US. For example, a Japanese manager in Bridgestone Corporation was accused of violation of FCPA, allegedly involved indirectly bribe-related activity of marketing in South America.

Recently, the crackdown under the FCPA now extend across world-wide and penetrates entire industries. The Justice Department is increasing its prosecutions of alleged acts of foreign bribery by US corporations, forcing them to take costly steps to defend against scrutiny.

Here is examples of Lucent Technologies Inc. In 2007, the Justice Department settled charges against Lucent for failing to properly record millions of dollars in travel to Disney World, Las Vegas and other sightseeing destinations for about 1,000 Chinese Foreign officials who worked for state-controlled telecom companies. Lucent had characterized the trips as factory tours, but admitted to the conduct and paid $2.5 millions in fines.

Another example of non-US company, Siemens AG, German industrial conglomerate. Siemens agreed in December 2008 to pay $800 millions in US fines to settle bribery investigations involving alleged payments to government officials around the world to win infrastructure contracts. This fine amount is the largest foreign-bribery fine ever. Also, the cost of addressing its own corrupting allegations was nearly as much as its total fine of $1.7 billions, including the fines to the German government. Siemens is spending more money now on compliance programs and a government-mandated monitor.

Among the companies currently under Justice Department review, Sun Microsystems, which is in the midst of a potential $7.4 billions purchase by Oracle Corp., said in a regulatory filing that it might have violated bribery laws in an unnamed country. Both Sun and Oracle declined to elaborate on whether the potential violations would affect the merger deal. Oracle has said in an SEC filing that Sun informed it out the matter.

The conclusion: It is absolutely wiser and less costly to have an adequate compliance system in place and a corporate culture that stands for clean business.

2009 Report on Compliance published by METI

Report on Compliance by Major Trading Trade Partners with Trade Agreements - WTO, FTA/EPA, BIT, is an official report by Japanese METI and have been published once a year.
On May 27, 2009 version was published on METI web site. As of now, the report is in Japanese version only, English version will be put on place later, currently up to 2008 version is available on METI web site.

The report covers broad range of trade issues, Part I is the specific trade issues per country, such as bringing the CCC （Chinese Compulsory Certification） issue in China. Part II is for WTO agreement matters, e.g. MFN principle, tariff, anti-dumping, or rule of origin, etc. Part III covers FTA/EPA issues.

Actually, this report covers almost same issues every year, and repeat same insistence from Japanese perspective.
For example in export control matter which request to US, Japan have insisted that US re-export extra-territorial requirement is a potential violation of international law. As Japan is a member of all major international export control regimes and have solid export control regulation fully and effectively. Therefore, Japan have requested US to exempt Japanese exporters as exempt of US re-export control regulation.

Reference:
2009 report (in Japanese): http://www.meti.go.jp/report/data/g90527c01j.html
English version (2009 report is not yet available) :　http://www.meti.go.jp/english/report/index_report.html#wtoinconsistency

Japan will update export controlled items list

(Turboprop engine model)

Japanese METI announced the pre-evaluation notice of export controlled items list update on its web site on May 27. Japan have joined major International Regimes such as NSG, AG, MTCR and Wassenaar Arrangement. The agreements in these International Regimes are to be reflected into Japanese export control regulation, usually it is updated once a year.

METI announced updated controlled list (draft) in Ministerial Ordinance and start to accept public comment from today until June 25. The updated point this time is reflecting the agreements in November and December 2007 of International Regimes.
(Please be noted the list of Wassenaar Dec 2008 is already available, but the latest 2008 list is NOT included in it.)

Some of the examples of newly added into controlled items list are such as a turboprop engine and its manufacturing equipments, advanced raw material for Semiconductor Integrated Circuit board, and an equipment for invalidating IED (Improvised Explosive Device) etc.

After accepting the public comment, METI will then officially announce the new controlled list and implement with affordable period for making known public. Most likely, the implementation will be around January 2010, based on the past practice.

(Source: http://search.e-gov.go.jp/servlet/Public?CLASSNAME=Pcm1010&BID=595109033&OBJ )

Japan will relax ban on Arms Exports

According to Nikkei newspaper on May 24, 2009, Japanese government decided on a course to relax the ban of arms export. Japanese government has been taking a tough stance against arms exports. At present, arms exports are basically prohibited except for return shipment of foreign military items for repair or replacement, or for some specific export in accordance with a government-to-government agreement.

New policy will allow the co-development or co-manufacturing of weapons with allied countries, which could help efficient development of next generation jet fighter, or help reducing the military related cost. Otherwise, the cost for developing and maintaining the military equipments would be higher and heavy burden in national budget.

The Nikkei news don't report any change of FEFTL (Foreign Exchange and Foreign Trade Law) and Export Trade Control Order. This direction change would be considered as internal policy change and the implementation of export license management may be modified in future.

(Source: Nikkei Net http://www.nikkei.co.jp/news/main/20090524AT3S2300Y23052009.html )


Overview of "Three Principles on Arms Export"

This policy is based on the statement the Japanese government made in the Diet in 1967, which is called "Three Principles on Arms Exports". This principle prohibits arms export to the following countries.

1) Communist bloc countries
2) Countries subject to arms export embargo under the UN Security Council's resolution
3) Countries involved in or likely to be involved in international conflict

Subsequently in 1976, the Japanese government expanded the policy by issuing following statement.

1) Arms export to countries to which the Three Principles applied shall not be permitted.
2) Arms export to countries to which the Three Principles does not apply would be also be restraint.
3) Export of weapon producing facilities shall be treated pursuant to arms export.

Japanese government further expanded the policy by prohibiting export of weapon-related technology as well. As a result, it is now prohibited to export arms and related items under Category 1 of the control list, which is described in the Export Trade Control Order Attachment List No. 1.

(Reference: Japan's Policies on the Control of Arms Exports http://www.mofa.go.jp/policy/un/disarmament/policy/index.html )

Vietnam - Japan EPA still awaiting approval by Diet in Japan

Vietnam-Japan Economic Partnership Agreement (VJEPA) is a comprehensive bilateral trade agreement, which was signed in Tokyo last December.
Vietnam has ratified this EPA last month April, but awaiting the ratification by Japan side.

The Prime Minister Nguyen Tan Dung, he visits Tokyo and Prime Minister Taro Aso had a top level meeting yesterday on May 22.
During this meeting, Prime Minister Dung requested Japan to ratify VJEPA as early as possible.
Prime Minister Aso responded that the deliberation in Diet has just started today (May 22) , and makes effort to ratify it as soon as possible after approval in Diet.

This EPA will enter into force on the first day of the second month following the month in which each country exchange diplomatic notes informing each other that their respective legal procedures have been completed, according to EPA article 128.

(Source: MOFA Press release: http://www.mofa.go.jp/mofaj/area/vietnam/visit/0905_sk.html )

AJCEP - Thailand entry into force on June 1, 2009

According to press release on May 18, 2009 on Ministry of Foreign Affairs of Japan, on April 30 (Thu) , 2009, Thailand made the notification on the completion of its legal procedures necessary for the entry into force of the Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast Asian Nations (AJCEP - Japan-ASEAN Comprehensive Economic Partnership Agreement).

With this notification, the Agreement will enter into force on June 1 (Mon), 2009 in relation to Thailand.

This Agreement has already entered into force among Japan, Singapore, Laos, Viet Nam, Myanmar, Brunei and Malaysia.

(Source: MOFA web site http://www.mofa.go.jp/announce/announce/2009/5/1191758_1134.html )

Trader arrested for export violaiton to North Korea

According to various news papers as of May 19, a trader in Kyoto is arrested in violation of Foreign Exchange and Foreign Trade Law ("FEFTL"), attempt to export Truck with tank to North Korea. This is considered as violation of Catch-all control provision, which imposes export license to a trader when the items are possibly to be used for WMD (Weapon of Massive Destruction) purpose.

This trader exported the Truck via Korea, where is the exemption of Catch-all control regulation as white country.
He then tried to transfer the truck to North without importing into Korea by arranging with shipping company there, but the cargo was captured by Korean customs authority. The end-user in North Korea is reported as "Korea Paekho 7 Trading". This company is listed as WMD related company in End-User list provided by METI.
The export to the listed company require export license by METI. (But only if the item is apparently NOT used to WMD activity, the license is not required.)

The truck (and its tank) is essential equipment for launching the missile by carrying the missile and its fuel.

(Reference: METI Press Release: http://www.meti.go.jp/press/20090519002/20090519002.pdf )

English translation site of Japanese Law

Japanese Ministry of Justice (MOJ) launched new web site which is database of English translation for Japanese Law. This is official translation and very helpful. Good initiative by MOJ and I really appreciate their hard work on this!

The site url is http://www.japaneselawtranslation.go.jp/

However for customs and trade professional, we still have challenges mainly in following points.

1) Export control - Only FEFTL (Foreign Exchange and Foreign Trade Law), Export Trade Control Order, and Foreign Exchange Order are available. There are no English translation for Ministry Ordinance and Notices, which include critical information when resolving operational inquiry from industry.

2) The translation is not for the latest one. For example, the translation of Export Trade Control Order doesn't reflect recent change in Nov. 2008, which should reflect catch-all control for Conventional Weapon.

3) Customs Law - No translation at all! These are under Ministry of Finance, but there is no customs related Law or Order.

MOJ states they continue to add, improve, or update the English translation.
Stay tuned and continue to monitor this web site.

Cuba Embargo may be lifted by end of 2010

According to Inside U.S. Trade - 5/8/2009, one of the congress man stated this week, Congress will “most likely” move to end the U.S. trade embargo of Cuba before the end of 2010.
However, we need to understand this move is not top priority, the committee would not consider legislation to end the embargo until after other priorities, particularly health care reform, were considered. It would be better to recognize this as just general direction.

As for recent update, State Department officials are in the early planning stages of a dialogue aimed at further engagement with Cuba. On April 13, the Obama administration announced it would allow U.S. telecommunications companies to do business in Cuba and lift all restrictions on family travel to Cuba, remittances to family members in Cuba and gift parcels sent to Cuba.

According to this announcement on April 13, the Obama administration will now allow more gift parcels, including clothing, personal hygiene items and fishing equipment, and personal communications devices, including cell phones, to be sent from the U.S. to Cuba.
To implement this policy, BIS is making changes to the EAR. The items in question are classified as EAR99. The Treasury Department’s Office of Foreign Assets Control is expected to publish rules on the licenses for telecommunications work in Cuba.

Unauthorized CO between Japan-Malaysia

METI made alert to public on their web site on May 1 regarding CO (Certificate of Origin) authorization issue between Japan and Malaysia EPA.
Between Japan and Malaysia, there are two EPAs in force, which are Japan-Malaysia bilateral EPA and Japan Asean regional EPA. Both EPAs have CO authorization signature provision and strictly impose the authorized CO operation in claiming preferential tariff in importing into Japan.

The problem reported is that in Malaysia side, "not authorized" signature has made in CO and consequently the CO is not effective and rejected by Japanese customs in importing into Japan.
Japanese METI made alert to traders when receiving CO in Malaysia, make sure to confirm whether the signature was made by officially authorized person.
(The report by METI don't disclose the organization name and the person's status who provided the unauthorized signature.)

If the unauthorized signature CO is presented to Japanese customs, the CO is not valid and the importer have to pay duty in MFN rate. The refund later on by submitting correct CO is NOT admitted.

Take care and be sure to check CO signature just in case!

(Source: http://www.meti.go.jp/policy/trade_policy/090501AJCEP%20JMEPA.pdf )

The End User List updated

Japanese Ministry of Economy, Trade and Industry ("METI") announced on May 1, 2009 that they updated "The End User List" (or Foreign User List), which is WMD activity concerned entities list. As general practice, this list is updated annually around May or June every year.

In the updated list, the number of entities increased by 21, most of them are in Iran and in North Korea, and making it total number of entities 244. There are no deletion of entities.
The list is available in following METI web site in pdf and MS-Excel format.
http://www.meti.go.jp/policy/anpo/kanri/user-list/list.htm


(Overview of The End User List)
The End User List is a list of foreign entity who are considered to have relations with development, production, manufacturing or storage of WMD. Exporters are required to file export license applications when they wish to export goods subject to the WMD Catch-all control to entities on the End User List, unless it is apparent that those will not be used for WMD purpose.
Please be noted this list is not an embargo list. It is allowed to export when the goods/technologies are apparently not related to WMD purpose.