Japanese Trader arrested in violation of Catch-all

According to various newspaper report, the president of small trade house in Tokyo, Toko Boeki, and the president of two other companies who cooperated with Toko Boeki were arrested in violation of Foreign Exchange and Foreign Trade Law ("FEFTL") by attempting the export of magnetic measuring devices supposedly to North Korea via Myanmar and Malaysia.

A magnetic measuring device is considered as dual-use item which can be used for development and manufacturing of missile. Any of news report don't indicate the ECCN for this device, and reported as violation of Catch-all control. In Japanese classification, it is reported as Category 16 in Export Trade Control Order Appendix I, which covers almost all general industrial goods except food and wooden products.

Actually, the name of Toko Boeki is not new in the export violation to North Korea. It was reported in end of Feb this year.

Newspaper resource report Toko Boeki was once "informed" by METI to apply export license, but they disregarded this warning from METI, and tried to export again without license in Customs declaration under another exporter's name. The companies who cooperated with Toko Boeki are as below.

Taikyo Sangyo Co., Ltd. http://www.taikyosa.co.jp/index.html

Riken Denshi Co., Ltd http://www.rikendenshi.co.jp/

Toko Boeki tried to export the device with receiving order inquiry from the Beijing office of North Korea related entity. This entity is reported as "New East International Trading Ltd." which have close relation with North Korea government and have been involved in Weapon of Massive Destruction ("WMD") and listed as restricted entity in METI's proliferation end-user list.

With the recent development of missiles and nuclear facility in North Korea, the export control is getting more focused in terms of risk management of company. It is critical for trader to understand and manage export control properly, and is encouraged to conduct end-use screening and minimize diversion risk as due diligence.

(Source: METI web site: http://www.meti.go.jp/press/20090629014/20090629014.pdf )

US-Japan agreed mutual AEO program

According to the press release from Ministry of Finance ("MOF") in Japan, U.S. Customs and Border Protection ("CBP") and Japan Customs and Tariff Bureau in MOF signed the mutual recognition agreement in AEO (Authorized Economic Operator) program.
The trade operators who have solid security and compliance program are approved as AEO operator. With the mutual recognition agreement in US and Japan, such AEO operators will be treated well as superior trader, will have certain benefit in customs clearance, thus contribute to the smooth and safety trade between US and Japan.

For Japan, this AEO mutual recognition is second agreement next to New Zealand.
For U.S., this is 4th agreement, next to New Zealand, Canada, and Jordan.

From Japanese trade operator point of view, their goods import into U.S. will be favorably treated in customs declaration and inspection. However, it is important to note, as U.S. AEO program is solely for import into U.S. (No AEO program for export from U.S.), the import into Japan is NOT in scope of this AEO mutual recognition.

In addition, although the AEO status is respected in both countries in customs clearance and other security related measure, what specifically is the beneficial point in actual implementation?
It is still uncertain.

Nevertheless, it is good direction to move forward. Japan is considering to have AEO mutual recognition with EU and Canada.

(Source: http://www.mof.go.jp/jouhou/kanzei/ka210626.htm - Japanese only)

Taiwan to be a part of GPA on July 2009

On July 15, 2009, Taiwan will become the 41st member of the Government Procurement Agreement ("GPA") of the World Trade Organization ("WTO").

As a member of the GPA, Taiwan is committed to open most of its government procurements valued over NT$6,520.- (approx. US$194,000) to international bidding by other GPA members.
Similarly, Taiwanese goods and services will be eligible to compete in the procurements of other GPA members above a certain monetary threshold.
The limit of value for bidding is case by case depending on its contents of the contract.
(For Japan's case see http://www5.cao.go.jp/access/japan/chans/tekiyouhyou.html )

Foreign companies competing for Taiwanese government contracts can now also expect equal treatment as well as a higher level of transparency and predictability. The GPA requires that members treat products and services from other members in a non-discriminatory manner.
Any disputes concerning these procedures or unequal treatment could be heard under the WTO Dispute Settlement Understanding.

Taiwan began the process to join the GPA soon after its accession to the WTO in 2002.
Objections from China prevented the conclusion of the negotiation until December of 2008, when the WTO Committee on Government Procurement finally approved Taiwan's application.

GPA accession is an option in WTO members, this means not all WTO members are a part of GPA. Taiwan will be the fifth signatory of the GPA in East Asia, following Japan, South Korea, Hong Kong and Singapore. Other members of the GPA include the 27 members of the EU and the United States, Canada, Iceland, Israel, Norway, Liechtenstein, Switzerland, and Dutch Aruba. China has begun its accession talks, but is not expected to become a member in the near future.

Documents retention period to be extended in Japan

With the coming revision of the Foreign Exchange and Foreign Trade Law ("FEFTL"), the relevant Orders such as Foreign Exchange Order will be revised. On June 22, Ministry of Economy, Trade and Industry ("METI") announced draft version of relevant Orders in the web site to seek public comment. I have read through the draft Orders and found most of the revised points are reasonable to prevent unnecessary duplicated license authorization.

One point to noteworthy and applicable to all traders in Japan is that the export documents retention period will be extended from current 5 years to 7 years.
Let me explain the legal reason of it.

Under current FEFTL penal provision, the maximum penalty imprisonment is "not more than five years". This will be enforced to extend to "not more than ten years" for violation of WMD related case. The document retention period is based on the the statute of limitations under Code of Criminal Procedure Article 250. The statute of limitation is proportional to imprisonment term. Therefore, with the extension of imprisonment term, the statute of limitation is also extended. For imprisonment "not more than 10 years", the statute of limitation is 7 years and the company need to retain export related documents for 7 years accordingly.

With the revision of FEFTL, which increase the penalty, the document retention period affects almost all traders, they have to make change their internal operational rule, and some need to revise ICP accordingly. The revision of FEFTL is expected entry into force in end of this year or earlier next year.

(Source: http://www.cistec.or.jp/service/090227gaitamehoukaisei/090622point.pdf - Japanese only.)

Japan totally prohibit export to N. Korea

On June 16, 2009, Japanese Ministry of Economic, Trade and Industry ("METI") announced Japan totally ban export to North Korea based on the UN Security Council resolution 1718.
The summary of this announcement is as follows.

- Prohibit export of ALL goods to North Korea by imposing export approval based on Export Trade Control Order Article 2, 1-1-2. (This imply even if an exporter apply export approval to METI, they never approve it.)

- Prohibit brokering of trade by Japanese resident, of the goods shipped from third country to North Korea based on Foreign Exchange Order Article 18, 3.

- Humanitarian aid is treated as the exception of export prohibition.

- This prohibition is effective on June 18, 2009 to April 13, 2010.

- The violation of this would be penalized based on Foreign Exchange and Foreign Trade Law, Article 70. Imprisonment not more than 3 years and monetary penalty. In addition, as administrative sanction, the prohibition of export not more than 1 year may be imposed.

On the same day, the notification by Director General of Customs and Tariff Bureau was announced to rigidly follow this announcement. Export by detour via a third country toward North Korea must be checked, the inspection by Customs to suspicious export case will be tighten. In case by case, Customs official may check the export contract or other supporting documents in export declaration to Customs to strictly inspect the final destination of the goods.

The actual trade amount from Japan to North Korea was approx. 8 millions US dollar in 2008, and it continued to decline for years. Therefore, the negative impact to Japanese trade economy is considered as very limited.

UN Security Council impose new sanction to North Korea

Recently these days, we find quite a lot of TV news and newspaper articles relating to North Korea trade sanction. They are broadcasted many times with each progress, it is not easy to understand whole picture.

See below URL articles regarding North Korea sanctions, it is summarised concisely in one page.

The bottom line is, the new sanctions do not extend to trade in civilian goods and services.
The ultimate impact of the new sanctions will depend on the extent to which governments’implementing laws and regulations. The best way to understand the situation correctly is to consult local export compliance professional in each country.

Source: http://www.bryancave.com/files/Publication/77853ea9-fc1a-42e0-9ca4-3e6541ad7e76/Presentation/PublicationAttachment/ee00571a-2cdc-47d2-aa33-4928759ba128/IRB442.pdf

EC export control new regulaiton

EU will introduce new regulation for export control of transfer, brokering and transit of dual use items. It was published in the Official Journal of the European Union (Council Regulation (EC) No. 428/2009). It will come into effect on August 27, 2009 and will replace the current regulation.

This new regulation reflect the UN Security Council Resolution 1540 (2004), which is requirement of "brokering" and "transit" control of dual use items.
"Brokering" is the transaction of controlled items from a third country outside the EU and to a another third country outside the EU. The license may be required for a potential WMD end-use. The items are defined to include software and technology.

Similar export regulation is also imposed in Japan based on US Security Council Resolution 1540, in terms of brokering service. However, the difference (or, say, loophole of Japan's regulation) is that Japan regulate only the goods, don't regulate technology brokering under FEFTL.

(Source: http://www.bryancave.com/files/Publication/b69b1fe6-698c-458d-bbe5-37d863f91e5f/Presentation/PublicationAttachment/ab7674bf-b862-4e12-bda2-3c1d1627df8d/IRB441.pdf)