Japan introduce new bulk export license for intercompany transaction

On November 20, 2009, Japanese Ministry of Economy, Trade and Industry (“METI”) announced to introduce new type of bulk export license of inter-company transaction for Japanese companies to export items to its overseas subsidiaries. Bulk export license allows an exporter make multiple exports of certain controlled items regulated by international regimes such as Nuclear Suppliers Group, Australia Group, Missile Technology Control Regime and Wassenaar Arrangement, to certain destinations without obtaining individual license by METI. This new type of bulk license system is effective on same day as of the announcement.

The new bulk export license is called as “Special Subsidiary Bulk License”, covers both goods and technology and its validity is three years. This bulk license is limited for exporting to specific Japanese subsidiary overseas, which is owned and controlled by Japanese company, and the parent company in Japan supervise, advise its export compliance, and conduct audit in its overseas subsidiary. Internal Compliance program (“ICP”) implementation of its parent company is compulsory. In this bulk license scheme, there are two types of license. Type A license is for a subsidiary as an end-user of items, while Type B license is for a subsidiary as an importer or a re-exporter which is typically considered as child company of Japanese trading house. Therefore, type B is required to have an end-user of Type A license holder.

In the past, there are three kinds of bulk export license in Japan, which are General Bulk Export License, Special Bulk Export License, and Special Bulk Export License for Repair or Replacement. The goods and technologies covered depend on the sensitivity of items and destination country and the matrix of items/destination country provide the validity of each bulk license. General Bulk Export License is for non-sensitive items in Category 2 to 14 to non-sensitive countries. Special Bulk Export License can be used for more sensitive and specific items in Category 2 to 14 to specific end-user in more broad destinations. For example, to export radiation hardened computer (or ECCN: 4A001.a.2) from Japan to Singapore, Special Bulk License is valid, while General Bulk License is not valid. Special Bulk Export License for Repair or Replacement is used only for arms and related items return (Category 1) to the original exporter in white countries.
The new license, Special Subsidiary Company Bulk License covers same goods and technologies as Special Bulk Export License and the end-user is limited for designated Japanese company’s subsidiary. Both special bulk licenses are not valid for export or transit to Iran, Iraq, North Korea, or Libya. The difference with current Special Bulk License is that the current special bulk license requires certain result of past shipments to get license application status, the export items must be decided in license application beforehand, and it is required to submit a written pledge by the end-user to METI. Instead, Special Subsidiary Company Bulk License has no such limitations, but an audit is required by parent company, and shipment results need to be reported to METI once a year. Also a big difference is that Special Subsidiary Company Bulk License does NOT include “design and manufacturing” technology in its coverage, although Special Bulk Export License allows it to be included. Therefore, as for technology export, Special Subsidiary Company Bulk License only covers the technology for “use”.

At the time of introducing this new bulk export license, the validity period of existing bulk export license is extended. As for Special Bulk Export License and Special Bulk Export License for Repair or Replacement, the validity period was two years, then both are extended to three years. With this period extension, all bulk export license are same validity period of three years.

With this new type of bulk license introduction, subsidiaries of Japanese companies in Asia may be required to set up more solid export compliance operation and accept internal audit by the initiative of its parent companies in Japan. While overall export control regulation tend to be enhanced and tightened to prevent illicit trade, good traders with excellent compliance record can get more privilege in trade. Traders are encouraged to make use of such privilege, and at the same time, can minimize the risk of violation. 　

(Source: http://www.meti.go.jp/policy/anpo/kanri/091120%20sekou/091120%20kogaisya.html )