Additional obligation in General Bulk License and new benefit as return exemption in export of dual-use items

As of April 01, 2011, additional new obligations and one exemption benefit in General Bulk License (“GBL”) came into effect in Japan based on the amendment of Notification of Bulk License （包括許可取扱要領）which was issued by Ministry of Economy, Trade and Industry (“METI”) on December 6, 2010. This amendment imposes additional end-user screening requirements when GBL holder export eligible items to non-white countries in using this bulk license. The new benefit is that the GBL now covers, as one of its options, an foreign origin dual-use item can be returned for repair or replacement to originating country without individual export license. For convenience of exporter, the GBL holder does not necessarily conduct accurate classification of the item if he/she is not able to do so, as long as it is identified as non-military items.

The additional obligations are following two points, and only applicable to the export transaction to non-white country only. In other words, if the export transaction under GBL is to white country, there is no new obligations at all.

1. To make sure the possible end-user and final destination is compliant in “stock sales”.

If an export transaction is for “stock sales” which is defined as “no end-user is specified at the time of export” or “movement of goods for inventory accumulation”, the GBL holder needs to make sure the possible end-user name, and to confirm an item will not be re-exported to third country where the GBL does not cover as eligible destination. For example, the exporter under GBL needs to keep in record like, “This item is for that industry, possible end-user would be ABC company in XYZ country”. This is the a kind of diversion risk management so that the item is not re-exported to Iran, North Korea, or Iraq etc., which are non-eligible countries of GBL under stock sales operation. In addition, METI impose to GBL holder that this stock sales screening “should be conducted by designated internal procedure”, therefore GBL holder may need to amend Internal Compliance Program (“ICP”) and relevant operational procedures accordingly. There is no requirement to report this stock sales screening each time of the transaction to government authority, but should be kept in record for anticipated audit by METI

2. If the end-user is military entity or relevant to army, police, or intelligence organization, the report to METI is required in advance to the export transaction.

There has been restriction in GBL if an eligible item is likely to be used for Weapon of Massive Destruction (“WMD”) or conventional weapon purpose, the GBL lose its validity or report to METI is required depending on the destination country and the sensitivity of the situation. In addition to the current restriction, if an end-user is military entity, the report to METI is required before the export transaction as additional requirement.

The amendment of GBL obligation is “carrot and stick” to exporter. As benefit to GBL holder, return shipment in free of charge basis is added as new eligible transaction. Although there has been return export exemption in Japan based on Export Trade Control Order Article 4, but the exemption was limited to an item which was originally exported from Japan, thus could not cover the return of foreign origin item. Now for GBL holder with relevant documents stating the reason of return, the import declaration copy, and Bill of Lading in importing, it is possible to export dual-use items without individual license and without classification of items, as long as it is not arms or weapons.

The additional exemption benefit may not be relevant to all exporters, but new requirements are possibly applicable to all GBL holders, because amendment of ICP and operational procedure may be required according to each exporter’s status, regardless of the frequency of the transaction under GBL. In case an exporter amend ICP, it should be submitted to METI within one month. Also, ICP holder must submit annual compliance “check list” to METI in July every year as obligation. The reporting form of this check list is also updated to reflect this GBL obligation amendment, ICP holder is encouraged to review whether these new obligations are relevant to the export operation.

(Reference:  http://www.meti.go.jp/policy/anpo/law09.html#015 )