Overview of Japan’s Export Control System

1. Overview of Japan’s Export Control System NobuoTANAKA Security Export Control Policy Division Trade and Economic Cooperation Bureau Ministry of Economy, Trade and Industry(METI) JAPAN

2. Contents • １．Introduction（Importance of Export Control) • ２．Japan’s Export Control System • ３．Recent Developments of Japan’s • Export Control

3. Introduction • （Importance of Export Control) 3

4. Terrorist attacks and WMD-related activities Terrorist attacks • Sarin gas attack on the Tokyo subway （March 1995) • 9/11 attacks (September 2001) • Bali bombings (October 2002, October 2005) • Madrid train bombings (March 2004) • London bombings (July 2005) • 2008 Mumbai attacks (November 2008) • Moscow bombings (February 2010, January 2011) WMD-related activities • A.Q. Khan Network (2004) • North Korean missile tests (July 2006, April and July 2009) • North Korean announcement on nuclear tests (October 2006, May 2009) • Iranian issues 4

5. Global Peace Index 2011 data from Global Peace Index

6. - There are high level of terrorist activities, resulting in serious harm to people’s lives. - Recently, terrorism has increased in Asia. Terrorist activities (reported in 2010) - Number of incidents: 11,604 - Number of dead: 13,186 Main areas of terrorist activities - Iraq, Afghanistan, Pakistan and African countries - Recently we see increased terrorist activity in Asia. • WMD (weapons of mass destruction) proliferation • is occurring in countries of concern and with • terrorists (non-state actor). • The United Nations has requested the • introduction of export control systems. 6

7. 2010 NCTC Report on Terrorism

8. 2010 NCTC Report on Terrorism

9. - There are high level of terrorist activities, resulting in serious harm to people’s lives. - Recently, terrorism has increased in Asia. Terrorist activities (reported in 2010) - Number of incidents: 11,604 - Number of dead: 13,186 Main areas of terrorist activities - Iraq, Afghanistan, Pakistan and African countries - Recently we see increased terrorist activity in Asia. • WMD (weapons of mass destruction) proliferation • is occurring in countries of concern and with • terrorists (non-state actor). • The United Nations has requested the • introduction of export control systems. 9

10. Terrorists or countries of concern can procure items through countries that do not implement export control systems. Terrorists,countries of concern Country A circumventing exports Threats to world peace Countries not implementing export control systems 10

11. Why must companies have export controls? 11

12. Why must companies have export controls? - Reduces cost of export procedures Companies can simplify export control procedures in accordance with their own export systems. - Social responsibility Companies are punished if exported goods are used for terrorist activities or countries of concern, regardless of regulations. • Enhanced evaluation by investors • Companies with export controls are more highly • evaluated because they pose lower investment risks. - Compliance 12

13. 2. Japan’s Export Control System 13

14. Conventional Weapons WMDs Missiles Nuclear weapons Biological/chemical weapons ＮＰＴ ＢＷＣ ＣＷＣ Treaties, Convention Nuclear Non-Proliferation Treaty Chemical Weapons Convention Biological Weapons Convention １９７５ １９９７ ＭＴＣＲ １９７０ １９７７ １９８５ １９８７ １９９６ ＮＳＧ ＡＧ Missile Technology Control Regime ＷＡ Export Control Regime Nuclear Suppliers Group Australia Group Wassenaar Arrangement 14

15. Control Lists of the International Regimes • 1. Nuclear Suppliers Group • Trigger List(Part 1) • Dual-Use List (Part 2) • 2. Australia Group • Chemical Weapons Precursors • Biological Agents • Plant ／Animal Pathogens • Dual-Use Chemical/Biological Facilities and Equipment • 3. Missile Technology Control Regime • Category I • Category II • 4. Wassenaar Arrangement • Munitions List • Dual-Use List (BL, SL, VSL) 15

16. Website(NSG) • NSG: http://www.nuclearsuppliersgroup.org/Leng/default.htm

17. Website(AG) • AG:http://www.australiagroup.net/en/index.html 17

18. Website(MTCR) • MTCR: http://www.mtcr.info/english/index.html 18

19. Website(WA) • WA: http://www.wassenaar.org/ 19

20. Law Act Cabinet Order The legal structure in Japan (1)Law or Act Foreign Exchange and Foreign Trade Act 　　　　－ Basic frameworks and thoughts (2)Cabinet Orders Export Control Order 　　　　－ List of goods Foreign Exchange Order 　　　　－ List of technologies (3)Ministerial Orders 　　　　－ Details(specifications and interpretations of listed items Ministerial Order 20

21. Outline of Japan’s Export Control System In order to ensure the agreement of Treaties and International Regimes • Legislation　・・・　The Foreign Exchange and Foreign Trade Act • Two types of controlList Control • Exporters should obtain a license when • exporting items listed in the Control List. • The Control List harmonizes with • International Regimes • Catch-all control (End-use Control） • Exporters should obtain a license in case • where they aware the item may contribute • WMDs programs, or informed by METI 21

22. A Flowchart of the classification procedure in companies No License Check on List Control Check on Catch-all Control （End-use & End-user） none none Business Inquiry may use for WMD listed item Need to apply for License 22

23. List control An export license is required for the export of listed items • An export license is required even if items are exported for own company/factory in a foreign country. • License exceptions • Shipment of Limited value • Replacement of parts and equipment etc • Bulk license 23

24. A Flowchart of the classification procedure in companies No License Check on List Control Check on Catch-all Control （End-use & End-user） none none Business Inquiry may use for WMD listed item Need to apply for License 24

25. Limitations of List Control • All items related to WMD cannot be coveredby export • control regimes’ lists • - It takes time to revise lists in the export control regimes, • but technologies continue to advance It’s difficult to implement sufficient export controls by list control only! Non-listed control, Catch-all control is necessary for effective export control 25

26. Catch-all Control (WMDs) – End Use Control Target All of the items except which do not clearly contribute to WMDs proliferation programs Licensing Conditions (1) Judgment by exporters • End-use: whether the exporters are aware that the items are used for • the development of WMDs. • End-user: whether the exporters are aware that the end-user got • involved in development of WMDs. (2) Informed by METI Exporters are informed of the need for licensing by METI Assistance Tools for Effective Enforcement a. Preliminary Consultation b. Risk Information of end-use（Commodities） c. Risk Information of end-user 26

27. a. Preliminary Consultation Consultation service for exporters b. Risk Information of end-use（Commodity) Commodity Watch List - Not a controlled list Examples of 40 items with high risk of diversion for development of WMDs. 27

28. c. Risk Information of end-user Foreign End-user List - Not an embargo list 354 entities on which there are concerns for development of WMDs. If the end-user is the listed end-user, exporter has to check carefully using *the guideline provided by METI. If end-use has clearly not a concern with WMDs Licensenot needed If end-use has a minor concern or a clear concern with WMDs License needed *The guideline to clear the concern There are 17 items to confirm whether there is a concern or not, such as: - The customer’s need for the items is reasonable for their business and their technological capabilities. - The requirements for spare parts are not excessive. - The shipping route is reasonable for export items and destination. etc… 28

29. Foreign End-user List (Revised Sep. 201１) Foreign End-user List(extraction) http://www.meti.go.jp/policy/anpo/law_document/tutatu/t08kaisei/100903EUL/t08kaisei_userlist_kohyo.pdf 29

30. Licensing Procedure • An exporter needs to apply the Ministry of Economy, Trade and • Industry (METI) or its regional branches for the export license. • An exporter is required to attach documents including the documents • provided by an end user such as the Letter of Assurance. • METI will examine the application referring to the criteria to issue an • export license. documents application the end user the exporter METI 30

31. Application Form （Goods） Application Form （Technology）

32. Exporters are required to submit documents as follows; • Application Form (available from the METI website) • Supplementary Details regarding the Application • Name of manufacturer • Quantity and Value • Outline of end use etc. • Back Ground Documents (e.g. a written contract) • Back ground documents are required to check whether the transaction meets the Export Licensing Criteria. • Other Documents • Commodity in Detail (e.g. catalogue) • End-User in Detail (e.g. leaflet) • The Letter of Assurance by the End-User • Any other documents requested by METI 32

33. Key points for Export Authorization • Will items actually reach the stated end-user? • Will the stated end-user really use the item? • Will the actual use exactly match the stated end-use ? • Will the stated end-user strictly control the item? Japan’s licensing requirements are all to be confirmed by licensing officer. The requirements are different according to the items or destinations. 33

34. ①Will items actually reach the stated end-user? ②Will the stated end-user really use the item? Importer Factory for dice Exporter End-user Are there consistent contacts from the exporter to the end-user through the importer? Is the business of the end-user consistent with the uses of the items? Are there any unnatural route from exporter to end-user? Is the number of items consistent with the scale of business? Unnatural route？ Very small factory Nomal route 34

35. ③Will the actual use exactly match the stated end-use? ④Will the stated end-user strictly control the item(s)? The main customers are … We deal … Does the end user deal with military items? Is the place where item is used decided? Does end user concern with the military industry? Are the items controlled appropriately? Fund from the Military Company related to Military Maintain appropriate depository Restricted entries of outsiders 35

36. Enforcement • Cooperation with relevant organizations • METI cooperates with other related government agencies to enforce • export control • Customs • National Police Agency (NPA) • Ministry of Foreign Affairs (MOFA) • Japan Coast Guard (JCG), etc. • Cooperation with private companies etc • METI encourages exporting companies and universities to • strengthen their export control, and provides them with a variety of • support. • Measures for promoting ICP • Guidance for the control of sensitive technologies (ITT) • Outreach seminar, etc. 36

37. 3. Recent Developments of Japan’s Export Control

38. Amendment of Foreign Exchange and Foreign Trade Act Date of issue: 30th Apr. in 2009 Effective: 1st Nov. in 2009 Main points of amendment 1. Reviewing export control on technology transfer 2. Strengthening the penalties 3. Establish the system according to the standard to observe ICP (Internal Compliance Programme)

39. 1. Reviewing export control on technology transfer Before After • Limitation of dealing • between residents and • non- residents • Target all persons who • offer or tend to offer • to foreigners

40. 1. Reviewing export control on technology transfer After Border Before offer Need a license Need a license Any person Any person offer offer Need a license Resident Non-resident Any person USB etc offer Resident Non-resident

41. 2. Strengthening of penalty • Tighten punishment of control • Establish new punishment for obtaining of license • through illicit means After Before • Imprisonment up to seven years, • fine up to 7 million JPY • Especially in case of WMD, • imprisonment up to ten years, • fine up to 10 million JPY • Establish new punishment for • obtaining of license through • illicit means • - Imprisonment: • up to five years • Fine: • up to 2 million JPY ※７７ JPY = 1 USD

42. 3. Establish the system according to the standard to observe ICP (Internal Compliance Programme) • Establishment of the standard to observe for exporters • Making instructions, counseling and orders to • exporters not to observe the standard of ICP Before After • Necessary condition • just for Bulk License • Defined clearly in law • All exporter need to • observe the standard of • ICP

43. Thank you for your attention Security Export Control Policy Division、 Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry(METI)