Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Overview of Japans Export Control System Nobuo TANAKA Security Export Control Policy Division Trade and Economic Cooperation Bureau Ministry of Economy, Trade and Industry (METI) JAPAN

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 2 Introduction Importance of Export Control) Japans Export Control System Recent Developments of Japans Export Control Contents

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 1.Introduction Importance of Export Con trol) 3

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Terrorist attacks and 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 Terrorist attacks WMD-related activities 4 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)

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Global Peace Index 2011 data from Global Peace IndexGlobal Peace Index

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. - There are high level of terrorist activities, resulting in serious harm to peoples lives. - Recently, terrorism has increased in Asia. 6 - 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.

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) NCTC Report on Terrorism

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) NCTC Report on Terrorism

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. - There are high level of terrorist activities, resulting in serious harm to peoples lives. - Recently, terrorism has increased in Asia. 9 - 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.

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Terrorists or countries of concern can procure items through countries that do not implement export control systems. Country A circumventing exports Countries not implementing export control systems Countries not implementing export control systems Terrorists, countries of concern Threats to world peace 10

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 11 Why must companies have export controls?

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Why must companies have export controls? - Compliance - Social responsibility Companies are punished if exported goods are used for terrorist activities or countries of concern, regardless of regulations. - Reduces cost of export procedures Companies can simplify export control procedures in accordance with their own export systems. - Enhanced evaluation by investors Companies with export controls are more highly evaluated because they pose lower investment risks. 12

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 2. Japans Export Control System 13

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Treaties, Convention Export Control Regime Biological/chemical weapons Biological Weapons Convention Australia Group Missiles Missile Technology Control Regime Wassenaar Arrangement Nuclear Non- Proliferation Treaty Nuclear weapons Nuclear Suppliers Group Conventional Weapons Chemical Weapons Convention WMDs 14

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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)

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 16 Website(NSG) NSG:

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 17 AG: Website(AG)

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 18 MTCR: Website(MTCR)

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 19 WA: Website(WA)

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) (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 Ministerial Order Law Act Law Act Cabinet Order Cabinet Order The legal structure in Japan 20

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Legislation The Foreign Exchange and Foreign Trade Act Two types of control List 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 Outline of Japans Export Control System 21 In order to ensure the agreement of Treaties and International Regimes

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Check on List Control Business Inquiry Need to apply for License Check on Catch-all Control End-use & End-use r none listed item may use for WMD No License 22

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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 List control 23

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Check on List Control Business Inquiry Need to apply for License Check on Catch-all Control End-use & End-use r none listed item may use for WMD No License A Flowchart of the classification procedure in companies 24

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) - All items related to WMD cannot be covered by export control regimes lists - It takes time to revise lists in the export control regimes, but technologies continue to advance Limitations of List Control Its difficult to implement sufficient export controls by list control only! Non-listed control, Catch-all control is necessary for effective export control 25

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. Catch-all Control (WMDs) – End Use Control (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

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. a. Preliminary Consultation 27 Consultation service for exporters

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. *The guideline to clear the concern There are 17 items to confirm whether there is a concern or not, such as: - The customers 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… 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 If end-use has a minor concern or a clear concern with WMDs License not needed License needed 28

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Foreign End-user List (extraction) CountryNumber Israel Iran India North Korea Syria Chinese Taipei China Pakistan Afghanistan Total Foreign End-user List (Revised Sep. 201 ) Country or Region Company or Organization Also Known As Type of WMD 1 Israel Ben-Gurion University (of the Negev) N 2 Israel Nuclear Research Center Negev (NRCN) N 3 Iran 7th of Tir 7th of Tir Complex 7th of Tir Industrial Complex 7th of Tir Industries 7th of Tir Industries of I Isfahan/Esfahan Mojtamae Sanate Haftome Tir Sanaye Haftome Tir Seventh of Tir N 4 Iran Abzar Boresh Kaveh Co. BK Co. N 5 Iran Aerospace Industries Organisation (AIO) Sazemane Sanaye Hava Faza M 6 Iran AMA Industrial Company AMA Industrial Co. N sei/100903EUL/t08kaisei_userlist_kohyo.pdf 29

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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. the end userthe exporter METI applicationdocuments Licensing Procedure 30

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 31 Application Form Goods Application Form Technology

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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 Exporters are required to submit documents as follows; 32

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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? Key points for Export Authorization Japans licensing requirements are all to be confirmed by licensing officer. The requirements are different according to the items or destinations. 33

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Exporter Importer End-user Will items actually reach the stated end-user? Will the stated end-user really use the item? Factory for dice Very small factory Unnatural route Nomal route Are there consistent contacts from the exporter to the end- user through the importer? Are there any unnatural route from exporter to end-user? Is the business of the end-user consistent with the uses of the items? Is the number of items consistent with the scale of business? 34

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) We deal … The main customers are … Company related to Military Fund from the Military Restricted entries of outsiders Maintain appropriate depository Will the actual use exactly match the stated end-use? Will the stated end-user strictly control the item(s)? Does the end user deal with military items? Does end user concern with the military industry? Is the place where item is used decided? Are the items controlled appropriately? 35

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) 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 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. 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

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Recent Developments of Japans Export Control

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Amendment of Foreign Exchange and Foreign Trade Act 1. Reviewing export control on technology transfer Date of issue: 30 th Apr. in 2009 Effective: 1 st Nov. in Strengthening the penalties Main points of amendment 3. Establish the system according to the standard to observe ICP (Internal Compliance Programme) 38

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) - Target all persons who offer or tend to offer to foreigners - Limitation of dealing between residents and non- residents 1. Reviewing export control on technology transfer Before After 39

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Residen t Need a license offer Non-reside nt offer Need a license Before After 1. Reviewing export control on technology transfer Any person Border Any perso n 40 USB etc offe r Need a license Residen t Non-reside nt

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) - 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 After - Imprisonment: up to five years - Fine: up to 2 million JPY Before - Tighten punishment of control - Establish new punishment for obtaining of license through illicit means 2. Strengthening of penalty 41 JPY = 1 USD

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) - Defined clearly in law - All exporter need to observe the standard of ICP After - Necessary condition just for Bulk License Before - Establishment of the standard to observe for exporters - Making instructions, counseling and orders to exporters not to observe the standard of ICP 3. Establish the system according to the standard to observe ICP (Internal Compliance Programme) 42

Joint Industry Outreach Seminar in Malaysia (Nov. 17, 2011) Thank you for your attention Security Export Control Policy Division Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry (METI)