Finding Common Ground U.S. Export Controls in a Changed Global Environment, Commissioned Papers (1991) / Chapter Skim
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Japan's Strategic Trade Controls: A New Era
Japan's Strategic Trade Controls: A New Era
Pages 173-206
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From page 173... ...
Both the formulation of strategic trade policy and the day-to-day administration of high technology export controls were only occasionally mentioned in the public press and were rarely matters of public debate. Indeed, even within the Japanese Government responsibility for the formulation of strategic trade policy and the administration of export controls rested principally within specialized offices of the Ministry of International Trade and Industry (MITI)
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From page 174... ...
Japan consequently set out to implement fundamental reforms to its system of strategic trade controls. The ensuing months saw amendments made to the underlying legal structure to Japan's export control system along with extensive changes to the administrative 2
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From page 175... ...
Ironically though, Japan and other COCOM allies are also now having to consider the implications of events in Eastern Europe which seem to question much of the underlying rationale for maintaining the COCOM system. Japan's Export Controls In Japan, exports are regulated under the Foreign Exchange and Foreign Trade Control Law (Control Law)
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From page 176... ...
Article 47 provides that the "export of goods will be permitted with such minimum restrictions thereon as are consistent with the purpose of this Law." Export restriction, including that required by COCOM, is allowed for under the Control Law through Articles 4751. (Restriction of technology transfer is allowed for under the Control Law through Articles 25 - 25.2.)
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From page 177... ...
A new Export Control Order was issued by MITI specifying the products and countries to which trade restrictions apply in order to enforce the trade embargoes set by COCOM. Currently Japanese law allows restricting exports for any of the following types of goods or technologies: o Items of excess competition (textile goods, binoculars, and other items of excess competition whose export may invoke import restrictions in the foreign countries of destination; o strategic co D odities and technologies based on the agreement of COCOM, Missile Technology Control Regime (MTCR)
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From page 178... ...
Japan's list of controlled commode ties is contained in a series of attachments to the Export Trade Control Order ~ Export Order ) , one of the implementing ordinances of the Foreign Exchange and Foreign Trade Control Law.
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From page 179... ...
In its decision the Court stated: The meaning of Article ~ of the Export Control Trade Order is that since the freedom of export is a fundamental human right, its restriction by MITI can be permitted only if such restriction is deemed purely and directly necessary for the sound maintenance of the balance of international payments and the sound development of international trade or the national economy.
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From page 180... ...
In response, the Court declared that if Japan had chosen to participate in COCOM for political or strategic reasons (as it had) , export controls, which are enforced for economic reasons, would have to be based on other domestic laws.
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From page 181... ...
Among the most dramatic changes made to Japan's export control system were amendments made to the Foreign Exchange and Foreign Trade Control Law which fundamentally improved the legal standing of COCOM controls in Japan. In many respects they eliminated the 9
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From page 182... ...
The new provisions are contained in amendments to Article 48, which regulates exports of goods, and to Article 25, which regulates exports of technology, technical data and other "services" by requiring MITI approval as follows: Article 48~: Those who intend to make exports of specific kinds of goods to a destination in specified areas which are recognized as an obstacle to the maintenance of international peace and security, as stipulated by government ordinance, must obtain authorization from the Minister of International Trade and Industry; 10
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From page 183... ...
Further amendments to the law addressed concerns that surfaced during the Toshiba Machine affair over whether Japanese enforcement measures were an adequate deterrent to potential violators. Under the new law the penalties for violations had been raised substantially as follows: o Administrative sanctions were strengthened from the previous one-year revocation of export privileges to a maximum of three years.
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From page 184... ...
granted the Ministers of International Trade and Industry and Foreign Affairs their first formal authority to exchange views and opinions on matters of strategic trade, Previously a certain awkwardness existed as MITI possessed authority over export licensing and trade policy issues, while the Foreign Ministry represented Japan's interests at COCOM and in most bilateral discussions on export control and related bilateral security issues with the United States. Under this authority the administrative structure for export controls was also improved substantially.
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From page 185... ...
These included: o Establishment within MITI of the Screening Council on the Export of Strategic Commodities, headed by the Deputy Director General of the International Trade Administration Bureau. The Council conducts thorough examinations of many export license applications for highly strategic goods and technologies, goods valued at more than 100 million yen and so on.
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From page 186... ...
The various vehicles established to improve coordination include: o Inter-Ministerial Conference on COCOM Affairs which was established to facilitate deliberations on the most important issues of strategic trade and COCOM policy. The Conference consists of the Ministers of international Tracle and Industry, Foreign Affairs, Finance, Justice, the Minister of State for the Japan-Def ense Agency, the Chief Cabinet Secretary and the Chad rman of the National Public Safety Commission.
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From page 187... ...
It meets periodically to exchange information and views on export control policy issues as well as on the investigation of specific violations. In addition to the increased coordination among Japanese ministries, Tokyo also sought a more active and regular dialogue with the United States on export control issues.
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From page 188... ...
During the meeting the MITI Minister called upon the organizations to formulate policies designed to ensure compliance with export related laws and regulations and to make their affiliated companies thoroughly aware of the necessity of observing Japan's export control regulations. In September of 1987 a second meeting was called during which MITI called upon the organizations and their affiliated firms to draw up internal control programs (ICP)
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From page 189... ...
Only those items contained in Annex I of the Export Trade Control Order are considered controlled for international security reasons, and therefore require an export license. In addition, Tokyo still maintains separate procedures for exports of goods controlled by Annex I to proscribed and non-proscribed destinations.
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From page 190... ...
Only after receiving a favorable determination on the case from COCOM will MITI then process the export license application. If pre-approval permission is denied, the exporter is neither allowed to submit an export license application nor to appeal the · ~ decision.
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From page 191... ...
Nonetheless, Tokyo can at times practice de facto reexport controls. One method is by including private contractual obligations on the purchaser to seek reexport permission directly from the Japanese vendor in terms of the original sales contract.
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From page 192... ...
MITI now requires all exporters to submit the original export contract with their export license applications. In instituting this requirement, MITT reasoned that submission of the original contract would help limit the risk of fraudulent applications which could happen more easily if only copies of the contract were required to be submitted.
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From page 193... ...
A major function of CISTEC is to familiarize its members with the export control requirements imposed by Japanese law and COCOM guidelines. The Center gathers information on products and technologies which are or might be included in the COCOM embargo.
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From page 194... ...
Tokyo police alleged that on several occasions in recent years, employees of Prometron Technics carried hafnium wire to East Germany in violation of Japanese export control laws. Japanese officials noted that measures to both improve interagency 22
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From page 195... ...
Previously, MITI had usually been the sole agency to uncover violations. Greater publicity, and hence accountability, has also apparently given Japanese exporters a greater incentive to take their export control obligations seriously.
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From page 196... ...
It was distributed to each member of the company. An Awakening in COCOM As a result of the Toshiba Machine incident the Japanese government also pledged to take a more active role in COCOM affairs.
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From page 197... ...
To date approximately 25 firms in Japan have received distribution ~ icenses . In order to qualify for a distribution license an exporter must show that: o At least twenty-five export licenses must have been approved for the same recipient during the previous year; 0 The exporter must have an adequate and approved internal control program; 25
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From page 198... ...
o Importers in non-COCOM member countries must also demonstrate adequate internal control programs; o An importer in a non-COCOM member country must demonstrate that it is subject to control by the exporter through any of the following relationships: o An overseas subsidiary exporter must have greater interest; or o An overseas subsidiary in which the exporter has a greater than SO% interest; or o An overseas subsidiary in which a company in a COCOM-member country has greater than a ~0% interest and that company has a greater than SON interest in the exporter. Only certain specified commodities and technical data are eligible for export under a distribution license.
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From page 199... ...
Ironically, the calls for liberalization of the COCOM regime are coming at a time when Japan now sports its most effective strategic trade control apparatus since entering COCOM. Japan's response, from both official and business circles, can be characterized as conservative and deliberate.
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From page 200... ...
Furthermore, a Soviet crackdown by force of arms in the Baltic or other dissident states would only reassure outside observers that the Soviet military is alive and capable of defending and perpetuating Soviet territorial claims. Nonetheless, a breakthrough on the Northern Territories issue is also possible, especially given Gorbachev's flair for the dramatic.
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From page 201... ...
Even the largest trading companies continue to limit their exposure in Eastern European markets to only 2-4~ of total sales with few incentives to increase that share substantially in the near term. respite the monumental changes underway in the political fabric of Eastern Europe and the soviet Union many business leaders reflect official concerns and continue to regard the Soviet and East European markets as too unstable for major investment.
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From page 202... ...
Through the almost complete renovation of its export control and export licensing system, Japan has taken a major step in demonstrating its willingness to accept both the responsibility for safeguarding Western strategic interests along with the economic benefits of its technological and industrial development. Japan can now boast of a system of strategic trade controls in which greater accountability and more extensive and thorough administration place it on a par with export control regimes in any COCOM-member country.
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From page 203... ...
However, the shared overall objectives of maintaining peace and security in the Pacific will most likely outweigh any disagreements which are likely to arise on specific technology control issues. Outside of serious, and now less likely, lapses in the administration or enforcement of Japan's strategic trade controls, such as the Toshiba Machine incident, there are few issues which would undermine or weaken this shared strategic objective.
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From page 204... ...
Indeed, Japan's more vigorous positions on technology security issues almost guarantee a more challenging but stronger system of strategic trade controls, which is more responsive to the political and economic demands of a rapidly changing East-West environment. In theory, at least, Japan should be ideally positioned to react to the changing events in a timely manner.
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From page 205... ...
Japan could possibly be left alone with the United States in holding onto a restrictive trade policy whit e European allies move forward in f orging new economic alliances in East Europe . Unlike the United States, an in some ways because of the United States as well, Japan is probably less likely to change its course suddenly and deem that political liberalizations in East Europe and the USSR now warrant a significant and rapid liberalization of strategic trade controls.
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From page 206... ...
o Importers in non-COCOM member countries must also demonstrate adequate internal control programs; o An importer in a non-COCOM member country must demonstrate that it is subject to control by the exporter through any of the following relationships: o An overseas subsidiary exporter must have greater interest; or o An overseas subsidiary in which the exporter has a greater than SO% interest; or o An overseas subsidiary in which a company in a COCOM-member country has greater than a ~0% interest and that company has a greater than SON interest in the exporter. Only certain specified commodities and technical data are eligible for export under a distribution license.
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