Joint Industry Outreach Seminar in the Philippines Mar

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Overview of Japan’s 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 the Philippines (Mar. 15, 2012) Contents １．Introduction（Importance of Export Control) ２. International Export Control Regimes ３．Japan’s Export Control System ４．Developments of Japan’s　Export 　　Control　in　２００９ 2

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 1. Introduction 　　　　　（Importance of Export Control) 3

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Terrorist attacks and WMD-related activities Terrorist attacks l l l l 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 l A. Q. Khan Network (2004) l North Korean missile tests (July 2006, April and July 2009) l North Korean announcement on nuclear tests (October 2006, May 2009) l Iranian issues 4

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Global Peace Index 2011 data from Global Peace Index

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) - 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

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 2010 NCTC Report on Terrorism 7

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 2010 NCTC Report on Terrorism 8

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Terrorism causes not only serious personal injury, but also damages the economy and industry in affected countries/regions. Example: 2002 Bali bombings - Tourist industry is 5% of GDP - Right after the bombings, hotel occupancy rates decreased from 70% to single digits - The number of tourists declined by 0. 8 million, to 4. 3 million Asian countries developing tourism and industry are seriously damaged by terrorism

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) - 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. 10

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) United Nations awaken international tackling with WMDs and also adapted some resolutions UNSCR 1540 u Proliferation of WMD and their means of delivery　poses 　　a threat to international peace and security u Attempts to prevent WMD and related materials from　　 　　falling into the hands of non-state actors that are of　　 　　concern with regard to proliferation u. All States are to establish relevant domestic controls

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 12

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) North Korea and Iran Growing concerns WMD-related activities by North Korea and nuclear development by Iran require a coordinated response from the international community - North Korea: Missile launches (July 2006, April and July 2009) Announced nuclear tests (October 2006, May 2009) - Iran: Enrichment-related activities that create suspicion in the international community UNSCRs - North Korea : UNSCR 1695, 1718 and 1874 - Iran : UNSCR 1696, 1737, 1747, 1803, 1835 and 1929

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Why must companies have export controls? 14

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Why must companies have export controls? - Compliance - 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. 15

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 2. International Export Control Regimes 16

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Conventional Weapons WMDs Nuclear weapons Treaties, Convention Biological/chemical weapons ＮＰＴ ＢＷＣ Nuclear Non Proliferation Treaty Biological Weapons Convention １９７０ １９７７ Missiles ＣＷＣ Chemical Weapons Convention １９７５ １９９７ １９８５ １９８７ ＮＳＧ Export Control Regime ＡＧ ＭＴＣＲ Nuclear Suppliers Group Australia Group Missile Technology Control Regime １９９６ ＷＡ Wassenaar Arrangement 17

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Control Lists of the International Regimes 1. Nuclear Suppliers Group p p Trigger List　(Part 1)　　 Dual-Use List (Part 2)　 2. Australia Group p p Chemical Weapons Precursors　 Biological Agents　 Plant ／Animal Pathogens　 Dual-Use Chemical/Biological Facilities and Equipment 　　　　 p p Category II　 3. Missile Technology Control Regime 4. Wassenaar Arrangement p p Munitions List　 Dual-Use List (BL, SL, VSL)　 18

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Website(NSG) • NSG: http: //www. nuclearsuppliersgroup. org/Leng/default. htm 19

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Website(AG) • AG: http: //www. australiagroup. net/en/index. html 20 20

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Website(MTCR) • MTCR: http: //www. mtcr. info/english/index. html 21 21 21

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Website(WA) • WA: http: //www. wassenaar. org/ 22 22

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Some exports can be used for military purposes and are called “dual use” items. To avoid criminal involvement, exporter must confirm whether or not your export item is dual-use. Military Use Civilian Use Titanium alloy Gas centrifuge for　 uranium enrichment Watches, eyeglass frames Carbon fiber Missile components Golf club shafts, fishing rods Tri-ethanolamine Chemical weapons Shampoo Freeze-drying　 equipment Biological weapons Instant coffee 23

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) ３. Japan’s Export Control System 24

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 25

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 control　　　 List Control ØExporters should obtain a license when exporting items listed in the Control List. Ø The Control List harmonizes with International Regimes 　　 　　　　　　　　 Catch-all control (End-use Control） Ø Exporters should obtain a license in case where they aware the item may contribute WMDs programs, or informed by METI 26

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Contents of Japan’s control list & Relation between Japan’s control list & International Export Control Regime Section No 　 １　 　 Weapons International Export Control Regime 　　　　　　　WA 　　２ Items 　 NSG 　３ 　 Nuclear related Items Chemical weapon related Items AG 　３／２ 　 　　４ 　WMD Related Biological weapon related Items MTCR Missile related Items 　　５ Category 1 Special Materials and Related Equipment 　　６ Category 2 Materials Processing Category 3 Electronics 　　８ Category 4 Computers 　　９ Category 5 Telecommunications & information Security Category 6 Sensors and Lasers 　１１ Category 7 Navigation and Avionics 　１２ Category 8 Marine 　１３ Category 9 Aerospace and Propulsion 　　７ Dual-use Conventional Weapon Related 　１０ WA 　１４ Others Munition Items other than Section No 1 　１５ Dual-use VSL Items in WA's control list 　１６ 　 　 　 Catch-all control Items

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Comparison table between Japan’s control list & EU dual-use list http: //www. meti. go. jp/policy/anpo/eulist_taihihyo. html

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) A Flowchart of the classification procedure in companies Business Inquiry none Check on List Control listed item Check on Catch-all Control none No License （End-use & 　 End-user） may use for WMD Need to apply for License 29

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 30

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) A Flowchart of the classification procedure in companies Business Inquiry none Check on List Control listed item Check on Catch-all Control none No License （End-use & 　 End-user） may use for WMD Need to apply for License 31

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Limitations of List Control 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 　 It’s difficult to implement sufficient export controls by list control only! Non-listed control, Catch-all control is necessary for effective export control 32

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 33

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) a. Preliminary 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. 34

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Examples of 40 items with high risk of diversion for development of WMDs Type of WMD 1. TRIBUTYL PHOSPHATE （ＴＢＰ） 5. Aluminum alloys Tubes with an outside diameter of more than 75 mm 10. Frequency changers Type of WMD N 11. Mass spectrometers & its ion sources 16. Oscilloscopes & Waveform digitizers, capable of measuring high frequency waves 17. High-power direct current power supplies with current or voltage stability 18. Large capacity Generator 19. Large size vacuum pump 20. Radiation- Proof Robot 22. Radiation measuring instruments N&M 2. Carbon fiber, Glass fiber, Aramid fiber 3. Titanium alloys 4. Maraging steels 6. Flow forming machines 7. Numerically controlled machine tools 8. Isostatic presses 9. Filament winding machines 12. Vibration test machines 13. Centrifugal multiplane balancing machines 14. Pressure measuring machines with corrosion-resistant 15. Large size non-destructive testing machines 21. TIG or Electron beam Welding machines 23. Pulverizing mills 24. Karl Fischer Moisture Titrators 25. Equipment for producing prepregs 27. Gyroscope 28. Rotary encoder Type of WMD 29. Large trucks (including tractors, trailers & dump trucks) M 30. Crane trucks 39. UAV, incorporating an aerosol dispensing system/mechanism 40. Aerosol dispensing system/mechanism specially designed for UAV 26. Graphite Type of WMD B 31. Fermenters without the propagation of aerosols 32. Centrifugal separators 33. Freeze drying equipments 39. UAV, incorporating an aerosol dispensing system/mechanism 40. Aerosol dispensing system/mechanism specially designed for UAV Type of WMD C 34. Reaction vessels with corrosion-resistant 35. Agitators with corrosion-resistant 36. Heat exchangers or condensers with corrosion-resistant 37. Distillation or absorption columns with corrosion-resistant 38. Remotaly operated filling machines with corrosion-resistant 35

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) c. Risk Information of end-user Foreign End-user List - Not an embargo list ３７４ 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 License not 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 whethere 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. 36 - The shipping route is reasonable for export items and destination. etc… 36

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Foreign End-user List (Revised Ｄｅｃ. 201１) Foreign End-user List　(extraction) Ｎｏ ． 国名、地域名 Country or Region 1 イスラエル Israel Ben-Gurion University (of the Negev) 　 核 N 2 イスラエル Israel Nuclear Research Center Negev (NRCN) 　 核 N 7 th of Tir ・ 7 th of Tir Complex ・ 7 th of Tir Industrial Complex ・ 7 th of Tir Industries of　I Isfahan/Esfahan ・Mojtamae Sanate Haftome Tir ・Sanaye Haftome Tir ・Seventh of Tir 核 N ・BK Co. 核 N 企業名､組織名 Company or Organization 別名 Also Known As 懸念区分 Type of WMD Country Number イラン Iran 4 イラン Iran Abzar Boresh Kaveh Co. 5 イラン Iran Aerospace Industries Organisation ・Sazemane Sanaye Hava Faza (AIO) 6 イラン Iran AMA Industrial Company 　 AMA Industrial Co. 　１８２ 　　１２ North Korea 　１１１ Syria 　　１３ Chinese Taipei 核 N Iran India ミサイル M 　　　２ China 　　１５ Pakistan 3 Israel 　　３３ Afghanistan 　　　２ ＵＡＥ 　　　２ 　　Total 　３７４ http: //www. meti. go. jp/policy/anpo/law_document/tutatu/t 08 kai sei/111209 EUL/t 08 kaisei_userlist_kohyo. pdf 37

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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 the end user application the exporter METI 38

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Application Form （Goods） 　　　Application Form （Technology） 39

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) u. 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 40

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Key points for Export Authorization ① ② ③ ④ Will items actually reach the stated end-user? the stated end-user really use the item? the actual use exactly match the stated end-use ? 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. 41

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) ①Will items actually reach the stated end-user? Importer ②Will the stated end-user really use the item? Factory for dice Exporter End-user Are there consistent contacts from the exporter to the enduser 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？ Nomal route Very small factory 42

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) ③Will the actual use exactly match the stated end-use? The main customers are … ④Will the stated end-user strictly control the item(s)? 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? Company related to Military Fund from the Military Restricted entries of outsiders Maintain appropriate depository 43

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 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. 44

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) ４．Developments of Japan’s　Export　Control 　　in　２００９ 45

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Amendment of Foreign Exchange and Foreign Trade Act Date of issue: 30 th Apr. in 2009 Effective: 1 st Nov. in 2009 Main points of amendment 1. Reviewing export control on technology transfer 2. Strengthening the penalties 3. Establish the company’s rules according to the Compliance Standard to observe Export Control Law 46

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 1. Reviewing export control on technology transfer Before - Limitation of dealing between residents and non- residents After - Target all persons who offer or tend to offer to foreigners 47

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 1. Reviewing export control on technology transfer After Border Before offer Need a license Any person offer Resident Non-resident Need a license offer Any person USB etc offer Resident Non-resident 48

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 2. Strengthening of penalty - Tighten punishment of control - Establish new punishment for obtaining of license through illicit means After Before - Imprisonment: up to five years - Fine: up to 2 million JPY ※ ８０ JPY = 1 USD - 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 49

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) 3. Establish the company’s rules according to the Compliance Standard to observe Export Control Law - Establishment of the Compliance Standard - Making instructions, counseling and orders to exporters not to observe the Compliance Standard Before After - Defined clearly in law - Necessary condition just for Bulk License - All exporter need to establish the Compliance standard 50

Joint Industry Outreach Seminar in the Philippines (Mar. 15, 2012) Thank you for your attention Security Export Control Policy Division、 Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry　(METI) 51