On the Update of the Application of Export Controls to the Republic of Korea
Basic Interpretation Regarding the Implementation of Japan’s System of Export Controls(Ver. 2)
August 7, 2019
Center for Information on Security Trade Control(CISTEC)On July 1, 2019, Ministry of Economy, Trade, and Industry (METI) announced an update ofits application of export controls to the Republic of Korea (ROK). (c.f. METI’s News Release in
English and News Release in Japanese dated July 1.)
Furthermore, on August 2, Cabinet approved partial amendments to the export trade control
order which removes ROK from “White Countries” (n), which will be effective on August 28.
(c.f. METI’s News Release in English and News Release in Japanese dated August 2.)
The above-cited METI’s News Release dated August 2 explains points of amendments of theGuidelines for Handling Bulk Export Licenses which will be published on August 7.
Misunderstandings regarding the measures discussed there are being amplified through themass media and other channels in both Japan and the ROK. It is necessary that we avoid a situationin which day-to-day business activities are impeded as a consequence of this.
Below, we have compiled those points that we CISTEC regard as the keys toward gaining abasic understanding of Japan’s security export controls.
(n)Regarding so-called “White Countries” mentioned below, they will be referred to as“Group A”.
(1) The present matter ultimately is a security export control issue. It is being
implemented based on multilateral export control regimes and U.N. Security Council
resolutions meant to prevent the proliferation of weapons of mass destruction and thediversion of exported items for military use.
Security export controls are joint multilateral initiatives that are based on four multilateralexport control regimes to which the world’s major nations have been members as well as
Security Council Resolution 1540(2004). These initiatives “control” exports to prevent theproliferation of weapons of mass destruction and prevent the diversion of exported items formilitary use.
These multilateral initiatives themselves fall under the Article XXI of GATT on Security
Exceptions of the World Trade Organization’s (WTO’s) General Agreement on Tariffs andTrade. So long as no concerns can be identified, exports would be allowed as a matter ofcourse. Accordingly, trade issues of the sort that would become problematic for the WTO
such as trade embargoes, quantitative restrictions, “gap in status” matters, and the like arematters of a different order.
* U.N. Security Council Resolution 1540(2004): To prevent the proliferation of weapons ofmass destruction and to prevent terrorist activities, member states have the legal obligation
to implement effective domestic control measures that includes controls on exports (2004).

(2) “White countries” refers to those nations that, in Japan’s case for example, areexempted from the application of catch-all controls. Whether or not a bulk export
license is applicable even if they are not in the category of white countries is a separate1issue.
For Japan, “white countries” are those nations that are exempted from the application ofcatch-all controls related to weapons of mass destruction and conventional arms. If a country
does not fall under that category, the catch-all controls apply.
 The question of whether or not a bulk export license is applicable is a different matter, andthe view that “If a country is no longer a white country, then bulk export licenses can nolonger be used and all of the exports will require individual licenses” is a major
misunderstanding (please refer to (3) below).
*Please refer to (5) below for the details of “Catch-all Controls.”
 The ROK, too, has a list of “white countries.” However, this has no connection withapplication of the catch-all controls. For the ROK, even in case of a country which is on that
list, that does not mean the catch-all controls are not applied. That list is meant to determine
the applicable scope of bulk export licenses and individual licenses.
(3) Even if a country is removed from the list of “white countries,” a special general bulk
export license can still be used, and an individual license will not necessarily berequired.



Broadly speaking, Japan’s bulk export licenses come in three types.
[1] General bulk export license (“white bulk license”): Usable only in case of exports towhite countries, granted even to exporters who implement comparatively simple controlson their own.
[2] Special general bulk export license (“special general bulk license”): Usable in case ofexports to countries that are participants in the multilateral export control regimes,granted to exporters who implement strict controls on their own.
[3] Special bulk export license: Granted to exporters who export to users with whom they
have an ongoing business relationship, and implement strict controls on their own..
* Additionally, there is a bulk export license system in place for dealing with subsidiaries
and that for dealing in defense-related equipment.
Only general bulk export licenses ([1] above) can no longer be used in case of a country
being removed from the list of white countries. Special general bulk export licenses ([2]above) and special bulk export licenses ([3] above) granted to exporters who implement thestrict controls and can continue to be used under the above-mentioned conditions. All of theexports of list-controlled items would not necessarily require an individual license.
*This point is re-clarified by the above-cited METI’s News Release dated August 2.
In the case of a major corporation engaged in international operations, one would expect thatit has acquired a special general bulk export license or special bulk export license so it would
still be able to use that same license even if the destination country is no longer a “whitecountry.”
However, conditions are imposed on the exporter such that they must strictly check as thefoundations of export controls whether or not there are any concerns about the end uses or
end users as well as about any transfers to a third country. (This is same for shipment to whitecountries.) In some cases, the end user as well will be called upon to submit documents andwritten pledges relevant to this point, too (in particular, with respect to items related toweapons of mass destruction).
* The bulk export licenses in the ROK include “user bulk export licenses” and “item bulk
export licenses.” Whatever the case, they are applicable in those cases in which thepurchaser, consignee, or end user has been designated. This type if expressed in terms ofJapan’s system of bulk export licenses is something close to that of the “special bulk
export license” ([3] above).

2(4) In addition to any inspections carried out by the exporter, the difference betweenhaving a bulk export license and having an individual export license comes down towhether or not the relevant government authorities themselves also carry out theirown inspection.






Even if they are not so common when viewed in terms of the whole, exports that are subject
to the list controls (including dealings that involve the transfer of technology) still comprise
hundreds of thousands or even millions of Japan’s total. Changing all of those to individual
licensing would, in fact, put a stop to the transactions of all items.
For that reason, the participating countries have created a system of bulk export licenses, andthey have approved its use based on the degree of a product’s sensitivity, the issue of whether
the country of destination is a participant in the multilateral export control regimes or not
and their implementation of the systems, and the level of self-management of the exporter.
Japan’s “white bulk export license” standard makes it possible for even a corporation with arelatively basic self-management system to obtain permission. At minimum, it calls for thosecorporations to carry out an inspection as to whether the end use has a military purpose ornot. The special general bulk export status is granted to those exporters cleared by METI as
having satisfied certain stricter self-management standards and also requires detailed
checking of various concerns.
In addition to the sort of careful checks that exporters who are to engage in these sorts ofstrict self-management controls are expected to carry out, individual licenses also entail
double checks performed by the relevant units of METI. Items that are related to weapons ofmass destruction or have potential military application, along with those items that require
careful checking owing to the relevant circumstances are subject to the individual license
system.
The use of an individual license or of a bulk export license is determined by each country’s
government based on their conditions and discretion.

(5) Catch-all controls would apply and require the individual license if it is determinedthat there is actually some concern with an individual dealing even if the item toexport is not subject to the list controls. It is not at all the case that those exports forwhich there are no concerns will uniformly subject to licenses.
Catch-all controls are basic to the security export control system as same as the list controls.
When there are individual exports of items outside of the list control items, they are subject
to license requirements in the cases that (1) the exporter knows that there are concerns thatthey may be used toward the development of weapons of mass destruction or of conventionalarms, or (2) the exporter has been informed of the need of license from the relevant sectionsof METI.
The instances in which such concerns exist are limited. Therefore, this does not mean theexport of all items (aside from foodstuffs, lumber, and the like) are uniformly subject tolicense application requirements. In fact, it seems there are not many cases where individuallicense is required due to Catch-all controls(6) Individual licenses are handled on a contract-by-contract basis (not on shipment-byshipment basis). They are granted on a case-by-case basis, based on the length ofcontract, export destination, etc. They are granted relatively quickly so long as it canbe confirmed that there are no matters of concern.
Contract-by-contract basis (not shipment-by-shipment basis, not export by export basis)

3




Bulk export licenses are valid for three years at maximum. However, even individual licenses
can be granted for a period that corresponds based on the length of the contract.
Review of the application will begin once the documents required for submission have been
actually submitted and received. It will be granted relatively quickly so long as the end use
and the end user are confirmed as not presenting any concerns.
The “90-day review period” is the standard amount of time for processing that has been
determined based on the Administrative Procedure Act. Normally, the review does notalways require that much time.
In the case that concerns about the end use or end user cannot be eliminated, the necessary
certificate cannot be obtained, or the items being shipped can have applications for military
uses, the review for license will be strict and may take some time.

(7) Not every item requires license based on the list-control regulations regardless of thespecifications of the three materials. Those are limited to cutting-edge items based on
the agreements of the multilateral export control regimes.






Export controls are based on the agreements under the multilateral export control regimes.
Only the cutting-edge items are subject to the list controls.
With respect to the three materials that require individual licenses to export to the ROK,Japanese companies are said to have an extremely large share of the market ranging from
70% to 90%. However, with regard to fluoride polyimides and resists, only certain of these
items with advanced specifications are subject to license requirements under the list controlsthat are based on the multilateral export control regime (Wassenaar Arrangement).
(Example) Those resists that require licensing are limited to those that, for example are for
EUV use—meaning they use extremely short wavelength ultraviolet light.
On the other hand, hydrogen fluoride is regulated under the multilateral regime related toweapons of mass destruction (Australia Group related to chemical and biological weapons).
Hydrogen fluoride for use in manufacturing semiconductors is highly pure, and for the mostpart it is subject to the list-control.
Whatever the case, license will be granted swiftly if it can be confirmed that there are noconcerns.

(8) What is needed for an individual licenseThe documents required for the application include:•Contracts and related materials•
End-use certificate (i.e., items will not be used for military use, prior consent will beobtained in the event of transfer or re-export, etc.)
Points that will require confirmation include:•No possibility of diversion for military use?
•Items will be used by the end user listed in the contract, and inventory controls are being
carefully implemented?
•Items are not being re-distributed or re-exported to a third-party country?
•The export destination is not engaged in a business of concerns, etc.?
•
There are no suspicious aspects to the distribution channel? (Items will be properlydelivered? etc.)•
There are no other questionable points? etc.

[REFERENCES]
Overviews of Japan’s systems of security export controls and their application:.
1） Briefing materials for the Ministry of Economy, Trade, and Industry (経済産業省 安全保障4貿易管理 説明会資料)
2）“Overview of Japan’s Export Controls”at the CISTEC website (CISTEC 日本の輸出管理概要)

The revision of a typo in (2) of the previous Version 1 in this Version 2
For the ROK, even in case of a country which is not on that list, that does not mean the catchall controls are not applied. (Previous Version 1)↓For the ROK, even in case of a country which is on that list, that does not mean the catch-all
controls are not applied. (This Version 2)

5