Attn. Bureau of Industry and Security, U.S. Department of Commerce
From: Center for Information on Security Trade Control (CISTEC)
Date: January 17, 2023
Re: Public Comments Regarding Areas and Priorities for U.S. and Japan Export Control
Cooperation for the Japan-U.S. Commercial and Industrial Partnership Export Control
Working Group (87 FR 73748) (ID: BIS–2022–0029)
We CISTEC refer to the above-captioned FR and are pleased to submit public comments
regarding Japan-U.S. export control collaboration based on the Japan-U.S. Commercial andIndustrial Partnership (JUCIP) between the U.S. Department of Commerce and the Japanese
Ministry of Economy, Trade and Industry.
With drastic changes in international affairs, Japan and the United States have formulated
a new national security strategy based on a common awareness of issues in both countries,
necessitating close cooperation between the two. That public comments regarding export
control collaboration, a major policy tool for ensuring security, have been solicited at this timeis extremely well-timed.
As such, we would like to express our gratitude for the opportunity to submit commentsfrom the standpoint of export control from the private sector.
With regard to Japan-U.S. export control collaboration, we would like to present commentson two broad points.
The first is on the importance of shared recognition amid the dramatically changing
international situation, among governments, industry, and academia about the rising security
tensions, both military and economic, and accordingly, the increasing position and role ofexport controls. We believe that this shared recognition will enable industry and academia toproactively, rather than passively, engage in policies put forth by the government, thus
ensuring smooth and effective export control.
The second point is on the specific measures expected for export control collaboration
between Japan and the United States. Security tensions have also escalated in East Asia,
stemming from Russia’s invasion of Ukraine. Japan and the United States are major suppliersof high-tech products and technologies. As such, it is hoped that the two countries will, in
cooperation with Europe and other countries, coordinate their export control systems andoperations as widely as possible.
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On the other hand, export control requires more than just creating a system, it is crucial
that exporters are able to use any system appropriately with regard to practical matters. It
may well be that the purpose of a system is understood, but if it is too difficult to implementin practice, it will not be effective. Instead, it will only serve to impose an unproductive burden
on the exporters who are doing all they can to comply with the regulations. This could also
lead to another problem of reduced manpower, time and effort which should otherwise befocused on transactions that are of little concern. We sincerely hope that government
understands this point.
Comments will be presented as follows:[Contents]
1. The importance of shared recognition among governments, industry, and academia
1.1 Drastic changes in the international situation, and a sense of crisis and risk
1.2 The expanding role and significance of export control (Part 1: Overview)
1.3 The expanding role and significance of export control (Part 2: Detailed
explanation)
1.4 Export control in regards to the prior deterrent of emergencies and postemergency response
2. The challenge of improving the effectiveness of export controls through collaboration
with like-minded countries
2.1 Establishing the sharing of information of concern between governments as aconvention and alerting export companies to the extent possible
2.2 Shared recognition and scope of regulations for items and entities (1) – Entities
2.3 Shared recognition and scope of regulations for items and entities (2) – Items
2.4 Prioritizing cooperation with like-minded countries, and positioning the U.S. direct
product rule as complementary
2.5 Quick development and operation of export control systems related to humanrights violations
2.6 Predictability, reduced burden, and strengthening of consultation system forexporters’ compliance with export control regulations
2.7 Strengthening coordination between export control and inward investment
control, and addressing issues
2.8 Multilateral harmonization of export control regulatory methods, regulatory
numbering systems, and system operation

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1. The importance of shared recognition among governments, industry,
and academia
1.1 Drastic changes in the international situation, and a sense of crisis and risk
- Despite security problems since the end of the Cold War in the early 90s, such as thedevelopment of weapons of mass destruction and terrorism, in economy, there has been
little concern about changes to the status quo of the postwar international order. As such,global expansion beyond political systems has been made possible on the basis of
economic rationality based on the premise of international rules.
- However, the reality now is a security problem where threats are being posed by countries
aiming to unilaterally unbalance the world order, meaning that the very premise of global
economic activity is being shaken. The public and private sectors must now share thissense of urgency and risk in response to this threat, of how Western countries have a
growing sense of crisis, of the need to ensure military and economic security as an urgent
issue, and how to deal with it.
- If this point is not properly identified and conveyed, if there is no shared recognition, thenthe private sector may become passive about government policies and regulations, andmay perceive them as a hindrance to their economic and research activities.
1.2 The expanding role and significance of export control (Part 1: Overview)- With the end of the Cold War, export control shifted away from the COCOM system towarda system of non-proliferation export control implemented with international cooperation,such as with multilateral export control regimes and the United Nations Security Council
Resolution 1540. While this international cooperation scheme is, and should be,
maintained in the future, it is undeniable that a non-proliferation export control regime alone
is no longer sufficient amid heightened tensions over unilateral changes to the status quo
by force.
In this regard, it is now more important than ever for there to be cooperation between likeminded countries that share basic values regarding the international order to complement
international cooperation schemes.
- While the pillars of non-proliferation control are to prevent the proliferation of weapons ofmass destruction and tensions arising from the excessive build-up of conventional
weapons, it is hoped that export control through the cooperation of like-minded countries
will play an important function and role in terms of defending against the pressures andthreats from countries that are militarily and economically geared toward upsetting the3balance in the world order.
- In some parts, export control regulations are viewed negatively or comparatively, seen asprotectionism, a means of struggle for power, or as a constraint to economic globalization.
However, export controls are a means of defense against attempts to violate internationalrules (or gain a free ride on such rules) concerning free and fair trade represented by WTO
rules, and thereby a means of defense against attempts to threaten security (and humanrights). Both the public and private sectors must therefore make efforts to promote a
common understanding on the importance of export control protecting companies that
operate in accordance with international rules.
1.3 The expanding role and significance of export control (Part 2: Detailed explanation)
Based on an understanding of the above, it is necessary to build a consensus on thefollowing points and to develop systems and operations as specific roles for export control
in addition to non-proliferation control.
- Firstly, the role of export control from the perspective of security may include deterrenceof military threats (including the threat from military-civilian fusion) and economic security,
in addition to preventing the proliferation of items used in the development andmanufacture of weapons.
Japan’s new National Security Strategy specifically presents within “the security
environment surrounding Japan and Japan’s national security challenges,” a wide rangeof themes from the global to the Indo-Pacific region. “Prominent examples of thecomplexity and severity of the current international security environment” include: unilateralchanges to the status quo by force in the form of a combination of military and non-militarymeans and the threat of such attempts; increasing risks in the cyber, maritime, space,electromagnetic, and other domains, and high potential for hybrid warfare; supply chain
vulnerabilities; increased threats to critical infrastructure; economic coercion against othercountries; and, the illegal theft of advanced technology research and its use for military
purposes. Also stated in the new National Security Strategy is, “Addressing those issues
not necessarily deemed as security targets in the past... has also become a major security
challenge. As a result, the scope of security has expanded to include the economic sector,
making economic measures even more necessary to ensure security.”
Based on a clear understanding of this point, we must examine the role of export control,
the expansion of its functions, as well as a concrete system and modes of operation, as
an economic means to deter and counter these problematic acts.
- The second point is that export control is also a powerful means to counter human rights
violations. With some like-minded countries moving toward an Export Control and Human
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Rights Initiative, human rights violations are now on a par with military and economic
security threats in terms of violating peace and security. Export control therefore, is a
powerful policy tool to prevent the delivery of products and technologies that can contributeto human rights violations. The fact that this point was also taken up as an issue to beaddressed by the JUCIP is very well received, and we sincerely hope it will be raised soon.
- The third point is the need to coordinate measures to deal with money laundering andproliferation financing (related to weapons of mass destruction and terrorism). In recent
years, converting exported goods into cash has also been pointed out as a means ofmoney laundering and proliferation financing. Since the goods themselves are not directly
related to weapons development, it is difficult to deal with them in the traditional world ofexport control. However, the export of these goods is also a source of funding for weapons
development and terrorism, thus it should be prevented. Moreover, as part of the means
to prevent any advantage being provided to terrorist forces, the provision of goods, suchas ships and aircraft, both inside and outside Japan, is prohibited.
These measures are being addressed from a financial perspective by the Financial Action
Task Force (FATF), but since they are closely related to export control, measures must be
taken in a coordinated manner. For the exporter, there is no change in terms of export
control, so they are able to export in the same manner, but it is hoped that there will becooperation among government ministries and agencies.
1.4 Export control in regards to the prior deterrent of emergencies and postemergency response- The new National Security Strategy refers to the foreign policy and military activities ofChina, a country with which Japan has had close economic ties, as “the greatest strategic
challenge” to the peace, security, and stability of Japan and the international community,
as well as to the international order based on the rule of law, while also referring to China’s
unilateral changes to the status quo by force and strengthening strategic alliances with
Russia.
- The National Security Strategy also states, “Japan will reinforce its own capabilities androles, and together with its ally, the United States, and like-minded countries and others,
deter contingencies and attempts to unilaterally change the status quo in Japan and its
vicinity. If by any chance a threat should reach Japan, Japan will disrupt and defeat thethreat and minimize the damage caused, and bring it to an end in a manner favorable toprotecting its national interests.”- Sharing with industry, academia, and the general public what could actually happen insituations where emergencies described herein occur and end, what could happen not5

only from a military standpoint but also economically, and what measures could be taken
for prior deterrence, is necessary to show the realistic possibility of an emergency arising,and it is also necessary to consider preparations for pre- and post-response in corporate
activities.
- Export controls, along with financial sanctions, have become a crucial tool in ex post facto
sanctions against Russia. Partly because of Russia’s countermeasures, economic
relations with Western countries that had been built up over many years were forced tocome to a halt. Ukraine has suffered serious damage, and the international community
supporting it has been forced to bear a tremendous burden. In case of an emergency
situation with Taiwan, the serious damage to economic relations and industrial activities
cannot be compared with those of Russia. In light of this, we are keenly aware of theimportance of prior deterrence.
- The U.S. government’s series of measures to significantly tighten export control
regulations in the semiconductor and supercomputer fields since the beginning of Octoberand requests to allies and others to join the agreement were sudden and confusing. Given
the background however, it is likely they are part of measures to prevent a Taiwan
emergency from happening. The 2022 annual report of the U.S.-China Economic andSecurity Review Commission (USCC), a bipartisan group of the U.S. Congress, makes
quite drastic military and economic recommendations in the event of a Taiwan emergency.
Yet these proposed measures can also be seen as part of the debate for proactive
deterrence in the face of a growing sense of crisis.
- In any case, bearing in mind what kind of situations and risks will arise, not only militarily
but also economically with regard to any emergency, it is necessary to fully explain thesignificance, necessity, and effects of strengthening export control regulations for priordeterrence and post-response, and to share such explanations with industry and academia.

2. The challenge of improving the effectiveness of export controls throughcollaboration with like-minded countries
2.1 Establishing the sharing of information of concern between governments as aconvention and alerting export companies to the extent possible- In order to carry out export control in cooperation with like-minded countries, it is essential
to share information of concern between governments, and it would be desirable toestablish such information sharing as a convention of export control in the same way aswith investment control.
- In terms of inward investment control, the Foreign Investment Risk Review Modernization
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Act (FIRRMA) in the United States and the Foreign Exchange and Foreign Trade Act inJapan have institutionalized information sharing with the authorities of other countries,
making it possible to use such information for investment screening.
- Similarly, if the sharing of information of concern with other countries is established as amatter of convention in export control with the information gained used in the examinationand operation of regulatory systems, as well as used as documentation to alert exporters
to the extent possible, then it will help to improve predictability.
2.2 Shared recognition and scope of regulations for items and entities (1) – Entities- Export control is based on the control of items with end-users and end-uses. In order tomake Japan-U.S. (as well as Japan-U.S.-EU) cooperation most effective, it is hoped thatthe items and entities subject to control will be subject to regulation following a sharedunderstanding while utilizing the above-mentioned institutional framework for information
sharing as necessary.
- With regard to entities, it is of course not appropriate for Japanese government to restrictin Japan all those entities that harm the national security or foreign policy interests of theUnited States, such as those on the U.S. Entity List. However, amid such heightened
tensions in East Asia, there are probably quite a few entities that are of great concern tothe common security of Japan and the United States. In terms of information sharing
between governments, it would be appropriate to define those entities that are of concern
to both Japan and the United States and announce them as subject to regulation.
These public comments seek ways to contribute to more transparent, efficient, effective,
and focused policy and implementation. We therefore believe that this measure of sharedrecognition wholeheartedly fulfills purpose.
- Even though there was a foreign end-user list, which is a list of concerns related toweapons of mass destruction, prepared under Japan’s Foreign Exchange and Foreign
Trade Act, there was no conventional weapons-related concern list (military end-users) orembargo list (even those on a foreign end-user list are not subject to an embargo).
However, in terms of its operation, there has been a significant change with the sanctions
on Russia. Military end-users based on a common understanding among Japan, the U.S.
and Europe have been listed, with the license policy on prohibited exports clearly
announced. In accordance with this, it is hoped that the current legal application will leadto an early realization.
- In this way, by clarifying the list of concerned parties, the Japanese government has thedistinct advantage of being able to obtain the protection of its own government against
criticism and pressure on exporters from governments of other countries (this is not the7case solely with the extraterritorial application of U.S. regulations).
- As a regulatory method, while end-use regulations impose a significant procedural burden
on exporters, the risk of penalty appears to be large. Instead, end-user regulations, inwhich the entities of concern (those who raise red flags and require careful examination,
those who are prohibited from exports, etc.), are clearly identified through intelligence
activities on the part of the government, and as such the regulations are a much more
effective and less burdensome method for exporters.
2.3 Shared recognition and scope of regulations for items and entities (2) – Items- Regarding emerging and foundational technologies, while some of these technologies
have already been agreed upon, it is desirable to reach an agreement under themultilateral export control regime. However, since it appears increasingly difficult to reachan agreement amid current tensions in world affairs, it would be appropriate to first consider
and implement any agreement based on consensus with like-minded countries thatpossess such technologies.
- Through such collaboration with like-minded countries, it is thought that the emerging andfoundational technology field in particular will be subject to export control among other new
items (fields), and it is highly likely that “designated critical technologies,” as specified by
the Economic Security Promotion Act that was established in Japan, will be subject toexport control due to the definition of the categories. The emerging technology field definedin the ECRA and the technology field identified in the “National Strategy for Critical andEmerging Technologies” in the United States, and the seven emerging technology fields
defined by the European Commission, for example, have much in common with the fieldof technologies that have been specified as candidate “designated critical technologies” inJapan. Thus, we understand that specific items to be subject to export control will benarrowed down from among these technologies through collaboration with like-mindedcountries.
- If items are to be subject to export control, it is necessary to clarify their extent. At the sametime, however, if the specifications become too detailed and complex, exporters would
need to spend a lot of effort on their classification. And should a mistake of judgment be
made, the exporter will be held liable for unauthorized export. Therefore, it will be extremely
important to ensure both clarity of those items being regulated and ease of understanding,
and we ask that due consideration be given with regard to this point.
- As a general rule of export control regulations, there is something called foreign availability.
Then again, we understand that the concept of foundational technology is characterized
by the fact that even if the technology is already mature and in use, the exporting country
8gains an advantage thereby allaying any security concerns. In that case, while keeping theprinciple of foreign availability in mind, the question of how many generations should begiven an advantage seems to be a point of contention. As long as it is a technology that isalready in use, if it were to be regulated, it would have a considerable impact on the profits
and losses of the companies involved in the transaction. In terms of regulation then, it isimportant to strike a balance between the two, so we hope that comments from theindustrial world will be carefully listened to. It is also highly likely that these regulations will
be implemented in the course of rebuilding supply chains, so the creation of alternative
demand within them will also be important.
- With regard to the emerging and foundational technologies subject to export control, we
believe they will be decided after examining the military applicability of advanced
technologies and the degree of concern. On the other hand, examining the technologies
that are chokepoints for the countries of concern would also be beneficial from theperspective of the effectiveness of export control regulations through cooperation among
like-minded countries.
- Recently, we have also come across reports that products from Western countries arebeing used in drones and other devices. Among these, it is sometimes mentioned that not
only controlled products but also non-controlled mass market products (commodities) arebeing used. However, once a mass market product (commodity) is sold, it is beyond the
distribution control of the manufacturer or exporter. As a result, even if the item were to be
used in military goods, it is not appropriate to hold the manufacturer or exporter responsible.
Since the performance of commodity products is improving year by year, we fully
understand that their use in military equipment is becoming a new concern. However, we
would like you to engage in careful discussion upon fully understanding the nature of mass
market product (commodity).
2.4 Prioritizing cooperation with like-minded countries, and positioning the U.S. direct
product rule as complementary- Although the U.S. direct product rule is an extraterritorial measure, it is understandable
that it is an effective measure to ensure the security of Western countries in the current
international situation where tensions are rising. However, basically as in the case of
Russian sanctions, it seems appropriate to exempt like-minded countries which arecooperating to take similar measures, and to take complementary measures with the othercountries.
- For exporters, the direct product rule is complex and difficult to understand, while penalties
are severe, and it is also difficult to obtain protection from the own government in relation9

to the destination country. Moreover, even if the rule does not apply, there is concern thatexporting the item may be seen as backfilling. Given this kind of situation, it is desirable
that the rule be implemented by the government of the home country.
- The right combination of like-minded cooperation in the above-mentioned sanctions
against Russia and the U.S. direct product rule is one model and it is hoped to be appliedin a suitable way in future export controls.
2.5 Quick development and operation of export control systems related to humanrights violations- The JUCIP is purported to hold technical consultations on advanced technologies thathave the potential to be used for serious human rights violations. In light of this, it isnecessary to urgently develop a system for regulation in Japan.
- Deliberations have been made as a key issue at a subcommittee of the Industrial Structure
Council, but these discussions have been postponed. Regulations have already beendeveloped and put into operation in the United States and Europe, so it is thought thatJapan, as a key player in the international community, should also be required to develop
such regulations.
- As a global exporter, we are firmly coping with the regulations already in place in the UnitedStates and Europe, and even if there are no direct laws and regulations, as a responsibility
to society, we cannot ignore and export those items subject to regulation. Moreover, inorder to obtain protection from the own government in relation to the destination country,
we believe that the Japanese government must implement internationally harmonious
regulations.
- In doing so, it is hoped that a method of export control will be implemented through anappropriate combination of list-control rules and end-use/end-user-control regulations fromthe viewpoint of effectiveness and reducing the burden on exporters.
2.6 Predictability, reduced burden, and strengthening of consultation system forexporters’ compliance with export control regulations- In order for exporting companies to respond appropriately to export control regulations, itis necessary to ensure predictability and avoid imposing excessive burdens.
- In this regard, recent U.S. regulations have been rather puzzling, even if there have been
unavoidable aspects due to recent developments. The drastic tightening of restrictions on
China in particular, at the beginning of October, was unprecedented and the re-export
regulations were extensive. Certainly, it was all very abrupt, and the restrictions came into
force either on the same day or very quickly, making it difficult to understand and respond.
10We hope that the governments of like-minded countries will share such information inadvance as much as possible, and come up with ways to increase predictability for the
benefit of exporters.
- The end-use-control regulations (semiconductor manufacturing and supercomputerrelated end-use regulations) are one of the pillars of the new rules imposed on China in
October. Under those rules, exporters were required to carry out sufficient due diligence.
Yet, while they were unsure as to whether they could ascertain and evaluate
semiconductor manufacturing facilities on a building-by-building basis, or whether they
could get cooperation from the other parties, or even to what extent they should be carryingout their checks, they also faced the risk of severe penalties. If this end-use regulation
were to be applied to human rights abuses, it would be even more difficult.
We believe that end-user-control regulations, in which parties of concern are clearly
identified, are effective and help reduce the procedural burden on exporters. Therefore, itwould be desirable to apply the end-use-control regulation as complementary byconsidering start-ups and unknown companies, etc. while focusing on end-user-control
rules.
- Furthermore, three types of direct product rules have been applied, but this is practicallythe first instance where such a wide range of regulations have been imposed. On
December 16, 21 of the 36 Chinese companies newly listed on the Entity List were subject
to the direct-product rule, so it seems that this has now become established as a powerful
re-export regulation.
However, it is a heavy burden for non-U.S. exporters to comply with this rule. Manycompanies are unfamiliar with the idea of what a ‘direct-product’ actually is, and theworkload to determine whether a product meets such requirements is large, as is theworkload to determine end-use (for any of the restricted companies’ products / for China).
Whether for a domestic or exporting transaction, companies are required to ascertain theabove-mentioned, and they are advised to obtain a declaration from the supplier as towhether the product is a direct-product or not. All this amounts to a huge amount of workfor the company. Even if the result is that the product is not subject to the rule, we cannot
dismiss the huge amount of effort needed to determine such outcome in the first place.
And we cannot ignore how this could also impact the company in that manpower which
would otherwise be spent on normal business needs to be allocated to such work.
As in the case of the framework with Russian sanctions, it would be desirable to have astructure in which like-minded countries implement similar regulations as much as possible
while applying the above-mentioned direct product rule to the other countries in acomplementary manner.
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- As U.S. re-export restrictions content and related companies grows along with anincreasing degree of impact, it becomes necessary to fully understand all the details. Yet,when a non-U.S. company needs to consult on such matters, it seems that there are morethan a few companies who feel that having to refer directly to the U.S. is a hurdle both interms of procedures and costs.
And then with respect to the content of the regulations, there are many cases where therules come into force in a very short space of time, if not on the same day. The work ofexporters involves receiving orders, and before they are shipped, they need to act quickly
to make decisions within the company on whether the product being shipped is subject toexport control, and if so, how to respond. Export control and legal departments are required
to interpret the law and regulation correctly for this very purpose, but companies locatedoutside the United States cannot help but feel somewhat constrained.
With your understanding of this situation, and as part of strengthening Japan-U.S. export
control collaboration, a contact point at the U.S. Embassy in Tokyo where exporters canconsult and make inquiries (preferably in Japanese) about U.S. regulations would help
ensure proper implementation of the rules.
2.7 Strengthening coordination between export control and inward investment control,
and addressing issues- Export control and inward investment control are closely related in terms of preventing theoutflow of sensitive technology, so it is thought that they should be controlled together incoordination.
- FIRRMA in the United States adheres to the concept of “U.S. Business” and restricts any
investment in U.S. businesses even if the investment is between non-U.S. companies. Thismeans that an investment in a Japanese company could also be potentially subject to thisregulation.
However, there is also a provision for “excepted countries” and “excepted investors.” Under
this provision, countries and investors satisfying certain requirements are exempt from theregulation placed on U.S. investment (current excepted countries areU.K., Canada,
Australia and New Zealand).
From the perspective of securing the effectiveness of Japan-U.S. cooperation, it seems
thoroughly appropriate to apply Japan’s investment control system to Japanese companies
rather than applying U.S. regulations. We also hope you will consider this issue bearing in
mind to designate Japan as an “excepted country.”- In the United States, export control and investment control are being linked together morestrongly than ever. Emerging and foundational technologies are subject to the control of12both FIRRMA and ECRA, and in light of the trend of strengthened acquisitions fromcountries of concern amid the economic turmoil caused by the pandemic in the spring of
2020, a decision has been made to impose an obligation to submit a prior declaration forinvestment from entities that require export licenses (in place of 27 industries initiallyannounced). Export control and investment control are thus coordinated from both thestandpoint of the item and the entity.
- In Japan, investment control has been strengthened by revisions to the Foreign Exchange
and Foreign Trade Act in 2019, but there remain issues such as how to deal withinvestments from entities of concern (including those subject to United Nations Security
Council sanctions, and those on the list of public concerns of Western countries, etc.), how
to deal with entities whose characteristics have changed or whose level of concern has
increased ex post facto (increased control of governments and state-owned enterprises,etc.), and the pros and cons of the situation in which even foreign financial institutions incountries of concern are given block exemption with regard to investment in industries
including core industries, etc.
- Additionally, “dual-use goods that may be diverted to military use” are identified as “coreindustry” items among those subject to investment control under the Foreign Exchange
and Foreign Trade Act, and their manufacture falls under the list control items for export
control. This may seem to indicate a linkage between investment control and export control.
However, list control items are regulated by detailed specifications, and the judgement of
whether an item satisfies these specifications requires specialized skills in export control.
Therefore, investors cannot make this judgement, and regarding companies anddepartments which are investment target, if they do not engage in export, it is difficult forthem to make this judgment. In this regard, there is a large difference with infrastructurerelated industries and other designated industries that can be relatively easily classified by
Japan Standard Industrial Classification based on disclosed materials, etc.
In response to this problem, a “recommendation list” is announced by the Ministry of
Finance as a reference for determining whether or not prior notification is required. This isan unusual practice not seen in any other country. The list is based on a questionnaire
survey by the Ministry of Finance, but as it is equivalent to announcing whether a company
engages in the manufacture of state-of-the-art “dual-use goods that may be diverted tomilitary use” and are subject to list control, many companies are voicing their concern thatit could contrarily trigger an outflow of sensitive technologies (hostile takeovers, cyberattacks, etc.).
In consideration of these concerns, we hope a scheme will be examined that would allow
industries that manufacture “dual-use goods that may be diverted to military use” to be13

classified relatively easily based on disclosed materials, etc. in reference to case examplesof recent regulations in Western countries, instead of requiring specialized classification
skills as does the existing system (such as item classification not bound by specifications
under ordinance of the Ministry of Economy, Trade and Industry, for example).
- Furthermore, both export control and investment control, the idea of separating how privatecompanies and state-owned enterprises are treated (judgment of control based onshareholding/voting rights ratio) seems to have been a common thread not only in Japanand the United States but also internationally. In China however, the absolute leadershipand control system of the Chinese Communist Party has been established legislatively,
meaning that even private enterprises have to abide by the Party’s instructions, resulting
in a corporate governance structure very different from the past. The strategy of militarycivil fusion, mixed ownership reform, and national intelligence laws also complicate theperception of a corporation’s right of control. Responding to these changes is also
becoming an issue for improving the effectiveness of export and investment control in the
future.
2.8 Multilateral harmonization of export control regulatory methods, regulatory
numbering systems, and system operation- In terms of multilateral export control cooperation, it would be preferable to harmonize
regulatory methods and systems as much as possible. There are many export control
measures being implemented based on G7 agreements, not just Japan-U.S. agreements,and many more are likely to be brokered in the future. It would therefore be most welcome
if the other party to such agreements could also clearly understand that Japan iswholeheartedly enforcing export controls based on those agreements, thereby allowing
Japan’s exporters to export to the world more smoothly. From this we would like to raise
two points.
- The first is a multilateral harmonization of methods for securing export control regulations.
A multilateral export control regime seeks to contribute to the non-proliferation by
regulating the development and manufacture of weapons of mass destruction andconventional weapons. However, under UN Security Council sanctions (on North Korea,etc.), entities that are not directly involved in the development and manufacture of weaponsof mass destruction, but which are involved in securing funding for development (entities
such as means of transportation, like railroads and ships, etc., trading companies, anddevelopment companies which are sources of funding), are subject to embargo. Under theForeign Exchange and Foreign Trade Act of Japan, entities are listed on a foreign end user
list, but essentially this applies to entities directly involved in development and14manufacturing, etc., and the nature of the list is not embargo list. In case of making it
embargo, the ban on payments, etc. under financial sanctions which makes it difficult toreceive payment for exports has become an unorthodox method for the substantive
embargo of exports. However, since the UN Security Council sanctions resolution includes
a freeze on financial assets and a freeze on economic resources, it seems necessary to
directly impose an export ban as part of the freeze on economic resources.
On the other hand, with the sanctions against Russia, a list of entities that require an export
license, such as Russian military-related companies, was announced with these entities
deemed as ‘policy of denial of license,’ thereby placing them directly on the embargo list.
This appears to be the result of coordinating measures with other countries based onagreements with the United States and the G7.
- The second point is a multilateral harmonization of regulatory numbering systems. In
Japan, the numbering system of list rules under the Foreign Exchange and Foreign Trade
Act is unique (classified by multilateral export control regime), unlike the EU’s numberingsystem (classified by item), which is a substantial international standard in Europe, theUnited States, and Asian countries. In this regard, the Ministry of Economy, Trade andIndustry (METI) and industrial circles continued discussions from the perspective offacilitating more global corporate activities, and in March 2022, created a framework thatallows for license applications and export control using EU codes, while maintaining thecurrent numbering system itself owing to restrictions under current law. This is a major step
forward for which we are deeply grateful.
On the other hand, if certain items are, in the future, subject to control based onagreements between Japan and the U.S. or the G7, it would be preferable if the system
could be made easier for cooperating countries to clearly understand which part of theagreement is being enforced.
On this point, for items newly subject to regulation under Japan-U.S.-Europe cooperation
due to Russian sanctions, Japan has adopted a method of ordering in accordance with theitem classification in the EU numbering system as per the appended table of the Cabinet
Order of the Foreign Exchange and Foreign Trade Act. This signals the possibility of areview of the entire list rules numbering system for compliance with the EU. As such, we
hope that you will be able to continue to have discussions with industries going forward.
- In addition, the detailed operation of export control regulations often differs from country tocountry. In domestic application of multilateral export control regimes, a certain degree of
discretion is allowed by member countries. So, although there are unavoidable aspects,
with more global corporate activities, even seemingly insignificant differences in system
operation must be dealt with differently depending on the country in terms of practical
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operation, which is a burden that cannot be ignored. Therefore, if you receive any inquiries
from the industrial world, etc., in that this problem is particularly serious, we ask that you
respond to facilitate a more harmonized operation of regulatory systems.

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