Overview of Japan's Export Control System

Articles 48-(1) and 25-1-(1) of the Foreign Exchange and Foreign Trade Act (“FEFTA”) respectively require a resident or non-resident intending to export or transfer specific goods or technologies to obtain approval from METI. Under FEFTA, Japan implements a dual system of control: list control; and catch-all control.

The 23 newly regulated semiconductor manufacturing equipment are subject to the list control. Under the list control, goods and technologies subject to control are listed in the Attachment List No. 1 to the Export Trade Control Order (“ETCO”) and in the Attachment List to the Foreign Exchange Order (“FEO”), respectively. Exporters of such listed items are required to obtain prior approval of METI.

For more information regarding licensing requirements, please see the “Moving Forward” section below. 

Summary of the New Regulations

The primary focal point of the new regulations is the modification of the bulk license system. Licensing is typically assessed on a case-by-case basis, subject to security screening, for each transaction. However, an exporter is eligible to apply for a “bulk license” if the exporter can manage a well-established internal export control system in compliance with the Ministerial Order Specifying Compliance Standards for Exporters, etc. (Ordinance of the Ministry of Economy, Trade and Industry No. 60 of 2009). A bulk license is an all-encompassing license that encompasses a specific scope, eliminating the need to apply for separate licenses for each individual contract.

Exports to certain countries such as the Netherlands, the United States, Taiwan, India, and Lithuania require a “General Bulk License (一般包括許可)”. This permit authorizes companies to export or transfer goods or technologies for specific destinations and/or item combinations.

On the other hand, exports to a separate group of countries, including China, require a “Specific Bulk License (特定包括許可)”. This permit only grants transactions with “the same counterparty with an ongoing business relationship.”

Key Differences between Japan’s and U.S. Export Controls for Advanced Semiconductors

Japan’s move follows the Netherlands’ new export controls on certain advanced semiconductor tools on 30 June 2023 in response to United States measures in October 2022 to limit China’s access to critical technology. However, the Japanese government stated that it is not aligning itself with the United States’ measures and emphasized that the content of its package is different from that of the United States.

1. Japan does not impose restrictions on the re-export of controlled items

Re-exported Japanese advanced semiconductor equipment is not subject to the new regulations if the equipment is initially exported under a METI license and then re-exported from that country. METI can enter into a goodwill agreement, requiring the exporter to inform METI when re-exporting items. However, whether an application is required for re-export controls to semiconductor equipment is determined by METI on a case-by-case basis.

2. Japanese law does not restrict Japanese non-residents working abroad in the semiconductor industry

Japan’s FEFTA does not impose regulations on Japanese citizens who are non-residents of Japan working in the semiconductor industry in other countries.

Moving Forward

When exporting advanced semiconductor equipment from Japan, entities should carefully review the eligibility and procedures for applying for either individual or bulk licenses. The following must be submitted when applying for individual licenses:

• an application form that details exporters, products, end-user, shipping route, and other relevant information;
• documents related to the product, such as written contracts, purchase orders, plant layout drawings, etc.; and
• other documents as may be required by METI, such as product catalogues, end-user's leaflets, end-user's End-Use Certificate, etc.

For bulk licenses, please note the following: 

• Depending on the type of license, exporters may be required to submit export records to METI multiple times throughout a year.
• For a General Bulk License, exporters must apply electronically through a network system provided by the government.
• To obtain any of the special bulk licenses, exporters must:
  • report their compliance status by responding to queries from METI in an export control compliance checklist;
  • receive an on-site inspection by METI; and
  • submit other required documentation and documents required for the particular type of special bulk license.
• To obtain any of the specific bulk licenses, exporters must:
  • report their compliance status by responding to queries from METI in an export control compliance checklist; and
  • submit other required documentation including documents required for the particular type of specific bulk license.

If it is unclear whether METI’s prior approval is required, it is a common practice for an exporter to consult with METI on an unofficial basis. It is best practice therefore to establish and maintain consistent communication with METI through authorized representatives especially given the ambiguity surrounding the new regulations.

Importantly, any unauthorized export of controlled goods/technology without the prior approval of METI may lead to criminal charges, administrative sanctions, warnings, and/or submissions of background statements/reports:

• Criminal charges include:
  • imprisonment of up to ten years;
  • a fine of up to one billion yen for judicial persons; or
  • a fine of up to thirty million yen for individuals.

*If five times the value of the item involved in the violations exceeds the amount of the above fines, a fine of up to five times that value may be applied.

• Administrative sanctions include:
  • a ban on export of goods or transfer of technologies for up to three years; or
  • a prohibition on working as a director or person responsible for the export of goods or transfer of technologies at any company.