Japanese Government is enforcing a revision of its Export Trade Decree that removes South Korea from its white list of favored trading partners starting from today. It proclaimed the revision on the 7th of his month and clearly stated its plan to remove South Korea from its white list. According to Japanese Government, South Korea will be placed into Group B. Group A consists of 26 countries that are part of Japanese Government’s white list. Japanese Government is going to categorize countries that are not part of its white list into Group C and Group D and tighten its control on exportation. South Korean Government and South Korean companies must prepare detailed measures to respond to Japanese Government’s newly revised Export Trade Decree.
Example 1: One South Korean company imports materials for electronic parts that correspond as strategic goods from Japan. It is now in a state of confusion due to Japanese Government’s revised Export Trade Decree. However, it is able to exhale for now as the company it imports materials from corresponds as a company that follows ICP (Internal Compliance Program). If an exporting company follows ICP, a South Korean company can import materials from the corresponding Japanese company without any restriction due to special blanket authorization.
Example 2: One South Korean company imports hydrogen fluoride, polyimide, and photoresist from Japan. This company has been facing difficulties in importing these materials since the 4th of August. This company can still face difficulties even if a Japanese company that exports materials follows ICP. As a result, it is necessary for this company to diversify its suppliers.
Example 3: One South Korean company imports rubber goods, which correspond as non-strategic goods but are subjected to ‘catch-all’ regulation, from Japan. In the past, it had not faced any difficult in importing rubber goods as rubber goods were exempted from this regulation. However, the company is under ‘catch-all’ regulation. As a result, the company needs to provide relevant information transparently whenever a Japanese exporting company requires information to check final purpose and final user of materials that it is exporting.
◊Japanese Government enforces revised Export Trade Decree
Above examples are possible scenarios that South Korean companies can face as Japanese Government enforces revised Export Trade Decree.
As a result, South Korea now belongs to B group. Japanese Government now divides countries belonged to its white list and countries that did not belong into four smaller groups.
As Japanese Government now places South Korea into B Group, South Korean companies can face stricter procedures whenever they import goods from Japan.
Every good that Japanese Government thinks that it will be used for militaries in South Korea except for food and lumber will has to go through individual authorization procedure that can take about three months whenever it is imported.
All 1,120 strategic goods managed by Japanese Government will now require individual authorization. 263 goods that already required individual authorization still require individual authorization. Other 857 non-sensitive goods will now require individual authorization after requiring blanket authorization. However, one can receive a special blanket authorization if an exporting Japanese company is one of companies that follow ICP and appointed by Japanese Government. Japanese Government appointed about 1,000 companies as companies that follow ICP and it so far made 800 of them public.
◊South Korean Government focuses on minimizing damage
It is expected that short-term damage will be inevitable for South Korean companies as the range of regulation is expected to expand and it is unclear how much regulation will expand.
“There are 1,970 items that will be subjected to regulation based on revised Export Trade Decree and amount of exportation of 795 items out of 1,970 items is worth more than $9.5 million (1 billion Yen).” said Lee Joon who is a researcher from Korea Institute for Industrial Economics & Trade.
He also emphasized that electronic parts, electric and electronic devices, and machineries are categorized as high-risk items.
Although South Korean companies may not face difficulties in importing materials that they need, how Japanese Government’s regulation will unfold in the future is a shaky element for them.
“As Japanese Government changed its Export Trade Decree, we are uncertain about when we are going to receive key materials and parts from Japanese companies.” said a representative for an industry.
South Korean Government is planning to minimize any damage that South Korean companies may face due to revised Export Trade Decree.
“As Japanese Government removes our country from its white list, our companies are uneasy about uncertainties.” said a representative for Ministry of Trade, Industry and Energy (MOTIE). “We are going to do our best to minimize any damage to our companies’ management by managing this situation as best as we can.”
South Korean Government is running a support group for companies that are facing difficulties due to Japanese Government’s regulation. This support group mainly focuses on supporting companies with financial support so that they can diversify their customers, localize key materials and parts, and resolve any financial difficulty.
Exporting companies that face indirect damage can also ask for help from this support group.
“We are going to assign additional budget for R&D and help companies to diversify their customers.” said a representative for MOTIE. “Information regarding revised Export Trade Decree can be found on the homepage of Korea Strategic Trade Institute.
Staff Reporter Lee, Kyungmin | kmlee@etnews.com