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Japan export control update: Introduction of prior reporting obligations for international transfer of key technologies and new exporter verification requirements

The direction of export control reform proposed by the METI Security Trade Control Subcommittee

On April 24, 2024, the Security Trade Control Subcommittee of the Industrial Structure Council (“Subcommittee”), established within the Ministry of Economy, Trade and Industry (METI) and consisting of expert members, issued an interim report (“Interim Report”)  recommending changes to export control regulation under the Foreign Exchange and Foreign Trade Act (“FEFTA”).  This recommendation comes against the backdrop of a new national security environment in which we observe rapid technological advances and rising risk that general-use goods and technologies (collectively, “items”) are converted to military-use. Export control under the FEFTA consists of regulations requiring a license for the export of (a) certain listed items (list control) and (b) non-listed items when there is a risk that the item will be used...To read the full article, please see the PDF file

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Authors

中島 和穂

Kazuho NAKAJIMA

  • Partner
  • Tokyo

He has extensive experience handling cases involving complex legal issues, such as mergers and acquisitions by a public-private investment fund in the context of a business turnaround, a high-value dispute between a securities company and a stock exchange, adoption of anti-takeover defense measures for the first time in Japan, expansion of foreign businesses into the Middle East involving geopolitical risks, and commercial arbitration involving sizable claims regarding M&A price adjustment clauses. Recently, he been advising on risk assessments for transactions, contract drafting, voluntary self-disclosure to government authorities, responses to enforcement actions by the authorities, and establishment of internal control systems with respect to economic security regulations. In particular, he engages in numerous transactions involving economic sanctions, export controls and other economic security regulations regarding conflicts between the US and China over technology competition and human rights issues in Myanmar, Iran and Russia.

桜田 雄紀

He served as Director for Foreign Direct Investment Issues at the Ministry of Finance of Japan for three years from 2019 to 2022. During his tenure, he was the chief architect and strategist of the amendment of the FEFTA in 2020, where the threshold for prior mandatory notification for the acquisition of listed company shares by foreign investors was lowered from 10% to 1%. After the enactment of the amendment, he was in charge of reviewing the scope of designated business for the mandatory notification (addition of pharmaceuticals and medical equipment for communicable diseases, and critical mineral resource-related industries), strengthening the operation of screening and post-transaction monitoring, and strengthening cooperation in investment screening with relevant authorities of like-minded countries, including CFIUS of the U.S. He was also engaged in the planning and drafting of the revision of the FEFTA in 2022 (related to crypto assets) and the prohibition of new investment in Russia in response to Russia’s invasion of Ukraine.

He is the co-author of a section-by-section commentary on FDI screening under the FEFTA (“Sho-kai Gaitame-hou, Inward Direct Investment and Specified Acquisition Edition” (Shoji Homu, June 2021). He was also a speaker at webinars on FDI screening for government officials of member countries organized by the Organization for Economic Cooperation and Development (OECD).

May 2021 – Webinar on Transparency, Predictability and Accountability for investment screening mechanisms
May 2022 – Regulatory proportionality of investment screening mechanisms