Cabinet Decision on the Bill for the Act of Partial Revision of the Foreign Exchange and Foreign Trade Act
On March 3, 2017, the Cabinet decided to approve the Bill of the Act for Partial Revision of the Foreign Exchange and Foreign Trade Act, and the bill will be submitted to the 193rd ordinary session of the Diet.
1. Purpose of the bill
As the globalization of business is accelerating and expanding, Japan is facing growing concerns over the outflow to overseas countries of critical technologies and goods from the viewpoint of national security that Japanese companies have. To maintain security in Japan and the rest of the world, Japan needs to establish a system in which critical technologies and goods are appropriately and securely controlled and enhance the effective imposition of sanctions on any illegal acts concerning imports and exports. In light of this situation, Japan will take the following measures:
- Strengthening penalties for the regulations concerning the imports/exports and trade of technologies
- Strengthening administrative sanctions concerning import/export regulations
- Strengthening the regulations concerning inward direct investment related security
2. Outline of the bill
1) Strengthening penalties for the regulations concerning the import/export and trade of technologies
- Aiming to enhance deterrence of illegal outflow of critical technologies and goods, the Act of Partial Revision is to raise the amount of fines applied to illegal conduct, e.g., unauthorized exports and trade of goods or technologies related to weapons of mass destruction and violations of import/export bans under sanctions (current fines: up to 10 million yen → revised fines: up to 30 million yen).
- Along with this, the Act of Partial Revision is to introduce a system to impose severe punishments on legal entities that have committed the illegal conduct (fines: up to 1 billion yen).
- Concerning violations of conditions with permissions for exports or trading of technologies, the Act of Partial Revision is to change the current non-criminal fines to punishments.
2) Strengthening administrative sanctions concerning import/export regulations
- Aiming to enhance the effectiveness of import/export regulations, the Act of Partial Revision is to introduce a new system to deter actions designed to avoid administrative sanctions. For example, a board member of a company on which an administrative sanction has been imposed, will be prohibited to take a position of a board member of another company in which the same business as that of the sanctioned company is operated A board member of a company on which an administrative sanction has been imposed will be also prohibited to launch a new personal business that operates the same business as that of the sanctioned company.
- Aiming to enhance deterrence of violations of domestic export/import bans in Japan, the Act of Partial Revision is to extend the upper limit of the period of administrative sanctions imposed on violators of the given export/import bans (current period: one year → revised period: three years*). * This upper limit of the period is the same as the maximum period stipulated by the administrative sanctions imposed on violators of the goods export regulations related to weapons of mass destruction.
- The Act of Partial Revision is to add stakeholders (exporting intermediaries, etc.) of exporters to the target coverage of on-site inspections for investigating unauthorized exports and other illegal conduct.
3) Strengthening regulations on inward direct investment related security
- Aiming to appropriately control the outflow of critical technologies to overseas countries triggered by investment or acquisition, the Act of Partial Revision is to include cases, that foreign investors take non-listed stock from other foreign investors, into the controlled targets under the prior notification system that requires an examination, where an examination is required based on the determination of the scale of potential risk that is deemed as harming national security.
- The Act of Partial Revision is to establish a system in which necessary measures and orders, e.g., orders to sell stock, are carried out on a foreign investor who has made an inward direct investment without submitting a notification, where the investment is deemed as harming national security.
3. Effective date
The revised Act will come into effect as of the day specified by Cabinet Order within a period not exceeding 12 months from the date of promulgation.
March 3, 2017
Division in Charge
Security Export Control Policy Division, Trade Control Department, Trade and Economic Cooperation Bureau