Japan: Revising Arms Export Regulation

Japan: Revising arms export regulation

Recent changes to Japan’s ‘Three Principles on Arms while article 48 covers goods. Exports’ relax controls held tightly for decades. Legislation supporting the act includes (1) cabinet orders, (2) ministerial Crystal Pryor reviews the revisions while pointing out orders, and (3) notifications and an important gap in Japan’s munitions regulations guidance. The most important statutes under the act are two cabinet orders: the Export Trade Control Order apan is one of the frontrunners for principles to allow exports in cases that (‘ETCO’, or Yushutsu-rei) and the the sale of submarines to will contribute to global peace and Foreign Exchange Order (‘FEO’ or J Australia, vying with France and serve Japan’s security interests. The Gaitame-rei). The ETCO refers to Germany. Japan arguably produces the rules themselves were renamed the controlled goods (article 48 of the world’s best non-nuclear submarine, ‘Three Principles on Defense Trade Law) while FEO specifies its Soryu class. The Australian Equipment Transfers’. controlled technologies (article 25 of government initially approached Japan In July 2014, the Japanese the Trade Law). Ministerial orders about the $35 billion deal in 2014. It is government approved delivery of provide details like the specification of noteworthy because, if realised, it seeker gyros to the United States for listed items. Finally, notifications and would be Japan’s first major defence use in Patriot Advanced Capability-2 guidance/ notices (interpretations) sit export to a third party (i.e., not the (PAC-2) missile interceptors. (The below ministerial orders in Japan’s United States) in four decades.1 Prime PAC-2 will ultimately be sold to Qatar.) legal structure. Japan’s ETCO and FEO Minister Abe’s strategic vision for Japan also agreed to conduct joint (and lower) are akin to how the U.S. Japan has been a key element of the research with the UK on using Export Administration Regulations submarine deal, but enabling it are the Japanese seeker technology in air-to- (‘EAR’) and International Traffic in changes in Japan’s ‘Three Principles on Arms Regulations (‘ITAR’) respectively Arms Exports’. This article addresses Japan has recognised sit below the EAA and the AECA. the background, significance, and Japan’s Center for Information on future implications of the Three the need to engage in Security Trade Controls (‘CISTEC’) Principles revision. arms exports and notes that Japan’s multi-layer legal structure, although pervasive in the Background: ‘Three Principles’ overseas development Japanese legal system, makes any In 1967, Prime Minister Eisaku Sato projects to maintain its regulatory change in export controls established the ‘Three Principles on difficult to implement.2 Arms Exports and Their Related Policy domestic defence The revision of the Three Principles Guidelines’, which prohibited arms industry and national is a cabinet decision and, as such, does exports to Communist countries, security. not impact this legal basis. Rather, the countries subject to arms embargoes new principles serve to clarify in which under UN Security Council resolutions, cases arms exports are banned, and countries involved in or likely to be air missile technology for fighter jets. especially with regard to countries in involved in international conflicts. In early 2015, it became clear that conflict, and in what cases the Then, in 1976, Prime Minister Takeo Japan was hoping to sell its P-1 government can make approvals under Miki strengthened these regulations to maritime patrol aircraft to the UK, but the principles. Yet the legal basis is say that Japan shall not promote ‘arms’ the UK decided to go with the tried- important in the actual exports, regardless of the destination – and-true Boeing P-8 Poseidon. The implementation of these rules. creating an effective blanket ban on sale of Japanese submarines to The new principles repeat the arms exports. These rules held for the Australia, however, is still on the table. existing definition of ‘defense next four decades, with the major We should know by mid-2016 whether equipment and technology’: ‘For the exception of exports to the United Japan could beat established arms purpose of this policy, “defense States from the 1980s, most notably in exporters France and Germany to land equipment and technology” refers to collaboration on ballistic missile its first third-party defence export “arms and military technologies”; defence. since the rule revision. “arms” refers to items listed in section Since at least the end of the Cold 1, Annexed List 1 of the ETCO (Cabinet War, Japan has recognised the need to Legislation on arms exports Order No. 378 of 1949), and are to be engage in arms exports and overseas The legal basis for Japan’s arms export used by military forces and directly development projects to maintain its controls is the Foreign Exchange and employed in combat; and “military domestic defence industry and national Foreign Trade Act (Law No. 228; the technologies” refers to technologies for security. In December 2013, Japan ‘Trade Law’ or Gaitame-ho), which was the design, production or use of arms.’3 released its first National Security originally enacted on 1 December 1949, Referring to this definition, CISTEC Strategy, which promised to review the and is the equivalent of the U.S. Export notes that the distinction between what ban on arms exports based on high- Administration Act (‘EAA’) and Arms is ‘directly employed in combat’ versus level discussions in years prior. In April Export Control Act (‘AECA’). Article 25 indirectly employed is not obvious, nor 2014, the Abe cabinet revised the of the Trade Law covers technologies, is why the items must be used by

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‘military forces’ (as opposed to, say, multilateral regimes – the Nuclear maintenance, (checking), repair, terrorists). More importantly, neither Suppliers Group, Australia Group, overhaul and refurbishing.’8 Yet only this definition nor the list of arms in Missile Technology Control Regime, Annexed List 1 employs a different Annexed List 1 considers new forms of and Wassenaar Arrangement (‘WA’) definition than WA of ‘use’: ‘any warfare and relevant IT technologies, dual-use lists. The distinction between such as in the cyber and outer space Annexed List 1 and the other lists exists With regard to the use of fields.4 This results in a gap between because Annexed List 1 has not been defence technologies, section 1, Annexed List 1 of the ETCO updated over the years, while the and the Wassenaar Arrangement others have.6 This state of affairs is the Japanese companies munitions list (‘WAML’). In particular, result of Japan restricting its arms now contemplating Japan’s list does not cover specially exports over the decades while designed IT technology or information routinely exporting dual-use defence-related exports communication-related technologies.5 technologies. are concerned that the CISTEC also notes that some items Meanwhile, with regard to the use of definition remains on the WAML are covered under defence technologies, Japanese Annexed List 14 of the ETCO rather companies now contemplating vague. than Annexed List 1. Further, among defence-related exports are concerned the items in Annexed List 1, items for that the definition remains vague. Both process other than design or police, industry, and civil use are article 25 of the Trade Law and the manufacture, including operation.…’ included. For these reasons, CISTEC FEO (Cabinet Order No. 260 of 11 This definition is both broad and argues that Japan’s list should be October 1980) describe ‘technology vague. If you follow this definition, no brought into line with the WAML. Only pertaining to the design, manufacture matter what the type of information, if then will it be appropriate for the new or use’ of listed items, in line with the it includes technical content related to Three Principles to refer to the WA definition.7 The scope of ‘use’ weapons, you may not so much as talk ‘Annexed List 1 items’ as subject to according to a Ministry of Economy, about that information to another controls. Trade and Industry (‘METI’) person without a licence. Therefore, The state of Annexed List 1 notification (ekimu tsutatsu) effective CISTEC sees the scope of ‘use’ as the contrasts with the dual-use 26 December 2011, and in line with primary reason for difficulty in making technologies covered in other lists, WA, is ‘Operation, installation a concrete, quantitative reference in which all correspond with the (including on site installation), business discussions. Nor is ‘use’ of arms limited to the six types of technology use defined in WA Arms and arms production related equipment listed as Item 1 (‘Operation, installation (including on- of the Annexed list 1 of the Export Trade Control order site installation), maintenance (checking), repair, overhaul and l Firearms and cartridges to be used therefor (including those to be used for emitting refurbishing’). For Japan’s dual-use light or smoke), and accessories thereof, as well as parts thereof. technologies, METI revised its 2 Ammunition (excluding cartridges), and equipment for its dropping or launching, and notification in 2011 to be in line with accessories thereof, as well as parts thereof. WA (through limited enumeration of 3 Explosives (excluding ammunition) and military fuel. the ‘use’ definition), except for 4 Explosive stabilisers. 5 Directed energy weapons and parts thereof. Annexed List 1. Therefore, as to 6 Kinetic energy weapons (excluding firearms) and equipment for their launching, as information related to Annexed List 1 well as parts thereof. arms, it is unclear what is subject to 7 Military vehicles, and accessories and bridges specially designed for military use controls, in both qualitative and thereof, as well as parts thereof. quantitative terms. CISTEC proposes 8 Military vessels, and hulls and accessories thereof, as well as parts thereof. that in line with WA, defence 9 Military aircraft and accessories thereof, as well as parts thereof. technologies should be limited to its six 10 Anti submarine nets and anti torpedo nets as well as buoyant electric cable for types of technology use; and the sweeping magnetic mines. development, production, and use of 11 Armour plates and military helmets, as well as bulletproof jackets and parts thereof. these technologies should be subject to 12 Military searchlights and control equipment thereof. 13 Bacterial, chemical, and radio active agents for military use, as well as equipment export controls. and parts thereof for dissemination, protection, detection, or identification thereof. Moreover, when it comes to defence 13-2 Chemical mixtures specially formulated for the decontamination of objects technology, its scope is not limited to contaminated with biological agents and radioactive materials adapted for use in ‘required’ technology for the war and chemical warfare agents ‘development’, ‘production’ or ‘use’ of 14 Biopolymers for detection and identification of chemical agents for military use and a product.9 The ‘required’ technology cultures of cells for production thereof, as well as biocatalysts for decontamination could instead be defined – as a METI and degradation of chemical agents for military use and expression vectors, viruses notification (kaishaku tsutatsu) or cultures of cells containing the genetic information necessary for production interprets – as ‘necessary technology’: thereof. as ‘the necessary technology to meet or 15 Equipment and parts thereof for the production or testing of military explosives. 16 Equipment for the production or testing of arms, as well as parts and accessories exceed the regulation performance thereof. level, property, or function.’ If the Source: METI government switched to this approach, it could better consider qualitative and

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quantitative aspects with regards to a limited number of items and be in line Japan’s (dual-use) export controls with WA, CISTEC argues. While Japan is new to the contemporary Security Trade Controls, ‘CISTEC’) that METI retains final authority to issue arms export market, it has a long history of serves to liaise between the government all export licences, including those for exporting sensitive dual-use technologies. and industry. CISTEC retains and produces arms, in contrast to U.S. practices for The United States censured Japan for a wealth of resources and knowledge military items on the USML list, which practising lax export controls during the about export controls, and has regularly the State Department regulates. Cold War, particularly after the Toshiba been publishing articles on the new arms machine tools scandal was disclosed in export principles, primarily geared for The Three Principles on Defense 1987. Japanese exporters. Equipment Transfers set out two new In 1989, Japan reformed its export Given Japan’s history in exporting and noteworthy requirements. First, control system including the amendment sensitive dual-use technologies, there is a the National Security Council (itself of Trade Law, and today it is seen as a consensus among Japanese experts that only established in 2013) must review regional standard-bearer.13 Japan is the Japan must build from the skillset and major defence-related exports, as with only major country to have a third-party knowledge it has developed in this field to the seeker technologies to the United organisation (the Center for Information on apply to arms exports. 14 States and the United Kingdom.10 METI is then responsible for implementing the Foreign Exchange information for joint development rules and ATLA will work in practice, a and Foreign Trade Act appropriately in related to seeker technology with the big piece of the puzzle is Japan’s accordance with the NSC’s decision. United Kingdom. defence industry. Having spent so Second, the government must publish many years having only needed to sell the NSC’s decisions as well as Establishment of ATLA to one major consumer (the SDF), information on the arms exports that On 1 October 2015, the Japanese Japanese industry must now figure out the NSC does not review. Unlike the government established the how to appeal to a much broader United States or the United Kingdom, Acquisition, Technology & Logistics market. While there is evidence that Japan has not traditionally published Agency (‘ATLA’). ATLA brings together Japanese industry generally supported information on its licensed arms or disparate parts of the MOD working on the opening of the arms export market, dual-use exports. Japan published the defence R&D, procurement, and companies have retained a passive first of these reports in October of last exports under one roof. The goal is to stance since the changes. For one, they year, which includes historical exports improve efficiency, and eliminate are concerned about being branded a made on the basis of exceptions to the organisational bureaucracy and ‘merchant of death’ in a still largely Three Principles.11 In these two duplication. Compared to similar pacifistic society. Moreover, defence respects, there are additional agencies in Japan’s peer countries, like exports make up a small amount of deliberative and transparency the United Kingdom and France, ATLA revenues (less than 10% even of the requirements in place which make it is small, at 1,800 people and with a major defence contractors’). And, difficult to describe the Three budget of about 2 trillion yen ($16.3 unlike Japanese commercial Principles revision as a ‘loosening’ of billion). Yet this is a massive agency by businesses, the defence agents sorely Japan’s arms export controls. Japanese standards, representing a lack experience in sales and METI’s first licensing report shows third of the total MOD budget. negotiations. that in fiscal 2014, Japan approved It has only been half a year since the Moreover, when it comes to 1,841 defence equipment exports under formation of ATLA, so whether it will business discussions, in the case of the the new principles and guidelines on be an effective institution for assessing U.S. ITAR, general explanations are arms exports. The vast majority (1,731) the impact of defence equipment exempt from export controls (basic were articles for use by governmental transfer on Japan’s security remains to marketing information on function, organisations including the Japan Self- be seen. As Morimoto notes, ideally objective and system explanations, Defense Forces (‘SDF’) and involved ATLA will have a function like the even if not public, is not subject to temporary exports to return, exchange, Defense Technology Security controls). Japan lacks such guidance or repair broken items purchased from Administration (‘DTSA’) in the United for its companies, and salespeople are overseas or for outsourced processing States, meaning it can implement a currently struggling with how much of domestically-produced products – framework for assessing the impact of they are able to reveal at international and more than 80% of these were to arms exports on Japanese security in a trade shows. the United States. Under the defence holistic manner. transfer rules, individual licences are l Inter-bureaucracy relations the standard, but special bulk licences As mentioned above, METI has been are available for returning items. The Future challenges the authority for issuing export government approved 45 such bulk licences, and this situation remains licences, primarily for the SDF and the l Industry engagement under the new rules. Major arms deals Ministry of Defence (‘MOD’)’s overseas With the revision of the Three will have to be approved by the activities. (There is no bulk licence Principles and the establishment of National Security Council, at which system for business activities such as ATLA, the administrative and the MOD and the Ministry of Foreign sale discussions, inquiries, or financial institutional structure is in place for Affairs (‘MOFA’) play major roles in statements.12) The report also Japan to engage in international arms addition to METI. As Japan is the only elaborates on the Patriot PAC-2 seeker sales and co-development. While there developed country with no extensive gyro and provision of technical are still questions about how the new history of exporting arms, MOD has to

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get up to speed quickly to increase its agency coordination, and also means this opportunity to take two steps that presence in export licensing, not only other governmental bodies will bear will improve international for arms but also for sensitive dual-use responsibility for licensing decisions.15 coordination on controlling the export technologies. MOFA also needs to step In terms of cooperation with the of sensitive technologies. The first is to up as a player in determining to which intelligence community, Japan’s publish not only its arms export data, destinations Japanese defence items capacity to collect and analyse but also its dual-use licensing data. and technologies will safely go. As intelligence is underdeveloped relative Such data can provide an overview as to some of its peer countries. Such to whether Japan’s dual-use licensing In terms of cooperation intelligence is critical in determining practices are in line with those of its whether arms should be exported and peer countries. The other step is with the intelligence keeping track of them once they have harmonisation of Japan’s export community, Japan’s been exported. control numbers with the EU, which now maintains the international capacity to collect and l Technology controls standard. Japanese companies have analyse intelligence is Technology leakage is also a major been pushing for this latter change for concern in the export of militarily years. Only recently – and reluctantly underdeveloped relative sensitive technologies, so Japanese – has METI issued a correlation table to some of its peer producers must consider steps like for exporters between the Japanese countries. including anti-tampering and reducing and EU export control numbers based the capabilities of (potential) military on 2012 lists.16 Asian countries like assets. Of course, Japanese companies South Korea, Singapore, Malaysia, Japan expands its military cooperation have taken safety measures in the dual- Singapore, and Hong Kong have with advanced arms exporters like the use field, such as incorporating already harmonised their numbers. United Kingdom and France and also relocation detectors into its machine Harmonisation would not only make with countries in Southeast Asia, tool exports. Japanese companies can things easier for exporters, many of MOFA’s input will be essential. Of build on these efforts and use which are multinational companies, course, the potential is great for turf information the government provides but also for the government to reflect wars with METI, the established player to assess what other measures they future changes at the multilateral level in exports. As one Japanese export should take. in the domestic rules. control expert notes, the NSC will take centre-stage in Japan’s major arms l International standardisation Conclusion exports decisions, which requires inter- Moving forward, Japan can also use Despite the revision of the Three Principles and the potential landmark Links and notes submarine deal, Japan has both institutional and cultural hurdles to 1 Crystal Pryor and Llewelyn Hughes, ‘PacNet #11 — Domestic interests and ‘strategic benefits’ in Australia-Japan overcome before it becomes a major submarine deal,’ available at http://csis.org/publication/pacnet-11-domestic-interests-and-strategic-benefits- australia-japan-submarine-deal. participant in the international arms 2 CISTEC, ‘Overview of Japan’s Export Controls (Third Edition)’ (October 2012), p. 5. market. Under the revised rules, Japan 3 Ministry of Defense, ‘Three Principles on Transfer of Defense Equipment and Technology,’ can only export to other governments http://www.mod.go.jp/e/pressrele/2014/140401_02.pdf. and for limited purposes such as 4 CISTEC Request to METI, 「防衛装備移転に係る手続き的環境整備に向けた課題について」 (‘Issues Related to international co-production or arming the Procedural Environment for Defense Transfers’), available at: http://www.cistec.or.jp/service/boueisoubi_data/youbou_20151211.pdf (11 Dec. 2015; Japanese only). the SDF. Further, it may still be in 5 List in English available at: http://www.meti.go.jp/policy/anpo/securityexportcontrol1_3_1.html. Japan’s best interest to stick to 6 Masamitsu Morimoto,「武器輸出管理の課題」(‘Issues with arms export controls’), PHP Policy Review (Vol. 9, No. exporting dual-use items and 68) (30 March 2015), available at: http://research.php.co.jp/policyreview/pdf/policy_v9_n68.pdf. participating in the co-development of 7 ML22(a) ‘Technology’, other than specified in ML22.b, which is ‘required’ for the ‘development’, ‘production’, arms rather than exporting full arms operation, installation, maintenance (checking), repair, overhaul or refurbishing of items specified by the Munitions packages. The latter move risks raising List.’ both domestic and regional concerns 8 This modifies the previous scope, ‘Operation, installation (including on-site installation), maintenance (inspection), repair, overhaul, refurbishing, etc., which are stages other than development and manufacturing.’ According to trade (while not necessarily bringing more compliance professional Tatsuya Kanemitsu, this change was instituted because Japan’s definition of ‘use’ tended revenue to Japanese companies). to be interpreted more broadly and covered more ‘use’ technology than other Wassenaar Arrangement countries. 9 WA definition of ‘Required’ Cat 6, 9: As applied to ‘technology’, refers to only that portion of ‘technology’ GTN which is peculiarly responsible for achieving or exceeding the controlled ML 22 performance levels, characteristics or functions. Such ‘required’ ‘technology’ may be shared by different products. 10 ‘Significant cases that require especially careful consideration from the viewpoint of Japan’s security will be examined at the National Security Council (NSC)’ (available at Crystal Pryor was a resident http://www.mod.go.jp/e/pressrele/2014/140401_02.pdf). Sasakawa Peace Foundation 11 Available from http://www.meti.go.jp/press/2015/10/20151015007/20151015007.html (Japanese only). Fellow (SPF Fellow) at Pacific 12 CISTEC Request to METI. Forum CSIS and a Ph.D. 13 Crystal Pryor, ‘From Global Straggler to Regional Exemplar: Japan’s Export Control System 1990–present,’ in Jankowitsch-Prevor, Michel & Paile-Calvo (Eds.), Modelling Dual-Use Trade Control Systems (Peter Lang: 2014). candidate in the Department of 14 See, for example, Heigo Sato, ‘Japan’s Arms Export and Defense Production Policy,’ available at Political Science at the http://csis.org/files/publication/150331_Sato_JapanArmsExport.pdf. University of Washington. 15 Morimoto. [email protected] 16 Available at http://www.meti.go.jp/policy/anpo/eulist_taihihyo.html (Japanese only).

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