As Japan is expected to remove South Korea from a "whitelist" of trusted importers, Korean companies that import the 1,100 strategic items from Japan are highly likely to suffer a big blow starting from later next month.
Japan is predicted to approve a rule that will exclude South Korea from its "whitelist" of countries at a cabinet meeting on Aug. 2, according to foreign media reports on July 28. Japanese media outlets reported on July 27 that the Japanese government is planning to approve the rule at a cabinet meeting on Aug. 2 at the earliest. The new regulations will come into effect 21 days after the promulgation.” Starting from July 4, Japanese companies need case-by-case approvals to export to South Korea three materials used to make semiconductors, including etching gas, or high-purity hydrogen fluoride. There has been no single case of imports since then.
If South Korea is removed from the whitelist, South Korean companies which need to import the 1,120 items of Japanese-made strategic materials will be obliged to submit detailed documents containing business goals as well as a written oath that they will not use them for weapons production. When South Korea is included in the whitelist, South Korean companies can import materials without preliminary examinations and get a permit once every three years. However, they will need to obtain a separate permit for each of the goods they import and notify Japan’s Ministry of Economy, Trade and Industry, of the quantity, purpose, use and final destination of materials.
Trade experts say that the license screening period will take at least 90 days, but they express concerns that the Japanese government could disapprove imports and delay the screening process. An official from the Ministry of Trade, Industry and Energy (MOTIE) said, “Even when South Korea is on the whitelist, it needs to receive a separate permit to import each of the 263 highly sensitive items. If Korea is excluded from the list, it will be required to receive a separate permit for each of the remaining 857 items.” Moreover, some non-strategic materials which can be used for military purposes will be subject to a “catch-all” system.
Market experts predict that the high-tech materials and electronics sectors will be the main target since they can strike the hardest blow to the South Korean economy due to Korea’s heavy reliance on Japan and the difficulty to find substitutes. Cases in point are precision machine tools, fine chemical products, such as functional films and adhesives, and carbon fiber which is used to produce aircraft and automobiles. As a result, the South Korean industry will be hit hard in various areas, ranging from semiconductors to displays, future cars, batteries and smartphones. All exposure equipment which is used to produce organic light emitting diode (OLED) display panels are made by Japan, and hydrogen storage tanks in hydrogen powered cars are also made with carbon fiber supplied by Japan’s Toray Industries Inc.
Japan accounted for 82.8 percent of Korea’s imports of equipment for manufacturing flat displays last year and 58.6 percent of the nation’s imports of adhesive plates for plastic products, according to the Korea International Trade Association (KITA). An industry insider said, “We have been looking for alternative products in Europe and South Korea, but we actually have no alternative since even small and mid-size companies import products from Japan.”