The South Korean government excluded Japan from its trade whitelist on Aug. 12 and limited knowledge and technology exchanges with Japan at the same time. This means case-by-case screening is now a must for exports of technologies and techniques that can be used for military purposes and joint research, entrusted research and technology transfer between a main office and a branch are now subject to restrictions.
The measure is similar to that the Japanese government took earlier. The Japanese government excluded South Korea from its list of trusted trade partners on Aug. 2, limiting the trade of technologies as well as goods with South Korea.
This is why bilateral relations between the two countries are predicted to get even worse. They used to exchange their technologies in a number of industries, including electronics, steel, machinery and shipbuilding, and both governments used to hold working-level talks to discuss various industrial issues, which have been on hold since Japan’s export curbs. Even private-sector cooperation is likely to be limited to a large extent.
In the meantime, it has been found that the number of South Korean companies satisfying the Compliance Program (CP) requirements is about 1 percent of that of their Japanese counterparts. Even after the exclusion of Japan from South Korea’s trade white list, export activities are possible as before via CP companies. This means South Korea tightened the export of such items relatively more than Japan.
The Ministry of Trade, Industry and Energy of South Korea is still applying its comprehensive export licensing to exports via CP companies. However, its item-specific approvals are limited to top-grade CP companies. According to the Korea Strategic Trade Institute, a total of 157 CP companies are currently registered in South Korea, including 11 with the AAA grade.
On the other hand, the number of CP companies registered in Japan amounts to 1,300. The Japanese government is currently allowing South Korean companies to be supplied with materials and components as before and without individual permission on condition that they do business with Japanese CP companies. “CP company-based export activities are likely to become prevalent because individual approvals are hard to get,” the South Korean government explained, adding, “In other words, our export regulations are somewhat more restrictive than Japan’s although South Korea’s strategic item exports to Japan are approximately 10 percent of Japan’s to South Korea.”