On July 14, 2017, the Ministry of Economy, Trade and Industry (METI) announced that the Cabinet and Ministerial Orders and the Public Notices required for the enforcement of the Revised Foreign Exchange and Foreign Trade Act (Revised Act) were promulgated and publicized in the Official Gazette on July 14, 2017. Aiming to exercise the strict control of critical technologies and goods and enhance the effectiveness of sanctions related to any illegal acts concerning imports and exports, the Revised Act increases the severity of penalties and tightens administrative sanctions imposed on import/export regulation violators and strengthens the regulations concerning inward direct investment related security.
The Revised Act was discussed at the ordinary session of the Diet in 2017 and enacted in May 2017. The Cabinet Order sets the effective date of the Revised Act as October 1, 2017.
To address businesses that evade sanctions under the import/export prohibition order by using distinct companies, the Revised Act introduces a new system in which Japan is allowed to issue a prohibition order to board members or employees of a company on which an import/export prohibition order has been imposed, preventing them from taking board member or other positions in charge of import/export operations in another company.
Regarding this system, the Cabinet and Ministerial Orders define the term “employee” subject to the above order, as “personnel who supervise business conducted in the business offices” and/or “personnel who substantially act for any other business equivalent to the former business including those who routinely supervise business.”
The direct investment measures include provisions related to specified acquisitions. The Revised Act add specified acquisition (a transfer of shares issued by non-listed companies between foreign investors）into the coverage of controlled targets under the system in which foreign investors are required to submit a prior notification and receive an examination.
The Cabinet and Ministerial Orders and the Public Notice stipulate specified acquisitions for which foreign investors are not required to submit a prior notification (acquisition through inheritance or as a testamentary gift) and those for which specified business types are subject to the submission of prior notifications (e.g., weapon manufacturing industries).
The Revised Act establishes a system in which government orders to take corrective measures (e.g., orders to sell stock）may be imposed on a foreign investor who has made an illegal inward direct investment (e.g., without submitting a notification). The Cabinet and Ministerial Orders will stipulate specific methods for advancing necessary measures and communicating orders, e.g., delivery of a document describing the details of such orders by mail, or by personal service, while returning the document by making service by publication effective in the case that recipient’s address is unknown.
