Korea faces growing trade uncertainties on Japan's further export curbs

Working level officials of Korea's Ministry of Trade, Industry and Energy, right, and Japan's Ministry of Economy, Trade and Industry sit during their meeting over Japan's export curbs on Korea in Tokyo, Friday. Yonhap

By Nam Hyun-woo

Korea is facing growing uncertainties over trade with Japan after Tokyo announced it would remove Seoul from its list of "white countries" next month, according to industry analysts, Sunday. The "white list" comprises 27 countries, including the U.S. and Germany, which are given customs shipping-clearance priority for imports from Japan.

As this will affect customs clearance procedures for at least 1,100 items imported from Japan, domestic companies are trying to find out more specific details from trade promotion agencies, but the analysts said it is still uncertain which items would be subject to increased regulatory procedures.

According to the Ministry of Trade, Industry and Energy, Tokyo will officially announce the removal of Korea from the list, July 24, after gathering opinions from ministries there, and the trade "restrictions" will take effect 21 days after this ― Aug. 22.

The move came after working-level talks between officials from Seoul and Tokyo failed to narrow the gap between the two countries in a meeting to address the trade conflict Friday.

Tensions between the two countries have continued to escalate since Japan announced the export "curbs" earlier this month, an apparent retaliatory move against last year's Supreme Court rulings here against Japanese firms over compensation for forced wartime labor.

A list of 40 categories for items subject to Japan's catch-all regulation / Courtesy of Korea Strategic Trade Institute

Though Japan's trade ministry is yet to exclude Korea from the list on its website, it has created a category only for Korea, separating it from other white countries, without elaborating further.

According to the Japanese ministry, its trade restrictions have two categories ― "list regulations" and "catch-all regulations."

Items subject to list regulations are those with a "high possibility of military diversion" and require the minister's permission for export regardless of their destination. On the other hand, items subject to catch-all regulations are those with the possibility of "developing, manufacturing or storing weapons of mass destruction" and do not require permission if they are being shipped to destinations on the list of white countries.

The Japanese ministry classified those catch-all items into 40 categories, which include carbon, glass, aramid fiber, centrifugal separators, artificial graphite, trucks, crane trucks and others.

The Korea Strategic Trade Institute expects at least 1,100 items in the categories would be affected in case Korea is removed from the white country list, but analysts and officials said the scale of the problem is difficult to anticipate because those regulations can be applied to more items depending on Japan's interpretation.

"The previous export curbs clearly designated three materials related to the building of semiconductors and displays, but the looming white country list regulations define affected items very comprehensively and allow discretionary interpretation," said Kim Gyu-pan, Japan team head of Korea Institute for International Economic Policy. "This has heightened the uncertainty to a new level."

A Korea trade ministry official said, "It is difficult to rule out the possibility of more items being included during the Japanese authorities' discussions."

As uncertainties are growing, domestic companies importing materials from Japan are asking the Korea Trade-Investment Promotion Agency (KOTRA) and the Korea International Trade Association (KITA) for details of the regulations and how to bypass them. KOTRA and KITA both said it was difficult to provide information to companies, citing the lack of details given by Japan.

"It is true that questions on Japan's export curbs have increased recently," a KOTRA official said. "Since the regulation is vague and not many details have been disclosed, it is difficult to provide detailed information to companies."

The Korea Economic Research Institute expects Korea's gross domestic product will decline by 2.2 percent if Korean chipmakers suffer a 30 percent shortfall in the materials necessary for semiconductors.

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