On March 31, 2023, the Japanese government released notices for public consultation on the draft amendments to the Foreign Exchange and Foreign Trade Act (“FEFTA”), which included 23 items of semiconductor devices and related equipment in the list of items subject to export control. In response, China Chamber of Commerce for Import and Export of Machinery and Electronic Products (“CCCME”) has invited relevant member companies and solicited opinions and submitted to the Ministry of Economy, Trade and Industry of Japan a written comment to firmly oppose Japan’s violations of the Most-Favoured-Nation Treatment Principle of the World Trade Organization, including its overt discrimination based on country and region, and the abuse and generalization of the “security” concept.

The semiconductor production is complex, integrated, and globally distributed. The development of semiconductor industry has not only promoted from the global collaboration and specialized supply chains to a new level, but also benefited from such cooperation and the division of labor across different economies. International cooperation and collaborative innovations among countries, including the one between China and Japan in the semiconductor industry, are the cornerstone of the development and prosperity of the global semiconductor industry.

Semiconductor equipment is essential to the complex manufacturing process in the semiconductor industry. Japan, as the world's leading country in semiconductor equipment technology, plans to implement selective licensing to the sales and export of equipment covering mature and advanced manufacturing processes under the pretext of “preventing diversion to military use”. This action has gone far beyond the purview of the international control mechanism, and will directly impair the exchanges and cooperation between Chinese and Japanese companies in semiconductors and even in the broader technology area. It will also harm the economic interests of Japanese suppliers, undermine the trust and confidence that the semiconductor industry has built over the years in terms of international cooperation, and hinder the development of the global technology industry and the pace of technological innovation.

The scope of Japan’s proposed amendment is broad and some of the listed items to be controlled are beyond the scope of general control regulations. Also, the expression of relevant regulations and indicators are ambiguous, and the explanation of licensing facilitation policies remain unclear, which seriously generalizes the concept of safety. Once enacted, it will result in excessive discretion of the Japanese licensing authority in the licensing process, impede the normal international trade of high-end semiconductor products and technologies between Chinese and Japanese companies, and impose substantial transaction costs and uncertain risks on the enterprises of the two countries, thereby disrupting the industrial chain and supply chain of the semiconductor industry between the two countries. Ultimately, this will bring many uncertainties to the sustained cooperation between Chinese and Japanese companies in the high-end semiconductor field, and creates almost inevitable obstacles for the economic and trade cooperation between China and Japan.

CCCME is committed to assisting member companies conduct international cooperation, expanding the global market, creating economic value, and jointly advancing scientific and technological progress with companies worldwide. We have been providing assistance to over 10,000 member companies in legal services, and addressing the importance of the abidance by the laws and regulations of China and related countries, including relevant regulations on export control, and advocates the establishment of an export control compliance mechanism for companies engaged in the import and export of dual-use items to facilitate normal international exchanges and cooperation among enterprises.

CCCME strongly opposes Japan’s misguided efforts to jeopardize the health and sustainability of the global semiconductor industry. We call on the Japanese side to prudently assess the far-reaching implications of this amendment and its influence on Japanese semiconductor companies and global industrial and supply chains, and to correct relevant measures without delay to safeguard the mutual interests of Chinese and Japanese enterprises and the long-term viability of the industry so as to prevent this amendment from creating unnecessary obstacles to the current and future cooperation between Chinese and Japanese semiconductor manufacturers.

CCCME appeals to the Chinese and Japanese governments and industries to resolutely uphold the ecological and healthy development of the global semiconductor industry. Meanwhile, CCCME calls on all its member companies to work together in good faith to resolutely maintain and advance economic globalization, defend the stability of the global industrial chain, and create opportunities to share a fruitful future.

China Chamber of Commerce for Import and Export of Machinery and Electronic Products
April 28, 2023