South Korea tightens export controls on Japan

South Korea’s Trade, Industry and Energy Minister Sung Yun-mo. (AFP)
Updated 13 August 2019

South Korea tightens export controls on Japan

  • Dispute fuels concerns over potential implications for security cooperation

SEOUL: South Korea has put Japan into its own new export category as President Moon Jae-in called Tokyo’s latest measures “very serious,” intensifying a trade war between the two neighbors and US allies.
The move came after Seoul announced earlier this month it would remove Tokyo from its list of trusted trading partners, reciprocating an identical decision by Japan.
That followed Tokyo’s imposition of tough restrictions on exports crucial to tech titans such as Samsung following a series of South Korean court rulings ordering Japanese firms to pay for forced labor during the Second World War.
The dispute has raised concerns over the potential implications for their security cooperation in the face of North Korean missile tests, and the possible impact on global supply chains.
At a meeting with his top aides, Moon reflected on Japan’s colonization of the Korean peninsula in the first half of the 20th century to highlight the gravity of the situation.
“As a victim of great suffering from Japanese imperialism in the past, we, for our part, cannot help but take Japan’s ongoing economic retaliation very seriously,” Moon said.
“It is even more so because this economic retaliation is in itself unjustifiable and also has its roots in historical issues,” he added.
Japan insists its latest measures were enforced on national security grounds.

As a victim of great suffering from Japanese imperialism in the past, we, for our part, cannot help but take Japan’s ongoing economic retaliation very seriously.

Moon Jae-in, President of South Korea

South Korea’s list of trade partners is currently divided into two groups, those who are members of the world’s top four export control agreements and those who are not.
But Seoul’s Trade Ministry said it added a new category for countries that had signed the four pacts “but operate an export control system that violates international norms.”
Japan is the only country in the new category.
“Since it’s hard to work closely with a country that frequently violates the basic rules ... we need an export control system that addresses this,” said South Korean Trade Minister Sung Yun-mo told reporters.
Sung did not offer examples of such violations by Japan.
The revision will be implemented in September, he said, adding that Seoul was open to negotiations with Tokyo.
Japan could look elsewhere for those goods currently sourced from South Korea, a Japanese government official said.
“We can import them from Taiwan. There are few items that can’t be replaced,” the unnamed official told the Yomiuri Shimbun.
Under the new regulations, South Korean firms must submit five documents — from the current three — to win approvals for exporting sensitive items to Japan, with the process taking up to 15 days.


Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

Updated 07 August 2020

Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

  • Growing pressure to crack down on Chinese companies that avail themselves of US capital markets but do not comply with rules
WASHINGTON: Trump administration officials have urged the president to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said on Thursday.
The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, with drafting a report with recommendations to protect US investors from Chinese companies whose audit documents have long been kept from US regulators.
It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of US capital markets but do not comply with US rules faced by American rivals.
“We are simply leveling the playing field, holding Chinese firms listed in the US to the same standards as everyone else,” a Treasury official told reporters in a briefing call about the report.
The US Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.
Democratic Senator Chris Van Hollen, who sponsored the bill described the recommendations as “an important first step,” but said that “without the added teeth of our bill, this report alone does not implement the requirements necessary to protect everyday American investors.”
The administration’s recommendations, if implemented via an SEC rulemaking process, would give Chinese companies already listed in the United States until Jan. 1, 2022, to ensure the US auditing watchdog, known as the PCAOB, has access to their audit documents.
They can also provide a “co-audit,” for example, performed by a US parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the United States for the first time will need to comply immediately, the officials said.
A State Department official told Reuters the administration plans soon to scrap a 2013 agreement between US and Chinese auditing authorities to set up a process for the PCAOB to seek documents in enforcement cases against Chinese auditors.
China said on Friday that the two countries have “good cooperation” in monitoring publicly listed firms.
“The current situation is that some US monitoring authorities are failing to comply with their obligations, and what they are doing is political manipulation — they are trying to force Chinese companies to delist from US markets,” foreign ministry spokesman Wang Wenbin told a media briefing.
The PCAOB has long complained of China’s failure to grant requests, giving it scant insight on audits of Chinese firms that trade on US exchanges.
The report also recommends requiring greater disclosure by issuers and registered funds of the risk of investing in China, as well as mandating more due diligence by funds that track indexes and issuing guidance to investment advisers about fiduciary obligations surrounding investments in China.
The moves come amid rising tensions between Washington and Beijing over China’s handling of the coronavirus and its moves to curb freedoms in Hong Kong, among other issues.