export control in it company in japan · 2019-03-05 · 4. export control of be aware of the u.s....

Export Control in IT company in Japan

Copyright (C) Fujitsu Limited 2010 All rights reserved.

September 2011Yasunari SUZUKI

Director, Export Control DivisionSecurity Export Control HQ

FUJITSU LIMITED

Contents1. About us

2. Internal Export Control

3. Export Control Activity


4. Export Control / overseas subsidiaries

5. Employee Awareness

6. Internal Audit

7. For Efficiency2

1 About FUJITSU


1. About FUJITSU

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Fujitsu at a Glance� Headquarters: Tokyo, Japan� President: Masami Yamamoto� Established: June 1935� Net Sales: 4,528.4 billion yen (US$54,559

million)� Net Income: 55.0 billion yen (US$663 million)� R&D Expenditure: 236.2 billion yen (As 5.2% of

S l )

Copyright 2011 FUJITSU LIMITED

Sales)� Employees: 172,000 worldwide� Principal Business Areas:

Technology Solutions, Ubiquitous Solutions, Device Solutions

� Stock Exchange Listings: Tokyo (Code: 6702), Osaka, Nagoya, London

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Business Composition� FY 2010 Revenue by Business Segment

Consolidated Net Sales by Business Segment, Including Intersegment Sales

13.0%

Device Solutions

・ LSI

・ Electronic Components

・ Others

¥630.6 billion Technology Solutions

Others

¥82.5 billion

US$0.993 million

1.7%


Note:

Percentage breakdown for each segment is calculated as segment’s net sales / (total consolidated net sales). US$1=¥83.

FY 2010 is fiscal year ended March 31, 2011. Quote from FY2010 Full-Year Financial Results of April 28, 2011(Page6,7)

62.1%23.2%US$7,598 million

Ubiquitous Solutions

・ PCs/Mobile Phones

・ Mobileware

・ Others

¥1,125.6 billionUS$13,561 million

・ Services

Solutions

System Integration

Infrastructure Services

・ System Platforms

System Products

Network Products

¥3,014.3 billionUS$36,317 million

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Business Composition� FY 2010 Revenue by Region

Consolidated Net Sales to Unaffiliated Customers by Customer’s Geographic Location

9.3%

7.1%APAC & China

¥419.6 billion

The Americas

¥322.3 billion

FUJITSU Hong Kong


64.9%18.7%

EMEA

¥845.5 billion

Japan

¥2,941.0 billion

LimitedBusiness activities

Offers a full range of ICT solutions, hardware and software products, professional IT services including data centre, systems integration, managed services, software development, multi-vendor desktop services and more

Website:http://hk.fujitsu.com

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Services� Consulting� Systems Integration� Outsourcing Services� Network Services� System Support Services� System Installation/Network Construction� Dedicated Terminal Systems & Equipment

(ATMs, PoS systems)

Technology SolutionsSystem Platforms� Servers (mainframe, UNIX, mission-critical IA, PC)� Storage Systems� Software (operating system, middleware)� Optical Transmission Systems� Mobile Phone Base Stations

Principal Products & Services


Note: *Japan market only

Ubiquitous Product Solutions� Personal Computers� Mobile Phones* � Storage Equipment (hard disk drives, magneto-optical disk drives)

� Optical Transceiver Modules� Other Products

Device Solutions � Logic LSI Devices (system LSI, ASICs, microcontrollers, FRAM-embedded logic)

� System Memory Devices (Flash memory, FCRAM)� Semiconductor Packages� SAW Devices� Other Electronic Components

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2. Internal Export Control


Export Control / RulesExport Control / Rules -- organizationorganization

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PRESIDENTPRESIDENTResponsible for export control Responsible for export control

for the whole companyfor the whole companyREPRESENTATIVE EXECUTIVEREPRESENTATIVE EXECUTIVE

Responsible for export controlResponsible for export control

SECURITY EXPORT CONTROL HeadquartersSECURITY EXPORT CONTROL Headquarters (SECHQ)(SECHQ) *22 members*22 members

E t C t l Div.E t C t l Div. A dit Div.A dit Div. T h i l Administration Div.T h i l Administration Div.

Export Control / Rules - organization

Compliance Program(CP) ※※）CP : Bulk Export License is provided to a company whose CP has been approved by the government.


1) Developing organization and rules1) Developing organization and rules2) Training of employees2) Training of employees3) Training and guidance to subsidiaries3) Training and guidance to subsidiaries4) Transaction reviews4) Transaction reviews

LOGISTICS DEPT.LOGISTICS DEPT.1) Export License applications 1) Export License applications 2) Administration of License (Individual / 2) Administration of License (Individual /

General Bulk License)General Bulk License)3) Review of Shipping Documents before 3) Review of Shipping Documents before

submission to the Customssubmission to the Customs

1) Submission of inquiries for sensitive exports1) Submission of inquiries for sensitive exports2) Classification requests2) Classification requests

[Export Control Administrator][Export Control Administrator]approx 290 in totalapprox 290 in total

R&D DEPT.R&D DEPT.1) Product classification1) Product classification2) Administration of technology transfers2) Administration of technology transfers

Export Control Div.Export Control Div.InIn--company Audit for company Audit for

export controlexport control

Audit Div.Audit Div.1) Developing classification standards1) Developing classification standards2) Classification reviews2) Classification reviews3) Training of employees on classification3) Training of employees on classification

Technical Administration Div.Technical Administration Div.

3. Export Control Activities


3. Export Control Activities

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ProductProductClassificationClassification

LogisticsLogisticsManagementManagement

Phase 1Phase 1

Govt.’s ApprovalGovt.’s Approval

Enquiry from

Customer

Phase 2Phase 2TransactionTransactionScreeningScreening

Phase 3Phase 3 ExportTransfer

3.1 Overview

Export Control Activities

Phase 4Phase 4PostPost--exportexportManagementManagement


Govt.’s ApprovalGovt.’s Approval(if necessary)(if necessary)

SECURITY EXPORT SECURITY EXPORT

CONTROL HQ (SECHQ) CONTROL HQ (SECHQ)

[Export Control Administrator][Export Control Administrator]

LOGISTICS DEPT.LOGISTICS DEPT.

“PRODUCT“PRODUCT CLASSIFICATION”CLASSIFICATION” is made through work flow systemfor all items to be exported, to determine whether an item is subjectto controls of the Japanese Export Control Regulations and theU.S. EAR.

R&D R&D E t C t lE t C t l S ity S ity

3.2 Product Classification



The classification results are registered in a ”CLASSIFICATION ”CLASSIFICATION DATA BASE”DATA BASE”, so that any employee may refer to them.

R&D R&D DepartmentDepartment

Export Control Export Control AdministratorAdministrator

Security Security Export Control Export Control

HQHQ

ClassificationClassification Initial Initial ReviewReview

Final Final ReviewReview

DatabaseDatabase

3.3 Transaction Screening (1)

Every transaction is initially screened by individual department in accordance with “guidelines”, developed by Security Export Control HQ (SECHQ). SECHQ then conducts the second screening for certain “sensitive” businesses, which is pre-determined under “guidelines”.

“Sensitive” business“Sensitive” business



Individual Dept.【Export Control Administrator】

Security Export

Control HQLOGISTICS

Dept.

◆ Initial Screening

◆ Review Each Transaction Carefully

◆ Final Check on (1)product classification, (2)Transaction Screening, and (3)confirmation of approved Government-issued License.

“Sensitive” business“Sensitive” business

Normal businessNormal business

Transactions Transactions to Stopto Stop

Transaction to proceed

e.g. R&D, Sales, Marketing No

Go

GoGo

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“Sensitive” business“Sensitive” businessTransactions is with an Entity Listed on the “Denied Customer List (DCL)”

The Ultimate Destination is Afghanistan, Democratic Republic of the C C t d'Ivoire, Cuba, Eritrea, Iran, Iraq, Lebanon, Libya,

▼

▼



Congo, Cote d'Ivoire, Cuba, Eritrea, Iran, Iraq, Lebanon, Libya, Liberia, North Korea, Sierra Leone, Somali, Sudan or Syria.

Transaction is with military or military related end-user(s), or is related to military application(s).

Transaction is Related to development of Weapons of Mass development of Weapons of Mass Destruction (WMD). Destruction (WMD).

Transaction is Suspected as Unauthorized Diversion.

▼

▼

▼


“Denied Customer List (DCL)”“Denied Customer List (DCL)”METI (Japanese Government)

WMD End User ListDepartment of Commerce (DOC)

Entity List Denied Persons List

UpdateUpdateInfo.Info.

SECHQSECHQ◆

◆◆



Department of the Treasury (DOT)Specially Designated Nationals Specially Designated Terrorists Specially Designated Narcotic Traffickers

Department of State (DOS)Statutorily Debarred Parties Designated Terrorist Organization Missile Proliferators Chemical & Biological Weapons Concerns

EUEU/ UN Sanctions List

OTHERSU.K. and Germany Concerned Entity List

Provide Latest Version through Our Web Site

◆

◆◆

◆◆◆

◆

◆

◆

[Review Sheet (RS)][Review Sheet (RS)]

3.4 Transaction Screening on Catch-All Controls▼For export to countries, other than certain

designated Euro-American countries, “Review “Review Sheet (RS)”Sheet (RS)” shall be submitted to SECHQ for approval to check end-use/end-user.

▼No shipment is allowed without approved “RS”“RS”

▼However, this “RS”“RS” procedure is NOT required in



- Export to overseas subsidiaries which have properly implemented ICP (Internal Control Program) approved by SECHQ.

- Export of parts to factories of overseas subsidiaries under a buy back agreement for completed products.

- Temporary Export under a condition of return shipment to Japan.

▼However, this RS”RS” procedure is NOT required in such cases as…

Exceptions

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Difficult to identify occurrence of Technology

3.5 Controls on Intangible Technology


Japanese RegulationsALL Technology Transfers, both tangible ALL Technology Transfers, both tangible (such as documents, recording (such as documents, recording media)media) and intangible and intangible (such as technical assistance, telephone, fax, e(such as technical assistance, telephone, fax, e--mail),mail),are subject to controls under Japanese Regulations.are subject to controls under Japanese Regulations.


Difficult to identify occurrence of Technology TransferCompanies define “Control Units” for technology transfersClassification of Technology to be transferred, and license application, as necessary, shall be undertaken on “project-basis”.

Project based control

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Record Keeping of Technology Transfers

“Post Factum” report for each Technology transferDay-to-day records of telephone, fax, e-mail communications are NOT usually filed

3.5 Controls on Intangible Technology



y

Corporate “Self–Control”Excessively strict Government controls may only cripple corporate activities.Emphasis on “self-control”

“Self–Control” System Required

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Employees’ Awareness▼Code of Conduct, Compliance Program

▼Education (e-learning)

Corporate “Self–Control”3.5 Controls on Intangible Technology



Watch by Local Experts▼Compliance officers designated in each business unit

Audit by Experts▼SECHQ’s Experts to execute annual audits

Support by CISTEC with administrative guidelines(e.g. a guideline for Technology Transfer using Network Servers)

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4. Export Control /


overseas subsidiaries

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4. Export Control of overseas subsidiariesBe aware of the U.S. Export Administrations Regulation

(EAR *) and take necessary preventive measures

Watch their customers & report to FUJITSU when required by FUJITSU (For details, please refer to the next slide)

Be compliant with local regulations （Import and Export Ordinance, Import and Export (Strategic Commodities) Regulations ）

Export Control / overseas subsidiaries


Attentive to theAttentive to theJapanese Export ControlJapanese Export Control

Observe own ICP (Internal Compliance Program).If your subsidiaries has not developed ICP, please establish ICP immediately based upon FUJITSU’s recommended Model ICP.

EAREARLocal Export Local Export Control LawsControl Laws ICP+ +

（*） because of extra-territorial nature of the EAR

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ExportR t

U.S.U.S.

CountryCountry--XXReexport

Export

Reexport

EAR controls not only Export, but also Reexport !

Why EAR ? / Coverage of EAR (EAR (EAR §734.2 for details)734.2 for details)

EAR §730.5 COVERAGE OF MORE THAN EXPORTS

“ ,,,, You will find, however, “ ,,,, You will find, however, that some provisions give that some provisions give broad meaning to the term broad meaning to the term “export”, apply to transactions “export”, apply to transactions outside of the United States, outside of the United States,


Reexport

Hong KongHong Kong

All Right Reserved, Copyright (C) Fujitsu 2006

p

Not only U.S. subsidiaries but also all Not only U.S. subsidiaries but also all FUJITSU group companies, including FUJITSU group companies, including FUJITSU Japan and Hong Kong, are FUJITSU Japan and Hong Kong, are required to comply with the EAR for required to comply with the EAR for (re)export of the items subject to EAR.(re)export of the items subject to EAR.

or apply to activities other or apply to activities other than exports.”than exports.”

(a) (a) Reexports. Reexports. Commodities, Commodities, software, and technology that software, and technology that have been exported from the have been exported from the U.S. are generally subject to U.S. are generally subject to the EAR with respect to the EAR with respect to reexport.reexport.

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4. Export Control of

A report to FUJITSU is required in the following cases, and in particular, prior consent from FUJITSU is also required for (a) – (d) :

(a) Transaction with Customers on Black List*

(b) (Re) export to the Concerned Countries**

Under what circumstance is subsidiary required to report to FUJITSU ??

Prior report

Prior consent

Report upon notice

Export Control / overseas subsidiaries


overseas subsidiaries(d) WMD*** End-Use Related Transaction

(c) Military End-Use Related Transaction

(e) Unauthorized Diversion

(f) Violation of Export Control Laws (Local, U.S or Japan)

*Black List：DCL (Denied Customer List) including both Japanese Foreign User List and U.S.’s DPL (Denied Person’s List) etc.**Concerned Countries：Iran, Iraq, Libya, North Korea, Afghanistan, Cuba, Sudan, Syria*** WMD: Weapons of Mass Destruction

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TrainingTraining per hierarchy level Training per hierarchy level

Training per business unit Training per business unit （（InIn--class trainingclass training））

e-learning In-class

For managersHierarchyHierarchy

For new employees

For new board members

For new directors


Training per business unit Training per business unit （（InIn class trainingclass training））

CompanyCompany--wide ewide e--learninglearning

� Training for export control administrators

� Training on product classification（Provided per training levels and product categories）

� Training for each department (upon request)

� Company-wide export control training course has been provided to all employees on e-learning since 2005.

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6. Internal Audit


6. Internal Audit

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Internal Audit� Who conduct audit ? ： Audit Division, Security Export

Control HQ

� How often ? ： Once a year

� How many days ? ： 2 weeks (up to 2 months)

� Who to be audited ?T b dited year by year>


<To be audited year by year>� Security Export Control HQ� Logistics Department

<To be audited occasionally>� Sales department, R&D department which is dealing with foreign customers/partners

� Transparency of Audit：Main points of audit is indicated beforehand, with intention for educational effect.

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7 For Efficiency


7. For Efficiency

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For EfficiencyInternal web siteInternal web site


Homepage of Security Export Control HQHomepage of Security Export Control HQ

◆◆Product Classification DBProduct Classification DB◆◆Tools/Documents for Product ClassificationTools/Documents for Product Classification◆◆Internal rule for security export controlInternal rule for security export control◆◆Lists to check (e.g. Denied Customer List etc.)Lists to check (e.g. Denied Customer List etc.)◆◆References and Training MaterialsReferences and Training Materials

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IT SystemIT System

SecuritySecurityExportExport

Management Management SystemSystem

R&D Dept.R&D Dept.Input Classification

result

SEC HQSEC HQ

Sales Dept.Sales Dept.Check License requirements

For Efficiency


SystemSystem

LogisticsLogisticsManagement Management

SystemSystem

SEC HQSEC HQIssue classification

Certificate etc.

Logistics Dept.Logistics Dept.Obtain documents required by METI

or Customs

Automatically input classification result

to shipping documents

Unauthorized Unauthorized export will be export will be suspended suspended

systematically.systematically.

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Our Challenges:Our Challenges:

IT system developed for compliance, efficiency, and paperless operation

IT SystemIT System

For Efficiency


▼No further processing of delivery unless Product Classification Data is registered (completed)

▼System check between our customer name and DCL (being developed)

▼System check of License Exception based on EAR

▼Automatic Record Keeping (Improving)

y, and paperless operation

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� In order to minimize / avoid those risks, additional cost may

Profits vs Compliance� Potential risks for non-compliance with export control

requirements are ,,,,,• Penalty (Monetary or Imprisonment),• Release by government or by the media to the public of non-

compliance and• Reputation risk as a result of dealing with concerned parties, All of the above would deteriorate corporate image.


� In order to minimize / avoid those risks, additional cost may be required for employing export control organization and establishing control system in short term. However, in long term, the cost will pay off.

� Therefore, even if sales/profit may be reduced for the time being, it is worth being compliant with export control regulations, which will eventually make company healthier, profitable and long-lasting. Compliance

Future profit

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