- Japan announced that it will remove South Korea from the “whitelist” in the Export Trade Management Order through an amendment act, and South Korea’s imports from Japan will lose preferential treatment.
- The export of fluorinated polyimides, photoresist and high-purity hydrogen fluoride from Japan to South Korea will be subject to heightened restrictions, which will impact local high-tech industry.
On 1st July, Japan Ministry of Economy, Trade and Industry (METI) issued a notice  that they would review the export controls of South Korea, two specific actions were included in the notice. One action is to review the export control category of South Korea. The other is to switch export licenses for several materials from a comprehensive export license to individual export licenses.
Review the Export Control Category of South Korea
From 1st July to 24th July, METI is accepting feedback form the public about the removal of South Korea from Category 3 in the Export Trade Management Order. Category 3 (known as the whitelist) lists over 20 countries and includes the list of countries that can avail of preferential trade policies in Japan. If removed from the list, South Korea will have to face a review period of approximately 90 days every time it wants to import from Japan.
Switch Export Licenses for Several Materials
The materials to be restricted are fluorinated polyimides, photoresist and high-purity hydrogen fluoride (HF). The fluorinated polyimides are key raw materials used in smartphone displays, photoresist is a thin layer used to transfer a circuit pattern to the semiconductor substrate and high-purity HF is used in etching silicon materials. These are quite important raw materials in semiconductor industry. Japan has long been the world's largest producer of these materials and major Korean electronics companies such as Samsung Electronics and SK Hynix are heavily reliant on these imports. This restriction will cause serious shortages of raw materials for these companies.
While the new amendments will certainly have a huge impact on Korean companies, Japanese manufacturers are also worried about whether the implementation of this bill will affect the sales of their products. In their view, the consequences of this restriction will impact both sides. If South Korea finds raw material suppliers in other countries during this time, the losses of Japanese manufacturers will be great. According to relevant media reports, Japan took these actions in retaliation for South Korea’s continued demand for Korean workers’ compensation as reparations for Japanese actions during the Second World War. There are also voices saying that Japan is simply manipulating its trade policy to curb the negative impact of Korea's advanced semiconductor industry on its own domestic sector.