South Korean manufacturers of cutting-edge electronic components are likely to face increasing costs and burden of securing hi-tech materials and parts from Japan following the decision to remove the country from its whitelist of entrusted trade partners.

Korean companies that purchase any of the 1,194 items designated as strategic materials from Japan will now be required to submit extra documents including export approval, the final users’ covenants and reasons for imports.

As many as 857 industrial materials and parts purchased by Korean businesses are expected to be subject to tighter screening by Japan. 

Japanese exporters will also have to submit nine documents in order to prove their exports to Korean customers are legitimate. They should provide explanations, including the purpose and usage.

The Japanese authorities will scrutinize submitted documents for up to 90 days before approval.

Companies based in Korea, one of 27 countries on Japan’s whitelist that receive preferential trade treatment, were exempted from submitting paperwork for three years once they apply. From now on, they will need to hand in the documents every six months.

“The time and costs of importing needed materials and parts from Japan are expected to increase significantly,” said an industry source. “Securing the materials at the right time will be key to overcoming the current situation.”

By Song Su-hyun (song@heraldcorp.com)