Last week, the Department of Commerce’s Bureau of Industry and Security (BIS) added eight Chinese entities and 36 subordinate institutions to its Entity List, ratcheting up tensions with China and reflecting the administration’s crackdown on U.S. exports that officials believe are being used to strengthen the Chinese military.
Historically, companies often are added to BIS’s Entity List for engaging in activities related to proliferation of weapons of mass destruction. Here, some of the newly designated entities—including China Electronic Technology Group Corporation (CETC) 13 and some of its subordinate institutions—were added due to their alleged illicit procurement of U.S. commodities and technologies for unauthorized military end-uses in China. The remaining entities—including China Aerospace Science and Industry Corporation (CASIC) Second Academy and some of its subordinate institutions—were added to the Entity List based on a risk of diversion of items to military end-uses in China.
The new restrictions prohibit exports, reexports, and transfers (in-country) of any items subject to the U.S. Export Administration Regulations (EAR) to the newly-designated entities, along with any other transaction in which these entities act as a purchaser, intermediate consignee, ultimate consignee, or end-user of items subject to the EAR. In other words, even common, off-the-shelf EAR99 and mass market hardware, software, and technology cannot be provided to these 44 Chinese entities/institutions without U.S. government authorization. Further, export licenses are subject to a policy of denial, and no EAR license exceptions can be used for transactions with the designated entities.
This action is notable because it is part of much larger U.S.-China trade tensions. It also reveals the administration’s concerns regarding China’s use of commercial and dual-use U.S. items for military purposes, including not only proliferation of weapons of mass destruction but also conventional military applications. U.S. companies should brace for more restrictions on trade with China, as the President is expected to sign legislation this month that may be used to impose additional export controls on China/Chinese entities, including on the provision of “emerging and foundational technologies” as well as items for military end-users/end-uses.