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The United States Continues to Increase Export Restrictions on Chinese Entities

Effective June 24, 2019, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) will add five more Chinese entities, including research institutions, to its prohibited "Entity List." Following closely on the heels of the recent designation of Huawei and its affiliates, this underscores the U.S. government’s continued efforts to tighten restrictions on U.S. companies’ technology transfers to and collaboration with Chinese entities and research institutions. Companies that have contacts with or commercial relationships with China should be prepared for potential further additions in the coming weeks and months.

As a result of the latest BIS action, a license will be required to export, reexport, or transfer any items (including commodities, software, and technology) that are subject to the Export Administration Regulations (EAR) to the following entities:

  1. Chengdu Haiguang Integrated Circuit, including two aliases (Hygon and Chengdu Haiguang Jincheng Dianlu Sheji);

  2. Chengdu Haiguang Microelectronics Technology, including two aliases (HMC and Chengdu Haiguang Wei Dianzi Jishu);

  3. Higon, including five aliases (Higon Information Technology, Haiguang Xinxi Jishu Youxian Gongsi, THATIC, Tianjing Haiguang Advanced Technology Investment, and Tianjing Haiguang Xianjin Jishu Touzi Youxian Gongsi);

  4. Sugon, including nine aliases (Dawning, Dawning Information Industry, Sugon Information Industry, Shuguang, Shuguang Information Industry, Zhongke Dawn, Zhongke Shuguang, Dawning Company, and Tianjin Shuguang Computer Industry);

  5. Wuxi Jiangnan Institute of Computing Technology, including two aliases (Jiangnan Institute of Computing Technology and JICT).

License applications will be reviewed with a presumption of denial, effectively barring most transactions involving items subject to the EAR—including collaborative research and technology transfer arrangements. There is no grace period or grandfathering of existing contracts or agreements under the latest BIS action.

Violations of the Entity List or other EAR restrictions can result in severe civil and criminal penalties, including civil penalties per transaction of up to $300,000 or twice the value of the transaction (whichever is higher) and criminal penalties of up to $1 million and 20 years’ imprisonment. Entities suspected of violating these restrictions can also have their own export privileges revoked, can be debarred from participation in U.S. government contracts, and may themselves be listed on the Entity List or on other denied party lists.

The latest action is part of a coordinated series of U.S. government export control and national security initiatives involving China. These are aimed at bringing a "whole of government" approach to address concerns about forced technology transfers, technology theft, and other issues implicating U.S. national security.

It is expected that additional Chinese entities and individuals may be designated under the Entity List or other U.S. government denied party and sanctions lists in the coming weeks and months. Companies doing business in China or with Chinese companies should closely follow developments in this area and be prepared to take prompt action to protect their interests.

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About this Author

Nate Bolin, Drinker Biddle Law Firm, Washington DC, Litigation Law Attorney
Partner

Nate Bolin has significant experience advising clients in compliance, transactional, litigation, policy and regulatory matters involving U.S. export controls, U.S. International Traffic in Arms Regulations (ITAR), economic sanctions, and related areas of national security and international trade law.

In corporate transactions and mergers and acquisitions, Nate regularly advises buyers, sellers and investors on the impact of U.S. export controls, customs laws, trade remedy laws, existing bilateral and multilateral trade...

(202) 230-5888
Associate

Qiusi Y. Newcom assists clients with navigating emerging issues and regulatory compliance in telecommunications laws and international trade laws. She is an associate with the Telecommunications Team and the Customs and International Trade Team.

Prior to joining Drinker Biddle, Qiusi was an associate with a boutique employment law firm where she handled labor and employment matters before federal courts and federal agencies, including the Equal Employment Opportunity Commission. Qiusi also gained valuable litigation experience through public interest work involving personal injury and criminal matters. During law school, Qiusi was a member of and published an article in the Federal Communications Law Journal. Qiusi is fluent in Mandarin Chinese.

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