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U.S. Department of Commerce Publishes Military End User List for Restricting Exports to China and Russia

On December 23, 2020, the U.S. Department of Commerce Bureau of Industry and Security (BIS) issued the anticipated list of designated military end users (MEU List) under Section §744.21 (MEU Rule) of the Export Administration Regulations (EAR) Restrictions (see Federal Register notice). This MEU List provides a "first tranche" of over 100 designated military end users from China and Russia. Per Commerce Secretary Wilbur Ross, "this action establishes a new process to designate military end users on the MEU List to assist exporters in screening their customers for military end users" (see link).

Most of the Chinese entities on the MEU List are in the aerospace industry, including seven subordinate institutions of Aviation Industry Corporation of China (AVIC) and eight subordinate institutions of Aero-Engine Company of China. Despite initial press reports, the MEU List does not include Commercial Aircraft Corporation of China (COMAC). MEU List designated entities may consider submitting a petition to the End-User Review Committee requesting removal or modification from the MEU List by addressing why the designated entity should not be considered a "military end user" or involved in "military end uses."

The MEU List, however, is not exhaustive of all "military end users" subject to the MEU Rule. Rather, the U. S. government only named certain military end users. Therefore, the MEU Rule still requires comprehensive due diligence to determine whether a China, Russia or Venezuela business entity is a military end user prior to the export, reexport or transfer (in-country) of any item subject to the EAR and listed in Supplement No. 2 (MEU Items). Exporters of items on the MEU List to China, Russia or Venezuela still must conduct due diligence prior to the export of MEU Items. If the MEU Items are intended for a military end user, then an EAR license is required prior to the export, reexport or in-country transfer. Under the current BIS license review policy, there is a presumption of denial for these corresponding license applications.

As due diligence guidance, BIS also noted that exporters should closely scrutinize those Chinese companies designated by the U.S. Department of Defense (DOD) pursuant to Section 1237 of the National Defense Authorization Act of Fiscal Year 1999, 50 U.S.C. § 1701. For compliance, the DOD-designated entities raise a red flag requiring additional due diligence as to whether a license is required prior to the export, reexport or transfer of MEU Items to the DOD-designated entities. Currently, the DOD has designated thirty-one (31) Chinese companies as "Communist Chinese military companies" (see Miller Canfield update). 

The MEU Items include many commercial items listed in Supplement No. 2 arranged by Export Control Classification Numbers (ECCNs) from the following Commerce Control List categories: (1) Materials, Chemicals, Microorganisms, and Toxins, (2) Materials Processing, (3) Electronics Design, Development and Production, (4) Computers, (5) Telecommunications and Information Security, (6) Sensors and Lasers, (7) Navigation and Avionics, (8) Marine, and (9) Propulsion Systems, Space Vehicles and Related Equipment. The MEU Items generally are not otherwise controlled for export, reexport or transfer (in-country) to China, Russia or Venezuela, so exporters should take steps to develop internal compliance tools for alerting the exporter of the need to perform due diligence prior to the shipment of MEU Items to China, Russia or Venezuela.

© 2023 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume X, Number 363

About this Author

Jeffrey Richardson Mergers & Acquisition Lawyer

Jeffrey Richardson advises multinational clients in the information technology and defense sectors on matters including mergers and acquisitions, distribution agreements, joint ventures, and strategic corporate structuring. 

Specifically, Jeffrey brings expertise in matching operational business execution requirements with functional business structures. He is frequently engaged in advising clients of export control compliance, as well as the impact of intellectual property matters within business structures. His breadth of experience is informed by a business...

Zhiguo Du Attorney International Business Lawyer Miller Canfield

Zhiguo Du focuses his practice on international business transactions, mergers and acquisitions, joint venture transactions, corporate governance, tax planning, and our China practice. Zhiguo has extensive experience in representing Chinese enterprises doing business in the U.S. and advising U.S. companies with operations in China.

Prior to joining the firm, Zhiguo was an associate attorney at a major Michigan law firm. He interned at the Michigan Attorney General’s Office. Previously he was a teaching assistant at the Hong Kong University of Science and...

Thomas Appleman Foreign Investment Lawyer Miller Canfield Law Firm

Thomas G. Appleman focuses his practice on inbound and outbound foreign direct investment and multi-national cross-border mergers, acquisitions and joint venture transactions.

He also helps U.S. clients take their products and services into the global marketplace by expanding their operations into Europe, China, India, Mexico, Brazil, South Korea and countries with emerging markets including Pakistan and Slovakia, and represents foreign businesses in establishing operations and joint ventures in North America.

With his colleagues, Tom helps clients...