Companies with Chinese business ties should consider how they would be affected if the U.S. began imposing Russia-style export controls against China, said Crowell & Moring trade lawyer Jeff Snyder. Speaking during a June 21 webinar hosted by the firm, Snyder said his practice has begun conducting exercises to imagine how potential China-related controls would affect a business’ operations, which can help companies assess their risk exposure and make preemptive plans so they aren’t caught off-guard by trade disruptions.
Exports to China
Georgetown University's Center for Security and Emerging Technology published a report this week on China’s state-operated laboratory system, which is used to drive the country’s innovation and research and ultimately reduce its dependence on foreign technogloies. The report includes a dataset of 469 state labs, including a table of labs with at least one "supporting unit" subject to U.S. sanctions or export controls, such as the Commerce Department’s Entity List.
The U.S. this week spoke with China to again warn it about helping Russia avoid international sanctions, a senior administration official said. During a June 13 meeting between U.S. National Security Adviser Jake Sullivan and Chinese Politburo Member Yang Jiechi, Sullivan “reiterated concerns that the United States has raised repeatedly with China with respect to certain kinds of assistance to Russia,” the official said during a call with reporters. Although U.S. officials said they haven’t yet seen signs that China is helping Moscow evade sanctions, the U.S. has publicly and privately warned Beijing it will face severe penalties if it does so, including secondary sanctions and strict export controls (see 2203140009).
The U.S. should create a new multilateral export control regime to counter China’s unfair industrial policies and misuse of sensitive technologies, said Mark Dallas, an associate professor at Union College in New York and a fellow with the Council on Foreign Relations. A new regime would create a “unified, clear and multilateral voice” around export controls and would reduce “commercial tensions” between the U.S. and its allies through better information sharing and enforcement.
The Bureau of Industry and Security June 8 issued a temporary denial order for three U.S. companies for their involvement in illegally exported technical drawings and blueprints to China. BIS said it suspended the export privileges for Quicksilver Manufacturing, Rapid Cut and U.S. Prototype for 180 days after they illegally exported materials used to 3D print satellite, rocket and defense-related prototypes, which are subject to strict export controls because of their “sensitivity and importance to U.S. national security,” BIS said.
After receiving criticism this week for its lack of progress in a possible investigation of illegal exports to Huawei, a Bureau of Industry and Security spokesperson said the agency is “committed to fully investigating any allegation” of violations of the foreign direct product rule, including illegal shipments to the Chinese technology giant. The agency has come under criticism for not yet penalizing Seagate Technologies for potentially illegally exporting goods to Huawei (see 2206070011).
The Bureau of Industry and Security by now should have penalized Seagate Technologies for illegally exporting goods to Huawei, James Mulvenon, a China technology and military expert, wrote in a June 6 post for the Lawfare blog. Mulvenon said BIS’s “inaction” has emboldened other companies to export similar shipments and is indicative of a larger enforcement issue at BIS surrounding its foreign direct product rule for Huawei.
China’s new export controls law may apply to a broader range of items than just dual-use goods, Baker McKenzie said in a June alert. In draft regulations released earlier this year (see 2204270040), China included a provision that will allow it to also restrict exports of non dual-use goods, which could include artificial-intelligence or integrated-circuit design technologies “that are currently regulated under a separate legacy technology import and export control regime,” the firm said.
The U.S. plans to build on and improve its export controls and investment screening measures to keep China from acquiring sensitive technologies, Secretary of State Antony Blinken said. Blinken, in a speech outlining the Biden administration’s China policy, also urged industry to reassess whether the price of doing business in China is worth the benefits and to work with the administration to push back against Beijing's unfair market practices.
Bureau of Industry and Security Undersecretary Alan Estevez said his top long-term priority is building a new multilateral export control regime, and he urged industry to continue considering diversifying away from China and Russia. He also said BIS is working hard to control emerging and foundational technologies and welcomes more input from industry, academia and think tanks.