Although EU export controls and sanctions on Russia don’t necessarily apply to Chinese-based subsidiaries of EU companies, European businesses should keep in mind that they can’t use their Chinese business to circumvent the restrictions, law firm CMS said in an April 21alert. Chinese subsidies are “incorporated under Chinese law” and “not, in principle, bound by the measures,” but their EU parent companies can’t use them to evade any “obligations that apply to the EU parent company,” the firm said. This includes “delegating to them decisions which run counter to the sanctions, or by approving such decisions by the Chinese subsidiary.”
Exports to China
Aviastar, the Russian cargo airline made subject to a temporary denial order last week (see 2204210043), continued to illegally fly multiple U.S.-origin aircraft after the U.S. in March announced restrictions on those flights (see 2203020072), including to China, the Bureau of Industry and Security said in its April 21 order. Flights included trips from the Russian cities of Novosibirsk and Abakan to the Chinese cities of Hangzhou, Shenzhen and Zhengzhou. All the trips, which took place April 5 to April 12, required approved license applications.
The Biden administration should “employ all tools necessary” to stop Chinese-owned Nexperia’s acquisition of Newport Wafer Fab (NWF), a U.K.-based chip facility, the Republican-led China Task Force said in a letter to the White House released April 21. If the acquisition is completed, the U.S. should remove the U.K. from the Committee on Foreign Investment in the U.S. white list and impose strict export controls on shipments to NWF, the House members said.
The Bureau of Industry and Security needs to “answer to Congress immediately” if U.S. software company Synopsys was able to illegally export semiconductor design software to blacklisted Chinese companies, Rep. Michael McCaul, R-Texas, said. McCaul -- referencing a report this week that said BIS is investigating Synopsys for potentially transferring technology to China’s HiSilicon and Semiconductor Manufacturing International Corporation (see 2204140057) -- said the agency needs to do a better job of preventing illegal exports on the front end.
The Commerce Department is investigating U.S. software company Synopsys for possibly violating U.S. export controls against China, Bloomberg reported April 13. Commerce is looking into whether Synopsys, the world’s leading supplier of semiconductor design software, worked with Chinese affiliates to provide chip designs and software to Huawei Technologies’ HiSilicon unit for manufacture at Semiconductor Manufacturing International Corporation, the report said. Both companies are subject to Entity List licensing restrictions.
Apple is considering incorporating chips made by Yangtze Memory Technologies Co., Bloomberg reported March 30, a Chinese state-owned company that some lawmakers say should be placed on the Commerce Department’s Entity list. Apple is exploring placing YMTC memory chips into its iPhones after one of its key suppliers in Japan, Kioxia Holdings Corp., “lost a batch of output to contamination” in February, the report said. Apple is “keen to diversify its network and offset the risk of further disruption from the pandemic and shipping snarls,” the report said, and is now testing sample NAND flash memory chips made by YMTC.
The administration should continue to levy new sanctions against Chinese officials responsible for human rights abuses, including a permanent ban on exports of crowd-control equipment to Hong Kong police, the bipartisan Congressional-Executive Commission on China said in a report last week.
The Office of the U.S. Trade Representative released its 2022 National Trade Estimate Report on Foreign Trade Barriers, detailing the most significant foreign market access issues facing U.S. exporters. The report examines a range of import policies, tariffs, customs procedures and phytosanitary measures that are restricting U.S. goods, including China’s new “opaque and burdensome” facility registration requirements.
The U.S. can take several steps to increase its export control pressure against Russia, including expanding certain restrictions to capture a wider range of end-users in Russia beyond the military, said Matt Borman, a senior official at the Bureau of Industry and Security. Borman also stressed that Chinese companies on the Entity List still have much to lose if they aid Russia, including a complete ban from U.S. exports, financing and other services.
The top Democrats on the Congressional-Executive Commission on China urged House and Senate leadership to include several sanctions and export control-related provisions (see 2202030062) in the final version of Congress’ China competition bill. As leadership begins negotiations on legislation to reconcile the versions passed in the House and Senate (see 2203210064), they should make sure not to omit “robust provisions on human rights principles,” said CECC Chair Sen. Jeff Merkley, D-Ore., and Co-Chair Rep. James McGovern, D-Mass.