Exports to China

The U.S. needs to increase engagement with China to convince it to limit restrictions on foreign companies and to end unfair government subsidies, former U.S. Trade Representative Michael Froman said. Although Froman said he is “hopeful” the U.S. can secure these concessions through more trade negotiations, he also said the U.S. may need to focus more on its own industrial policy to remain technologically competitive with China.

China’s so-called unreliable entity list could present compliance challenges for multinational companies and may be used to retaliate against U.S. export controls and sanctions, trade lawyers said. As a result, companies trying to comply with both U.S. and Chinese regulations may have to choose one over the other, risking sanctions from at least one country, law firms said.

The U.S. needs a clearer approach to its export control regime and should coordinate more closely with allies to counter China’s technological rise, Sen. Mark Warner, D-Va., said, adding that the U.S. needs to better communicate to industry about the risks of doing business with China and its government-sponsored human rights abuses.

Export Compliance Daily is providing readers with the top stories for Sept. 8-11 in case you missed them. You can find any article by searching on the title or by clicking on the hyperlinked reference number.

Sen. Marco Rubio, R-Fla., urged the Committee on Foreign Investment in the U.S. to review the potential purchase of Pennsylvania-based GNC Holdings by Harbin Pharmaceutical Group, a state-controlled Chinese pharmaceutical company. Rubio said the purchase falls within CFIUS’s purview because it involves a Chinese company acquiring sensitive data on “millions” of GNC Holdings’ customers and retail locations “on and around military installations” across the U.S.

China is growing increasingly confrontational on trade issues and may be more willing to respond to U.S. sanctions with restrictions of its own, experts told the U.S.-China Economic and Security Review Commission Sept. 9. As China mulls retaliation against the U.S., the Trump administration should focus on areas in which it has leverage over China by continuing to push for purchases under the phase one trade deal and restrict Chinese attempts to develop advanced technologies, the experts said.

The Trump administration is considering placing export controls on China’s top chipmaker, the latest move in a campaign of restrictions aimed at Chinese technology companies. The controls would target the Semiconductor Manufacturing International Corporation by placing it on the Commerce Department’s Entity List, Reuters said in a Sept. 4 report. The effort is being spearheaded by the Defense Department, the report said, which petitioned Commerce’s End User Committee last week to add SMIC to the Entity List.

The Trump administration “is committed to bold, decisive action” against China that protects U.S. national and economic security interests, Commerce Secretary Wilbur Ross said during a virtual Bureau of Industry and Security conference on Sept. 2. He cited as evidence BIS' s additional export restrictions on Huawei (see 2008170029) and President Donald Trump’s Aug. 6 executive order banning U.S. transactions with the parent companies of TikTok and WeChat. “We each must remain alert to China’s malign behavior and that of other foreign entities that seek our sensitive technologies to damage our economic and national security,” Ross said. “China is a capable, effective and adaptable adversary with unconstrained resources, who regularly uses our American freedom and rules-based norms to advance its goal of dominating global markets.”

Export compliance is never going to be perfect, panelists said, but with constant education, companies can ensure that their mistakes only warrant warning letters, not fines. The American Association of Exporters and Importers held a panel Sept. 1 about how export compliance plays out in the real world.

While industry welcomed the U.S. June decision to allow companies to more easily participate in standards-setting bodies in which Huawei is a member (see 2006160035), the administration should expand the rule to exempt all businesses on the Entity List, companies and trade groups said in comments last month. If the Bureau of Industry and Security does not expand the rule, companies will still be hampered at international standards bodies and could continue to cede technology leadership to China, they said.