The Chinese government responded angrily to the news this weekend that 39 companies in China and Hong Kong had been added to a list of entities that face special export controls when doing business with U.S. firms.
The so-called Entity List, maintained by the Commerce Department’s Bureau of Industry and Security (BIS), identifies companies, individuals and even places of business, to which U.S. firms cannot transfer goods without a license. This most recent addition to the list concerns entities that have been helping companies affiliated with the Russian military obtain U.S.-made goods that cannot legally be sold to them.
“BIS has taken aggressive actions, in concert with our allies and partners, to impose strict export controls in response to Russia’s illegal, unprovoked, and full-scale invasion of Ukraine. Today’s action is an extension of this critical and ongoing work,” Alan Estevez, undersecretary of Commerce for Industry and Security, said in a statement.
“We will continue our multilateral approach to attack this problem from all sides and use every tool in our arsenal to prevent Russia from gaining access to the advanced U.S. technology needed for its weapons,” he said.
Long-arm jurisdiction
According to the state-run Xinhua news service, a spokesperson for the Chinese Ministry of Commerce said that Beijing “resolutely opposes” the addition of Chinese firms to the Entity List.
In an article that appeared to paraphrase remarks from a spokesperson that were not published elsewhere, Xinhua wrote, “The move is a typical act of unilateral sanctions and long-arm jurisdiction, said the spokesperson in an online statement. It undermines the international trade order and rules, impedes normal international economic and trade exchanges, and affects the security and stability of the global industrial and supply chains.”
The statement called on the U.S. to “immediately stop its wrong actions” and said, “China will take necessary measures to firmly safeguard the legitimate rights and interests of Chinese enterprises.”
Technology firms
Among the items that the U.S. has been trying to prevent Russia from obtaining are sophisticated semiconductors and other technologies necessary to build high-tech modern weaponry, such as missile guidance systems.
One way that Russia has been avoiding those sanctions has been to pay companies outside of Russia to purchase the necessary materials from U.S. suppliers, claiming that they are intended for domestic use, or for non-military applications, and to transfer them to Russia after they have been delivered.
The list of Chinese companies named in the most recent Entity List addition includes a large number that appear to be in the computer technology distribution field. Among those named are AllChips Limited; Chipgoo Electronics Limited; Hong Kong Haiheng Electronics Co. Ltd.; Shenzhen Bailiansheng Electronic Science and Technology Co., Ltd.; and Superchip Limited.
In total, entities from 10 countries were added to the list in the most recent update. Other than Russia, which was home to approximately half of the new additions, China was home to the largest number.
While none of the Chinese companies added to the Entity List this weekend were household names, some high-profile entities within China are subject to its restrictions. For example, Chinese telecommunications giant Huawei has been on the list since 2019. Harbin Institute of Technology, a major public university, is also on the list. In total, it includes more than 600 Chinese companies.
Impact of inclusion
After a company is placed on the Entity List, it becomes illegal for U.S. companies to transfer any goods to them that were made in the U.S., were ever present in the U.S., or were made in another country but contain U.S.-made components equal to 25% or more of the product’s value.
Inclusion on the Entity List can be a devastating blow for companies, because not only are they cut off from U.S. suppliers, but they may also find themselves blacklisted by non-U.S. firms that refuse to do business with them for fear of running afoul of U.S. authorities, said Clif Burns, a senior counsel with the law firm Crowell & Moring.
“It can essentially shut them down, particularly if they are dependent upon U.S. goods in their supply chain,” Burns told VOA. “Plus, as a practical matter, given the way most U.S., European and first-world countries handle screening, if you’re on the Entity List, they just generally will not do any kind of business with you at all.”