The Department of Justice charged a California electronics company, its president and an employee with trying to illegally export chemicals to a Chinese company on the U.S. Entity List. President Tao Jiang, employee Bohr Winn-Shih and the company, Broad Tech System Inc., ordered the chemicals from a Rhode Island company before trying to ship the items to China Electronics Technology Group Corporation 55th Research Institute (aka NEDI) (see 2006030032), the Justice Department said July 20. The shipment would have violated the Export Control Reform Act.
Exports to China
The Commerce Department plans to add 11 Chinese-based entities to its Entity List for their involvement in human rights abuses in China’s Xinjiang region. Nine of the entities are involved in the forced labor of Muslim minority groups and two of the entities conduct “genetic analyses” to “further the repression” of the minorities, Commerce said. The additions take effect July 22.
President Donald Trump’s executive order ending preferential treatment for Hong Kong details a range of sanctions authorities and export bans but includes a carve-out for certain defense exports authorized before the order was issued. The State Department’s Directorate of Defense Trade Controls issued a July 15 guidance to clarify the new restrictions and answer industry questions.
China criticized the Trump administration’s Xinjiang business advisory (see 2007010040) issued earlier this month, saying the guidance “seriously distorts the facts” and threatens to damage cooperation between U.S. and Chinese industries. The guidance -- which outlined export control, sanctions and forced labor risks for U.S. companies doing business in China’s Xinjiang region -- “undermines the stability of the global supply chain,” a Chinese Commerce Ministry spokesperson said July 14, according to an unofficial translation of a press release about a reporter's question on the topic. “This is bad for China, bad for the United States, and bad for the whole world,” the spokesperson said. “China will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.”
Companies affected by the Bureau of Industry and Security's recent rule on military-related exports (see 2004270027) were frustrated by the lack of a comment period before the rule was finalized and BIS’s decision not to postpone the effective date, industry officials said in interviews. Some officials said they were disappointed the new requirements were not first issued as a proposed rule, adding that smaller businesses with fewer compliance department employees have struggled to adjust.
The upcoming U.S. presidential election and the increasing government focus on China will likely “exacerbate risk” for companies with supply chains in China’s Xinjiang region, law firm Covington said. The region has come under scrutiny for human rights abuses and has been a recent focal point of U.S. sanctions.
Rep. Rick Larsen, one of the chairpersons of the New Democrats' trade task force, told the Washington International Trade Association that he thinks the U.S. has not gotten any benefit out of the Trump administration's trade war. When asked by International Trade Today if a Joe Biden administration would roll back the Section 301 tariffs, even if China does not give concessions on industrial subsidies or state-owned enterprises, Larsen said, “I think the next administration needs to reset where we are, how we’re going to approach this.”
Industry should expect the Bureau of Industry and Security to dedicate significant resources to enforcing its new export restrictions on shipments to military end-users and end-uses, export control experts said. Although the rule (see 2004270027), which took effect June 29, increased license restrictions for shipments to China, Russia and Venezuela, companies should expect increased enforcement and monitoring specifically for exports to China as the Trump administration hardens its stance on countering China’s civil-military fusion efforts, the experts said.
The Trump administration is considering more measures to punish Beijing for interference in Hong Kong, including sanctions outlined in the Hong Kong Autonomy Act, Secretary of State Mike Pompeo said. While Pompeo declined to say how far the administration would go to sanction China, he said President Donald Trump wants to ensure Hong Kong is “treated just like mainland China.”
The Trump administration issued an advisory for companies doing business with China’s Xinjiang region, which could expose companies to sanctions, export controls and forced labor risks. In a 19-page guidance issued July 1, the departments of State, Commerce, the Treasury and Homeland Security describe supply chain risks and possible sanctions exposure for companies trading with the region, and includes suggested due diligence practices. The guidance comes less than a month after President Donald Trump authorized sanctions against Chinese officials for human rights violations against the country’s Uighur population in the Xinjiang region (see 2006170064).