China's Export Control Draft Law Lists Regulations for End-User Statements, Penalties, Application Timelines
China’s latest draft of its export control law (see 1912260029) represents the country’s first “comprehensive and consolidated” export control legislation and includes regulations for end-user statements, increased penalties and more, according to a Jan. 9 post from Baker McKenzie.
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The draft, which was proposed in late December and is open for public comment until Jan. 26, removed a provision from the draft’s 2017 version that allowed China to retaliate against “discriminatory measures” taken by other countries against China, the post said. China has yet to release details of its ”unreliable entity list,” which is viewed as a response to the U.S. Commerce Department’s Entity List (see 1908300052) and could have been used as a potential retaliatory measure under the draft. Baker McKenzie said “there is no clear indication” whether the unreliable entity list would be integrated into the export control legislation or “be enacted independently.”
The draft law also removed a definition for reexport, but the draft still includes references to re-exports relating to “transshipment and transit activities,” the post said. The draft also clarified China’s catch-all provision to cover items used in the “design, development, production or use” of weapons of mass destruction or used in certain terrorist activities. The provision previously said the controls covered “unlisted items” that may threaten China’s national security, “present risk of circulation or be used for terrorism purposes,” the post said.
China also clarified details surrounding inquiries made by exporters about whether an item is subject to control under China’s export control legislation. The draft said the scope of the “determination” may include technologies and services and requires Chinese authorities to respond to the inquiry in a “timely manner,” Baker McKenzie said. But the draft did not provide a definition for “timely manner” or say whether the inquiry's determination is “binding,” the post said.
End-user and end-use submissions are mandatory for export permit applications, the law firm said, and China changed the burden to request approvals for changing end-uses or end-users. Under the previous draft law, the obligation belonged to the importer, the post said, but the new draft places the obligation to obtain approval on the end-user. Despite the change, traders are required to “immediately report” amendments to an item’s end-use or end-user when the trader discovers the end-use or end-user “may” change, the post said.
The draft also clarified that the 45-day application timeline for dual-use items may be extended to an additional 15 days in special circumstances, Baker McKenzie said. In addition, China “significantly” increased the penalties for a “number of offenses” and removed a provision relating to “penalty mitigation” in voluntary disclosure cases.
The draft law is expected to go through two more rounds of deliberation at the National People’s Congress “within the next few months,” the post said. After the law is passed, the law firm expects China to issue more regulations on “control lists, license facilitation measures, record keeping requirements, and internal compliance programs.”