The Bureau of Industry and Security should add the Commercial Aircraft Corporation of China (COMAC), a state-owned aerospace manufacturer, to its Military End-User List, Florida Sens. Marco Rubio and Rick Scott said in an April 24 letter to BIS Undersecretary Alan Estevez. The Republican lawmakers said COMAC works closely with the Aviation Industry Corporation of China (AVIC), which is already included on the Entity List and MEU list and holds a minority stake in COMAC.
Exports to China
The U.S. this week sanctioned three people for supporting North Korea through “illicit financing and malicious cyber activity,” the Office of Foreign Assets Control said. Wu Huihui is a China-based based virtual currency trader who helps convert virtual currency stolen by North Korean “actors” working with the U.S.-sanctioned Lazarus Group (see 1909130039), and Cheng Hung Man is a Hong Kong based virtual currency trader who works with Wu to “remit payment to companies in exchange for virtual currency.” OFAC also sanctioned China-based Sim Hyon Sop for working for U.S.-sanctioned Korea Kwangson Banking Corp. (see 1907230027) and coordinating “millions of dollars in financial transfers” for North Korea.
Companies should expect China to increase the use of its so-called Unreliable Entity List following the addition of U.S. defense companies Lockheed Martin and Raytheon to the list in February (see 2302160064 and 2304180029), Beijing-based Zhong Lun law firm said in an April client alert posted by Lexology. The firm said “we anticipate” that the “trade ban rules may be developed into a full-fledged and well-designed mechanism with increased enforcement of the UEL Provisions in the future,” saying Chinese companies should make sure they're running “effective compliance programs” to comply with the list.
The Biden administration could first release its outbound investment screening regime as a trial period and then expand the restrictions to cover broader investments after the initial year, said Anna Ashton, director of China corporate affairs at the Eurasia Group. Ashton, speaking during an April 21 event hosted by the University of Virginia's Miller Center, also said current U.S. chips subsidies will fall far short of making up for lost U.S semiconductor exports to China, while other experts said they fear U.S. chip export controls (see 2210070049) will continue to cause foreign companies to “design-out” American technology and software.
The U.S. is still “considering” a new outbound investment screening regime, Treasury Secretary Janet Yellen said this week, stressing that any restrictions would be “narrowly scoped and targeted to clear objectives.”
The U.S. should work with China in select artificial intelligence areas instead of imposing sweeping export controls that create financial incentives for companies to “design-out” U.S. technology, Paul Scharre, vice president and director of studies at the Center for a New American Security, said in an April 18 opinion article for Time Magazine. While current U.S. restrictions on semiconductors exports to China are “narrowly targeted,” he said they will “de facto grow over time as chips advance and the threshold for export controls remains the same.”
Sen. Roger Wicker, R-Miss., said companies should make sure they comply with national security-related trade restrictions following the Bureau of Industry and Security's record $300 million fine against Seagate Technology for violating export controls against Huawei (see 2304190071). “Our national security interests are being threatened by Communist China, and companies need to take this situation seriously by following the law,” said Wicker, who led Senate Republicans two years ago in producing a report that urged BIS to penalize Seagate for violating the controls (see 2110260040).
The Office of Foreign Assets Control sanctioned one person and several entities involved in a sanctions evasion network that has helped Iran procure electronic parts for its unmanned aerial vehicles program. The designations target Mehdi Khoshghadam, the head of the sanctioned Pardazan System Namad Arman, along with several front companies based in Iran, Malaysia, Hong Kong and China, OFAC said April 19. Those companies are “suppliers that have enabled PASNA’s procurement of goods and technology,” including Amv AJ Nilgoun Bushehr, PASNA International, Arttronix International, Jotrin Electronics, Vohom Technology and Yinke Electronics.
The Bureau of Industry and Security on April 19 fined Seagate Technology $300 million for violating U.S. export controls against Huawei in what it said is the “largest standalone administrative penalty in BIS history.” The agency said the California-based company and its branch in Singapore sold more than 7 million export-controlled hard disk drives to Huawei in violation of the BIS foreign direct product rule.
Export Compliance Daily is providing readers with the top stories from last week in case you missed them. You can find any article by searching for the title or by clicking on the hyperlinked reference number.