Commerce Adds 28 Chinese Organizations to the Entity List for Associations with Human Rights Violations and Abuses

10/09/2019
Client Alert

The U.S. Department of Commerce (“Commerce”) has added 28 Chinese organizations to the Bureau of Industry and Security (BIS) Entity List, a move that effectively cuts off these entities from directly or indirectly acquiring hardware, software, and technology subject to the Export Administration Regulations (EAR). These new restrictions are effective upon publication of the notice in the Federal Register, which is scheduled for October 9, 2019.

The Chinese organizations include commercial and government-owned entities that specialize in artificial intelligence and other technologies deployed for surveillance purposes. Twenty of the organizations are government entities affiliated with the XUAR People’s Government Public Security Bureau. Commerce determined that eight commercial companies “are enabling activities contrary to the foreign policy interests of the United States.” Among the companies identified are Hikvision, Dahua Technology, and SenseTime, which are some of the world’s largest and most advanced manufacturers of video surveillance products. The full list of designated organizations can be found at the end of this alert.

These Entity List designations were widely anticipated following the addition of Huawei to the Entity List in May 2019, as the Administration and Congress were focused on taking action related to the repression of the Uighurs and other predominantly Muslim minorities in China. According to Commerce’s announcement, “these entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uighur Autonomous Region (XUAR).”

Although Commerce officials deny any connection between these measures and the ongoing trade war with China, the fact that Chinese officials are in Washington this week for trade negotiations with the Administration may be linked. It is also noteworthy that, to date, the Administration has focused its attention on expanding the number and type of Chinese organizations on the Entity List, which now includes companies in the telecommunications, supercomputing, and surveillance sectors in China. The Administration has not, to date, sought to enhance measures against organizations already on the Entity List by, for example, issuing denial orders against them or having the U.S. Treasury add them to the list of Specially Designated Nationals, both of which would represent major escalations in restrictions against the organizations.

Key Takeaways
  1. Companies should immediately take measures to curtail the sale or transfer of controlled U.S.‑origin products and technology to designated entities. Companies are required to comply with the notice as of the effective date, although it includes a standard “savings clause” exempting items that are already en route as of October 9, 2019.
  2. The Entity List designation affects both U.S. and non-U.S. companies doing business with designated entities. The Entity List notice requires a license for the sale or transfer to the designated entities of any hardware, software, or technology subject to the EAR, regardless of whether such a sale or transfer takes place outside the United States or is effected by U.S. or non-U.S. persons.
  3. Companies should expect that Commerce will deny most licenses to sell to listed entities. Although the EAR allows companies to apply for a license to continue to sell or transfer items to a company on the Entity List, most applications will be subject to a presumption of denial. A few technologies—certain items and technology related to the detection of or protection from chemical, radioactive, and biological agents—will be reviewed on a case-by-case basis.
Effects of Additions to the Entity List

Organizations identified in the BIS notice are, absent a license, effectively banned from receiving any items subject to EAR, which include:

  1. All U.S.‑origin items wherever located in the world;
  2. Any item exported from the United States (even if it is not of U.S. origin);
  3. Any foreign-made item that contains more than 25% controlled U.S.-origin content or controlled 10% U.S.-origin content for countries subject to U.S. sanctions (the “de minimis rule”); and
  4. Any foreign-made item that is the direct product of certain controlled U.S.-origin software, technology, or major plant or equipment located abroad.

Days after adding Huawei to the Entity List, Commerce issued a temporary general license authorizing certain activities in the telecommunications industry. This measure was considered to be necessary given the prevalence of Huawei in the telecom sector globally and in the United States, especially for rural telecom providers. It remains to be seen if Commerce will issue a similar license here, but it seems unlikely as the newly added entities do not have nearly the same size footprint in the United States that Huawei does.

We will continue to monitor these and other U.S. government actions against Chinese entities in the coming days and weeks.

 

28 Chinese Organizations Added to the Entity List

Aksu District Public Security Bureau

Altay Municipality Public Security Bureau

Bayingolin Mongolian Autonomous Prefecture Public Security Bureau

Boertala Mongolian Autonomous Prefecture Public Security Bureau

Changji Hui Autonomous Prefecture Public Security Bureau

Dahua Technology

Hami Municipality Public Security Bureau

Hetian Prefecture Public Security Bureau

Hikvision

IFLYTEK

Kashgar Prefecture Public Security Bureau

Kelamayi Municipality Public Security Bureau

Kezilesu Kyrgyz Autonomous Prefecture Public Security Bureau

Megvii Technology

SenseTime

Shihezi Municipality Public Security Bureau

Tacheng Prefecture Public Security Bureau

Tumushuke Municipal Public Security Bureau

Turfan Municipality Public Security Bureau

Urumqi Municipal Public Security Bureau

Wujiaqu Municipality Public Security Bureau

Xiamen Meiya Pico Information Co. Ltd.

Xinjiang Police College

Xinjiang Production and Construction Corps (XPCC) Public Security Bureau

Xinjiang Uighur Autonomous Region (XUAR) People’s Government Public Security Bureau

Yili Kazakh Autonomous Prefecture Public Security Bureau

Yitu Technologies

Yixin Science and Technology Co. Ltd.

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