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This is the third in a series of articles by Eversheds Sutherland partners Ginger Faulk and Jeff Bialos explaining the legal and regulatory impacts of certain recent US sanctions and export control actions targeting various Chinese entities. Each article explains the regulatory context of the recent rules. Recognizing that this is a highly charged political topic, the article does not condone or promote any governmental actions discussed here but is only explanatory in nature.

If the first time you ever heard of the US “Entity List” was in March 2016, when subsidiaries of mobile telecommunications equipment manufacturer ZTE Corporation were listed, or in March 2017, when ZTE agreed to an $892,360,064 penalty and settlement agreement in order to secure its removal from the list, you are probably not alone. That 2016 listing had to do with allegations of evasion of US sanctions against North Korea and Iran. More recent Entity List designations have derived not only from US economic sanctions but also cite to various other types of US allegations or policy concerns.

In the first article of this series, we discussed US export controls applicable to Huawei as a result of its designation on the Entity List in May 2019. In this article, we delve into the background and regulatory context of the list itself, as compared to other US sanctions lists, and discuss ways it has been used in the last four years under the Trump Administration.

1. What is the Entity List and What are Its Origins?

The Bureau of Industry and Security (“BIS”) at the US Department of Commerce administers US export controls pursuant to the Export Administration Regulations (“EAR”). The EAR generally controls, and in some cases, requires licenses for, exports on the basis of the type of product, the country of export and the reasons for control, e.g. Anti-Terrorism, Nonproliferation, National Security, etc. In contrast, the Entity List imposes comprehensive export controls applicable to particular foreign entities due to specific policy concerns.

The US Entity List was established in 1997. It initially focused on identifying the public entities at risk of causing the diversion of exported items in support of the proliferation of weapons of mass destruction. Since its initial publication, however, the purpose of the Entity List has been considerably expanded to encompass the identification and designation of foreign entities and other persons “reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.” A committee (known as the “ERC”) composed of the US Departments of Commerce (Chair), State, Defense, Energy and Treasury adds persons to the Entity List by majority vote.

Once an entity is added to the list, it generally follows that exports or re-exports of goods, technology or software (“items”) that are “subject to the EAR” require an export license issued by BIS. As a result, the export and re-export of not only military or dual-use items but all categories of items are subject to a licensing requirement (of course, to the extent that they are deemed to be subject to the jurisdiction of US export controls). Notably, the Commerce Department’s policy is generally one of “presumption of denial” for these types of license applications unless indicated otherwise in the company’s listing.

Jurisdictionally, the ban applies also to non-US persons to the extent that those persons deal in subject US items. Significantly, items “subject to the EAR” includes not only US-origin items and items exported from the US but also non-US-origin items that contain more than a minimal (“de minimis”)  level of controlled US-origin content. Since a licensing requirement generally applies to exports or re-exports of any item to an Entity List entity, this means that any type of US content or component whatsoever, provided it is of sufficient value as compared to the overall fair-market value of the finished item (25% for non-embargoed countries, including China), could cause an item manufactured outside of the US item to be “subject to the EAR” and therefore requiring a license for export or re-export to an Entity List entity.

2. The Entity List and China

Until 2012, there were fewer than 30 Chinese entities on the Entity List. Before President Trump’s 2017 Inauguration, fewer than 100 Chinese entities had ever been listed on the Entity List over its 23-year history. Since then, however, more than 200 Chinese companies have been added to the Entity List, making export controls one of many contentious issues in recent US-China relations. Perhaps most notable was the May 2019 listing of Huawei and its 114 non-US affiliates – an enterprise which recently took the place of Samsung as the world’s largest mobile phone manufacturer (as addressed in our earlier article). More recently, the US added a number of Chinese state-owned enterprises to the Entity List on the basis of their alleged support in advancing Beijing’s territorial claims in the South China Sea. Further, over the last year, more than 38 individuals and entities were added for reasons related to their alleged use of forced labor in the Xinjiang province of China.

One might ask why the US Commerce Department would use the same export control list to address so many varied types of issues. And does it make sense to designate under export controls companies that are the producers of raw materials such as cotton and textile producers in Xinjiang?

The answer lies both in the designation process and in the intended impacts of an Entity List designation. As noted, the ERC is an interagency committee represented by multiple US government departments. Fundamentally, it affords the ERC, the interagency charged with adding companies to the list, the flexibility to address certain conduct by such entities in a more targeted and flexible fashion – as it did with respect to Huawei. In this regard, an Entity List designation does not impose the same outright ban on all commercial and financial dealings as a designation on the US Treasury Department’s Specially Designated Nationals List. It also is intended to signal to industry to use care when doing business with these entities.

In addition to the Entity List, BIS also maintains a Denied Persons List of persons or entities that are the subject of an export denial order. For example, after deciding that ZTE failed to fulfill its commitments under the 2017 settlement by which it secured its removal from the Entity List, BIS issued a denial order in June 2018 that exceeded the terms of the original Entity Listing by also preventing ZTE from directly or indirectly participating in any way in any transaction involving an item subject to the EAR. That denial order was removed following discussions between the Trump Administration and the Chinese government in July 2018.

3. Can a party seek removal from the Entity List?

The ERC also reviews requests for removal from the Entity List. To be removed, the person or entity must submit a request to the chairman of the ERC. In making a determination, the ERC will look favorably upon an entity’s cooperation with the US government and future compliance assurances. The ERC’s decision is final and cannot be appealed as an administrative matter.

4. Conclusion

Recently, the US has made frequent use of the Entity List to target Chinese companies over varied national security concerns. In response, China has introduced its own “Unreliable Entity List” regime, under which foreign entities or individuals that boycott supplies to Chinese companies for non-commercial reasons may be listed. It remains to be seen whether the US Commerce Department will continue to make such an expansive use of the Entity List under the Biden Administration.


Eversheds Sutherland associate Vedia Biton Eidelman was a contributing author to this article.

Ginger T. Faulk, partner at Eversheds Sutherland, represents multinational companies in matters involving US government regulation of foreign trade and investment. She has extensive experience advising and representing global companies, counseling clients in matters arising under US sanctions, export controls, import and other national security and foreign policy trade-related regulations.

Jeffrey P.  Bialos, partner at Eversheds Sutherland, assists clients in making multi-faceted business decisions, structuring transactions and complying with complex regulatory requirements. A former Deputy Under Secretary of Defense for Industrial Affairs, he brings deep experience in defense, homeland security and national security matters, including antitrust, export controls, foreign investment, industrial security, the Foreign Corrupt Practices Act, and mergers and acquisitions, and procurement.


Getting Caught on the Backswing – Will US Sanctions Undermine the Dollar?

Since the Bretton Woods Agreement in 1944 there has been one currency that eclipses all others for international trade: the U.S. dollar. The dollar dominates when it comes to reserves and the settlement of trades, a hegemony that affords U.S. foreign policy incredible strength on the world stage. However, the U.S. reliance on the strength of the dollar to pursue far-reaching sanctions is also beginning to cut at the roots of that strength, as allies and global trading partners simultaneously pursue their own economic agenda and react to perceived over-reach by U.S. policymaker. 

A View from the Top

In 2019, the dollar comprised over 60% of global debt, more than 60% of global reserves for foreign exchange, and was the medium used in 40% of international payments, according to the European Central Bank (ECB). Despite the economic output of the Eurozone roughly matching that of the U.S., the euro accounted for only 20% of foreign exchange reserves and just over 20% of international debt (1).

This allows U.S. foreign policy a potency lacking in other international currencies. The Trump administration has relied heavily on this dynamic, imposing coercive economic measures on a wide spectrum of targets from Venezuela to North Korea and exponentially increasing the number of sanctioned entities. In fact, the U.S. sanctioned around 1,500 Specially Designated Nationals and Blocked Persons (SDNs) in 2018 alone, almost 50 % greater than in any other single year. 

Growing trends have become noticeable in the financial streams flowing between borders; a rise in the use of the euro, RMB and ruble as forex currencies, development of routes around the conventional financial sector, and flurry of interest surrounding the nascent potential of cryptocurrencies. The major drivers of these changes are unrelated to sanction policy and are more tied to the politicization of U.S. monetary policy or the inherent economic interests of other nations and trading blocs, including turning their own currencies into global standards. Regardless of the drivers, these developments suggest an international system ill-at-ease with the power of the dollar.

Secondary Nature, Primary Threat

The unrivaled strength of the U.S. dollar affords U.S. policymakers a weapon unavailable to any other nation. This is built on by the ‘secondary’ nature of U.S. sanctions – extending the impact of sanctions to non-U.S. entities who do business with sanctioned entities or individuals – that leaves few avenues to evade the regime. 

As virtually all dollar-denominated transactions pass through the U.S. financial system, even if just momentarily when they are “cleared,” very few businesses are able to trade with the targets of primary sanctions without themselves falling under the secondary regime. Violators are potentially liable for sizeable fines or other punishments, including being locked out of the U.S. financial system themselves. 

While this is a useful tool for closing down avenues of terrorism, crime or other illicit activity, it also means countries that disagree with the targets of U.S. sanctions must either comply or place their own industry at risk. The EU-U.S. divergence on the Iranian Nuclear deal, or on U.S. sanctions towards Cuba, are good example of this. 

This increasing sanctions activity provides the seedlings that may undermine the dollar’s strength, as it prompts allies that disagree with sanctions regimes to develop alternatives to the dollar – such as the Euro, Chinese RMB or Russian ruble. Special Purpose Vehicles, such as the EU-Russian INSTEX, are created – albeit with difficulty – to provide routes around the conventional financial system. 


Against this politicization of the dollar, various countries are developing alternatives. The euro is staking its claim with the development of the INSTEX vehicle and a declaration by Jean Claude Juncker, then-president of the European Commission, “to do more to allow our single currency to play its full role on the international sector” (2).

Similar gauntlets are being thrown by the ruble – Russia has been developing its own payments system since the Crimean sanctions in 2014 – and the RMB, with the Chinese Cross-Border Interbank Payment System (CIPS) launched in 2015. Given the size of the Chinese market and its growing world position, the RMB could theoretically pose a challenge to the dollar. However, the politicization of the RMB’s value – witnessed most recently in its rapid devaluation targeted at injuring the U.S. as part of the trade war – undermines its use as a global currency in the near to medium term. 

Another potential pitfall for the dollar is the development of new financial technologies, including the much-discussed Blockchain and cryptocurrencies. Such systems allow for the circumvention of the U.S. financial system and enable payments in relation to sanctioned activities, and have already have been used to facilitate illicit payments in North Korea and Iran. 

Mobile payments are also on the rise, further reducing global exposure to the dollar. However, as with other examples above, the use of some of these alternatives are being driven in significant part by illicit activity, which may lay the seeds of its own demise or limited adoption. 

The dollar’s strength on the international stage is undeniable, affording U.S. foreign policy unparalleled reach and potency. However, increasing international attention is being given to the Trump Administration’s fondness for relying on coercive economic measures in foreign policy, including the imposition of sanctions, tariffs, export controls, and investment restrictions. 

Each time a trading partner or ally objects to the U.S. policy goals but is forced to accept a new sanctions regime because of the dollar’s dominance, that dominance is eroded. While the dollar remains by far the best safe-haven for investments, backed as it is by a resilient economy and a history of stability, the potential corrosive effect of sanctions cannot be ignored. The future use of sanctions should factor in this unintended consequence and overall sanctions policy designed to ensure the long-term dominance of the U.S. dollar. 


Matthew Oresman leads Pillsbury Winthrop Shaw Pittman’s International Public Policy practice, carrying out high-profile activities in many of the world’s capital cities. He principally advises governments, political leaders, businesses and NGOs on achieving their most important objectives. He regularly designs and implements legal and policy solutions, including managing integrated U.S. and Europe-based initiatives. He advises global businesses on entry into emerging markets and compliance with U.S. and international regulations.



(2) See Juncker, J.C. (2018), “The Hour of European Sovereignty”, State of the Union Address 2018 –