U.S. Department of Commerce’s Bureau of Industry and Security Archives

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has issued a final rule amending the Export Administration Regulations (“EAR”) to add 77 entities to the Entity List. This rule took effect on Friday, December 18, 2020, when BIS made a copy available for public inspection on the Federal Register website.

As a result of these Entity List designations, the EAR will now require BIS licensing for any exports, reexports, or in-country transfers of items “subject to the EAR” to these entities. The designated entities include 60 Chinese companies and additional entities from the countries of Bulgaria, France, Germany, Italy, Malta, Pakistan, Russia and the United Arab Emirates. The designated entities include (but are not limited to):

-Semiconductor Manufacturing International Corporation Incorporated (SMIC) of China and ten of its related entities, which BIS added to the Entity List because of “SMIC’s relationships of concern with the military-industrial complex, China’s aggressive application of military-civil fusion mandates and state-directed subsidies” (according to a BIS press release). BIS will evaluate any SMIC license applications involving “items uniquely required for the production of semiconductors at advanced technology nodes (10 nanometers and below, including extreme ultraviolet technology)” according to a presumption of denial and will evaluate all other license applications on a case-by-case basis.

-A group of four Chinese biotechnology companies (AGCU Scientech, China National Scientific Instruments and Materials (CNSIM), DJU and Kuang-Chi Group, which BIS added to the Entity List because it determined that they “have enabled wide-scale human rights abuses within China through abusive genetic collection and analysis or high-technology surveillance, and/or facilitated the export of items by China that aid repressive regimes around the world, contrary to U.S. foreign policy interests.” BIS will evaluate any license applications for these entities involving “items necessary to detect, identify and treat infectious disease” on a case-by-case basis and will evaluate all other applications involving these entities according to a presumption of denial.

-China State Shipbuilding Corporation, Ltd. (CSSC) and over twenty of its research institutions, which BIS added to the Entity List after determining that they had acquired and attempted to acquire U.S.-origin items in support of programs for the People’s Liberation Army of China. BIS will evaluate any license applications involving these entities according to a presumption of denial.

-A group of four Chinese universities (Tianjin University, Beijing University of Posts and Telecommunications, Nanjing University of Aeronautics and Astronautics, and Nanjing University of Science and Technology), as well as businesses and individuals associated with those entities. BIS will review license applications involving these universities, entities, and individuals according to a presumption of denial.

As a result of these new designations, these entities will now be ineligible for almost all license exceptions provided under the EAR. The announcement also included a savings clause which would allow shipments to any of these newly listed entities to continue without a BIS license if: (i) they were en route aboard a carrier to a port of export or reexport as of December 22, 2020, (ii) they were made pursuant to an actual order for export or reexport to a foreign destination, and (iii) they did not otherwise require a BIS license under any separate provision of the EAR.

These new designations were partially offset by BIS’s removal of Israel’s Ben Gurion University and Dow Technology, Hassan Dow and Modest Marketing LLC of the United Arab Emirates from the Entity List. Those delistings were also effective December 18, 2020.

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Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group,

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a notice in the Federal Register announcing a rule change effective June 18, 2020, which amends the Export Administration Regulations (“EAR”) to allow for the release of certain technology to Huawei Technologies, Co., Ltd. and 114 of its non-U.S. affiliates designated on the Entity List without a license “if such release is made for the purpose of contributing to the revision or development of a ‘standard’ in a ‘standards organization.’”

Despite being added to the Entity List by BIS in 2019, Huawei and its foreign affiliates still participate in several international standards organizations in which U.S. companies also participate. BIS states in its notice “[a]s international standards serve as the building blocks for product development and help ensure functionality, interoperability, and safety of the products, it is important to U.S. technological leadership that U.S. companies be able to work in these bodies in order to ensure that U.S. standards proposals are fully considered.”

As a result of Huawei’s entity list designation, BIS has received questions regarding the applicability of the EAR in the context of standards-setting or development. On August 19, 2019, BIS issued a “General Advisory Opinion Concerning Prohibited Activities in the Standards Setting or Development Context When a Listed Entity is Involved”, which addressed the applicability of certain types of releases. With the issuance of this new interim final rule, that previous guidance has been rescinded.

The new rule removes certain licensing requirements imposed by the original listing and removes the need to determine the application of controls to those releases. The interim final rule revises ninety-three entries, which list Huawei and its 114 foreign affiliates by changing the text in the Licensing Requirement column from “For all items subject to the EAR (See §744.11 of the EAR)” to “For all items subject to the EAR (see § 744.11 of the EAR), EXCEPT for technology subject to the EAR that is designated as EAR99, or controlled on the Commerce Control List for anti-terrorism reasons only, when released to members of a ‘‘standards organization’’ (see § 772.1) for the purpose of contributing to the revision or development of a ‘‘standard’’ (see § 772.1).’’

According to the notice, the definition of a “standard” for the purpose of this rule can be found in the Office of Management and Budget (“OMB”) Circular A-119. BIS welcomes comments from interested parties on the impact of the rule change on or before August 17, 2020.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

BIS Adds Over 70 New Entities to the Entity List, Including SMIC

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