BIS Adds Five Chinese Entities to Entity List

Commerce’s Bureau of Industry and Security added five Chinese entities to its Entity List, the latest escalation in the U.S. and China’s ongoing trade war. The move restricts the entities' ability to purchase certain U.S. products and will require licenses for all items subject to the Export Administration Regulations with a review policy of presumption of denial. The entities are: Chengdu Haiguang Integrated Circuit, Chengdu Haiguang Microelectronics Technology, Higon, Sugon and Wuxi Jiangnan Institute of Computing Technology. The Wuxi Jiangnan Institute is owned by owned by the Chinese government, Commerce said.

Commerce also modified an existing entry on the list, China’s National University of Defense Technology (NUDT), to include one alias (Hunan Guofang Keji University) and four updated locations.

The changes take effect June 24. All shipments now requiring a license as a result of this announcement that were aboard a carrier to a port as of that date may proceed to their destinations under the previous eligibility for license exception.

The five entities operate in the fields of supercomputers, integrated circuits, electronic information systems, software development, computer system integration and computer chips, Commerce said. Sugon, the Wuxi Jiangnan Institute and NUDT -- which was added to the Entity List in 2015 because of its use of U.S.-origin products to support “nuclear explosive simulation and military simulation activities” -- lead China’s development of “high performance computing,” the notice said. Commerce said Sugon has “publicly acknowledged” its computers are destined for military end uses.

The listing also indirectly affects THATIC, which is partly owned by Sugon and Higon and U.S.-based Advanced Micro Devices (AMD), a semiconductor company. THATIC is a joint venture between AMD and China-based companies, including Sugon, to build computer chips.

Higon and Chengdu Haiguang Integrated Circuit -- which is owned by Higon -- are both involved in developing “architecture computer chips for network information services, Commerce said. In addition, Chengdu Haiguang Microelectronics Technology produces, designs and manufactures integrated circuits and has a “substantial ownership by Higon through a second joint venture.”

Commerce said all five entities “raise sufficient concern” that reviews of the entities' exports, re-exports or in-country transfers will help BIS protect the U.S.’s national security and foreign policy interests.

While the exact impact on U.S. businesses in unknown, the announcement is not likely to be as significant as earlier additions to the Entity List. “This is certainly not anything like Huawei or ZTE,” said Doug Jacobson, a trade lawyer with Jacobson, Burton and Kelley in Washington, saying the move may be “symbolic.” “This is additional pressure being placed on the Chinese.”

The U.S.-China Business Council said the U.S. business community is not "specifically concerned" about the additions because they are "consistent" with other U.S. export controls that restrict commercial sales to the Chinese military. "What is a concern is broadening the types of products subject to controls under the definition of national security," spokesman Doug Barry said in an email. Barry said the council is weary of "overly broad restrictions" on emerging and foundational technologies that deprive U.S. companies of market shares "while unwittingly handing a bonanza to our competitors." Barry said China may "redouble its efforts to develop what they need" or simply buy the technology from another country. "Restrictions the U.S. imposes will not deny the advance of China’s indigenous technology," he said.