Commerce Drafts Rule Regarding Chinese, Russian Companies With Military Ties, Report Says

The Commerce Department drafted a rule that would restrict U.S. exports to 89 Chinese and 28 Russian companies with military ties, Reuters reported Nov. 22. The rule, which includes several Chinese aerospace companies such as the Commercial Aircraft Corp. of China Ltd. (COMAC) and the Aviation Industry Corporation of China (AVIC), would build off an April rule that increased license requirements for exports to military end-users and for end-uses in China, Russia and Venezuela, (see 2004270027). The rule contains a list that identifies Chinese and Russian companies that the U.S. considers military end-users, the report said, which require licenses to buy a range of U.S. goods and technologies. If the rule is issued, those licenses will be “more likely to be denied than granted,” Reuters said.

In the draft rule, Commerce stressed that the list of companies is “not exhaustive” but an “initial tranche,” Reuters said. AVIC was included in a Defense Department June list of Chinese companies with ties to the country’s military (see 2006250024).

A Chinese Foreign Ministry spokesperson on Nov. 23 said China “firmly rejects the U.S. unwarranted oppression against Chinese companies” and urged the U.S. to not follow through with the rule. “The United States should stop its erroneous moves of oppressing foreign companies by overstretching the concept of national security.” A BIS spokesperson declined to comment.

BIS’s April rule that expanded due diligence requirements for exports to companies with military ties has caused challenges for industry. Some companies have struggled to determine whether the rule might capture their Chinese customers (see 2006180035); others were frustrated by the lack of a comment period before the rule took effect and the short timeline for industry implementation (see 2007090075). BIS issued guidance for the rule in June (see 2006290045).