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BIS Adds 77 Entities to Entity List, Including China's SMIC

December 21, 2020 by Ian Cohen|Top News

The Bureau of Industry and Security added 77 entities and people to the Entity List, including China’s top chipmaker, to further prevent China and other countries from acquiring sensitive U.S. technologies, the agency said Dec. 18. Along with China’s Semiconductor Manufacturing International Corporation, the Entity List additions include China-based DJI, one of the world’s largest drone makers, and companies in Bulgaria, France, Germany, Hong Kong, Italy, Malta, Pakistan, Russia and the United Arab Emirates.

BIS listed a range of reasons for adding the companies, saying they either have ties to China’s military, are involved in human rights abuses, support China's militarization of the South China Sea, steal U.S. trade secrets or violate U.S. export controls. The notice also revised one existing entry under China and Pakistan and removed four entries under the UAE and Israel.

BIS said it will impose a licensing review policy of presumption of denial for shipments to SMIC that include “items uniquely required to produce semiconductors at advanced technology nodes 10 nanometers or below.” For technology nodes above 10 nanometers, BIS will impose a case-by-case license review policy, a senior Commerce Department official told reporters during a Dec. 18 call. Four other entities added to the list will be subject to a case-by-case license review policy for certain items used to detect and treat infectious diseases, and two entities will be subject to license restrictions for certain nuclear end-uses. The majority of the 77 entities will be subject to a policy of presumption of denial.

The Commerce official said the restrictions on SMIC are preemptive because the company is “primarily producing at higher, older legacy technology nodes” and don’t yet have the technologies needed to produce at lower nodes. “For them to get to production levels at 10 nanometers and below, they certainly would need a U.S. tool,” the official said during the press call. “So this is really a forward-looking technology redline that we’ve established.”

Another Commerce official said the agency added SMIC to the Entity List because it has “hard evidence” that SMIC’s clients are using their chips to support the Chinese military. The official said Commerce has been working with SMIC “over the last several months” but has been “unable to come up with a solid solution to address our concerns.” Commerce plans to keep working with SMIC, the official said during the call. “We want to keep that conversation open.” SMIC didn't comment.

The official said the U.S. plans to work with U.S. industry and ensure “open lines of communication,” saying all companies will get a “fair hearing” and be allowed to “explain the intents of their exports” when applying for a license. Commerce is also working with allies to push for multilateral restrictions against SMIC, the official said. “We are working closely with like-minded governments to achieve a uniform approach to this.”

Commerce is not coordinating with the Joe Biden transition team on these controls but is speaking with them to get them brought up to speed, one of the officials said. The Biden team is “still learning and setting up their personnel,” that official said. “I'm very confident they will understand the national security imperative behind the actions that we're taking today,” the official added. “They will have to decide what sorts of actions that they will take to ensure that our national security interests are protected.”

A Chinese spokesperson said the restrictions will harm both Chinese and U.S. companies. “We urge the U.S. side to stop its wrong behavior of oppression of foreign companies,” a Foreign Ministry spokesperson said Dec. 18, according to a transcript provided in English of a regular press conference. “China will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese companies.”

All exports and reexports that now require a license as a result of the Entity List additions that were aboard a carrier to a port as of Dec. 22 may proceed to their destinations under the previous eligibility, BIS said.

The 77 entities -- added under 78 entries because one entity is being added under two entries -- are: