More China-Related Entity Listings Likely, BIS Official Says

The Bureau of Industry and Security will likely add more entities involved in China’s supercomputing and semiconductor manufacturing industry to the Entity List, said Thea Kendler, BIS’s assistant secretary for export administration. “We view advanced chip manufacturing and supercomputer activities in China as a national security concern,” Kendler said during a Nov. 2 Information Systems Technical Advisory Committee meeting. “So I expect that there will be Entity List additions.”

Kendler, who was addressing written questions recently received by the agency on its new China controls (see 2210070049), declined to say whether the agency will issue a list of end-users captured by supercomputer and semiconductor manufacturing end-use restrictions described in 744.23, which would perhaps be similar to its Military End User List. Instead, she said more Entity List additions could help companies better understand which companies are captured by the controls. She also said BIS “anticipates” companies will do their own diligence to make sure potential customers or suppliers in the supercomputing or chip industries aren’t subject to the rules.

“Regardless of whether an entity is on the Entity List,” Kendler said, the controls “apply to all entities in the [People’s Republic of China] that exceed the given thresholds.”

She also said the restrictions under 744.23 apply to fabless design houses “if there's knowledge that the items going to the fabless designer are ultimately destined to a prohibited end use in China.” She specifically pointed to the regulations’ use of the phrase “located in or destined to” China. “It's that phrase, ‘or destined to,’ that is intended to catch these types of scenarios where a fabless designer may be intending to send a design to China or to a fab located outside China for producing an item that's ultimately destined to China in a prohibited end-use,” Kendler said.

Kendler also said BIS doesn’t “have any plans” to publish due diligence guidance for the restrictions outlined under 744.23. She pointed to the agency’s set of frequently asked questions released last month (see 2210310044), which lists “some types of activities that appropriate due diligence could include.” She stressed that companies should review public information and be familiar with BIS’s Know Your Customer guidance and red flag indicators.

“Frankly, if you think there's a need for specific due diligence guidance for Section 744.23, I think this is an area that would benefit from public comment,” Kendler said. Comments on the new controls are due to BIS by Dec. 12.

Kendler declined to say whether BIS plans to publish more China controls but said “we evaluate and assess the effectiveness of our export controls for China on an ongoing basis. And if we see gaps or the need for updates based on national security and foreign policy concerns, we make changes.” She also said BIS will publish another set of FAQs “in the near future.”