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BIS Adds Chinese, Russian Entities to Entity List, Including YMTC

December 16, 2022 by Ian Cohen|Top News

The Bureau of Industry and Security added a host of Chinese and Russian entities to the Entity List, including top Chinese chipmaker Yangtze Memory Technologies Co. and leading Chinese artificial intelligence firms, the agency said in a pair of notices released Dec. 15. The new restrictions on the Chinese firms are aimed at “severely restricting” China’s ability to leverage AI, advanced computing and other commercial technologies for its military or human rights abuses, BIS Undersecretary Alan Estevez said. The agency added the Russian entities to the list after it was unable to complete end-use checks. The changes took effect Dec. 16.

BIS added 36 entities -- 35 in China and one in Japan -- for trying to acquire U.S. technology to support China’s military modernization or for sending controlled U.S. items to other companies on the Entity List, the agency said. Other entities were added for illegally exporting U.S. items to Iran or for their involvement in Chinese surveillance efforts in Xinjiang. The entities -- mostly involved in China’s semiconductor manufacturing, research and sales industries -- will require a license for all items subject to the Export Administration Regulations. BIS will review license applications under a review policy of presumption of denial.

In a separate notice, BIS said it will also remove nine Russian entities from the Unverified List and move them to the Entity List after the agency said it was unable to "verify their bona fides" for receiving controlled U.S. items. BIS also removed 27 entities from the UVL -- 26 in China and one in Pakistan -- after it said it was able to successfully conduct end-use checks on those entities. The new Russian entities on the Entity List -- which were added under a new BIS policy that allows it to move companies on the UVL to the Entity List if BIS can’t complete an end-use check within 60 days (see 2210070006) -- will require a license for all items subject to the EAR with a license review policy of denial.

The addition of YMTC to the Entity List comes after months of lobbying from lawmakers, who have urged Commerce to place strict export controls on the chip company for illegally diverting controlled U.S. goods to Huawei (see 2204270056, 2208020058, 2209160064 and 2107130006). In its notice, BIS said it has evidence that YMTC, along with Hefei Core Storage Electronic, presents a risk of “diversion to parties on the Entity List,” including Huawei and Chinese surveillance technology company Hikvision.

Speaking on the Senate floor, Majority Leader Chuck Schumer, D-N.Y., applauded BIS' decision, calling YMTC a threat to American national security. "Of course, YMTC is a well-known chips supplier for Huawei, one of the biggest companies that pose a risk to US security interests," Schumer said Dec. 15. "This was a necessary and prudent step by the Administration." YMTC didn’t respond to a request for comment.

BIS also added 21 Chinese AI chip research, manufacturing and sales entities to the Entity List for efforts to support China’s military modernization efforts. These entities, including Cambricon and China Electronics Technology Group Corp. (CETC), will also be subject to foreign direct product rule restrictions, which will restrict their ability to buy foreign items made with certain U.S. technology or components.

Other Chinese entities added to the list, including Shanghai Suowei Information Technology and Beijing Vision Strategy Technology Co., have ties to China’s hypersonic weapons development efforts and other weapons activities that support the country’s air force and naval military-civil fusion activities, BIS said. Another Chinese entity was added for ​​illegally exporting U.S.-origin electronics to Iran to help it produce unmanned aerial vehicles and missile systems, and others were added for contributing to the repression of Uyghurs and other Muslim minority groups in Xinjiang.

BIS also removed nine Russian entities from the UVL and transferred them to the Entity List due to their “prevention of a successful end-use check.” The agency said the Russian government has demonstrated a “sustained lack of cooperation” by failing to “schedule and facilitate the completion of a timely end-use check” for those entities. No license exceptions will be available.

The agency also removed 27 entities from the UVL -- including electronics and technology companies in China -- after it was able to successfully complete end-use checks, the agency said. The new policy, which establishes a process for BIS to move companies from the UVL to the Entity List and encourages entities to arrange end-use checks to be removed from the UVL, is “yielding results,” said Matthew Axelrod, the agency’s top export enforcement official.

“When a host government facilitates a check that results in our ability to confirm a company’s bona fides, the company comes off the Unverified List, as demonstrated by today’s” removals, he said in a statement. “But when a host government persists in preventing a check, there are real consequences, as demonstrated by today’s addition of 9 Russian parties to the Entity List.”

BIS also revised three Chinese entries on the Entity List. The agency listed certain “subordinate” institutions of CETC, including Micro Electronic Technology, as Russian military end-users, which subjects them to license restrictions under the Russia/Belarus-Military End User FDP rule. Those entities have supplied controlled items to Russia’s military, BIS said, and will be subject to a license review policy of denial for all items subject to the EAR, except for certain food and medicine designated as EAR99, which will be reviewed under a case-by-case basis.

BIS also modified the entry for HSJ Electronics by adding one additional alias and four additional addresses and modified the entry for Tenco Technology Co. Ltd.

Estevez said the addition of more Chinese companies to the Entity List builds on the agency’s October rule that imposed a sweeping set of new semiconductor restrictions on China (see 2210070049). “This work will continue,” he said, “as will our efforts to detect and disrupt Russia’s efforts to obtain necessary items and technologies and other items for its brutal war against Ukraine, including from Iran.”

All exports that now require a license as a result of the Entity List changes that were aboard a carrier to a port as of Dec. 16 may proceed to their destinations under the previous eligibility, BIS said.

The new Entity List additions are:

China

Japan

Russia