U.S. ANNOUNCES MORE THAN THREE DOZEN ADDED TO ENTITY LIST RELATED TO RUSSIA, CHINA AND BURMA

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced this past week that it was adding more than three dozen companies to the Entity List effective immediately. This is the second round of restrictions that the United States has imposed in as many weeks. The preceding restrictions are discussed in our client alert U.S. Announces New Restrictions and Renewed Focus on Protecting Critical Technologies After China Balloon Shootdown.

The Entity List identifies parties that the U.S. government has reasonable cause to believe have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States. Parties on the Entity List are subject to restrictive licensing requirements and policies.

In total, BIS added 37 to the Entity List. While most (28) were from China, BIS also added entities from Belarus, Burma, Pakistan, Russia and Taiwan.

Of note:

• BIS found that nearly half of the entities, all of which were based in China, were supporting Chinese military modernization and sanctioned parties in Iran.
• BIS added a significant number of Chinese and Pakistani entities for supporting ballistic missile and unsafeguarded nuclear activities.
• Several entities in Russia, Belarus, and one Taiwan entity, were added for supporting Russia’s military.
• BIS added a half dozen entities for supporting human rights violations in China and Burma, largely through surveillance programs that supported trafficking, surveillance and imprisonment of innocent civilians.

The BIS rule also amended ten prior Chinese entries on the Entity List—adding aliases and addresses. BIS also modified the license review policy of a prominent Chinese university to a presumption of denial based on its contributions to China’s military modernization efforts.

See the full text of the rule, including the list of all parties added to the Entity List. BIS adds parties to the Entity List after a review by the interagency End-User Review Committee (ERC), which consists of representatives from the U.S. Departments of Commerce, Defense, State, Energy, and Treasury. The decision to add a party to the Entity List is by majority vote, but removal or modification of a party requires a unanimous vote.

Key Takeaways

These entity listings continue a trend that began in 2019, with the U.S. government using entity listings more frequently to effect foreign policy and national security goals. Given the geopolitical tensions stemming from increased competition with China, the state of negotiations in the Iran nuclear deal, and the ongoing Russian invasion of Ukraine, we can expect to see increased entity listings in the future. Companies with cross-border business dealings should ensure their counterparty screening is conducted often enough and regularly updated to capture changes to the Entity List.

In announcing these additions, BIS also warned that along with screening against the Entity List, exporters and those transacting in items subject to the Export Control Reform Act of 2018 (EAR) regulations need to exercise due diligence to ensure items are not being diverted to prohibited end-uses or end-users.