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BIS Adds Seven Chinese Parties Involved in Supercomputing to the Entity List

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On April 9, 2021, the US Commerce Department’s Bureau of Industry and Security (“BIS”) published a final rule (“Final Rule”) in the Federal Register to add seven Chinese parties (together, the “Designees”) to the Entity List.  The Final Rule took effect on April 8, 2021.  According to the Final Rule and the Commerce Department’s press release, the Designees were added to the Entity List because they have procured US-origin items for use in building supercomputers that are used to support China’s military actors and military activities (i.e., its military modernization efforts and/or its weapons of mass destruction programs). 

For all of the Designees, BIS imposed a license requirement that applies to all items subject to the US Export Administration Regulations (“EAR”).  As a result, no supplier – US or non-US, wherever located – may export, reexport, or transfer (in-country) any commodity, software, or technology (“items”) subject to the EAR to a Designee or where a Designee acts as a purchaser, intermediate consignee, ultimate consignee or end-user in the transaction (“a party to the transaction”), unless licensed by BIS.  Furthermore, no license exceptions may be used for exports, reexports, or transfers (in-country) of items subject to the EAR to a Designee or where a Designee is a party to the transaction.  BIS will review license applications involving these Designees with a presumption of denial. 

This is the first time the Biden administration has added Chinese parties to the Entity List.  These designations are a continuation of efforts by the Trump administration to use of the Entity List against Chinese parties for their contribution to China’s supercomputing development.  On June 24, 2019, BIS added five Chinese parties to the Entity List.  Two of these five Chinese parties were added because of their involvement in the development of China’s exascale high performance computing that is allegedly used for military end-uses.  We summarized that development in our prior blog post here. In response to the addition of the Designees to the Entity List, the spokesperson of the PRC Ministry of Foreign Affairs stated in his April 9, 2021 regular press conference that China will take necessary countermeasures to safeguard Chinese companies’ legitimate rights and interests, but did not specify what “necessary countermeasures” may be implemented.

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Paul Amberg is a partner in Baker McKenzie’s Madrid office, where he handles international trade and compliance issues. He advises multinational companies on export controls, trade sanctions, antiboycott rules, customs laws, anticorruption laws, and commercial law matters. Paul helps clients assess and address compliance risks presented by export controls, trade sanctions, antiboycott rules, customs laws, and anticorruption laws. His practice especially focuses on internal reviews, voluntary disclosure filings, and enforcement actions brought by, the US Government in relation to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), trade and economic sanctions programs, and US customs laws.

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Alex advises clients on compliance with US export controls, trade and economic sanctions, export controls (Export Administration Regulations (EAR); International Traffic in Arms Regulations (ITAR)) and antiboycott controls. He counsels on and prepares filings to submit to the US Government's Committee on Foreign Investment in the United States (CFIUS) with respect to the acquisition of US enterprises by non-US interests. Moreover, Alex advises US and non-US companies in the context of licensing, enforcement actions, internal investigations, compliance audits, mergers and acquisitions and other cross-border transactions, and the design, implementation, and administration of compliance programs. He has negotiated enforcement settlements related to both US sanctions and the EAR.

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Iris's practice involves assisting multinational companies with a wide range of trade matters including export controls, sanctions, internal investigations and risk assessments. She also assists companies with respect to customs laws and other trade regulation issues in the US and abroad. Iris's practice extends to assistance in internal compliance reviews as well as enforcement actions and disclosures necessitated by US government action.

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