On June 24, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) added five Chinese entities to the Entity List: Wuxi Jiangnan Institute of Computing Technology, Sugon, and its affiliates, Higon, Chengdu Haiguang Integrated Circuit, and Chengdu Haiguang Microelectronics Technology. The final rule announcing the addition also includes an extensive list of aliases for these entities.
As a result of the Entity List designations, no supplier — US or non-US, wherever located — may export, reexport, or transfer (in country) any commodity, software, or technology (“items”) subject to the Export Administration Regulations (“items subject to the EAR”) to the five Chinese entities unless authorized by a BIS license. An item is subject to the EAR if it is (i) physically located in the United States, (ii) of US origin, wherever located, (iii) manufactured outside the United States but incorporating more than de minimis levels of controlled US content (which is more than 25% for most countries including China, and more than 10% for sanctioned territories such as Iran), and (iv), in some circumstances, a foreign direct product of certain national security controlled US technology or software. BIS will review license applications involving these five entities with a presumption of denial.
The Wuxi Jiangnan Institute of Computing Technology, which is owned by the People’s Liberation Army, and Sugon are involved in the development of exascale high performance computing. BIS cited Sugon’s public acknowledgement that its high-performance computers have a variety of military end uses and end users and Wuxi Jiangnan Institute of Computing Technology’s military ownership in support of its determination that they are involved in activities contrary to the national security and foreign policy interests of the United States. Sugon owns Higon, which has interests in integrated circuits, electronic information systems, software development, and computer system integration. Higon also owns Chengdu Haiguang Integrated Circuit, which designs X86 architecture computer chips for network information servers, and holds a substantial share in Chengdu Haiguang Microelectronics Technology, which is engaged in integrated circuit production. BIS cited these relationships with Sugon in support of its determination that these three entities pose a significant risk of being or becoming involved in activities contrary to the national security and foreign policy interests of the United States.