Earlier this month, the US Government updated its ongoing response to what the Department of Commerce (“Commerce”) described as “Beijing’s campaign of repression, mass detention, and high-technology surveillance against Uyghurs, Kazakhs, and members of other Muslim minority groups in the Xinjiang Uyghur Autonomous Regions of China (“XUAR”), where the [People’s Republic of China] continues to commit genocide and crimes against humanity.” Commerce’s Bureau of Industry and Security (“BIS”) added twenty-four (24) China-based entities to the Entity List on July 12th, thereby prohibiting the export, reexport, or in-country transfer of commodities, software, and technology subject to the Export Administration Regulations (“EAR”) to those entities without a license. Then, on July 13th, a group of agencies including Commerce, the Office of the U.S. Trade Representative (“USTR”), and the Departments of Homeland Security, Labor, State, and Treasury updated its Xinjiang Supply Chain Business Advisory (the “Advisory”) to highlight the increasing legal and reputational risks to companies who maintain supply chains with links to Xinjiang.
BIS specifically linked fourteen (14) of the twenty-four (24) total China-based entity designations to their connection to the ongoing repression of Muslim minority groups in Xinjiang. In addition to companies within China, foreign affiliates of Suzhou Keda Technology Co., Ltd. in the Netherlands, Pakistan, Singapore, South Korea, and Turkey, as well as the foreign affiliate of China Academy of Electronics and Information Technology in the United Kingdom, were also targeted. These worldwide additions confirm the importance of screening both customers and supply chain participants wherever they are located. The July 12 BIS Entity List additions also included thirteen (13) Entity List designations of companies and persons located in China and Russia as a result of their use of items for military programs or transfer to sanctioned Office of Foreign Assets Control (“OFAC”) Specially Designated Nationals (“SDNs”). BIS also added one (1) Russian company to the Military End User (“MEU”) list, which restricts the export or reexport of certain items to companies meeting the definition of an MEU.
Besides direct services to prison camps and authorities in Xinjiang, the inter-agency Advisory highlights activities that carry a heightened risk of a nexus to the intrusive surveillance system implemented by China in Xinjiang, which include:
- Venture capital investment in Chinese companies contributing to surveillance in Xinjiang;
- Selling items such as cameras, tracking technology, and biometric devices into China;
- Certain research joint ventures and research partnerships in surveillance-related areas with Chinese firms;
- Exporting, reexporting, or transferring (in-country) EAR-regulated items to companies on the Entity List;
- Trading in the securities of certain Chinese firms listed on the Non-Specially Designated Nationals Chinese Military-Industrial Complex Companies List (“NS-CMIC List”).
The Advisory puts industry on notice that rigorous due diligence is necessary to mitigate risks in the areas of anti-money laundering (“AML”), potential surveillance assistance, forced labor use by customers or supply chain participants, and the provision of construction materials to Xinjiang authorities, and that the US government will use all agencies, laws, and federal contract clauses available to it to hold companies accountable. The European Union also released its own “Guidance on Due Diligence for EU Businesses to Address the Risk of Forced Labour in Their Operations and Supply Chains” on July 12th.
For other recent developments related to US actions with respect to international trade implications arising from the situation in Xinjiang, see here and here. Should you have any questions concerning these recent developments, please contact Cortney Morgan, Grant Leach, or Tony Busch of Husch Blackwell’s Export Controls & Economic Sanctions team.