The Bureau of Industry and Security added 24 companies added to list entity list for their involvement in constructing artificial military islands for the Chinese military. China has been building these islands since 2013. This announcement was made by the U.S Department of Commerce on August 26, 2020.
The islands have been condemned by the United States and nations in the South China Seas. The islands allow for the military control of some of the busiest shipping lanes in the world.
International Reaction to China’s Island Building
The World Court ruled that the building of islands violated the sovereign rights of the Philippines. This was due to the fact that the Chinese military islands have interfered with Philippines fishing and petroleum industries. This ruling has been supported by Japan, Vietnam, and Australia who also contest China’s assertion of claims to the waters.
Companies Added to Entity List
A number of Chinese companies have been added to the entity list of late. Most of these have been high tech companies. This has been partially the result of China’s actions with regard to Hong Kong and cybersecurity concerns about the products of companies like Huawei. This latest group of companies however include companies involved in construction and dredging.
What is the Entity List?
The BIS uses the entity list to restrict the export, re-export, and transfer (in-country) of items subject to the Export Administration Regulations (EAR). These restrictions can apply to individuals, organizations, or businesses. Restrictions are applied to entities that are involved in activities contrary to the national security or foreign policy interests of the United States. As a result, exports to those on the list are significantly limited.
Effect of BIS Ruling on U.S. Businesses
Companies added to the Entity List are subject to export restrictions. It is the responsibility of all businesses in the United States to comply with all export law. To fulfill these requirements it is necessary to conduct an Export Control Classification of items to be exported.
This classification should begin with an examination of the United States Munitions List that categorizes military articles and services controlled by the International Traffic in Arms Regulations (ITAR). If the item is not covered under ITAR it should next be categorized by its Export Control Classification Number (ECCN) which is controlled by the Export Administration Regulations (EAR).
Restrictions may still apply even if an item does not fall under these classifications. These restrictions can be the result of sanctions. They can also apply to exports destined to parties on the Entity List.
CVG Strategy Export Compliance Consultants
Complying to ever changing export laws is complicated. Not complying to these laws and regulations can result in severe fines, penalties, and even imprisonment. CVG Strategy can help you develop an export compliance program. We can also provide the training essential to keeping your entire team current on all parts of these important regulations.