The release of the new Chinese Export Control Law (ECL) were approved by the National People’s Congress on October 17, 2020 and became effective December 1, 2020. These laws will effect the export of military, dual-use items, nuclear items, and items related to the national security interests if the Chinese government.
On December 1, 2020 the ECL was further defined through the release of a number of articles that detail such items as controlled items, country and product lists, and enforcement actions.
Previous export laws in China had fallen under a variety of regulations including Customs Law, Criminal Law and Foreign Trade Law. This new centralized Export Control Law should streamline the states ability to place restrictions on export and trade. The new ECL are similar in structure, at first glance, to many systems in effect internationally, including the United States and Canada.
Concerns in the International Community
There are shared concerns in the international community that China may strategically target selected markets and technologies to secure advantages in certain market niches. This may result in nations strengthening provisions concerning licensing practices and export control of the Wassenaar Arrangement.
The Role of ECL in Chinese Foreign Policy
While citing national security for its implementation of the ECL, the law is seen by many as a response to recent sanctions of the United States against Chinese companies such as Huawei Technologies. Many importers of goods from China remain hopeful that decisions made by the government apply the laws in a consistent and transparent manner. It is also important to note that this action occurs at a time when China is seeking to broaden its international economic influence.
State Export Control Administrative Departments
The ECL will be administered and enforced by the State Export Control Administrative Agency to control the export of goods, technologies, or services. They will apply especially to items for military and nuclear uses and dual-uses. They will also extend to any items related to China’s international obligations (i.e. non-proliferation treaties and any goods used for terrorist purposes.
The State Export Control Administrative Agency will be comprised of the State Export Control Administrative Departments (SECADs). The SECAD shall have the authority to create the Export Control Item List of controlled goods and impose temporary prohibitions for a length of two years on any items seen as a threat to the national security of China.
To engage in the export of controlled items or transfers of controlled items, applications for licensing are required. Transport of these items shall be performed by an approved enterprise. As with U.S. export law, the ECL extends to the transfer of technologies and information. Under the U.S. International Trade in Arms Regulations (ITAR) and the Export Administration Regulations (EAR) such transfers are referred to as deemed exports.
While the ECL framework is at present is sparse, containing only 49 Articles, 11 of those articles deal directly with the enforcement of the laws. To be certain, exporters in China, and those engaged in re-exports, transfers, or import of goods from China should treat these provisions with respect. Furthermore businesses that rely on imported goods or services from China should appraise their supply chain vulnerabilities.
Viewing the ECL in the Larger Picture
The new Chinese Export Control Law is but one development in the country’s agenda. During the last several years, China has been become a more hostile force to be reckoned with.
Increased Hostile Rhetoric Towards Taiwan
On January 29, 2021 the Global Times, an English language newspaper operated by the Chinese government, reported that Wu Qian, spokesperson of China’s Ministry of National Defense, said that “Taiwan independence” means war. He went further to state that, should Taiwan choose to collide with the mainland’s will that they “they will be like a moth to a flame”.
China Island Building in South Seas
The islands, which have been under construction since 2013, have been condemned by the United States and nations in the South China Seas. The U.S took further action by adding Chinese companies involved in the construction to the Entity List.
The islands allow for the military control of some of the busiest shipping lanes in the world. The World Court ruled that the building of islands violated the sovereign rights of the Philippines. This ruling has been supported by Japan, Vietnam, and Australia who also contest China’s assertion of claims to the waters.
Actions in Hong Kong
For decades, the Hong Kong Special Administrative Region (HKSAR) has served as a major conduit for global finance and trade. The Chinese Communist Party imposed severe security measures under the National Security Law on the area in 2020. In addition to raising concerns about human rights, these actions are seen to undermine the autonomous status of Hong Kong. As such, it is now impossible to ensure that exports are not diverted to China’s People’s Liberation Army or Ministry of State Security.
As a result the United States Department of Commerce suspended Hong Kong’s special status for the export of sensitive technologies. The United Kingdom, has voiced concerns for human rights and trade in Hong Kong and has undertaken an effort to allow citizens of Hong Kong to move to the U.K. and eventually apply for citizenship.
The European Union (EU) has stated its concerns about the conformity of the National Security Law with Hong Kong’s Basic Law and with China’s international commitments. The European Union considers it essential that the existing rights and freedoms of Hong Kong residents are fully protected. How the rest of the world reacts to this crisis will very likely change the dynamics of trade in the region. It will be important therefore, to continue monitoring this situation.
CVG Strategy Export Compliance Consultants
Given the degree of volatility in the international arena, it is more important than ever that businesses remain aware of developments in trade laws. The new Chinese Export Control Laws are just one example of a development that could greatly effect a company’s business operations. CVG Strategy, LLC is recognized the world over as the premier provider of export compliance consultation.
We can help you develop customized export compliance programs that address your organizations requirements. We specialize in integrating compliance programs into quality management systems to ensure essential documentation, control, and assessment. This includes ITAR and Export Administration Regulations (EAR). We also can provide assistance with the Canadian Goods Program.
Our ITAR compliance consultants work with businesses of all sizes. We can provide training for your organization at all levels to keep your team up to date. We even serve as an outsourced Export Compliance Officer for some clients, who don’t have the bandwidth to dedicate to the function but need it done on a part-time basis.