China has released for comment a draft export control law that could drastically change the country’s export controls on dual-use, military, and related items.

The draft law would provide for the development of a unified export control system that manages exports through control lists (one for dual-use items and one for military arms and goods) and licensing. The government would establish broader powers to ban exports of certain controlled items to controlled destinations and prohibit exports to certain persons and entities. Toward this end the draft calls for an end-user and end-use risk management system and a blacklist of at-risk foreign importers and end-users.

General and specific export licenses would be established. Licenses for items on the dual-use list would be issued within 45 days. For exports of military arms and goods, exporters would have to not only comply with the licensing requirement applicable to the transaction but also be “qualified for exclusive export,” which implies a registration requirement like that imposed by the U.S. Department of State’s Directorate of Defense Trade Controls.

The draft law also sets forth new measures to aid compliance with export controls, including the encouragement of internal compliance mechanisms, consultation with state export control authorities if an exporter is unsure if a license is required, and a right for individuals to inform authorities of suspected violations.

Penalties for unlicensed exports or other violations of the draft law would be significant. Authorities would be able to impose fines of five to ten times the illegal business revenue or, if that amount is less than 50,000 yuan (US$7,319.68), a fine of 50,000 to 500,000 yuan (US$7,319.68 to US$73,196.79). Any illegal income could be confiscated and export privileges and licenses could be suspended or revoked. Personal liability for those directly responsible for violations would include fines up to 300,000 yuan (US$43,918.08).

The draft law also includes a de minimis exception for re-exports, whereby items with Chinese controlled content below a certain threshold would not be controlled under the export law after they leave China, and a principle of reciprocity, whereby China could impose reciprocal measures against any country that imposes discriminatory export control measures on it.

For more information on the provisions or effects of the draft law, or for assistance in developing or submitting comments, please contact Sandler, Travis & Rosenberg’s Export Controls and Economic Sanctions group.

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