China’s export control law was first implemented in December 2020, and Beijing has now announced a detailed implementation rule that will become effective Dec. 1. Under these Dual-Use Export Control Regulations, the overall dual-use good control mechanism and the export license application process will remain unchanged, but other restrictions will impact U.S. companies that rely on importing subject goods from China and their Chinese subsidiaries. Additional information is expected to be announced in the near future.
For more information on these regulations and how they may affect your business, please contact Xiaofeng Xu at (852) 2603 9350 or via email.
Highlights of the new rules include the following.
- The timeline for processing export license applications will remain 45 working days.
- China is expected to update its dual-use item control list before Dec. 1. Unlike the U.S. ECCN classification system, China’s current control list is based on HS code and product description, with temporary control measures and catch-all controls if there is a national security concern.
- Unlike the U.S. and many other countries, China does not have a white list of countries for exports of dual-use goods; if a product is classified as such in China, the exporter must apply for a license before export.
- It is anticipated that China will more frequently approve bulk export licenses for routine exports of dual-use goods, which have been limited in the past.
- There are a couple of scenarios in which an export license will not be required and only registration will be needed before export, such as aircraft components exported for repair and temporary export of dual-use items for testing and exhibition.
- Foreign exporters may need to apply for an export license for re-exports of dual-use goods originating from China or utilizing Chinese-controlled components or technology to produce dual-use items. China’s Ministry of Commerce will provide detailed implementation measures later.
- China’s Ministry of Commerce is expected to publish lists of foreign companies that may be subject to prohibition or restriction of exports from China; these lists are likely to be more comprehensive than the “unreliable entity list” and the sanctions list China currently maintains.
In light of the new regulations, now is a good time to start developing a China export control program if your company does not have one yet. Internal export compliance programs are highly encouraged under the new regulations and are one of the prerequisites for applying for bulk permits. Such programs should also consider re-export compliance if activities in foreign countries are subject to export control in China.
Further, exporters should review current products and export processes to help identify risks related to dual-use exports. This will help exporters prepare for the detailed implementation measures and control lists anticipated in the coming weeks.
Once the regulations are in effect, exporters should include accurate end-user and end-use information in their China export license applications and should submit such applications as early as possible. Penalties and export bans may be imposed for violations. Voluntary disclosures of errors may be helpful in reducing penalty amounts and maintaining an exporter’s good record in China’s export risk database.
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