On April 9, 2021, the US Commerce Department’s Bureau of Industry and Security (BIS) published a final rule (“Final Rule”) in the Federal Register to add seven Chinese parties (together, the “Designees”) to the Entity List. The Final Rule took effect on April 8, 2021. According to the Final Rule and the Commerce Department’s press release, the Designees were added to the Entity List because they have procured US-origin items for use in building supercomputers that are used to support China’s military actors and military activities (i.e., its military modernization efforts and/or its weapons of mass destruction programs).
For all of the Designees, BIS imposed a license requirement that applies to all items subject to the US Export Administration Regulations (EAR). As a result, no supplier – US or non-US, wherever located – may export, reexport, or transfer (in-country) any commodity, software, or technology (“items”) subject to the EAR to a Designee or where a Designee acts as a purchaser, intermediate consignee, ultimate consignee or end-user in the transaction (“a party to the transaction”), unless licensed by BIS. Furthermore, no license exceptions may be used for exports, reexports, or transfers (in-country) of items subject to the EAR to a Designee or where a Designee is a party to the transaction. BIS will review license applications involving these Designees with a presumption of denial.
This is the first time the Biden administration has added Chinese parties to the Entity List. These designations are a continuation of efforts by the Trump administration to use of the Entity List against Chinese parties for their contribution to China’s supercomputing development. On June 24, 2019, BIS added five Chinese parties to the Entity List. Two of these five Chinese parties were added because of their involvement in the development of China’s exascale high performance computing that is allegedly used for military end-uses. We summarized that development in our prior blog post here. In response to the addition of the Designees to the Entity List, the spokesperson of the PRC Ministry of Foreign Affairs stated in his April 9, 2021 regular press conference that China will take necessary countermeasures to safeguard Chinese companies’ legitimate rights and interests, but did not specify what “necessary countermeasures” may be implemented.