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China’s Export Control Law (“ECL”) came into effect on 1 December 2020, providing a framework to a series of separate administrative regulations on export controls issued prior to the law’s enactment.

While no implementing rules or regulations under the ECL have been enacted since its passage into law, China’s Ministry of Commerce (MOFCOM) recently released Announcement No. 10 of 2021, on “Internal Compliance Guidelines on the Export of Dual-Use Items” (hereafter, the “Guidelines”) pursuant to Article 5 of the ECL. The Guidelines replace the previous guidance issued by MOFCOM in 2007 on the same topic. The Guidelines have been published in Mandarin. To date, MOFCOM has not provided an English translation.

The Guidelines set out and elaborate on 9 key elements that form an effective internal compliance program. The elements are: (1) enactment of a policy statement; (2) establishment of an organizational structure; (3) comprehensive risk assessment; (4) establishment of review procedures; (5) formulation of emergency measures; (6) training and education; (7) compliance audits; (8) recordkeeping; and (9) management manual preparation. The Guidelines discuss practical tips on how each of the key elements can be incorporated into the export operator’s compliance framework and processes, and they provide templates for the business’s ‘Export Control Compliance Policy Statement’ and employee’s ‘Export Control Compliance Commitment Statement‘; detailed product and third party screening considerations; list of red flag considerations in a customer due diligence exercise; compliance audit considerations; and more. 

As export operators move to put in place or adapt their compliance programs to take into account recent export control developments, the Guidelines will serve as a useful reference point for export operators across different industries and operational contexts (including, for e.g., business, universities, science and technology research institutes). MOFCOM’s announcement also notes that licensing privileges may be extended to export operators with established and well maintained compliance programs. In the event where a non-compliance occurs, active steps taken to mitigate adverse consequence may be taken into account as mitigating factors in determining the administrative penalty.

Author

Weng Keong Kok is an associate in Baker McKenzie Hong Kong office.

Author

Author

Ivy Tan is an Associate in Baker McKenzie's Hong Kong office.

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