According to a government notice posted on Tuesday, the United States has added 13 companies in China to a list of entities receiving U.S. exports that officials have been unable to inspect. The companies — which include two firms that supply parts for AstraZeneca’s COVID-19 vaccine, as well as other optical, machinery, and technology businesses — are placed on the “Unverified List” when U.S. export control officers cannot complete on-site visits to determine whether the Chinese companies can be trusted to receive U.S.-origin technology and other goods, according to the Commerce Department’s Bureau of Industry and Security.
The move comes after a review of a set of export restrictions that the United States began to apply in October 2022. The restrictions reduce the types of semiconductors that American companies can sell to Chinese companies, including chips that enable artificial intelligence and self-driving cars. The U.S. Commerce Department says the new rules will help address a security threat posed by certain semiconductors that can be used for prohibited military end-use activities and to support human rights violations in China’s Xinjiang autonomous region.
Under the new rules, if foreign governments prevent U.S. export control officers from conducting on-site inspections, the company will be placed on a new “Unverified List,” a more restrictive category. Suppose a company remains on the Unverified List for 60 days. In that case, the Bureau of Industry and Security will begin adding it to the “Entity List,” which has much harsher penalties.
Companies on the Entity List can’t be sold to customers outside of China and must have an export license for any reexports or exports from abroad to customers in China, regardless of whether the items are listed on the Commerce Control List. The government will only lift the designation if it can be determined that the entities are no longer involved in prohibited end uses or supporting human rights violations, among other things.
If the companies are on the list, U.S. exporters must conduct additional due diligence before shipping any items to them and may have to apply for more licenses. The companies on the list include PNC Systems in Jiangsu, Beijing Shengbo Xietong Technology, Guangzhou Xinwei Transportation, and Plexus in Xiamen.
In a statement, the United States and China agreed to work together to ensure that the two countries have robust trade and investment relations while protecting each other’s intellectual property and avoiding misappropriating each other’s technology. The statement also acknowledged that both countries have laws on the books that can be used to punish those who steal technology or disclose confidential business information.
