Effective December 16, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a Final Rule adding 36 Chinse entities to BIS’s Entity List. These additions are intended to further restrict China’s “ability to leverage artificial intelligence, advanced computing, and other powerful, commercially available technologies for military modernization and human rights abuses,” according to Under Secretary of Commerce for Industry and Security Alan Estevez.
This Final Rule follows BIS’s advanced computing and semiconductor manufacturing equipment rule of October 7, 2022 (see Thompson Hine bulletin dated October 31, 2022), and the majority of these additions to the Entity List are directly related to U.S. efforts to further restrict access to such advanced technologies. The additions include:
- Twenty-one entities that are major artificial intelligence (AI) chip research and development, manufacturing, and sales entities. According to BIS, these companies are, or have close ties to, government organizations that support the Chinese military and the defense industry. For these entities, BIS is also applying the Foreign Direct Product (FDP) rule as indicated with a footnote 4 designation on the Entity List. The application of the FDP rule further restricts their ability to obtain U.S.-origin technologies and other items produced in foreign countries if they are produced using substantial U.S. technology, tools, or other inputs or components.
- Two entities are being added for acquiring or attempting to acquire U.S.-origin items in support of the China’s military modernization.
- Seven entities have been added for engaging in support of China’s military modernization and reportedly have direct ties to activities of concern, including hypersonic weapons development, design and modelling of vehicles in hypersonic flight, designing and producing ballistic missile radomes, using proprietary software to model weapons design and damage, and other efforts to support China’s military-civil fusion activities.
- Four entities have been added due to a “significant risk” of a negative impact on U.S. national security and potential diversion.
Notably, two of the companies are Yangtze Memory Technologies Co. (and its Japanese subsidiary) and Shanghai Micro Electronics Equipment (Group) Co., Ltd., both major Chinese semi-conductor chip manufacturers. For Yangtze Memory, BIS cited concerns of diverting U.S. export controlled items to Huawei and Hikvision entities that are on the Entity List. Both Yangtze Memory and Shanghai Micro were previously on BIS’s Unverified List.
One Chinese entity, Tianjin Tiandi Weiye Technologies Co., Ltd., is being added for engaging in or enabling activities involving China’s campaign of repression and human rights violations against Uyghurs and other Muslim minority groups in the Xinjiang Autonomous Region, as well as enabling the procurement of U.S.-origin items for use by Iran’s Islamic Revolutionary Guard Corps (IRGC).
The final entity has been added for Iranian-related concerns. Beijing UniStrong Science & Technology Co., Ltd. has been added to the Entity List for facilitating the illegal export of U.S.-origin electronics to Iran for use in the production of military unmanned aerial vehicles (UAV) and missile systems that have been used for attacks throughout the Middle East.
As a result, licenses are required from BIS for all exports, reexports or transfers (in-country) to these entities for all items subject to the Export Administration Regulations (EAR). BIS will review any license applications pertaining to these entities under a policy of denial, and no license exceptions are available.