US Enhances Export Blacklist Targeting Chinese Subsidiaries in Major Crackdown
New U.S. Export Rule Expands Entity List to Impact Global Trade
U.S. Expands Restrictions on Chinese Companies and Subsidiaries
In a significant policy shift, the U.S. has tightened its export controls by expanding the scope of its Entity List, impacting companies globally, particularly in China. The new rule, unveiled by the Commerce Department, extends restrictions to cover subsidiaries owned 50% or more by companies already on the Entity List. This move effectively increases the number of businesses requiring licenses to access American goods and services.
Substantial Increase in License Requirements
The expansion means that many subsidiaries, even those used to bypass existing export curbs, now fall under strict regulations. Exporters are tasked with ensuring compliance by determining the ownership stakes of their customers or suppliers, adding complexity to international trade. Although certain transactions may be permitted under a 60-day grace period, the changes are likely to cause significant disruptions to global supply chains.
China’s Strong Opposition to New Restrictions
China’s Commerce Ministry has expressed strong disapproval, labeling the rule as damaging to global economic stability and an infringement on the legitimate rights of affected enterprises. The Chinese government argues that these measures severely disrupt international trade order and compromise the security of global industrial chains.
Impacts on Key Industries: Huawei, DJI, Hikvision Concerned
Analyses indicate that the new rule will predominantly affect Chinese technology firms such as Huawei, DJI, and Hikvision. The extension of the ‘50% ownership rule’ aligns with existing U.S. Treasury sanctions and could present significant hurdles for older chip manufacturing, aircraft, and medical equipment sectors.
| Company | Sector | Potential Impact |
|---|---|---|
| Huawei | Telecommunications | Restricted access to American goods |
| DJI | Drone Manufacturing | Increased license requirements |
| Hikvision | Video Surveillance | Export limitations |
Kharon’s Analysis: Global Subsidiary Scrutiny
A report by data analytics company Kharon foresees thousands of hidden subsidiaries coming under scrutiny across nearly 100 countries. This includes major economic hubs like the EU, Singapore, Japan, and Australia. The analysis highlights the extensive reach of the new U.S. policy, affecting trade relations worldwide.
Entity List Background and Future Challenges
Approximately 3,400 parties are on the Entity List, with about 1,100 being Chinese entities. The U.S. government updates this list to safeguard national security interests. The new rule addresses concerns about potential evasive maneuvers by listed companies, though experts like trade lawyer Dan Fisher-Owens caution that companies might restructure to bypass these constraints, a phenomenon described as a “game of whack-a-mole.”
As this rule comes into effect amidst ongoing U.S.-China trade talks, its long-term implications on trade and diplomatic relations remain to be seen. Emegypt will continue to monitor developments in this evolving situation.
