News

BIS targets companies involved in Chinese military research and development activities

09 April 2021

The U.S. Commerce Department’s Bureau of Industry and Security has added seven Chinese entities to the Entity List. This rule is effective 8 April 2021.

On 8 April 2021, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) announced the addition of seven entities to the Entity List, all of which are in China. This rule is being published in the Federal Register on 9 April, but is effective on 8 April. There is a savings clause for items that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), pursuant to actual orders, on 8 April 8 2021.

The rule imposes a license requirement for all items subject to the Export Administration Regulations (EAR), with a presumption of denial, for the following entities:

National Supercomputing Center Jinan
National Supercomputing Center Shenzhen
National Supercomputing Center Wuxi
National Supercomputer Center Zhengzhou
Shanghai High-Performance Integrated Circuit Design Center
Sunway Microelectronics
Tianjin Phytium Information Technology

According to BIS, these entities are being designated for being “involved in activities that support China’s military actors, its destabilizing military modernization efforts, and/or its weapons of mass destruction (WMD) programs.”

In addition, Secretary of Commerce Gina Raimondo stated the following in a press release:

“Supercomputing capabilities are vital for the development of many – perhaps almost all – modern weapons and national security systems, such as nuclear weapons and hypersonic weapons. The Department of Commerce will use the full extent of its authorities to prevent China from leveraging U.S. technologies to support these destabilizing military modernization efforts.”

Press reports by the Washington Post here and here provide some additional detail behind the Commerce Department’s decision-making:

“All seven are linked to China’s ambition to build the world’s first exascale computer, Commerce Department officials said. An exascale computer — the next frontier in high- performance computing — can handle a million trillion calculations per second.

That’s the sort of speed necessary to more accurately model the heat and drag on hypersonic vehicles, a field of advanced weapons research in which the Chinese military is already engaged, using its current generation of supercomputers.”

Next steps

Companies in the semiconductor and other industries will need to carefully assess their activities in China, as the Biden Administration’s actions make clear that it will continue to use export controls aggressively to target China’s policy of civil/military fusion, rather than breaking with the Trump Administration’s approach.

Please contact any of the Hogan Lovells lawyers listed below for further information or assistance.

Authored by Adam Berry, Ajay Kuntamukkala.