THE TRUMP ADMINISTRATION is ratcheting up another notch its efforts to prevent China from acquiring US technology that could be used to modernise its military.
There is no lockdown in the rivalry between the two countries.
The US Commerce Department has announced that US companies will henceforth need licences to sell certain items to Chinese companies that supply the People’s Liberation Army. The permits are required even if the export is purportedly for civilian use and the buyer a non-military firm. The new rules also close a loophole that has allowed products that would require an export licence for sale to a military buyer to be exported licence-free to a civilian end-user.
The new rules have been trailed for some weeks, but were formally published today.
The US Commerce Department details the changes thus:
- Expansion of Military End Use/User Controls (MEU)
- Expands MEU license requirements controls on China, Russia, and Venezuela to cover military end-users in all three countries, as well as items such as semiconductor equipment, sensors, and other technologies sought for military end use or by military end-users in these countries.
- Removal of License Exception Civil End Users (CIV)
- Removes a license exception for exports, reexports, or transfers (in-country) to civilian end-users in countries of national security concern for National Security- (NS) controlled items.
- Elimination of License Exception Additional Permissive Reexports (APR) Provisions
- Proposes to eliminate certain provisions of a license exception for partner countries involving the reexport of NS-controlled items to countries of national security concern to ensure consistent reviews of exports and reexports of US items.
The rule change broadens the definition of a military end-user considerably by including the civilian supply chain. US exporters of semiconductors, chip-making equipment and parts for vehicles and aircraft will have to look carefully at their customers and, in turn, their customers’ customers.
The new rules also apply to Russia and Venezuela, if not seemingly Pakistan, Iran and North Korea, all three of which have also been the subject of export-control-violation legal sanctions by the Trump administration.
However, they seem most clearly intended for China. The evolution of the official language used to describe a mandate of the Bureau of Industry and Security (BIS), the agency that administers such export controls, to restrict ‘the rise of destabilizing foreign militaries’ to restricting ‘destabilizing military modernization programs’ is the giveaway.
In truth, it has been hiding in plain sight. US Commerce Secretary Wilbur Ross said flatly last July:
We are alert to China’s civil−military fusion strategy, and understand China’s tenacious pursuit of American technologies it needs to modernize its military. This cannot be tolerated, and we are updating our export control policies to account for this very real threat.
The Export Control Reform Act of 2018, passed with bipartisan support, elevated national security considerations in trade policy as the Trump administration sought to keep emerging and foundational US technologies out the hands of China and its military in particular. The latter is an increasingly difficult task given the relentless narrowing of the boundaries between civilian and military technologies.
That makes rules like the ones newly announced more inevitable but also more of a risk to legitimate trade. The economic impact of the new regulations is unknown at this point. The US Commerce Department is allowing a comment period to gather information on that. The BIS is required to take account of both the economic impact on US firms of its actions and US national security, though the latter is its paramount responsibility. US high-tech exports to China are worth around $2 billion a year.
The expansion of the BIS’s Entity List of companies with which US firms cannot sell sensitive technologies is the other part of that. More than one-quarter of some 200 companies added to the list during the Trump administration are Chinese firms such as Huawei and ZTE.