AIRCRAFT, CHIP MEDICAL EQUIPMENT SECTORS MAY BE AFFECTED
Though companies around the world are on the Entity List, the change will most significantly impact Chinese entities, experts said. Factories that produce older, less sophisticated chips may be affected, as well as other sectors, including aircraft and medical equipment.
Chinese tech giant Huawei, video surveillance company Hikvision and drone manufacturer DJI are three examples of companies that may be impacted, one expert said. Many Huawei subsidiaries are already on the list, but not all.
The companies did not immediately respond to requests for comment.
An analysis by Kharon, a Los Angeles-based data and analytics company, found the expected rule could pull thousands of hidden subsidiaries in nearly 100 destinations around the world into “export-control crosshairs”.
“While Russia and China account for the majority of subsidiaries tied to already-listed entities, Kharon’s analysis uncovered that hundreds more are located in major trade and finance hubs – including the EU, the United States, the UK, Singapore, Switzerland, Japan, Canada, Australia and India,” the company said in a June brief in anticipation of the rule.
The US puts companies on the Entity List that it has determined pose risks to US national security or foreign policy. There are now about 1,100 Chinese entities on the list, according to the think tank Center for a New American Security. Overall, there are about 3,400 parties on the list, according to Kharon.
Since the Entity List was first published in 1997, restrictions applied only to the company or organisation named.
The Commerce Department “is concerned that the old approach can enable diversionary schemes, such as the creation of new foreign companies to evade Entity List restrictions,” the rule said. It will also apply to the Military End-User list.
The change is not a “wonder drug that cures all ills” said Dan Fisher-Owens, a California-based trade lawyer. Entity List companies may restructure, just as OFAC targets have done, he said.
“The game of whack-a-mole will continue”.
