This move significantly increases the number of companies needing licenses to receive US goods and services.

The United States is increasing scrutiny of companies in China and other countries that use subsidiaries or other foreign affiliates to circumvent restrictions on exports of chipmaking equipment and other goods and technology.

The U.S. Department of Commerce on September 29 issued a new rule expanding the list of restricted exports, known as the Entity List, to automatically include subsidiaries owned by a company on the list that is 50% or more owned. The move significantly increases the number of companies that need licenses to receive U.S. goods and services.

The rule could disrupt supply chains and make it more difficult for companies to determine whether exports to customers or suppliers are restricted. Under the rule, certain transactions could be allowed for 60 days.

China's Ministry of Commerce has strongly criticized the US regulation, saying it affects the legitimate rights and interests of enterprises, disrupts the international economic and trade order, and undermines the security and stability of the global industrial and supply chain.

Analysts say older chip factories, as well as other sectors such as aircraft and medical equipment, could be affected. One expert cited Chinese tech giant Huawei, surveillance equipment maker Hikvision and drone maker DJI as three examples of companies that could be subject to the new rules. Several Huawei subsidiaries are already on the list.

An analysis by Kharon, a Los Angeles-based data and analytics firm, found that the new US rule could put thousands of anonymous subsidiaries in nearly 100 destinations around the world “under the export control radar.” While Russia and China account for the majority of subsidiaries linked to listed entities, Kharon’s analysis found that hundreds more are located in major trade and financial centers such as the European Union, the United States, the United Kingdom, Singapore, Switzerland, Japan, Canada, Australia and India.

The US places companies on the Entity List if it determines they pose risks to its national security or foreign policy. According to the Center for a New American Security, there are currently about 1,100 Chinese entities on the list.

Source: VTV

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