The new export control program of the PRC
Since December 2020, the People’s Republic of China has had its own new export control program.
China certainly wants to defend its leading status in certain technologies and sees itself as a globally active player that is creating its own legislature. A Western-style export control law based on the standards of a developed industrial nation seems a suitable means to achieve this.
The plan for a reform had been known since 2016, and the first known draft was published a year later. This still had strong features of US export control law. At the end of 2019, a draft was published that took on more European features, which did not change until June 2020. The draft was further refined in September, the same year.
On October 17, 2020, the National People’s Congress approved the new export control law, which took effect on December 1, 2020.
Export Control Program Contents:
- Control of military equipment & dual-use goods, these are mostly technologies and services related to China’s national security and interests
- Goods shipments within China or from China to foreign countries are recorded on controlled goods list
- Goods shipments on the temporary controlled goods list allows for control for a maximum of two years
- System approves export of controlled and non-controlled goods (approval depends on “social credit system”)
- With internal compliance program, companies can obtain facilitations, such as general export permits
- Chinese chambers of commerce and industry should act as service providers to advise companies on export controls
- Chinese export control authorities can evaluate possible export countries and regions in terms of risk potential and control measures and make decisions accordingly
- In addition to physical and electronic export, re-export is also defined
What happens in case of violations:
Violation of these regulations may result in various consequences. These range from fines, customs or criminal penalties, notations in the social credit system and bans on conducting export business for five years to a lifetime. In addition, a so-called “Unreliable List” was introduced. Companies that act contrary to Chinese interests are placed on the “Unreliable List. Through the “Social Scoring” program, companies within China are judged according to the aspect of “law-abidingness”, while the “Unreliable List” is mainly aimed at foreign companies.
Authorities can conduct extensive investigations into possible violations, even outside China, for example by questioning companies, examining their place of business and inspecting documents or bank accounts. Anonymous whistleblowers are to be protected.
Due to a current strong political polarization, importers and exporters should be concerned about their supply chains, as the combination of U.S. technology and Chinese technology could become more difficult in the future. Products may need to be designed differently for market approval for the Chinese mainland market (including Hong Kong) and the U.S. market. In addition, goods with U.S. and/or Chinese components can no longer be interchanged at will.