US publishes list of Chinese firms to face limits for military links

(ATF) The US Commerce Department on Monday December 21 published a list of 58 Chinese and 45 Russian companies that are dubbed a ‘military end user’ (MEU) and will face export limits.

“This action establishes a new process to designate military end users on the MEU list to assist exporters in screening their customers for military end users,” said US Commerce Secretary Wilbur Ross.

“The department recognizes the importance of leveraging its partnerships with US and global companies to combat efforts by China and Russia to divert US technology for their destabilizing military programs, including by highlighting red flag indicators such as those related to communist Chinese military companies identified by the Department of Defense.”

The MEU list informs exporters, re-exporters, and transferors that a licence will be required to export, re-export, or transfer designated items to listed entities.

The final list does not include Commercial Aircraft Corporation of China (COMAC), or the Hong Kong subsidiaries of Colorado’s Arrow Electronics and Texas-based TTI Inc, a Berkshire Hathaway electronics distributor. Those companies were on a draft list reported earlier by Reuters.

The final list names 103 entities, 14 fewer than on the draft list seen by Reuters in November. Some 58 are designated in China, down from 89, and 45 entities are tied to Russia, up from 28.

The announcement on Monday followed the addition of dozens of Chinese companies to another US trade blacklist on Friday, including the country’s top chipmaker SMIC and Chinese drone manufacturer SZ DJI Technology.

Tensions between Washington and Beijing have escalated over the past year, as Trump blamed China for the coronavirus pandemic, a national security law was imposed in Hong Kong and a dispute involving the South China Sea intensified.

Definition expanded

The Commerce Department expanded the definition of “military end users,” as the department defines companies with military ties.

The category includes any person or entity that supports or contributes to the maintenance or production of military items – even if their business is primarily non-military.

The “military end user” designation requires US companies to obtain licences to sell to the firms, which are more likely to be denied than granted.

The list is not definitive and Commerce officials said US companies must continue to do their own due diligence to help decide whether their buyers are considered military end users.

Publication of the list is likely to anger China. Chinese Foreign Ministry spokesman Zhao Lijian in November called news of the draft list “unprovoked suppression of Chinese companies by the United States.”

While COMAC was removed, seven Aviation Industry Corporation of China (AVIC) subordinate entities remain on the list.

General Electric Co and Honeywell International both have joint ventures with AVIC and supply COMAC, which is spearheading Chinese efforts to compete with Boeing and Airbus.

Earlier this month, Arrow and TTI both denied their subsidiaries have ties to the Chinese military and said they were working to be removed from any final list.