In the early morning of March 3, 2023 Beijing time, the Bureau of Industry and Security (BIS) of the United States Department of Commerce included 28 Chinese enterprises and individuals such as Dragon Core Technology and Inspur Group in the Entity List, limiting their access to relevant products and technologies from the United States. BIS believes that these enterprises and individuals pose a threat to the national security and foreign policy interests of the United States, and therefore must obtain permission from BIS before selling controlled items and technologies originating in the United States to them.

According to the US announcement, the Chinese enterprises and individuals included in the entity list this time include:

What is an entity list?

The Entity List is a trade blacklist published by the Bureau of Industry and Security (BIS) of the United States Department of Commerce. Individuals, entities, or governments on the list must obtain a license issued by the BIS in order to obtain controlled products and technologies. Through this system, BIS closely monitors and restricts the trading activities of listed entities related to controlled items and technologies.

Entity List Enterprise Implementation Status

According to recent data released by the US Department of Commerce, as of February 28, 2023, there were 639 Chinese entities on the "entity list" of US export controls to China. Among them, more than 60 enterprises were added to the list in 2022, covering high-tech fields such as chip semiconductors, artificial intelligence, and biological genetics.

Consequences of Entity Lists

Once a company is included in the entity list, the cost of compliance and transaction difficulty will significantly increase, and it will negatively affect international reputation and investor confidence. Specifically, first, enterprises included in the entity list must apply to BIS for a license and perform additional cumbersome procedures to obtain relevant controlled items and technologies. If controlled items and technologies are necessary for production and operation, enterprises on the entity list will face greater uncertainty. Second, U.S. exporters are not allowed to sell controlled products and technologies to target companies on the entity's list without obtaining government permission, otherwise they will face significant fines and even criminal liability. In order to reduce transaction risk or compliance costs, US companies are generally reluctant to cooperate with companies on the entity list. Third, if a company is included in the entity list, it will cause panic in the capital market, leading to a decline in stock prices, and affecting investor decision-making.

Removal of Entity List

The removal threshold for the entity list is high and requires the unanimous consent of all member units of the End User Review Committee (ERC). Therefore, successful cases that can be removed from the list are rare. However, if the enterprise included in the entity list believes that the allegations of the BIS are inconsistent with the facts, or that the controlled items and technologies are necessary for the production and operation of the enterprise, it should promptly communicate with the BIS and apply for removal from the list. For legal support in this regard, please contact us.