Detailed Description of PRC Export Controls
Author: QIU MENGYUN & HAN XIAOXI 2023-11-29Introduction
The export control system in mainland China is a set of regulations to limit the export of specific goods, technologies, and services to fulfill non-proliferation and other international obligations, maintain national security, and protect development interests. It is based on national laws, administrative regulations, ordinances, standards, and operational procedures. This system ensures that specific controlled items are not diverted for unintended purposes or to unauthorized users. It includes various legal frameworks such as the PRC Export Control Law, the PRC Foreign Trade Law, and the Regulations on the Prohibition and Restriction of Imports and Exports and etc. These laws and regulations specify critical elements including an export licensing system, exporter registration system, blacklist management, PRC controlled items lists, and corresponding penalties. China regularly updates its control lists and technical parameters in response to changes in the international landscape to meet the requirements of global non-proliferation standards.
Table of Contents
I Scope of PRC Export Controlled Items
II Export Licenses
III Restrictions on End-User and End-Use of PRC Controlled Items and Technologies under the PRC Export Control Law
IV Possible Consultation with the PRC Competent Commerce Authorities
V Conclusion and Suggestions for Enterprises in Mainland China.
I Scope of PRC Export Controlled Items
According to the PRC Export Control Law, Exporters shall obtain PRC export licenses from the competent PRC export control authorities for the export of PRC-controlled items and technologies or temporarily PRC-controlled items and technologies[1] listed on various PRC export control lists (“PRC controlled items”).
For deciding whether an item (including technology) is a PRC Controlled Item, Exporters shall refer to the following effective PRC export control lists:
1. Arms Export Administration List (《軍品出口管理清單》, effective on November 15, 2002, “Arms Export Administration List”)[2]
2. Catalogue of Dual-Use Items and Technologies Subject to the Administration of Export Licenses (2023 version) (《兩用物項和技術出口許可證管理目錄》, effective on January 1, 2023,“Dual-Use Items and Technologies Export Catalogue”).[3] In accordance with the Export Control Law of the People's Republic of China, the Measures for the Administration of Import and Export Licenses for Dual-Use Items and Technologies (《兩用物項和技術進出口許可證管理辦法》) promulgated under the Decree [2005] No.29 of the Ministry of Commerce and the General Administration of Customs, and the Customs Import and Export Tariff of the People's Republic of China (2023), the Ministry of Commerce and the General Administration of Customs have adjusted the Catalogue of Dual-use Items and Technologies Subject to the Administration of Import and Export Licenses (“Dual-Use Items and Technologies Catalogue”). The Dual-Use Items and Technologies Catalogue is divided as Catalogue of Dual-Use Items and Technologies Subject to the Administration of Export Licenses and Catalogue of Dual-Use Items and Technologies Subject to the Administration of Import Licenses. Controlled items and technologies listed on the Dual-Use Items and Technologies Export Catalogue are also the controlled items and technologies include following:
(1) Items and Technologies listed on Nuclear Export Control List [4]
(2) Items and Technologies listed on Dual-Use Nuclear Items and Related Technologies Export Control List[5]
(3) Items and Technologies listed on Dual-Use Biological Agents and Related Equipment and Technologies Export Control List of the People's Republic of China[6]
(4) Items and Technologies listed on Regulations of the People's Republic of China on the Administration of Controlled Chemicals[7]
(5) Items and Technologies listed on Measures on Export Control of Certain Chemicals and Related Equipment and Technologies approved by the State Council[8]
(6) Items and Technologies listed on Missiles and Missile-related Items and Technologies Export Control List of the People's Republic of China[9]
(7) Precursor Chemicals (I)[10]
(8) Precursor Chemicals (II)[11]
(9) Certain Dual-Use Items and Technologies[12]
(10) Special Civil Items and Technologies[13]
(11) List of Commercial Cryptographic Products subject to Export Control[14]
According to the Measures for Administration on Import and Export License for Dual-use Items and Technologies, the MOFCOM shall be in charge of the nationwide administration of the import and export license for dual-use items and technologies, responsible for formulating measures, regulations, and regimes for the administration of the import and export license for dual-use items and technologies, for supervising and inspecting the implementation of measures for the administration of the import and export license for dual-use items and technologies, and for granting penalties on the violations.
3. Catalogue of Technologies Prohibited or Restricted from Export (No. 38 of 2020)[15] (《中國禁止出口限制出口技術目錄》, revised on August 28, 2020) jointly issued by the MOFCOM and the Ministry of Science and Technology according to the Foreign Trade Law of the People’s Republic of China (Revision 2016) (《中華人民共和國對外貿易法（2016修正）》) and the Administrative Regulations of the People's Republic of China on Import and Export of Technologies (Revised in 2020) (《中華人民共和國技術進出口管理條例（2020修訂）》).
The State Council foreign economic and trade department (國務院外經貿主管部門) shall be responsible for the administration of technology import and export nationwide; while the foreign economic and trade department of the governments of provinces, autonomous regions and centrally administered municipalities shall be responsible for administration of technology import and export within their administrative region in accordance with the authorization by the State Council foreign economic and trade department.
Besides the above catalogues, certain items are controlled under individual announcements or decrees. For example, the export control measures of Potassium perchlorate and High-pressure water cannons are separately announced by MOFCOM and the General Administration of Customs.[16]
II Export Licenses
In terms of export licenses:
1.for export of the items listed on the Arm Export Control List, an exporter shall obtain an arm export license (軍品出口許可證) from the PRC Science and Technology Commission and Equipment Development Department of the Ministry of National Defense;
2. for export of the items listed on the Commercial Cryptographic Products Export Control List and Dual-Use Items and Technologies Export Catalogue, an exporter shall obtain a dual-items and technologies export license (兩用物項和技術出口許可證) from the competent department of MOFCOM;
3. for export of the items as technology restricted to export under the Catalogue of Technologies Prohibited or Restricted from Export, an exporter shall obtain a technologies export license (技術出口許可證) from the State Council foreign economic and trade department.
III Restrictions on End-User and End-Use of PRC Controlled Items and Technologies under the PRC Export Control Law
The PRC Export Control Law has restrictions on the end-user and end-use of PRC Controlled Items.
According to the PRC Export Control Law, to apply for the PRC export license, the exporter shall submit to the State's export control authorities the documents evidencing the end-user and end-use of the item to be exported and related technical information and other data, and such document shall be issued by the end-user or relative government of the country or region where the end-user is located. The end-user of the item and related technical information and other data shall undertake not to change the end-use and related technical information and other data and not to transfer them to any third party without the consent of the State's export control authorities. Both the exporter and importer are obligated to report the State's export control authorities if they find that the end-user or end-use and related technical information and other data are likely to be changed. [17]
In addition, it is also suggested that exporter regularly check whether itself and the end-user of the item and related technical information and other data are listed on the PRC entity list (管控名單)(if promulgated). According to the PRC Export Control Law, exporters shall not trade with importers and end users that are listed on the PRC entity list in violation of the relevant provisions. Where an exporter does need to trade with any entities listed on the PRC entity list under special circumstances, it may file an application with the State's export control authorities for permission. The State's export control authorities may also take other necessary measures, such as prohibiting or restricting the entities listed on the PRC entity list from doing transactions of relevant PRC Controlled Items and ordering them to suspend the export of relevant PRC Controlled Items.
As of the date of this memorandum, the PRC entity list has not been officially promulgated. Under the PRC Export Control Law, the PRC entity list will list the importers and end users that fall under any of the following circumstances: (1) breaching the requirements for the administration of end-users or ultimate uses; (2) being likely to endanger national security and interests; or (3) using PRC Controlled Items for any terrorist purposes. [18]
IV Possible Consultation with the PRC Competent Commerce Authorities
According to the PRC Export Control Law, if an exporter is unable to determine whether the export of goods, technologies, and services is controlled under the PRC Export Control Law, the exporter may submit an inquiry to the State export control authorities (國家出口管制管理部門) and the State export control authorities shall respond in a timely manner.
Although the PRC Export Control Law is still new, several administrative cases in the Customs now refer to the PRC Export Control Law as a legal basis. Likewise, in the criminal field, judgments related to export violations of dual-use items have emerged following the enactment of the PRC Export Control Law.[19] Thus, it is suggested that the exporter check the PRC export control lists to decide whether the item to be exported is a PRC Controlled Item. If the exporter is unable to make a relatively accurate decision or is uncertain about its own decision, the exporter may consult the local competent commerce authorities.
V Conclusion and Suggestions for Enterprises in Mainland China.
In conclusion, ensuring corporate compliance with PRC export control laws and regulations is a critical aspect of conducting international business responsibly and legally. Our compliance suggestions are as follows:
1. Understand Applicable Laws and Regulations: Businesses should have a thorough understanding of the PRC export control laws and regulations.
2. Perform Due Diligence: Implement robust due diligence processes to identify whether products, technologies, or services fall under various controlled items lists. This includes understanding end-uses and end-users for exported items.
3. Export Licensing: Ensure that all required export licenses are obtained before any controlled items are shipped. Regularly review the licensing requirements as they may change with updates to control lists.
4. Controlled Items Lists: Regularly review and classify goods and technologies accurately according to the PRC controlled items lists.
5. Internal Compliance Program (ICP): Develop and maintain an Internal Compliance Program that outlines procedures for export control compliance, including training employees, auditing, and record-keeping.
6. Training and Awareness: Provide regular training to employees regarding export control regulations and the company's internal control procedures to ensure they understand their roles and responsibilities.
7. Stay Informed: Stay up-to-date with PRC and international changes in export control regulations to adjust compliance programs accordingly.
8. Risk Assessment and Management: Conduct periodic risk assessments of export control compliance and implement risk management strategies.
9. Record Keeping: Maintain thorough records of export transactions, licensing documentation, and due diligence efforts as required by law.
10. Seek PRC Legal Advice: When in doubt, consult with PRC legal experts specializing in export controls to ensure your business remains compliant.
NOTES
[1] The State's export control authorities may, in light of the needs of safeguarding national security and interests and fulfilling non-proliferation obligations and other international obligations, impose temporary control over goods, technologies and services not included in the export control list, upon the approval of the State Council or the Central Military Commission.
[2]See,http://chinadefense.sastind.gov.cn/n6759542/c6811691/content.html
[3]See,http://images.mofcom.gov.cn/aqygzj/202212/20221230192140395.pdf
[4] Chinese origin: 核出口管制清單所列物項和技術
[5] Chinese origin: 核兩用品及相關技術出口管制清單所列物項和技術
[6] Chinese origin: 生物兩用品及相關設備和技術出口管制清單所列物項和技術
[7] Chinese origin: 監控化學品管理條例名錄所列物項
[8] Chinese origin: 有關化學品及相關設備和技術出口管制清單所列物項和技術
[9] Chinese origin: 導彈及相關物項和技術出口管制清單所列物項和技術
[10] Chinese origin: 易制毒化學品（一）
[11] Chinese origin: 易制毒化學品（二）
[12] Chinese origin: 部分兩用物項和技術
[13] Chinese origin: 特殊民用物項和技術
[14] Chinese origin: 商用密碼出口管制清單
[15]See,http://www.mofcom.gov.cn/zfxxgk/article/xxyxgz/202112/20211203230742.shtml
[16]See,http://aqygzj.mofcom.gov.cn/article/glml/202112/20211203233142.shtml;and http://aqygzj.mofcom.gov.cn/article/glml/202211/20221103363969.shtml
[17] Refer to the Article 15 of the PRC Export Control Law
[18] Refer to the Article 18 of the PRC Export Control Law
[19]See,https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=AmRp3IYia0dNyoc7xQFV6AKFtUAdKSocsQueRamgq6GvxghaicrgL5O3qNaLMqsJcR4sdiGyLh61JxQThvhSRzxfvFlcnFqe/AprGMJ++qg3ToQ5EuR9ub4UACwI+jUt
