Entity List

The Entity List is a trade blacklist published by the United States Department of Commerce's Bureau of Industry and Security, consisting of certain foreign persons, entities, or governments.[1] Entities on the Entity List are subject to U.S. license requirements for the export or transfer of specified items, such as some U.S. technologies.[1][2] Being included on the Entities List is less severe than being designated a "Denied Person," which Chinese manufacturer ZTE was once subject to.[3]

First published in 1997 to inform the public on entities involved in disseminating weapons of mass destruction, the list has since expanded to include entities that engaged in "activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests."[4] It is published by the Department of Commerce's Bureau of Industry and Security (BIS) at Supplement No. 4 to Part 744 of the Export Administration Regulations (EAR).[1]

Entities on the Entity List

According to Chinese media reports, a total of 260 Chinese entities are on the Entity List.[5] Designated entities consist of mainly companies and research institutions (including universities like Harbin Institute of Technology) involved in military technology, 5G, AI and other advanced technologies.[5]

Notable entities on the Entity List include Huawei, a Chinese telecommunications and consumer electronics manufacturer.[2] Huawei was added to the list in May 2019, with a revision in May 2020 that further tightened sanctions,[6] resulting in it no longer being able to use certain Android software on its smartphones.[2] While Google services are banned in China, consumers outside China are accustomed to Google services, and Huawei's smartphone market share declined as a result.[2]

Chinese telecoms manufacturer ZTE was once subject to the more severe designation of "Denied Person."[3] Dozens of Chinese entities participating in China's "military-civil fusion" or the alleged human rights abuses in Xinjiang province are on the list, including companies that make surveillance gear and those that helped the Chinese military to construct artificial islands in the South China Sea.[7][8] Other entities in China, Russia and Venezuela are also included in the List.[9]

Chinese Responses

Advice of Chinese experts

Chinese experts advised Chinese entities on the list to "speedily seek alternative supply strategies for sensitive equipment, parts, software or technology" and said that it is unlikely for them to be removed from the list.[5]

Experts also recommended that China increase its research and development and seek more indigenization of technology to avoid more severe sanctions in the future.[5] The servers, databases, and data storage devises provided by Intel, Oracle and Dell EMC are widely used in Chinese banking, telecommunications, and electricity sectors and is seen as weak point.[10] As of 2020, Chinese cellular service providers and certain other state-owned enterprises have begun (and some have completed) the replacement of all U.S. and western-sourced software and hardware in crucial domains.[10]

Huawei's response and stockpiling

Before the September 15, 2020 deadline, Huawei was in "survival mode" and stockpiled "5G mobile processors, Wifi, radio frequency and display driver chips and other components" from key chip suppliers and manufacturers, including Samsung, SK Hynix, TSMC, MediaTek, Realtek, Novatek, and RichWave.[11] Even in 2019, Huawei spent $23.45 billion on the stockpiling of chips and other supplies in 2019, up 73% from 2018.[11]

On its most crucial business, namely, its telecoms business (including 5G) and server business, Huawei has stockpiled 1.5 to 2 years' worth of chips and components.[12] It began massively stockpiling from 2018, when Meng Wanzhou, the daughter of Huawei's founder, was arrested in Canada upon U.S. request.[12] Key Huawei suppliers included Xilinx, Intel, AMD, Samsung, SK Hynix, Micron and Kioxia.[12] On the other hand, analysts predicted that Huawei could ship 195 million units of smartphones from its existing stockpile in 2021, but shipments may drop to 50 million in 2021 if rules are not relaxed.[11]

China's Unreliable Entities List

In response to the Entity List, the Chinese government announced in May 2019 that it would establish an "unreliable entities" list.[13][14] On the list are foreign companies, organizations or persons which has "severely damaged the legitimate interests of Chinese firms by not obeying market rules, violating contracts or blocking or cutting off supply for non-commercial reasons."[14]

In June 2019, multiple ministries of the Chinese government summoned the representatives of technology companies, including Microsoft, Dell and Samsung, to warn of dire consequences if they cooperated with the U.S. ban on sales of key American technology to Chinese companies.[15] In the meeting, China also emphasized its commitment to open trade and the protection of intellectual property.[15]

The Chinese list was created and went into immediate effect in September 2020, after the Trump administration decided to ban Chinese apps TikTok and WeChat from American app stores.[8] Chinese media has previously identified Apple, Qualcomm, Cisco and Boeing as U.S. firms that could be targets of the list.[16]

References
  1. "CBC FAQs - 1. What is the Entity List?". www.bis.doc.gov. Archived from the original on 2020-10-23. Retrieved 2020-10-31.
  2. Kharpal, Arjun (2020-10-30). "China's Huawei smartphone shipments plunge as U.S. sanctions continue to bite". CNBC. Archived from the original on 2020-10-30. Retrieved 2020-10-31.
  3. "US chipmakers hit after Trump blacklists Huawei". www.ft.com. Archived from the original on 2020-10-03. Retrieved 2020-10-31.
  4. "CBC FAQs - Entity List FAQs". www.bis.doc.gov. Retrieved 2020-10-31.
  5. sina_mobile. "美再将11家中企列入实体清单 专家：被"拉黑"后基本不可能"变白"". news.sina.cn. Archived from the original on 2020-11-01. Retrieved 2020-10-31.
  6. "Commerce Addresses Huawei's Efforts to Undermine Entity List, Restricts Products Designed and Produced with U.S. Technologies". U.S. Department of Commerce. Archived from the original on 2020-05-15. Retrieved 2020-10-31.
  7. "Commerce Department Adds 33 Chinese Entities and Research Institutions to Entity List, Citing Military Ties and Human Rights Violations | Faegre Drinker Biddle & Reath LLP". www.faegredrinker.com. Archived from the original on 2020-08-17. Retrieved 2020-10-31.
  8. Bradsher, Keith; Zhong, Raymond (2020-09-19). "After Trump's TikTok Ban, China Readies Blacklist of Foreign Companies". The New York Times. ISSN 0362-4331. Archived from the original on 2020-10-28. Retrieved 2020-10-31.
  9. "Commerce Further Revises License Review Policy for Certain Exports to China, Russia and Venezuela | Lexology". www.lexology.com. Archived from the original on 2020-11-01. Retrieved 2020-10-31.
  10. 《财经》新媒体 (2020-10-27). "中国大型基础软件如何"去美国化"？权威专家这样说". finance.sina.com.cn. Retrieved 2020-11-01.
  11. "Huawei in 'survival mode' as suppliers race to beat US deadline". Nikkei Asia. Archived from the original on 2020-10-29. Retrieved 2020-10-31.
  12. "Huawei builds up 2-year reserve of 'most important' US chips". Nikkei Asia. Archived from the original on 2020-10-28. Retrieved 2020-10-31.
  13. Stevenson, Alexandra; Mozur, Paul (2019-05-31). "China Steps Up Trade War and Plans Blacklist of U.S. Firms (Published 2019)". The New York Times. ISSN 0362-4331. Archived from the original on 2020-11-01. Retrieved 2020-10-31.
  14. "What We Know About China's 'Unreliable Entities' Blacklist". Bloomberg.com. 2019-06-04. Archived from the original on 2020-09-26. Retrieved 2020-10-31.
  15. Conger, Kate (2019-06-08). "China Summons Tech Giants to Warn Against Cooperating With Trump Ban (Published 2019)". The New York Times. ISSN 0362-4331. Archived from the original on 2019-06-13. Retrieved 2020-10-31.
  16. "China ready to put Apple, other U.S. companies in 'unreliable entity list': Global Times". Reuters. 2020-05-15. Archived from the original on 2020-06-27. Retrieved 2020-10-31.
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