New export control compliance requirements announced for U.S. Aerospace companies dealing with partners and customers of certain origin.
Just a week after the U.S blacklisted Chinese drone maker DJI and introduced new rules that would bar Chinese public companies from U.S. stock markets should they fail to comply with financial reporting requirements, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), announced more export control requirements for the aerospace sector.
On December 23, 2020, BIS issued a Federal Register notice where Export Administration Regulations (EAR) amendments were announced. Notably, BIS announced the addition a new Military End User (MEU) List.
BIS identified 103 entities which it determined to be “military end users” as defined in the EAR (i.e., 15 C.F.R. § 744.21). BIS added the 103 “military end users” to the new MEU List, including 58 companies from China and 45 companies from Russia. A reserved category for Venezuela would be added to the MEU List in the future.
The Department of Commerce saw the creation of a MEU list necessary to prevent U.S.-origin civil aviation products from being used for military purposes and in order to protect U.S. national security interests.
Noteworthy: major Chinese & Russian aerospace groups were identified as “military end-users,” including China’s AVIC and COMAC, Aero-Engine Company of China, Harbin General Aircraft Industries, as well as Russia’s United Aircraft Corporation, Sukhoi Civil Aircraft, Kazan Helicopters, Beriev, and Irkut.
But the creation of the MEU list also came after multiple clarification requests were submitted by U.S. companies and exporters for clarity since the earlier MEU rule had been published in 28 April 2020. The U.S. export community reportedly requested support in identifying military end-users known to the U.S. Government. As a result, BIS agreed that identifying `military end users’ on the MEU List, where possible, would ease the public’s compliance burden and make for a more effective `military end-use’ and `end user’ control.
According to Wilbur Ross, Commerce Secretary:
“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 Ross. “The Department recognizes the importance of leveraging its partnerships with U.S. and global companies to combat efforts by China and Russia to divert U.S. 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.”
Through this notice, BIS wanted to “inform all potential exporters, reexporters, and transferors that all exports, reexports, or transfers (in-country) of designated items to these entities represent an unacceptable risk of use in or diversion to a ‘military end use’ or a ‘military end user’ for purposes of § 744.21, and therefore require a license.”
An export license would therefore be required in the event the exporter, reexporter, or transferor has knowledge or reason to believe that the export-controlled item is meant for a military end user.
BIS will review such license applications with a presumption of denial.
The creation of this new MEU list should hardly come as a surprise since it is merely a continuation of BIS’ last April announcement that it was looking to “prevent efforts by entities in China, Russia, and Venezuela to acquire U.S. technology that could be used in development of weapons, military aircraft, or surveillance technology through civilian supply chains, or under civilian-use pretenses, for military end uses and military end-users.”
However, of particular interest, is the intense focus placed on China under the Trump administration. Whilst export controls restrictions only applied to military end users in Russia and Venezuela before; the April restrictions expanded to include military end users in China. The rule change was meant to target trade with companies involved in China’s Civil-Military Fusion strategy – with a particular focus on aerospace technology.
On 12 June 2020, the U.S. Department of Defense (DOD) – in a seemingly unrelated announcement – published a list of “Communist Chinese military companies operating in the United States”. The list specifically designated 20 private and state-owned companies deemed to qualify as “military companies operating in the United States.”, including Huawei, Hikvision, Aviation Industry Corporation of China, China Railway Construction Corporation, and China State Shipbuilding Corporation. The list has been amended with further additions since.
The Trump Administration certainly deployed a panoply of other control measures targeting China during its term, including restrictions in the communications technology and technology destined to Huawei.
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