The Commerce Department has taken aim at China’s burgeoning supercomputer research and development efforts, which it sees as intricately tied to the country’s military buildup, by adding five of the country’s leading companies and research institutions to the Bureau of Industry and Security’s Entity List.
The Entity List subjects U.S. exporters to specific export licensing requirements and prohibitions. Organizations or persons who violate U.S. export control rules — as defined under the Export Administration Regulations — are subject to criminal penalties and administrative sanctions.
The End-User Review Committee (ERC), which is composed of members from the Commerce, State, Defense, Energy and Treasury departments, stated in a Federal Register notice that, for the five newly listed Chinese entities, “there is reasonable cause to believe, based on specific and articulable facts, have been involved, are involved or pose a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons.”
The five Chinese entities to be added to the Entity List are Chengdu Haiguang Integrated Circuit, Chengdu Haiguang Microelectronics Technology, Higon, Sugon and Wuxi Jiangnan Institute of Computing Technology.
The entities also continue to rely heavily on U.S. exports of semiconductor technologies to develop their high-performance computers.
In the Federal Register notice, Commerce also modified an existing Entity List entry, China’s National University of Defense Technology (NUDT), by adding the university’s alias, Hunan Guofang Keij University, and four locations in China.
A big challenge for U.S. export compliance managers will be tracking the numerous aliases under which these five Chinese entities may operate. The currently known aliases for these entities are included on the Entity List.
Sugon, for example, uses nine aliases: Dawning, Dawning Information Industry, Sugon Information Industry, Shuguang, Shuguang Information Industry, Zhongke Dawn, Zhongke Shuguang, Dawning Company and Tianjin Shuguang Computer Industry.
“When you do your review [of the Entity List], make sure you are also checking the akas (also known as),” said Paul DiVecchio, principal of Boston-based export compliance consultancy DiVecchio & Associates, in a memo to his clients.
He told American Shipper that U.S. exporters that do not daily check the various export control lists or those with insufficient or nonexistent export compliance programs may become illegally involved with these Chinese entities and their myriad aliases.
“While they’re on the Entity List, these Chinese entities will undoubtedly work hard to obtain U.S. semiconductor components whenever and wherever they can,” DiVecchio said.
During the past two years, Commerce has stepped up its efforts to deny Chinese firms and research institutions access to U.S.-made technologies.
In May, under the auspices of a presidential executive order, Commerce added Huawei Technologies Co. Ltd. of China and its 68 overseas affiliates to the Entity List.
In 2017, the U.S. government assessed penalties of more than $1 billion against China’s ZTE Corp. for its violation of export control regulations by shipping technology with U.S. semiconductor components to Iran. Initially, ZTE was placed on Commerce’s Entity List but was shortly followed by a general license that enabled continued trade with the company until it was determined that it did not abide by the enforcement settlement.
After meeting various compliance conditions, Commerce in July 2018 lifted the export denial order against ZTE to the relief of U.S. industry.
The U.S. semiconductor industry and other high-tech manufacturers have warned that they’re falling behind China in terms of research and development. The Task Force on American Innovation released a report last month that stated in 2005 the U.S. controlled nearly half the world’s 500 fastest supercomputers. That proportion stands at less than a quarter today.