Two nuclear related technology were added to the “restricted” category of the updated Catalogue:

• “Technology relating to equipment and materials for Generation III & IV nuclear reactors” is added to the restricted category of “heavy machinery industry strategic new product design technology (183609X)” under Professional Equipment Manufacturing Industry; and
• “Technology relating to design of Generation III nuclear power plant” is added to the restricted category of “large-scale power equipment design technology (184401X)” under Electricity and Heating Power Production and Supply Industry.

Export of restricted technologies covered by the updated Catalogue requires prior review and approval by the provincial counterpart of MOFCOM. For the export of the above-described nuclear related technology, this will add a separate regulatory procedure in addition to the current regulatory approval and licensing procedure applicable to the export of nuclear items.

1. Existing Separate Control System Regarding Nuclear Export

Currently, China has separate export control regulations and control lists for nuclear related items (including technology) controlled for non-proliferation reasons. The focus of the existing regulations and control lists for nuclear related items is to control the export of nuclear materials and equipment based on export destination, end user, end use and other factors.

The existing regulatory framework for nuclear export is primarily governed by (A) Regulations on the Control of Nuclear Export (Nuclear Export Regulations),¹ and (B) Regulations on Control of Nuclear Dual-Use Items and Related Technologies Export (Nuclear Dual-Use Items Export Regulations).² The framework generally follows the Nuclear Suppliers Group Guidelines.

According to the Nuclear Export Regulations, “nuclear export” refers to (i) export of nuclear materials, nuclear equipment, non-nuclear materials for reactors and related technologies in the Nuclear Export Control List (Nuclear Control List);³ and (ii) transfer of the same to territories outside of the PRC for providing gifts, exhibition, scientific and technological cooperation, providing assistance and through other means. The export of items and technologies covered by the Nuclear Control List is subject to prior review and approval by the China Atomic Energy Authority (CAEA) and other regulatory authorities such as MOFCOM and the State Administration for Science, Technology and Industry for National Defense (SASTIND) and MOFCOM’s issuance of a License for Export of Nuclear/Dual-Use Items and Related Technologies (Nuclear/Dual-Use Export License).

The Nuclear Dual-Use Items Export Regulations establish a separate Nuclear Dual-Use Items and Related Technologies Export Control List (Dual-Use Control List) to regulate nuclear dual-use items and related technologies not covered by the Nuclear Control List. The export of items and technologies covered by the Dual-Use Control List is subject to prior review and approval by MOFCOM in consultation with other regulatory authorities and issuance of the Nuclear/Dual-Use Export License.

The Nuclear Control List and Dual-Use Control List include a broad range of nuclear related items, including equipment, components, and related technologies. Although the updated Catalogue does not provide any definition for technologies relating to Generation III & IV nuclear reactors, it is reasonable to conclude that (i) technologies relating to Generation III & IV nuclear reactors and (ii) technologies relating to equipment and components specially designed or manufactured for Generation III & IV nuclear reactors are covered by the above existing control lists, thus subject to the review and approval and licensing requirements.

This is to say that under the current nuclear related export control system, the export of Generation III & IV nuclear reactors, equipment, components and related technologies are subject to CAEA and/or SASTIND’s prior review and approval and MOFCOM’s issuance of a Nuclear/Dual-Use Export License.

2. Updated Catalogue and Generally Applicable Technology Export Regulations

The newly updated Catalogue entails a separate set of regulatory requirements that generally govern the export of technologies in different industries.

The original version of the Catalogue, last updated in 2008, had included limited nuclear related technology (e.g. manufacturing process of power, control and instrument cables for nuclear power plants). The newly updated Catalogue has added technology relating to Generation III & IV nuclear reactors. The export of such technology is subject to a separate set of regulatory requirements in addition to what is described under Section 1 above, based on our no-names inquiry with the Beijing Commission of Commerce.

Companies preparing to export restricted technologies covered by the updated Catalogue must fill in the “Application for China’s Export Restricted Technologies” form and submit the application form to the relevant provincial counterpart of MOFCOM (Commerce Department) for application before any substantive negotiations with foreign parties for the export of the technologies. If the technologies to be exported involve state secret technologies, the applicant must go through the confidentiality clearance review procedures in advance.

If the application is approved by the Commerce Department, the applicant company will obtain a technology export license letter of intent from the Commerce Department and apply for export credit, make insurance commitments, and then start and conduct substantive negotiations with the foreign parties to sign a technology export contract. After the technology export contract is signed, the Chinese company must also apply for a technology export license (Technology Export License) with the Commerce Department. The technology export contract will not take effect until the date of the issuance of the Technology Export License.

3. Our Analysis

China is a major player in the development, construction and operation of Generation III nuclear reactors, with 48 nuclear power reactors in operation (32 of which were built in the last decade) and 12 under construction. China is also pressing ahead with indigenous nuclear reactor designs. China National Nuclear Corporation (CNNC) and China General Nuclear Power Group (CGN) have combined their forces to design the Hualong One (based on ACP 1000 and ACPR1000+), a Generation III reactor design, which is under construction domestically and marketed for export. State Nuclear Power Technology Corporation (SNPTC) has developed CAP 1400, an evolution of the Westinghouse AP1000 technology imported from the United States. In addition, CNNC and CGN are also both developing small modular light water reactor designs. Finally, China is also actively conducting research, development and demonstration of Generation IV nuclear reactors, including the demonstration of the HTR-PM, a high temperature reactor at Shidaowan, and the Chinese Demonstration Fast Reactor, a fast reactor, at Xiapu. China’s significant capabilities in Generation III & IV nuclear reactors are a likely reason these nuclear technologies were added to the updated Catalogue.

China is also leveraging its domestic construction experience in seeking to enhance its nuclear export footprint. Karachi 2 and 3 (in Pakistan) are the first export of China’s Hualong One design, with construction of unit 2 beginning in 2015 and unit 3 in 2016. The units are scheduled for commercial operation in 2021 and 2022. Chinese companies are also negotiating agreements to export the Hualong One to Argentina and the CAP1400 to Turkey and are licensing the Hualong One in the United Kingdom.

Adding technologies related to Generation III & IV nuclear reactors to the restricted category of the updated Catalogue does not necessary mean that China will block the export of such technologies. Rather, the export of such technologies will be subject to substantial review by MOFCOM prior to the negotiation of the contracts and a technology export license issued by MOFCOM. In a statement, MOFCOM stated that the main purpose of the revisions to the Catalogue is to “regulate the export of technologies, promote technological improvement and expand economic and technological exchanges with foreign countries while safeguarding national economic security.”

Many analysts believe that the recent tensions between the U.S. and China over trade and technology, particularly increasing U.S. export controls and bans on Chinese companies, have accelerated the issuance of the updated Catalogue. The Catalogue is updated to include technologies in the areas where China believes it has the lead or an advantage, such as space materials, 3D printing, encryption and large-scale high-speed wind tunnel design. The prevailing view is that the Catalogue is not established to block the exports of such technologies but to strengthen government review when a Chinese company intends to export China’s advanced technologies to a foreign party. The updates to the Catalogue shows Chinese government’s efforts to enhance its export control regime and use export control as a policy tool in response to the Trump Administration’s restrictions on U.S. technology exports to China.

As the scope and definition of “Generation III & IV nuclear reactor” related technologies under the updated Catalogue is yet to be clarified, companies doing business with Chinese nuclear companies should work with their legal advisors to understand the applicability of Chinese export controls to any potential Chinese nuclear exports, the timelines associated with export approvals and the obligations on the importer with respect to these technologies. Foreign importers of Chinese nuclear technologies should ensure that the Chinese exporter has obtained not only a Nuclear Dual-Use Export License for the export of nuclear items covered by the Control List and the Dual-Use Control List, but also obtain a Technology Export License for the export of any technology relating to Generation III & IV Nuclear Reactors covered by the Catalogue. Note that the technology export license application process requires the exporter to apply with the Commerce Department before starting substantial contract negotiation with the foreign party.

^{1 Promulgated by the State Council on November 9, 2006.}

^{2 Promulgated by the State Council on January 26, 2007.}

^{3 The Control List currently includes the following types of nuclear items:}

• ^{nuclear materials, including source materials (e.g. natural uranium, depleted uranium and thorium) and special fissionable materials (e.g. Plutonium-239, Uranium-233, etc.);}
• ^{nuclear reactors and equipment and components specially designed or manufactured for the same;}
• ^{Non-nuclear materials for reactors (e.g. deuterium and heavy water, nuclear grade graphite, etc.);}
• ^{Plants for reprocessing of irradiated fuel elements and equipment specially designed or manufactured for the same;}
• ^{Plants used for the manufacture of nuclear reactor fuel elements and equipment specially designed or manufactured for the same;}
• ^{Natural uranium, depleted uranium or special fissionable material isotope separation plant and equipment specially designed or manufactured for the same (other than analytical instruments);}
• ^{Plants that produce and concentrate heavy water, deuterium and deuterium compounds and equipment specially designed or manufactured for the same;}
• ^{Uranium and plutonium conversion plants for the manufacture of fuel elements and separation of uranium isotopes (as defined under items (5) and (6) above) and equipment specially designed or manufactured for the same.}