New Controls Target Tech Exports to China, Russia and Venezuela

Shearman & Sterling LLP

Shearman & Sterling LLP

On April 28, 2020, the Trump Administration significantly expanded the reach of U.S. export controls over certain items and certain countries, changes that will have a particularly limiting impact on particular exports to China, Russia and Venezuela. The stated purpose of these changes is to support U.S. national security and foreign policy objectives by broadening the U.S. Government’s visibility into and ability to deny or condition exports, re-exports and in-country transfers of certain items to certain countries.

As a practical matter, these rules will require licenses for more exports, re-exports from one foreign country to another and in-country transfers involving the affected countries and substantially increased diligence with respect to the evaluation of end users. This will have repercussions up and down the supply chain and impact investment decisions in a wide range of industries including telecommunications, information security, electronics, sensors and lasers, propulsion and materials processing.

In three separate actions, the U.S. Commerce Department: expanded license requirements to China, Russia and Venezuela; broadened the list of items covered by these expanded license requirements; expanded the definition of “military end use;” created a new reason for control; created a new review policy for certain items to certain countries; added substantial electronic export information filing requirements; eliminated the license exception for civil end use for two dozen countries, including China, Russia and Venezuela; and proposed to remove the same countries from the list of those eligible for additional re-exports license exceptions.

The final rules are effective June 29, 2020, and comments on the proposed rule on re-exports are due on the same day.

Cited Authority

The Administration’s authority for these actions comes from the Export Control Reform Act of 2018, which was companion legislation with the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA).[1] Both laws were designed, in part, to limit certain exports and technology transfers to China and other countries subject to a U.S. embargo. For more information, please see our summary of FIRRMA and its implementing regulations.


In explaining the new controls, the Commerce Department references the Trump Administration’s 2017 National Security Strategy[2] and 2018 National Defense Strategy,[3] which outline challenges and objectives in response to growing global “political, economic and military competitions.”

The specific challenges from the Trump administration’s National Defense Strategies that Commerce cited in its actions include the following:

  • China and Russia seek to: challenge U.S. power, influence and interests; erode U.S. security and prosperity; grow their militaries; and use data and information to repress their societies and expand their influence.
  • China and Russia support the dictatorship in Venezuela and seek to expand military linkages and arms sales in the region.
  • Increased integration of civilian and military technology development in China, Russia and Venezuela makes it more difficult to know or determine whether the end use and end users of items proposed for export, re-export or in-country transfer will not be or are not intended for military uses or military end users.
  • Significant variations exits in how the United States and its partners perceive these threats.

Other specific concerns cited by the Commerce Department in its actions, a number of which reach back more than a decade, include: China’s strengthening of its military activities and capabilities; Russia’s continuing policy of destabilization in Ukraine and occupation of Crimea; and the actions and policies of the Venezuelan military, including its continued and increased repression and complicity in human rights violations, undermined democratic processes and institutions and thereby constituted an unusual and extraordinary threat to the national security and foreign policy of the United States.

The stated objectives of the National Security Strategy include: protecting the homeland; promoting American prosperity; preserving peace through strength; and advancing American influence. Commerce’s general goals with this effort include advancing U.S. national security, foreign policy and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.

Summary of Expanded Controls

In three separate actions, all issued on April 28, 2020, the Trump Administration, through the Commerce Department, seeks to limit exports, re-exports or other transfers of U.S. technology that could benefit China, Russia or Venezuela in any of the above-listed efforts.

Expanded License Requirements to China, Russia and Venezuela

This final rule expands the 2007 rule imposing a license requirement on exports, re-exports and in-county transfers of certain items intended for military end use in China[4] and the 2014 rules expanding those license requirements to include military end uses and end users in Russia[5] and Venezuela.[6] Pursuant to the new rule, these license requirements are applied to military end users in China, as well.

Broadened List of Items Covered If Exported to China, Russia or Venezuela

The scope of items now subject to expanded license requirements includes additional items in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers and propulsion[7] and expands the range of items included in the categories of electronics, marine systems or equipment and aircraft and gas turbine engines.[8]

Expanded Definition of “Military End Use”

The definition of military end use is expanded to include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, “development” or “production” of military items. The definition of “military end user” does not change and includes the army, navy, air force, marines and coast guard, plus the national guard/police, government intelligence and reconnaissance organizations. This definition refers both to direct use (for parts, components or subsystems of weapons and other defense articles) and indirect use (weapon design and development, testing, repair and maintenance).

New Reason for Export Control

The new rule relocates these license requirements to the “600 series”[9] and assigns a new reason for control, regional stability. Regional stability controls support U.S. foreign policy objectives and make sure exported, re-exported or transferred items do not contribute to the destabilization of the region.

New Review Policy

The new rule adopts a license review policy of presumption of denial, meaning that all should presume the license application will be denied. This action is consistent with the review policy for certain exports, re-exports and in-country transfers of microprocessors and associated software and technologies for military end uses.

New Filing Requirements

The new rule expands filing requirements in the Automated Export System for exports to China, Russia or Venezuela, regardless of the value of the shipment.[10]

Civil End Use License Exception Eliminated

The new rule removes the license exception for civil end use and requires a license for national security-controlled items to certain destinations including Armenia, Azerbaijan, Belarus, Cambodia, China, Georgia, Iraq, Kazakhstan, North Korea, Kyrgyzstan, Laos, Libya, Macau, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Venezuela, Vietnam and Yemen.

Proposed Limit of Re-Exports of US Products and Technology to China from Third Countries

The proposed new rule would prohibit without a license re-exports for national security-controlled items to certain destinations including Armenia, Azerbaijan, Belarus, Cambodia, China, Georgia, Iraq, Kazakhstan, North Korea, Kyrgyzstan, Laos, Libya, Macau, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Venezuela, Vietnam and Yemen.

Grandfathered Exports

Shipments of items subject to final rules that are on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on June 29, 2020, pursuant to actual orders for exports, re-exports and in-country transfers to a foreign destination, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported, re-exported or transferred in-country before July 27, 2020.

Implications for US Businesses

The collective result of these new measures is a heightened level of scrutiny and ability to deny exports of U.S. technology destined for China, Russia or Venezuela, which will have repercussions up and down the supply chain and impact investment decisions in a wide range of industries including telecommunications, information security, electronics, sensors and lasers, propulsion and materials processing. U.S. businesses would be well advised to undertake a comprehensive review of all practices that involve or rely on exports, re-exports and in-country transfers to Russia, China and Venezuela and update and expand all compliance measures.


[1] See Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801–4852), included in the John S. McCain National Defense Authorization Act for Fiscal Year 2019. ECRA provided long-awaited permanent statutory authority for the Export Administration Regulations, which had been operating under executive order pursuant to the International Emergency Economic Powers Act since the expiration of the Export Administration Act of 1979. Those regulations, which cover the export and re-export of dual-use items, are administered by the U.S. Commerce Department’s Bureau of Industry and Security.
[2] See National Security Strategy of the United States of America (Dec. 2017)
[3] See Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s Competitive Edge
[4] See 72 FR 33646 (Jun. 19, 2007).
[5] See 79 FR 55608 (Sep. 17, 2014).
[6] See 79 FR 66288 (Nov. 7, 2019).
[7] ECCNs 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996 and 9B990.
[8] ECCNs 3A992, 8A992 and 9A991.
[9] Items previously controlled on the United States Munitions List, covered by the Wassenaar Arrangement Munitions List and other munitions entries.
[10] Unless the shipment is eligible for License Exception GOV.

Special thanks to Lisa Raisner, Head of Government Relations, who co-authored this publication.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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