On December 18, 2020, the United States added 60 companies in China and 17 companies located elsewhere to the Commerce Department’s Entity List. Among the Chinese firms targeted are chipmaker Semiconductor Manufacturing International Corporation (SMIC) and ten semiconductor companies related to SMIC, shipbuilder China State Shipbuilding Corporation (CSSC), and drone manufacturer DJI. The move is the latest step in escalating U.S. trade restrictions on China.

The new rule prohibits U.S. and non-U.S. persons from providing the listed entities with goods, software, or technology (collectively, “items”) that are “subject” to the U.S. Export Administration Regulations (EAR) without first obtaining a license from the Bureau of Industry and Security (BIS), which administers the EAR. License applications involving exports or transfers to most listed companies will face a presumption of denial, although BIS appears willing to entertain license applications for exports of less sensitive items to SMIC and certain items necessary to detect, identify and treat infectious disease to certain other companies, including DJI. The broad license requirement applies to all items in the United States, items made in the United States, and certain non-U.S. items that contain more than de minimis U.S.-origin content or were made using certain U.S.-origin technology.

Companies doing business with the listed parties should carefully review whether these rules apply to their operations and implement controls to prevent exports, reexports, transfers, or releases of items to the listed parties without U.S. government approval.

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