Holland & Hart - International Compliance Blog

This week, the U.S. Department of Commerce formally named 103 Chinese and Russian companies to its new Military End User (“MEU”) List.  A long time in the publication and release process, the MEU List identifies entities that the U.S. Government has determined represent “an unacceptable risk of use in or diversion to a ‘military end use’ or ‘military end user’ in China, Russia, or Venezuela.”  With the U.S. Government’s action this week, a license will be required to export, reexport, or transfer (in-country) designated items to entities on the MEU List.

First generally proposed more than 15 years ago by then U.S. Representative Henry Hyde, among others, the MEU List provides the first steps toward greater public guidance and notice to the manufacturers and sellers of dual-use items and technologies of military end users known to the U.S. Government.  “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 Commerce Secretary Wilbur Ross.

The initial MEU List includes 58 Chinese and 45 Russian companies.  However, additional parties are expected to be added by the U.S. Government’s End-User Review Committee, an interagency body composed of the Departments of Commerce, Defense, Energy, State, and, where appropriate, the Treasury.

The action comes as tensions between the U.S. Government and China have escalated sharply this year.  In April, the Bureau of Industry and Security (“BIS”) amended the EAR to tighten licensing requirements and due diligence expectations for exporting, reexporting, and transferring (in-country) items intended for military end users or military end uses in China, Russia, and Venezuela.  Last month, President Trump signed an Executive Order effectively barring U.S. persons from investing in Chinese companies that support China’s military.  Last week, the Trump Administration added Chinese semiconductor company Semiconductor Manufacturing International Corporation (“SMIC”) and dozens of Chinese companies to the BIS’s Entity List.  In light of current bi-partisan support in Congress for such actions generally, one may reasonably anticipate that the incoming Administration of President-elect Biden (a) will build upon and expand these export controls aimed particularly at the supply chains for the Chinese and Russian militaries and intelligence agencies and (b) will seek broader multilateral support for such controls among allies of the United States.

The MEU List was formally published yesterday, December 23, 2020, in the Federal Register.