Commerce Tightens Restrictions on Technology Exports to Combat Chinese, Russian and Venezuelan Military Circumvention Efforts

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New export control actions to prevent the acquisition of U.S. technology, through civilian supply chains, that could be used in development of weapons, military aircraft, or surveillance technology.

Treliant Takeaway:

Treliant knows how to design, operationalize, maintain, and validate compliance programs. The new rules require exporters and those that finance exportation of goods to enhance their compliance programs. If your business needs assistance with compliance risk management, Treliant can help.

Article Highlights:

The Department of Commerce announced today new export control actions to prevent efforts by entities in China, Russia, and Venezuela to acquire U.S. technology that could be used in development of weapons, military aircraft, or surveillance technology through civilian supply chains, or under civilian-use pretenses, for military end uses and military end-users.

“It is important to consider the ramifications of doing business with countries that have histories of diverting goods purchased from U.S. companies for military applications,” said Department of Commerce Secretary Wilbur Ross. “Certain entities in China, Russia, and Venezuela have sought to circumvent America’s export controls, and undermine American interests in general, and so we will remain vigilant to ensure U.S. technology does not get into the wrong hands.”

Specifically, the rule changes include:

  • Expansion of Military End Use/User Controls (MEU)
    Expands MEU license requirements controls on China, Russia, and Venezuela to cover military end-users in all three countries, as well as items such as semiconductor equipment, sensors, and other technologies sought for military end use or by military end-users in these countries.
  • Removal of License Exception Civil End Users (CIV)
    Removes a license exception for exports, reexports, or transfers (in-country) to civilian
    end-users in countries of national security concern for National Security- (NS) controlled items.
  • Elimination of License Exception Additional Permissive Reexports (APR) Provisions
    Proposes to eliminate certain provisions of a license exception for partner countries involving the reexport of NS-controlled items to countries of national security concern to ensure consistent reviews of exports and reexports of U.S. items.

While the goal of these new rules may be to restrict China, Russia, and Venezuela’s access to U.S. goods and technology ultimately intended for military applications, they send a signal to U.S. companies and the financial institutions that service those businesses:

  • Take a closer look at the relationships that your business counterparties may have with certain sovereigns and the types of transactions you enter into with those counterparties;
  • The expanded definition of “Military End Use/User,” will require companies to perform greater due diligence as to whether they will need an export license to sell certain products to these countries despite the fact that the sale of those products may be intended for civilian use; and
  • The enhanced risks in these sales will require greater scrutiny by the financial institutions involved in financing such transactions.