Introduction to U.S. Export Control Lists

The U.S. Export Administration Regulations (EAR) restrict trade activities with specific entities through multiple lists to safeguard national security and foreign policy interests:

• Entity ListIssued by the U.S. Department of Commerces Bureau of Industry and Security (BIS), it lists entities deemed to pose a threat to U.S. national security or foreign policy. Exporting controlled items to listed entities requires BIS authorization.
• MEU List (Military End User List)Targets entities supporting Chinas military modernization, restricting exports of items with military applications.
• NS-CMIC List (Non-SDN Chinese Military-Industrial Complex Companies List)Issued by the U.S. Department of the Treasury, it restricts companies supporting Chinas military-industrial complex, primarily involving U.S. investment limitations.

These lists have different focuses, with the Entity List imposing the strictest restrictions, second only to the Denied Persons List.

Jurisdictional Scope of U.S.-Related Items

U.S.-related items refer to goods originating from the U.S. or using U.S. technology or software, whose exports are subject to EAR jurisdiction. Determining whether they are controlled requires attention to the following factors:

• Item Proportion and ClassificationNot only the proportion of U.S.-related components but also whether the item is restricted according to the EARs Commerce Control List (CCL) must be considered.
• Foreign Direct Product Rule (FDPR)If U.S.-controlled software, technology, or equipment (such as semiconductor manufacturing equipment) is used in the production process, even if the product is not of U.S. origin, it may still be subject to EAR jurisdiction.

Risk Analysis of Sales Activities

When Entity List companies sell U.S.-related items to MEU or NS-CMIC List-affiliated enterprises, the risk depends on the following key points:

1. Compliance at Initial Acquisition
   • If the Entity List company obtained the U.S.-related items with BIS authorization or the items were not subject to EAR jurisdiction during initial acquisition, subsequent resale is generally not subject to additional restrictions.
   • If the initial acquisition was non-compliant, subsequent sales may amplify the violation risk.
2. Sensitivity of Items
   • Particularly sensitive items (such as 5G technology or high-performance computing chips) may remain controlled even in downstream transactions.
   • Ordinary items without military applications or connections to sensitive technologies carry lower risks.
3. Nature of List-Affiliated Enterprises
   • Although MEU and NS-CMIC List enterprises are not on the Entity List, sales involving military end-uses or support for the military-industrial complex may trigger EAR scrutiny.
4. Difference Between Upstream and Downstream
   • The Entity List primarily restricts upstream supply (exports from U.S. companies and global suppliers to listed enterprises) rather than downstream resale.
   • However, resale involving FDPR-controlled items or sensitive technologies may still constitute compliance risks.

Risk Assessment and Compliance Recommendations

Key Risk Points

• Jurisdictional Misjudgment: Failure to identify whether U.S.-related items are subject to FDPR jurisdiction may lead to unintentional violations.
• Sensitive Transactions: Sales of sensitive items to MEU or NS-CMIC-affiliated enterprises may require additional authorization.
• Compliance Gaps: Failure to verify compliance during initial acquisition of U.S.-related items may affect the legality of subsequent transactions.

Practical advice

1. Comprehensive Due Diligence: Verify the EAR jurisdiction scope of U.S.-related items, initial acquisition authorization status, and end-use.
2. : If you have any questions, consult a professional customs broker or customs department in a timely manner to ensure the accuracy and compliance of the declaration.: Collaborate with export control experts to assess transaction compliance.
3. Record Management: Maintain transaction documents, authorization proofs, and compliance review records for potential BIS audits.

Conclusion

Sales of U.S.-related items by Entity List companies to MEU or NS-CMIC List-affiliated enterprises carry certain risks, depending on the items jurisdictional scope, initial acquisition compliance, and transaction details. Enterprises should conduct due diligence and seek professional support to ensure EAR compliance and avoid potential legal and commercial risks.