Entrepreneurs have always desired to open up new international markets. But trading with nations under sanctions adds red tape.
In 2020, we shipped $124.5 billion worth of goods to China. This was a 17% increase from the previous year.
Since then, our business dealings with the nation have only grown.
By the end of this article, we hope to make your task of exporting to them much easier.
Export Restrictions to China for Interested Companies
You want to keep your supply chain running smoothly. Whether you have an individual export or many, let’s start with U.S. commodity classification.
Items Subject to Export Administration Regulations (EAR)
A regular part of end-user controls, the Export Administration Regulations have two main purposes:
- Limit goods that endanger national security
Advance U.S. foreign policy interests
Low-grade military and dual-use items fall under its watchful eye.
The Bureau of Industry and Security (BIS) oversees compliance to these standards. They work with such entities which engage in international trade.
Examples:
- U.S. embassies
- Trade associations
Site visits, known as End-Use Checks (EUCs), are their best way to guarantee that all boxes are checked.
Unauthorized transactions may show up during interviews with an end-user. Leading to legal actions against involved parties.
Prohibitive or Restrictive Measures for Export Control
Foreign civil end-users also have a way to comply with export control measures. BIS’s counseling desks provide them with answers on items subject to oversight.
Located in U.S. embassies and consulates, they raise awareness in overseas communities. Ultimately aiding your commercial service to these nations.
BIS Export Control Officers (ECOs) act as the main educators.
Teaching topics:
- Commodity classifications
- Specific and articulable facts
- Controlled items
- Export processing zones
It’s not a bad idea to direct questions from your international customers to this source. That way you’re both aiming to avoid scrutiny, saving money and time in the process.
Now that the U.S. is covered, we’ll look at the other party in this transaction.
Export Licenses for Engaging Chinese Entities
Export licenses factor in national security to determine your acceptance or denial. Let’s look at how China handles them.
Meeting Export License Requirements
You may need to work directly with the People’s Republic of China in a couple of license application scenarios. Their Ministry of Commerce can provide the required End-User Statement.
When it’s needed:
- Commerce Control List items worth more than $50,000
Certain lower-dollar value transactions
Even if a license isn’t required, you must provide the Export Control Classification Number (ECCN). Use their automated filing system for this task.
Also, expect extra checks if a military end-user will be receiving your product or service. Because our armed forces don’t collaborate, you’re probably not surprised.
When the product has a military intelligence end-use, an export license is always needed.
Next, we’ll offer advice on strengthening ties within the foreign nation.
Conducting Business With the People’s Republic of China
Reduce significant risk to your business using research on our Asian neighbor. This extra step equips you as a “trade representative” for the United States.
In Country Behavior Could Create Investment Links
Beyond respect for Chinese cultural traditions, there’s other ways to help your business relationships. Ultimately boosting your bottom line.
The first is knowing the difference between their export license types:
- General license
Special license
Trading companies selling “normal” goods qualify for the general variety. “Restricted” goods like medical equipment require a special one.
Moving on, the second area can make life easier for you and the buyer. Enter the Validated End-User program.
Export control is loosened if your customer has an established track record of law-abiding behavior. Encourage them to submit a request to the BIS, who will issue a written advisory opinion in this matter.
If accepted, you’ll have one less barrier to profitability. Because you won’t have to get a re-export or export license.
Be aware that controlled items aren’t included, only those items for civilian use.
Understand the Role of China’s Central Military Commission
It’s wise to educate yourself on export controls administered by China’s Ministry of Commerce (MOFCOM) and others.
One more recent development deals with encryption. MOFCOM issued a relevant document the end of 2020 for exporters in the United States.
Covered materials:
- Devices
- Software
- Technologies
Systems
With encrypted communication growing in popularity among consumers, this news matters. It appears to be a move towards updating the list of controlled items.
You could speculate about their timing behind this report. But regardless, you need to follow it should you be in a related field.
Wrapping up, let’s look at a few final checks to conduct before shipment.
Party’s Entity List Entry Negating Control Measures
Before the actual exportation stage, there are a few indexes to double check. To ensure you’re in the clear.
Directories to review:
- Entity List
- Denied Persons List
- Unverified List
- Military End-User List
- Specially Designated Nationals and Blocked Persons List
- Debarred List
Check out the BIS website for further information.
In the case of verifying a validated end user, triple checking might even be worthwhile.
Listed Parties Generally Require an Established Track Record
If you’re wondering what excludes someone from getting your business, we’ll cover that here. It’s good information to know.
Regarding the Entity List mentioned above, Chinese entities have their names added for the following:
- Involvement in military activities in the South China Sea
- Human rights violations against their citizens
Ignoring government sanctions on embargoed nations
Specific abuses of human rights in the Xinjiang Uyghur Autonomous Region (XUAR) have increased the directory as of late.
As we’ve shown, there are a number of these records. Hopefully by relaying what activity may land someone in the hot seat, you see the reasoning.
Perhaps you’re still unsure about how your specified items should be dealt with.
We’d like to humbly suggest that legal assistance may be right for you.
Reidel Law Firm Helping You Navigate Export Controls
As experts in international trade law, we can help you handle the legal aspects of business with the People’s Republic of China.
And in doing so, keep customs and other trade regulators satisfied with reporting and filing.
Conducting business across borders becomes much easier when they see reasonable care taken. We are your partners in making this a reality.
Our international trade law division also supports:
- Import Compliance
- Litigation before the Court of International Trade (Section 337, anti-dumping/countervailing, and other trade-related cases)
- Trade Compliance Audits and Training
Call Reidel Law Firm today at (832) 510-3292 or fill out our form to see how we can help you with export control policies.
