In the News: New Huawei Restriction; China's Countermeasures; and Entry Ban Exemptions

The U.S. effectively blacklisted Huawei when it added the company to the Entity List in May 2019. The blacklisting effectively barred U.S. chip suppliers from doing business with Huawei, but it did not stop global suppliers from doing the same if the chips were produced overseas. The U.S. authorities considered this a "loophole" in the export control regime that had to be closed, Amanda DeBusk, chair of Dechert's global international trade and government regulation practice, said in our latest podcast episode. The U.S. is targeting Huawei specifically by expanding its foreign-produced direct product rule, which subjects certain national security-controlled foreign-made products to U.S. export control jurisdiction. The move is a reflection of U.S. dominance not just in the production of semiconductor chips but also in the technology underlying these chips and the equipment needed to produce them, which means that global chipmakers such as TSMC will see their chips fall within the scope of the new rule. 

More from CLP:

Tech war: Podcast #5: Discussing new US Controls on Tech Exports to China with Amanda DeBusk, Former Commerce Department Official

Not welcome: In the News: U.S. Blacklists Chinese Tech Firms

China to impose retaliatory punishments against U.S. companies

China is set to unveil a series of "countermeasures" against U.S. companies. According to Chinese state-run newspaper Global Times, the Chinese government plans to put U.S. companies on an "unreliable entity list" similar to the U.S. Entity List, launch investigations and impose restrictions on major U.S. tech companies, and suspend the purchase of Boeing airplanes.

The U.S. tech companies mentioned in the report as likely to be targeted include Apple, Qualcomm and Cisco. The report quotes a government source as saying that the move is a response to U.S. actions against Huawei as well as recent lawsuits filed by U.S. parties against China over the coronavirus pandemic. Chinese laws cited in the report as possible bases for crackdowns on U.S. companies include the new Cybersecurity Review Measures (网络安全审查办法) and the PRC Anti-monopoly Law (中华人民共和国反垄断法).

The report from Global Times, a mouthpiece for the Chinese government, will be worrying reading for U.S. companies in China. The report says that Chinese firms will flag U.S. companies' unfair market behavior to regulators who will then launch "rounds of endless investigations on those firms," followed by possible revoking of their operating licenses or other penalties. In May 2019, the Ministry of Commerce announced that it would target certain foreign entities through its "unreliable entity list", which will include foreign companies and individuals that discriminate against Chinese businesses. Once a company is listed, it will face "necessary legal and administrative measures and the Chinese public will also be warned against it to reduce risks," the report says. 

More from CLP:

Tit-for-tat: Is China's 'Unreliable List' A Serious Threat to Foreign Companies?

Full-text: Cybersecurity Review Measures

China allows some foreign executives to enter country

China is allowing a limited number of executives from foreign companies to enter the country despite a near-total ban on foreigners entering due to the coronavirus pandemic. Bloomberg reports that the Ministry of Commerce has told some key foreign companies that they can apply for exemptions to the ban in a bid to help revitalize China's severely-hit economy.

China began barring almost all foreigners from entering the country in late March, including those with valid work and resident visas. "China will establish fast-track channels for business, logistics, production and technical services professionals from some countries to travel to China under the premise that safe epidemic prevention is ensured," the Ministry of Foreign Affairs told Bloomberg in a statement.

China has begun loosening entry restrictions for foreigners in recent weeks as the COVID-19 outbreak has come largely under control domestically. In early May, China loosened restrictions for essential business travelers from South Korea, quarantine requirements shortened from 14 days to just up to two days. On Apr. 30, a Foreign Ministry spokesman said at a news briefing that China wants to establish "fast-track" agreements with other countries, although no further details were given. According to the European Chamber of China, local governments including Beijing, Shanghai and Chongqing have introduced various measures to facilitate the entry of foreigners into the country for business reasons. 

More from CLP:

Balancing act: In the News: China Resumes Business; Beijing Quarantines Foreigners

Planes grounded: In the News: Airline Subsidies