China Expands Export Controls for Certain Technologies | White & Case LLP


China Expands Export Controls for Certain Technologies | White & Case LLP

China’s Ministry of Commerce (MOFCOM) and the Ministry of Science and Technology (MOST) published Notification No. 38/2020 dated August 28, 2020 announcing a new version of the Catalogue of Technologies Prohibited or Restricted by China from Export (the “2020 Catalogue”). A key component of the updated export controls in the 2020 Catalogue is a new restriction on the export of technologies based upon data analysis for “personalized information recommendation services.”

Despite the sensitive timing to expand China’s export control regime amidst the escalating tensions between China and the United States, MOFCOM indicated that it made the amendments only to regulate exports, facilitate technology cooperation and safeguard the national economic security of the country. Looking ahead, MOFCOM is expected to further reduce the number of prohibitions and restrictions in the Catalogue and take other measures to facilitate trade in technologies.

Background

China’s export control scheme on technologies commenced in 1998, when MOST and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the predecessor of MOFCOM, released the first version of the Catalogue, which was then amended twice in 2001 and in 2008. The amendments of the 2020 Catalogue are based upon the draft proposed revisions released by MOFCOM and MOST as part of a broader policy to update the country’s trade controls, and the corresponding public comments on the draft collected in 2018.

Salient amendments in the 2020 Catalogue

  • Adds 23 new items to the list subject to export restrictions, highlights of which include technologies related to drones, production of space materials, design and construction of large-scale high-speed wind tunnels, and aerospace bearings and lasers, among others;
  • Adds description of new elements and technical specifications subject to export control with regard to 21 items in the 2008 Catalogue, e.g., adding “personalized information recommendation services” under the existing control over information processing (code 056101X), which also affect other technology items related to production of certain chemical materials and biological pesticides, spacecraft measurements and controls, spatial data transmissions, and map making, among others;
  • Removes four items that were subject to export prohibition in the 2008 Catalogue, which involve technologies related to microbial fertilizers, as well as the production of synthetic and semisynthetic caffeine and vitamin B2 production; and
  • Removes five items that were subject to export restriction in the 2008 Catalogue, which involve technologies related to the Newcastle disease vaccine (for chickens), production of natural medicines, preparation and processing of functional polymer materials with biological activity, production of certain synthetic and semisynthetic chemicals, and information security firewall software.

Pursuant to the Regulations on the Administration of Import and Export of Technologies,1 export of a technology, either by means of transfer or licensing, would be prohibited if such technology is classified as a prohibited technology in the Catalogue. With regard to transfer of any technology subject to export restrictions in the Catalogue, approval from a competent commerce authority at the provincial level2 is required before entering into any substantial transfer negotiation with foreign counterparties, and an export license issued by the same authority would be also required when completing the technology transfer agreement.

Click here for Notification No. 38/2020 and here for the detailed amendments in the 2020 Catalogue (both in Chinese).

1 These regulations were first released in 2001 and subsequently amended in 2011 and 2019. See here (in Chinese): http://www.gov.cn/gongbao/content/2019/content_5468926.htm
2 This is 30 days upon application, for approval to enter into negotiation, and once approved, a preliminary license would be granted for contract negotiation; and 15 days upon the second application after signing the contract to release the forma export license.

 

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