China has published the second draft of its first-ever export control law. The draft law, which is open for public comment until 26 January, is expected to come into force later this year.
Its scope includes both traditional and ‘deemed’ exports of military, nuclear and dual-use items, as well as other national security-related goods, technologies and services. While the draft says that control lists will be published, an entity list is also specified – but this, it is thought, may be for internal use only.
Under the law, licences must be issued for the export, re-export, transit or transhipment of controlled items from China to other countries (including Taiwan, Hong Kong and Macao), and for the transfer of controlled items to foreign individuals or entities within China. For items not covered by the control lists, the law specifies a temporary control period of up to two years.
The law also requires exporters to establish internal compliance plans (‘ICPs’).
After initial release for public comment in 2017, the second draft of the law comes amid simmering China-US trade tensions. The current draft’s removal of previous language giving China the ability to ‘retaliate’ against other nations’ export controls indicates to some observers that China aims to de-escalate the situation. However, others have suggested that this lack of specificity ensures that China retains maximum flexibility to respond in the event of further moves by the US. In a briefing on the proposed legislation, Johnny Xie, Managing Director, Export Controls and Sanctions at FTI Consulting, has noted that the potential for retaliatory measures is already covered under China’s foreign trade law.
According to Xie, the most significant change from the first to second draft is ‘reflected in the penalties. For example,’ he writes, ‘the penalty for export without licence has been upscaled from RMB50,000 – 500,000 in the 1st draft to RMB500,000 – 5,000,000 in the 2nd draft.’ (RMB500,000 equals approximately USD 72,000.)