The China Question

www.worldecr.com 21 ThE ChInAquESTIOn CHINA Wang Wenbin told reporters shortly aer the law was passed. e new law gives Beijing the authority to target companies and entities involved in formulating, implementing or abiding by foreign sanctions on China by seizing their assets, prohibiting or restricting trans- actions and denying or cancelling visas. e same day the bill became law, China’s official Xinhua news agency commented: ‘In recent years, some Western countries and organizations have smeared China’s domestic and foreign policies, and imposed so-called sanctions upon related state organs, organizations and public servants by using pretexts including Xinjiang, Tibet and Hong Kong-related issues.’ It quoted an unidentified official from China’s top legislature as saying that the purpose of the law ‘is to counter, fight and oppose unilateral sanctions on China imposed by foreign countries, safeguard its national sovereignty, security and development interests as well as to protect the legitimate rights and interests of Chinese citizens and organization.’ Notably, he also said ‘the law will not affect China's opening-up.’ For international businesses still in a daze over navigating burgeoning US and EU sanctions and regulations on China, the maze is about to turn into a haze. at is because China is preparing to deploy more of its regulatory arsenal as the war with the US escalates. is includes the Unreliable Entities List (‘UEL’), that will be used to designate entities and the Export Control Law (‘ECL’), which took effect on 1 December 2020 but is awaiting enforcement guidelines from the government. e ECL broadly covers dual-use items, military items, nuclear items, technologies, services and items related to the maintenance of national security and national interests and to the performance of anti-proliferation. Tough choices ahead for US subsidiaries in China Tahlia Townsend, a partner at law firm Wiggin and Dana, says that businesses are still guessing how they will be impacted by the Chinese regulations because Beijing so far has not issued complete implementing regulations. ‘ey haven’t fully implemented those authorities yet, but there are some clues,’ she notes. In late April, when the Chinese government issued guidelines on the implementation of export compliance programmes for parties operating in China, the instructions also clarified a few important points about the new export control law, Townsend explains. ‘One of the things that jumps out is the clarification that the Chinese rules will cover what we in the US know as “deemed exports”, or the oral or visual disclosure of technical data within China to non-Chinese persons,’ she adds. ‘at could have a huge effect on US companies that have subsidiaries in China that employ US-person expats or that have shared IT systems with the US parent,’ Townsend says, explaining that it is fairly common for a global company to share all or some IT system resources with overseas subsidiaries. ‘But under the new Chinese law, sharing data with those US-person expats, or putting data onto that shared system, where foreign persons have access to it will be considered an export, and so companies are going to have to figure out how to manage that.’ She notes that the ECL is also similar to US regulations in its extraterritorial aspect: ‘China’s new law says explicitly that it has extraterritorial effect, that China will have the authority to take action against foreign companies that re-export Chinese goods contrary to Chinese law. I think we can expect to see some actions against US and other companies operating in China if they fail to implement an export compliance programme and [do not] comply with the new Chinese law.’ Townsend says it is important to note Highlights of China’s new Anti-Sanctions law The law, enacted on 10 June targets the ‘discriminatory restrictive measures’ imposed by foreign countries on PRC persons (individuals and entities) that violate international law or basic principles of international relations and interfere in PRC domestic affairs. l State Council agencies may also take countermeasures against persons related to listed persons, such as the close family members of listed foreign individuals or the senior management of listed foreign entities. l Countermeasures may include denial/revocation of visa, denial of entry, deportation, freezing of assets, and prohibition or restriction on transactions with listed persons, among others. l State Council agencies' listing decisions and use of countermeasures aren't subject to administrative reconsideration or judicial review. l Those implementing, or assisting in the implemention of foreign discriminatory restrictive measures, thereby harming Chinese persons' lawful rights and interests, are subject to civil suit in Chinese courts. l The Law delegates broad rulemaking power to State Council and its agencies, and provides for additional countermeasures against acts that harm PRC sovereignty, security, and developmental interests. l The Law applies by reference to other acts by foreign countries or entities that harm PRC sovereignty, security, and developmental interests, for which it is necessary to take countermeasures. Source: NPC Observer https://twitter.com/NPC_Observer/status/1402990385295593488