The China Question

www.worldecr.com 29 ThE ChInAquESTIOn INSIgHT p erhaps it would be an understatement to say that it has been an interesting few years for those responsible for maintaining university compliance programmes. Of course, there has been the ordinary, but always challenging, trade compliance task of making sure that each item exported by the university is properly classified and authorised for export; a problem Princeton recently experienced first-hand when it was fined $54,000 and required to undergo an external audit, as a result of its failure to obtain licences for pathogens that were controlled for chemical and biological weapons reasons. But a significant new set of challenges has arisen from the United States’ whole-of-government approach to countering the perceived threat from China, which has resulted in a plethora of new compliance obligations stemming from multiple government sources, many developed without the benefit of standard notice-and-comment rulemaking and requiring rapid implementation. While it is beyond the scope of this article to survey every China-related compliance obligation that has developed over the past few years, the following sample shows the diversity and depth of the new requirements and enforcement trends: l Section 889 of the National Defense Authorization Act of 2019 was extended to grant recipients via 2 C.F.R. 200.216, thereby prohibiting universities from using grant money to procure telecommunications equipment, or services or systems that use equipment, produced by Huawei, ZTE, and certain other Chinese telecom manufacturers; l e Department of Commerce, Bureau of Industry and Security (‘BIS’) amended 15 C.F.R. 744.21 to extend the prohibition on exporting certain items for military end-use in China to encompass exports to military end- users in China, a term that is broadly defined to include any party that supports or contributes to the development, production, operation, installation, maintenance, repair, overhaul, or refurbishing of ‘military items’, and that potentially reaches many Chinese commercial, academic, and research entities. While BIS ultimately published a list of identified Chinese military end-users, that list is by no means exhaustive, and compliance personnel are still le to determine, through independent due diligence, whether any given Chinese institution is involved in activities that could cause it to be considered a ‘military end-user’; l BIS also added a new rule at 15 C.F.R. § 744.22 and revised existing 15 C.F.R. § 744.6 to (i) impose a licence requirement on exports/reexports/ transfers of any item subject to the EAR (including EAR99 items) to a ‘military- intelligence end-use’ or a ‘military-intelligence end-user’ in China (or Cuba, Iran, Syria, North Korea, Burma, Russia, or Venezuela), and (ii) absent a licence, prohibit US persons from engaging in any activity that ‘may assist or benefit’ military-intelligence end-users or end-uses in those countries, whether or not the activities involve items that are subject to the EAR. Because the rule applies even to activities involving no items subject to the EAR, universities must undertake due diligence to determine whether proposed activity by university personnel could ‘assist or benefit’ any intelligence or reconnaissance organisation of the PRC armed services or national guard (including but certainly not limited to the many- tentacled Intelligence Bureau of the Joint Staff Department) even with respect to projects, travel, and guest lectures that exclusively involve ‘published’ materials or ‘fundamental research’, and that would therefore typically be exempt from US export controls; and l BIS has added numerous Chinese universities, research centres and technical institutes to the Entity List, thus further compelling universities to screen its Chinese partners and any party that might be considered an end- user of the products or technology to be exported. Academics in the spotlight Beyond the implementation of entirely new rules, there have been the highly publicised criminal prosecutions of professors and visiting scholars under a variety of existing authorities, with charges ranging from defrauding federal agencies by failing to disclose Chinese affiliations in grant applications, to espionage, visa fraud, failure to file as a foreign agent, the of intellectual property, and tax fraud. While A significant new set of challenges has arisen fromthe united States’ whole-of-government approach to countering the perceived threat from China, which has resulted in a plethora of newcompliance obligations.