When preparing to import a technology from a Chinese exporter, foreign importers will concern about whether the technology can be transferred in entirety smoothly. In such an import, the centerpiece is whether the technology to be transferred can be legally exported under current PRC laws and regulations, and what procedures should be performed at what times if the export is permitted. Understanding the above is also essential for foreign importers to control the pace of the whole technology export process. And this article will sort out the current situation of technology export control in China below.
Part I Control of Exported Technologies
Any export of Chinese technologies should be in compliance with the technology export provisions set forth in the Export Control Law of the People’s Republic of China (中华人民共和国出口管制法) (the “PRC Export Control Law”).
I. Technology Export Control
The PRC Export Control Law, effective as of December 1, 2020, is the first special law of China on export control, under which, export control is defined as the prohibitive or restrictive measures taken by the State against the transfer of any controlled items out of the People’s Republic of China and the provision of any controlled items by citizens, legal persons and unincorporated organizations of the People’s Republic of China to any foreign organizations and individuals.
(I) Controlled Items
1. Dual-use items, military products and nuclear goods;
“Dual-use items” refer to the goods, technologies and services that can be used for both civil purposes and military purposes, or that are helpful to enhance military potential, especially those can be used in the design, development, manufacturing or use of weapons of mass destruction (WMD) and their means of delivery. “Military products” refer to the equipment, special production equipment and other related goods, technologies and services used for military purposes. “Nuclear goods” refer to the nuclear materials, nuclear equipment, non-nuclear materials used in reactors, and related technologies and services.
2. Other goods, technologies and services related to safeguarding national security and national interests and fulfilling non-proliferation and other international obligations;
3. Technical information and other data related to the controlled items.
(II) Controlled Acts
1. Transfer of any controlled items out of the People’s Republic of China;
2. Provision of any controlled items by citizens, legal persons and unincorporated organizations of the People’s Republic of China to any foreign organizations and individuals;
3. Transit, transshipment, through transportation and re-export of any controlled items, or export of any controlled items from bonded areas, export processing zones and other special customs supervision areas, export supervision warehouses, bonded logistics centers and other bonded supervision sites to overseas.
(III) Control Targets
2. Agents, freight forwarders, courier and delivery service providers, customs brokers, third-party e-commerce trading platform operators and financial service providers for export of dual-use items;
3. Overseas importers and end users.
Any of the above control targets violating the PRC Export Control Law will be subject to administrative penalties or even criminal penalties if he is a Chinese or it is registered in China. Overseas importers and end users may be included in the control list if they:
(1) violate the administrative requirements regarding end users and end uses;
(2) may endanger national security and interests; or
(3) use controlled items for terrorist purposes.
For the importers and end users included in the control list, the State export control administrations may take necessary measures to prohibit or restrict the transaction related to controlled items and order the suspension of the export of relevant controlled items.
(IV) Control Measures
China controls export of technologies from: (i) the technologies subject to control, by defining which technologies are controlled and the specific content of such control, so that the technologies beyond the scope of control are freely exportable technologies; and (ii) the trading counterparties of technology export, by requiring the check on whether the trading counterparty falls within the scope of China’s sanctions and embargoes, or is included in the control list. However, no control list has been published so far.
The direct control of technologies is mainly realized by:
1. Establishing lists of controlled items
The main list of export-controlled technologies currently in effect in China is the revised Catalogue for the Administration of Export Licenses for Dual-use Items and Technologies (两用物项和技术出口许可证管理目录), effective as of January 1, 2022, which mainly provides for the licensing administration of dual-use items and technologies as well as technologies falling into the scope of the Catalogue. For more information, please see the Measures for the Administration of Import and Export Licenses for Dual-use Items and Technologies (两用物项和技术进出口许可证管理办法). Except the PRC Administrative List of Export of Military Products (军品出口管理清单), the Catalogue for the Administration of Import and Export Licenses for Dual-use Items and Technologies (两用物项和技术进出口许可证管理目录) almost incorporates other item lists, including the following items, technologies and lists:
(1) Items and technologies listed in the Nuclear Export Control List (核出口管制清单);
(2) Items and technologies listed in the Export Control List of Nuclear Dual-use Items and Related Technologies (核两用品及相关技术出口管制清单);
(3) Items and technologies listed in the Export Control List of Dual-use Biological Agents and Related Equipment and Technologies (生物两用品及相关设备和技术出口管制清单);
(4) Items listed in the catalogue under the Regulations on the Administration of the Controlled Chemicals (监控化学品管理条例);
(5) Items and technologies listed in the Export Control List of Certain Chemicals and Related Equipment and Technologies (有关化学品及相关设备和技术出口管制清单);
(6) Items and technologies listed in the Export Control List of Missiles and Missile-related Items and Technologies (导弹及相关物项和技术出口管制清单);
(7) Precursor chemicals (I) （易制毒化学品一）;
(8) Precursor chemicals (II) （易制毒化学品二）;
(9) Certain dual-use items and technologies（部分两用物项和技术）;
(10) Special civilian items and technologies（特殊民用物项和技术）;
(11) The Export Control List of Commercial Cryptography（商用密码出口管制清单）.
Below please find an example of the controlled technical information in this Catalogue:
Technologies for the “development”, “production” or “use” of the equipment, materials or “software” regulated by Items 1-40 above
ollow “technology control”
The technologies and dual-use items in the Catalogue are listed in the above format, and most of the specific items are provided with the corresponding HS code to facilitate identification. However, the example technology above does not have an HS code.
In addition to the controlled technologies listed in the above control lists, licensing administration is also implemented for temporary control technologies. Temporary control means the temporary control that the State export control administrations may impose on the goods, technologies and services beyond the export control lists according to the needs of safeguarding national security and interests and fulfilling non-proliferation and other international obligations, with the approval of the State Council, or with the approval of both the State Council and the Central Military Commission, which will be announced to the public. The implementation period of temporary control shall be no more than two years. China announced temporary export control on TBP in 2003, graphite related products in 2006 and dual-use unmanned aerial vehicles in June 2015. However, no announcement has been made on temporary control over export of technology yet. The temporary control items in the three announcements above were subsequently included in the temporary control list in the Catalogue for the Administration of Export Licenses for Dual-use Items and Technologies.
2. Implementing export licensing mechanism
In addition to the controlled items and temporary control items listed in the export control lists which are subject to export license administration, an exporter should also apply to the State export control administrations for license for other technology or service, if it knows or should know, or has been advised by the State export control administrations, that such technology and service may have the risks of:
(1) endangering national security and interests;
(2) being used in the design, development, production or use of WMD and their means of delivery; or
(3) being used for terrorist purposes.
If an exporter is unable to determine whether or not the technology to be exported is an controlled item prescribed by law, it may consult with the State export control administrations, which shall make timely reply.
II. Technology Export Administration
In addition to licensing administration over the technologies related to dual-use items mentioned above, licensing administration is also implemented for technologies that are restricted from export in addition to the technologies related to dual-use items.
According to the PRC Regulations on the Administration of Technology Import and Export (中华人民共和国技术进出口管理条例), effective as of November 29, 2020, technology export is defined as the transfer of technology from within to outside the territory of the People’s Republic of China through trade, investment or economic and technological cooperation, including the transfer of patent / patent application right, license of patent exploitation, transfer of know-how, technical services and other forms of technology transfer. Technology export is subject to list administration. Competent authorities will formulate, adjust and publish the catalogue of technologies prohibited or restricted from export. Technologies that are prohibited from export shall not be exported. Technologies that are restricted from export will be subject to licensing administration, that is, shall not be exported without license.
The revised PRC Catalogue of Technologies Prohibited and Restricted from Export (中国禁止出口限制出口技术目录) came into effect on August 28, 2020. This Catalogue incorporates the PRC Catalogue of Technologies Prohibited from Export (中国禁止出口技术目录) and the PRC Catalogue of Technologies Restricted from Export (中国限制出口技术目录), each of which is arranged by industries, and lists the controlled technologies under each of such industries. Each controlled technology consists of Series No., Technical Name and Control Points. The Series No. has 7 digits, including annual code (2 digits), industry classification code (2 digits), technology name sequence number (2 digits), and a Pinyin code “J” (the first letter of Pinyin for technology prohibited from export) or “X” (the first letter of Pinyin for technology restricted from export) (1 digit). The annual code is the last two figures of the year of catalogue. The control points refer to the technical content, characteristics and scope that need to be controlled in this type of technology.
Series No.: 056201X
Technology Name: General Computer Software Programming Technology
Control Points: 1. Supercomputer [operations ≥ 130 billion] software technology
2. The implementation technologies for a microkernel-based and multi-threaded parallel computer architecture, the technologies on identification of parallelism in programs and the parallel optimization of compiler source program.
Technologies that do not fall into the Catalogue of Technologies Prohibited and Restricted from Export are freely exportable technologies, the export contracts of which shall be filed for registration with the competent department of foreign trade under the State Council or its entrusted institutions. Such technology export contracts shall come into effect when they are duly established, and such registration is not a condition for their effectiveness.
The application process for technology export license is as follows:
1. A Proposal For Technology Export Licence Of The People’s Republic Of China (技术出口许可意向书) will be issued upon approval of an application for technology export. Not until the Proposal For Technology Export Licence is obtained may an applicant conduct substantive negotiations or sign a technology export contract with a foreign entity.
2. After signing a technology export contract, the applicant shall apply to the competent department of foreign trade and economic cooperation under the State Council for a technology export license. The technology export contract shall come into effect as of the date when the technology export license is issued.
To sum up, if a technology does not fall into the Catalogue for the Administration of Export Licenses for Dual-use Items and Technologies or the Catalogue of Technologies Prohibited and Restricted from Export, then one can basically determine that such technology is a freely exportable technology; otherwise, it should be a technology prohibited from export or technology subject to licensed export (including the technologies listed in the Catalogue for the Administration of Export Licenses for Dual-use Items and Technologies and the technologies listed in the Catalogue of Technologies Restricted from Export).
Please be noted that as required by laws, the export contracts of freely exportable technologies shall be filed for registration, but such technology export contracts come into effect when they are duly established, and such registration is not a condition for their effectiveness. [For other technologies,] one shall apply for a PROPOSAL FOR TECHNOLOGY EXPORT LICENCE and a technology export license successively for its technology export contract, and the technology export contract comes into effect as of the date when the technology export license is issued.
Part II Restrictions over the Technology Export Counterparties
I. Unreliable Entity List System
The Provisions on the Unreliable Entity List (不可靠实体清单规定) effectives as of September 19, 2020 set forth the conditions for inclusion in the Unreliable Entity List and the corresponding sanctions, such as restricting or prohibiting a listed entity from engaging in China-related import or export activities.
A foreign entity may be included in the Unreliable Entity List if it engages in international economic, trade and other relevant activities that:
(1) endanger national sovereignty, security or development interests of China;
(2) suspend normal transactions with a Chinese business, incorporated or unincorporated, or citizen or apply discriminatory measures against any Chinese business, incorporated or unincorporated, or citizen, which violates normal market transaction principles and causes serious damage to the legitimate rights and interests of the Chinese business, incorporated or unincorporated, or citizen.
A foreign entity included in the Unreliable Entity List may be subject to one or several of the following measures:
(1) restricting or prohibiting the foreign entity from engaging in China-related import or export activities;
(2) restricting or prohibiting the foreign entity from investing in China;
(3) restricting or prohibiting the foreign entity’s relevant personnel or means of transportation from entering into China;
(4) restricting or revoking the foreign entity’s relevant personnel’s work permit, status of stay or residence in China;
(5) imposing a fine of the corresponding amount according to the severity of the circumstances;
(6) other necessary measures.
A foreign entity may apply for its removal from the Unreliable Entity List. No announcement has been made on inclusion of any foreign entity in the Unreliable Entity List so far.
II. Sanctions implemented and issued by China
China enforces UN sanctions as required.
In addition, China also issued five sanctions in 2021, respectively:
(1) In January, 2021, China decided to sanction 28 US persons who are mainly responsible for serious violation of China’s sovereignty in terms of China-related issues. Such persons and their family members are prohibited from entering the Mainland, Hong Kong and Macao of China. They and companies and institutions associated with them are also restricted from doing business with China.
(2) In March 2021, China decided to sanction nine individuals and four entities on the UK side for maliciously spreading lies and disinformation. As of today, the individuals concerned and their immediate family members are prohibited from entering the Mainland, Hong Kong and Macao of China. Their property in China will be frozen, and Chinese citizens and institutions will be prohibited from doing business with them.
(3) In March 2021, in response to the unilateral sanctions of the US and Canada on relevant persons and entities in Xinjiang, China on March 22 based on lies and disinformation, China decided to sanction Gayle Manchin, chair of the U.S. Commission on International Religious Freedom (USCIRF), Tony Perkins, vice chair for USCIRF, Michael Chong, Canadian Member of Parliament and the parliamentary Subcommittee on International Human Rights. The above persons will be prohibited from entering the Mainland of China, Hong Kong and Macao Special Administrative Regions, and Chinese citizens and institutions will be prohibited from trading with the above persons or communicating with the above entities.
(4) In March 2021, China decided to sanction 10 individuals and 4 entities on the European Union side for severely harming China’s sovereignty and interests, and maliciously spreading lies and disinformation. The individuals concerned and their families are prohibited from entering the Mainland, Hong Kong and Macao of China and they and companies and institutions associated with them are also restricted from doing business with China.
The above sanctions mainly involve the individuals and their associated companies and institutions, and prohibit any business dealings between Chinese persons and such individuals and entities, which, of course, include technology export.
(5) In July 2021, in response to the so-called “Hong Kong Business Advisory” concocted by the US to smear the business environment in Hong Kong, and its illegal sanction on several officials of the Liaison Office of the Central People’s Government in the Hong Kong SAR, China decided to take reciprocal countermeasures against the recent erroneous practice of the US, including seven US persons and entities in the countermeasures list (反制清单) pursuant to the Anti-Foreign Sanctions Law (反外国制裁法).
The individuals and entities in the countermeasures list will be subject to one or several countermeasures below, as the case may be:
(1) refusing to issue or invalidating visas, or banning entry into China or deportation;
(2) attaching, seizing and freezing movables, immovables and other types of property in China;
(3) prohibiting or restricting organizations and individuals within the territory of China from entering into transactions, cooperation or carrying out other activities with them; and
(4) other necessary measures.
With respect to whether a Chinese technology can be exported legally, one should first pay attention to the current control situation of the proposed technology to be exported, and then check whether the importers and end users of such Chinese technology are included in the lists of prohibited transactions and cooperation, such as control list, sanctions list and countermeasures list.