issue 14, april 2019...7 companies, of electronics and logistics industry issue 14, april 2019...
TRANSCRIPT
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Revisions to the Unverified List of the United States Export Administration
Regulations affect Chinese companies and institutions
Background
On April 11, 2019, the Bureau of Industry & Security (BIS) announced a rule to amend the Unverified List (i.e. “UVL”) under the U.S. Export Administration Regulations (EAR) which entered into force on the same day. It added and deleted dozens of companies and institutions from China, the United Arab Emirates, Malaysia, Indonesia, Finland and Russia, which included adding 37 companies, universities and research institutions from mainland China and six companies from Hong Kong, adding one additional address of one Hong Kong company currently in the UVL, and removing 3 companies and institutions from mainland China.
Main contents
According to the rule, the above Chinese companies, universities and institutions involved include:
Newly-added companies and institutions from mainland China
24 companies, from the industries of auto parts, LCD, optics, electronics, non-ferrous metals, machinery, aviation, automation, instruments, sensors, lasers, etc.; including not only manufacturing and trading companies, but also R & D centers; both Chinese and foreign invested companies.
5 universities, and 8 research institutions of nanotechnology, high pressure technology, metrology, chemical, physics, astronomy, etc.
Companies from Hong Kong were added and updated address
7 companies, of electronics and logistics industry
Issue 14, April 2019
Regulations discussed in this issue:
• The U.S. Departmentof Commerce, Bureauof Industry & Securityannounced a rule toamend the UnverifiedList under the U.S.Export AdministrationRegulations
China Tax Alert
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Companies and institutions from mainland China were removed
1 non-ferrous metal companies, 1 university, and Yantai Salvage Bureau, under the Ministry of Transport
The main purpose of the EAR is to control the exports, re-exports, transfers (in country), deemed exports, and other transactions regarding U.S. commercial and dual-use items, software or technology within and outside the U.S. It requires that, in some instances, an exporter or transferor apply to the U.S. Department of Commerce for an export license prior to proceeding in the above transactions. However, when certain conditions are met, the export or transfer may not require an export license or a "license exception" may be applicable, so that the items may be shipped without formal a formal export license.
According to the EAR, companies and institutions added to the UVL are often because, due to various reasons, the BIS cannot verify their bona fides through end-use checks. Sometimes there may not be sufficient information to add an entity under to the Entity List under stricter controls, so the BIS may add the entity to the UVL instead.
Any party transferring items subject to the EAR (including U.S. origin items among other things) to a UVL entity may not do so unless the following apply: (a) for shipments that do not require an export license or the use of a license exception, the shipping party must first obtain a UVL statement; or (b) for shipments that require the use of a license exception, a BIS export license must be obtained. A common example is encryption items classified under Export Control Classification Number (ECCN) 5A002, which requires a BIS license for shipment to the UVL entities. These requirements may create substantial obstacles to parties dealing with those on the UVL especially when they are engaged in international trade, technology exchanges or other international business event that involve the U.S. dual-use items, software or technology.
The BIS may remove a company from the UVL if it make corrections and submit documented evidence to verify the bona fides for U.S. export controls purpose.
KPMG observation
In recent years, the U.S has tightened its export control enforcement involving Chinese companies, universities and institutions in international trade and technology exchange. This includes not only import and export trade of goods and technology, but also the M&A of relevant enterprises, assets and technology, establishing R&D institutions, participating overseas technology exchanges and training. Furthermore, China is also drafting its own Export Control Law and it has been included in the National People’s Congress (“NPC”) legislative plan in this year. It means China is also strengthening its own export control management in accordance with its own industrial development and security needs. Therefore it is necessary for companies, universities and institutions to raise their awareness regarding the export control policies and regulations of major countries around the world, and positively strengthen their compliance now.
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG's global Trade and Customs practice has a dedicated global export control and sanction team that provides the following services for export control regulations in major countries around the world:
• Classification of export control items and construction of therelated internal control systems;
• Compliance review of export controls and the related training;
• Assistance in applying for export control licenses;
• Export control risk assessment and mitigation in cross-border M &A transactions, including transfer of original licenses, processintegration, etc.;
• Export control risk assessment and mitigation in companies anduniversities' overseas R&D cooperation program, investment anddonations, personnel exchanges and information sharing, etc.
© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. © 2018 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Althoughwe endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received orthat it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thoroughexamination of the particular situation.
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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