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The U.S. Department of Commerce, Bureau of Industry & Security (BIS) has added 33 China-based companies to its Unverified List, which now includes more than 100 entities located in China. A listing of these companies is provided in the appendix below.

Effective February 8, 2022, the export, reexport, or transfer of any items subject to the Export Administration Regulations (EAR) including goods, software, and technology to any of the companies added to the Unverified List will require enhanced diligence and documentation, including in some instances a certified UVL Statement from the listed entity. Inclusion on the Unverified List also precludes reliance on any license exception, meaning that the exporter must seek an export license from BIS before exporting controlled items to these entities.

A company doing business with an Unverified List designee must first determine whether the transaction involves an item subject to the EAR including even non-dual use items and those designated EAR99. (The provision of services and certain published materials are generally excluded.) If so, the company must then determine whether a license is required for the intended destination (e.g., China), end-user, or end use; and even when no license is required, the company must still obtain a UVL Statement from the listed entity certifying its compliance with the EAR and committing to cooperation with end-use checks by BIS. Records relating to the transaction, regardless of whether a license is required, must be kept for at least five years.

The exclusion from license exception eligibility impacts items that, although subject to a license requirement for certain destinations such as China, can ordinarily be exported without a license, provided the requirements of an applicable license exception are met. For example, technology companies that supply encryption software classified under the Export Control Classification Number (ECCN) 5D002 routinely rely on License Exception ENC to lift a license requirement for end-users located in China. Those companies will now need an export license from BIS before providing the same software (and potentially software updates) to the Unverified List entities.

BIS added the 33 China-based entities to the Unverified List because it has been unable to sufficiently determine the entities legitimacy or reliability as end-users of items subject to the EAR. While additions to the Unverified List are not necessarily predicated on specific national security or foreign policy concerns, this action reflects the U.S. governments increased scrutiny of Chinas business practices and continued focus on perceived threats from China. BIS indicated the Unverified List update, which follows the addition of 34 Chinese companies to the Entity List last December, is intended in part to signal to the [Chinese] government the importance of their cooperation in assisting BIS with verifying the legitimacy and reliability of these parties to receive U.S. exports. Delays in the ability of BIS to conduct such verification checks may have also resulted from the COVID-19 pandemic. Although designations on the Unverified List may not reflect wrongdoing by the listed entities, these listings are in some cases confused with other U.S. government prohibited party listings having broader impact (e.g., BISs Entity List and the Office of Foreign Assets Controls Specially Designated Nationals (SDN) List).

Entities seeking removal from the Unverified List may petition BIS and supply information to verify their legitimacy and reliability.

Appendix: List of Companies Added to the Unverified List on February 8, 2022

The names and websites of the companies recently added to the Unverified List suggest operations in a wide range of industries, including electronics, optoelectronics, semiconductor manufacturing, wind and solar energy, unmanned aerial vehicles (UAVs), industrial equipment, heavy machinery, specialty chemicals, biotechnology, and pharmaceuticals, among others. Universities are also among the recent Unverified List designees.

Read more:
Commerce Adds 33 Chinese Companies to the Unverified List - JD Supra