According to a report from Kuaitech on October 1st， the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce has announced a new regulation. This regulation stipulates that subsidiaries owned 50% or more by entities already on the U.S. export control Entity List will also be subject to the same export restrictions.
The announcement states: “To ensure that Entity List restrictions more effectively protect U.S. national security and foreign policy interests， the restrictions must apply to one or more domestic or foreign affiliated enterprises directly or indirectly held by restricted entities.”
Historically， some Chinese companies facing U.S. sanctions have utilized their subsidiaries to circumvent these restrictions and continue their business activities. This new rule specifically targets this loophole， aiming to broaden the scope of control， particularly concerning Chinese technology firms.
Chinese technology giants often operate through a complex web of subsidiaries and maintain extensive partnerships with international companies. This structure has made it challenging for the U.S. to completely sever their access to controlled American technologies. The expanded scope of the Entity List is intended to address this complexity.
Furthermore， for U.S. companies that rely on Chinese enterprises for raw materials and components， this new regulation will necessitate increased diligence in scrutinizing their partners to ensure compliance with export controls. This added layer of review is likely to increase operational costs for these U.S. businesses.
Sources familiar with the matter indicate that this new policy from the U.S. government has been in development for several months. Prominent figures within the hawkish faction， such as Landon Heid of the White House National Security Council (NSC)， are considered key proponents. Heid was notably nominated by the Trump administration for the role of Assistant Secretary of Commerce for Export Enforcement.
In response to the latest U.S. policy， a spokesperson for China’s Ministry of Commerce issued a statement， highlighting that the U.S. action is “extremely egregious in nature” and that China firmly opposes it.
During a regular press conference held on September 29th， a reporter inquired about the U.S. Department of Commerce’s announcement regarding the “penetrating regulation” on export controls. The regulation imposes equivalent export control sanctions on subsidiaries holding over 50% ownership of companies already on the U.S. Entity List. The spokesperson for the Chinese Ministry of Commerce was asked for their comments.
The spokesperson for China’s Ministry of Commerce acknowledged the situation， stating that the related rules are another typical example of the U.S. generalizing national security and abusing export controls. The spokesperson elaborated that this move by the U.S. is extremely egregious in nature， severely damaging the legitimate and lawful rights and interests of the affected enterprises， seriously disrupting the international economic and trade order， and gravely undermining the security and stability of global industrial and supply chains. Therefore， China firmly opposes this action. China urges the U.S. to immediately correct its erroneous practices and cease the unreasonable suppression of Chinese enterprises. China will take necessary measures to resolutely safeguard the lawful rights and interests of Chinese enterprises.
