China Releases Regulations for Unreliable Entity List
China released regulations for its unreliable entity list that will target a “very small number of foreign entities” that violate Chinese laws. The regulations detail procedures for adding companies to the list but do not say when China will announce its first set of additions. “Foreign entities that are honest and law abiding do not need to worry,” China’s Commerce Ministry said Sept. 20, according to an unofficial translation.
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China said a new “working mechanism” to decide which companies are placed on the list will take into account the degree to which that company has harmed China’s “national sovereignty,” security and development. The ministry said China can investigate foreign entities for placement on the list based on its own suspicions or through suggestions from “relevant parties, and will announce all probes. After it places a company on its list, China will remind industry about the “risk of dealing with the foreign entity” and will warn businesses to “heighten their vigilance and guard against risks.” China may also place trade, investment and travel restrictions on companies added to the list.
Before adding an entity to the list, however, China may give that company a “time limit” to “correct its behavior,” based on certain conditions outlined by the Chinese government. “During this period, no measures will be taken against the entity,” China said.
“If the correction is not made within the time limit, corresponding measures shall be taken.” China also said it will remove from the list any entities that change behavior, and companies can apply for removal.
China said it has no “timetable” for adding companies to the list, and stressed the regulations will be “strictly limited.” The ministry said China will not “arbitrarily expand the scope” and aims to be transparent when designating a company. “The initiation of investigation procedures, decisions to be included in the list, and handling measures of relevant foreign entities shall be announced … [and] foreign entities have the right to make statements and defenses during the investigation,” China said. “These system designs can not only ensure the orderly operation of the unreliable entity list system, but also protect the legitimate rights and interests of foreign entities.”
The move is considered to be in response to restrictions imposed on Chinese companies through the Commerce Department’s Entity List, but China’s Commerce Ministry said its regulations are unrelated to actions by other countries. China said it has worked on the regulations for more than a year. “The Regulations neither target a specific country nor a specific entity,” it said. However, the ministry specifically mentioned the U.S., urging it to lift restrictions on Chinese companies. “We always believe that cooperation is the only correct choice for China and the United States,” the ministry said. “It is hoped that the US can meet China halfway, respect international law and rules, and conduct dialogue and consultation on the basis of equality and mutual benefit.”