The U.S. should tighten export controls against the Beijing Genomics Institute and its subsidiaries to prevent it from importing U.S. genomic and semiconductor technologies, the House’s Republican-led China Task Force said in a letter to National Security Adviser Jake Sullivan. Although the Commerce Department’s Entity List has two of BGI’s subsidiaries, the lawmakers said several more should be added to restrict the company’s “access to technology, data, and money.”
The Commerce Department could impose strict export controls, including through the Entity List, on Chinese companies that violate U.S. export restrictions against Russia, agency officials said this week.
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Important questions still surround the implementation of a potential multilateral sanctions package against Russia, economic and security experts said, including U.S. efforts to enforce an expansion of the foreign-direct product rule. Although details may not yet be clear, a former State Department official warned that new U.S. sanctions against Russia could soon turn strict enough to mirror trade restrictions against Iran.
The Russian government planned to meet with about 100 domestic electronics manufacturers, consumers and financial firms Feb. 12 to discuss methods to avoid various trade restrictions imposed by foreign countries, according to an unofficial translation of a Feb. 11 report from the Russian daily Kommersant. The talks, planned as Russia prepares a military invasion into Ukraine, were expected to include a “strategic session” on how the Russian companies can “diversify import channels” to mitigate the restrictions. Officials were to speak about “adjusting measures to support electronics manufacturers, developing independent chip production in Russia, as well as the prospects for import substitution in the segment of laptops, workstations and servers,” the report said. Companies expected to participate include SberBank, Rostelecom, Baikal Electronics and Rostec. The U.S., the European Union and others are preparing a new set of export controls and sanctions against Russia if it further invades Ukraine (see 2201250042).
Q4 revenue at China’s largest chipmaker, Semiconductor Manufacturing International Corporation, jumped 61.1% year over year to $1.58 billion, and its quarterly profit was $552.8 million, increasing 212.7% from Q4 2020, despite being added to the Commerce Department’s Entity List in December 2020 (see 2012180039), the company reported Feb. 10. It was an “exceptional year in SMIC's development history,” it said. The global shortage of chips and the strong demand for “local and indigenous manufacturing” brought SMIC “a rare opportunity,” while the U.S. export restrictions of the entity list “set many obstacles to the Company's development,” it said. “Focusing on the primary task of ensuring operation continuity, meeting customer demand, and alleviating the supply chain shortage, the Company rose to the challenge, tackled difficulties precisely and achieved sound performance.”
The European Commission announced plans this week to increase investments and incentives for its semiconductor industry and establish a more reliable chip supply chain to reduce dependence on foreign suppliers. The plans also could lead to more export control measures over sensitive chip products in response to domestic shortages or unfair foreign trade policies.
The House voted 222-210 last week to pass its China competition bill, which includes a variety of provisions that could expand U.S. export controls, sanctions and investment screening authorities. Although the America Competes Act faced objections from Republicans who argued it wasn’t tough enough on China and didn’t include strong enough export control measures (see 2202020039), several provisions could lead to more China sanctions and further restrict exports of critical American technologies.
Companies could face a variety of compliance challenges if the U.S. expands its foreign direct product rule to capture exports to Russia, Cooley's Annie Froehlich, an export control lawyer, said in a Feb. 3 Atlantic Council blog post. The U.S. has reportedly considered using the rule if Russia further invades Ukraine, which could limit Russia’s ability to import certain foreign-produced chips, integrated circuits and microprocessors, the post said. “If regulatory actions are imposed, assessing exposure and implementing appropriate compliance responses will be challenging.”
Two senators this week asked the Commerce Department to say whether it opposes stronger export controls against SMIC, China’s top chipmaker, as has been reported in the media, and to explain why.