The Export Control Law of the People's Republic of China (the “ECL”) has been unveiled since October and came into force on 1 December 2020, which marks the establishment of China’s first comprehensive and consolidated legal framework for export control law in China. The ECL consists of five chapters with a total of 49 articles, regulating the export of sensitive materials and technologies from China to overseas with the safeguarding of “national security and national interests” as top priority. This obliges both Chinese exporters and foreign customers to carefully review their compliance to Beijing’s export control policy and take a close look at the restrictions on the export-controlled items, controlled activities, State’s Export Control Authorities and legal liabilities for non-compliance, as introduced as follows.
Article 2 of the ECL applies to the so-called “controlled items” and to technical information and data related to such items, including dual-use items (for both civil and military purposes), military products, nuclear items (including non-nuclear materials used for reactors), and technologies and services related to the safeguarding of national security and national interests. When it comes to identifying specific controlled items, the ECL identifies 3 control systems:
- Product Control lists, which will be updated periodically by the State's Export Control Authorities (Article 4, 9);
- In addition, the ECL authorizes State Export Control Authorities to list items for “temporary controls”, for a provisional period of up to 2 years before deciding whether to include them in the control list (Article 9);
- Control by the miscellaneous provision (Article 12);
Article 12 provides that any goods, technologies or services that might implicate any of the following risks shall subject to the control:
- endangering national security and national interests;
- being used in the design, development, production or use of weapons of mass destruction and their means of delivery; and
- being used for terrorist purposes.
In these cases, the ECL allows an extension to all potentially risk bearing items and adaption to the ever-changing demand of practice. Though the criteria are not specifically prescribed in the ECL, the crucial elements of export controls will likely be clarified in future policies.
The controlled activities covered in the ECL include “export” (physical or electronic transfers of controlled items from the territory of China to overseas) and “deemed export” (provision of controlled items by citizens, legal persons and other non-incorporated organizations of China to foreign organizations and individuals). The Supplementary Provisions (Chapter V) even widens the scope of its application to contain “the transit, transshipment, through transport, and re-export of controlled items from areas under special supervision of the Customs, such as bonded zones and export processing zones, as well as bonded supervision areas such as export supervision warehouses and bonded logistics centers”. Since technology and data are controlled items under the ECL, the release of them to foreign persons may also be regarded as exports.
State’s Export Control Authorities
The State’s Export Control Authorities, as mentioned above, is a collective name of the departments of the State Council and the Central Military Commission that assume the function of export control, which shall be responsible for export control according to the division of duties. Relevant departments at provincial level should also undertake responsibilities accordingly. The ECL does not specify the particular departments to be the State’s Export Control Authorities, but in practice, the State’s Export Control Authorities usually comprise the Ministry of Commerce (MOFCOM), the Ministry of Industry and Information Technology (MIIT), State Administration for Science, Technology and Industry for National Defense (SASTIND), China Atomic Energy Authority (CAEA), etc. The State’s Export Control Authorities have broad powers in investigating suspected violations. Such investigative measures can be carried out against investigated persons, not limited to Chinese exporters.
Legal Liabilities for Non-Compliance
Chapter IV of the ECL provides detailed administrative penalties for various export control violations of this law. In addition to common penalties as warning, confiscation of illegal income, and fines, in serious cases, the exporters may be ordered to suspend business for rectification or even to revoke its export qualification for relevant controlled items. In addition, once the exporter has been penalized under the ECL, it may be refused to apply for export licenses for five years from the effective date of the penalty decision, and the persons directly liable shall be banned from engaging in export business for five years. Whoever exports items prohibited by the law or controlled items without permission, will be investigated for criminal liabilities. If criminally punished, a person shall be banned from export activities for life.
The introduction of the ECL marks another step by China towards a comprehensive and consolidated export control regime but poses new risks and challenges for Chinese exporters and their customers. Soon China’s implementation and enforcement of the ECL and publication of other supporting policies will come into effect and all parties engaged in the controlled activities should update the measures of compliance and conduct risk assessments on a regular basis to ensure that their operations are compliant with China’s export control regime.