UK tech firms warned to ensure compliance as US implements tough export controls on Chinese exports

Tue 13 Dec 2022
Posted by: William Barns-Graham
Trade News

China export controls

UK technology businesses have been warned that they need to ensure compliance with US export control regulations throughout their supply chains following the toughening of restrictions on Chinese exports of semiconductors and other associated technologies.

The US recently claimed that China is now implementing US inspections on Chinese exports that are subject to tightened US export controls.

The deadline for Chinese firms to co-operate with the new US control rules – which have extra-territorial reach – passed last week. Chinese firms found to not comply with the restrictions and checks would have faced being blacklisted from continued trade with the US.

In October, the Biden administration moved to slow the supply to China of microchips and associated high-end technology used in advanced computing and military applications, as previously covered in the IOE&IT Daily Update.

UK firms impacted

Roger Arthey, the chair of the Institute of Export & International Trade’s Export Control Profession, warned that UK firms could also face great scrutiny as a result.

“As the level of controls on US exports to China, especially of semiconductors and associated technology, have increased, it is reasonable to expect that the US would want to make additional checks,” Arthey said.

“It is also reasonable that firms in other countries, such as the UK, involved in the supply chain may expect increased US scrutiny,” he added. “As usual, the advice to UK companies is to ensure that their systems are robust and transparent so that they can avoid non-compliance with all relevant export control regulations, including US ones.”

US inspections

The FT reports that Alan Estevez, the US commerce under-secretary for industry and security, said China is letting American officials inspect some Chinese companies to ensure that American technology was not being diverted for unauthorised activity such as the manufacture of weapons.

Thirty-one Chinese companies, including memory chipmaker YMTC, were placed on the “unverified list”, setting a 60-day deadline for the companies to allow checks or face being added to a trade blacklist

Beijing approved visits of US officials to companies in Wuhan, Shanghai and several cities in Guangdong province in November after the semiconductor industry and local authorities filed a series of petitions highlighting the impact of the export controls.

US relents too

According to Techmonitor, the US has itself also bowed to pressure from its own businesses to water down legislation over chips.

A cross-party bill unveiled in September would have required US government departments to immediately stop using chips manufactured by Chinese firms, but the wording of the legislation has been changed.

Where agencies and their contractors would have previously been compelled to remove the devices immediately, or in some cases within two years, they will now have a five-year compliance window should the legislation become law.