Exclusive-U.S. to publish list of Chinese and Russian firms with military ties

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(Reuters) – The Trump administration on Monday plans to publish a list of Chinese and Russian companies with alleged military ties that restrict them from buying a wide range of U.S. goods and technology, said senior U.S. Commerce Department officials.

Reuters first reported last month that the U.S. Department of Commerce drafted a list of companies that it linked to the Chinese or Russian military, news that brought a rebuke from Beijing.

The final list does not include Commercial Aircraft Corporation of China (COMAC), or the Hong Kong subsidiaries of Colorado’s Arrow Electronics (NYSE:ARW) and Texas-based TTI Inc, a Berkshire Hathaway (NYSE:BRKa) electronics distributor, the officials said. Those companies were on the draft list seen by Reuters.

The final list names 103 entities, 14 fewer than on the draft list seen by Reuters in November. Fifty-eight are designated under China, down from 89, and 45 entities are tied to Russia, up from 28, one of the officials said.

Commerce Secretary Wilbur Ross said on Monday the action establishes a new process “to assist exporters in screening their customers for military end users.”

The final list is expected to be published on the Commerce Department website on Monday and for public inspection in the Federal Register on Tuesday, the officials said.

Publishing the list in the waning days of the Trump administration follows the addition of dozens of Chinese companies to another U.S. trade blacklist, including the country’s top chipmaker, SMIC, and Chinese drone manufacturer SZ DJI Technology Co Ltd, on Friday.

Tensions between Washington and Beijing have escalated over the past year, as Trump blamed China for the coronavirus pandemic, a national security law was imposed in Hong Kong and a dispute involving the South China Sea has intensified.

The U.S. government also has grown increasingly concerned about China’s “military-civil fusion,” a policy that aims to build up its military might and technological development in tandem.

Last spring, the Commerce Department expanded the definition of “military end users,” as the department defines the companies with military ties.

The category includes not only armed service and national police, but any person or entity that supports or contributes to the maintenance or production of military items – even if their business is primarily non-military.

The “military end user” designation requires U.S. companies to obtain licenses to sell to the firms, which are more likely to be denied than granted.

One of the officials stressed the list is not definitive and that U.S. companies must continue to do their own due diligence to help decide whether their buyers are considered military end users.

Publication of the list is likely to inflame Beijing. Chinese Foreign Ministry spokesman Zhao Lijian in November called news of the draft list “unprovoked suppression of Chinese companies by the United States.”

While COMAC was removed, seven Aviation Industry Corporation of China (AVIC) related entities remain on the list.

General Electric (NYSE:GE) Co and Honeywell International (NYSE:HON) both have joint ventures with AVIC and supply COMAC, which is spearheading Chinese efforts to compete with Boeing (NYSE:BA) Co and Airbus.

Arrow and TTI have both denied their subsidiaries have ties to the Chinese military and have said they were working to be removed from any final list.

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