China Export Control Reform
On June 28, 2020, the government of PRC China announced the 3rd draft of export control law that tightens the administration of service providers involved in the export of controlled items.
New changes to previous version
This Law is established for the purposes of protecting the national security and interests of the State, fulfilling international obligations including non-proliferation, and strengthening and standardizing export control.
For the controlled items listed in the export control lists or temporarily controlled items, the export operator shall apply to National Export Control Authorities for permission.
In relation to goods, technologies and services other than goods under the control lists, and other than goods, technologies and services under temporary control, if the export operator knows or should know, or is notified by National Export Control Authorities that the goods, technologies and services may have the following listed risks, then the operator should apply to National Export Control Authorities for permission:
(1) Endangerment of national security;
(2) Used to design, develop, produce or use weapons of mass destruction and their delivery vehicles;
(3) Used for terrorist purposes.
Should the export operator be unable to determine whether the goods, technologies and services to be exported belong to the controlled items specified under this Law, and if National Export Control Authorities are consulted, National Export Control Authorities shall reply in a timely manner.
Internal Compliance Program Clause
Organizations and individuals outside the territory of the People's Republic of China that violate relevant export control provisions under this Law, obstruct performance of international obligations including non-proliferation, or endanger the national security and interests of the People's Republic of China, shall be handled in accordance with the law, and with legal responsibility pursued.
Please note that China doesn’t have an ECCN regime in its export control system. Instead, it differentiates the controlled items from the uncontrolled items by assigning them different HS codes. So, having both HS classification and ECCN classification capabilities and a mapping database is essential for an effective compliance practice.
The mechanism works to some extent, but a remarkable shortcoming is that the Harmonized System, which was designed for the classification of tangible goods only, doesn’t cover technologies, software, and services that constitute a significant portion of today’s mainstream control lists. For the intangible controlled items, in China we have to refer to a number of control lists that are discrete and lack a uniform coding system.