An Analysis of the Export Control Law from the Angle of National Security and Interests

(By Wang Haichuan)The Export Control Law adopted by the Standing Committee of the National Congress on 17 October 2020 took effect on 1 December 2020. The aim of this law to accord paramount status to national security and interests was reflected in its official version and the process of its amendment in its formulation procedures. This article is an analysis of this law from the angle of national security and interests.

1.National security and interests up to the highest status

Article 1 of the Export Control Law provides that the aim of making this law is to protect national security and interests, perform the international duty of non-proliferation and strengthen export control. The second draft published in July 2020 changed the order of the phrases “protect national security and interests” and “perform the international duty of non-proliferation” so that the former came before the latter. In contrast with the second draft, in Articles 2, 9 and 10 of the official version the phrase “protect national security and interests” comes before the phrase “perform the international duty of non-proliferation”. The amendments are aimed to align the clauses with Article 1 and reflect the top aim of making the law to protect national security and interests.

2.Lower export control threshold

Two clauses in the second draft that mention “national security and interests” are Articles 1 and 44. Article 44 thereof is about legal responsibilities of overseas organizations and individuals. Other clauses thereof such as controlled items (Article 2), temporary control measures (Article 9), ban on export of controlled items (Article 10), application for clearance to export items not included in the control list (Article 12) and control list are written as harming or protecting “national security”. In the official version, these clauses are amended to harm or protect “national security and interests”. For example, in Article 12 exporters that know or should know exported items have the risk of “harming national security and interests”, which in the second draft is written as the risk of “harming national security” should apply for clearance to the state export control department. The amendment is aimed to align the clause with Article 1 and reflects the lawmakers’ intention to lower the export control threshold. According to the national security Law, national security means a situation in which there is no danger or internal or external threat of harming state related interests and the ability to keep the state in safe conditions. The matter that threatens national security must have been serious. The Export Control Law includes national interests, does not require national security threat and sets a lower export control threshold than the second draft.

The official version of the law includes new provisions on countermeasures to lower the threshold. Article 48 provides that China can take countermeasures against any country or region that abuses export control measures to harm national security interests of China. Export control measures taken by a foreign country against China would not necessarily threaten national security of China, but the Export Control Law allows China to take countermeasures. national interests cover a wide range of things. With international trade protectionism coming up, other countries’ trade protection measures could be believed to harm national interests of China. Therefore, the Export Control Law is applicable in trade disputes with other countries.

3.A highly flexible range of controlled items

Article 2 of the Export Control Law provides that the law applies to dual-purpose items, military, nuclear and other items such as goods, technologies and services connected with national security and interests and international duties like the duty of non-proliferation (“controlled items”). In the Export Control Law, the range of controlled items is highly flexible and contains three levels of the control list, temporary control measures and other dangerous items. Article 4 thereof provides that the export control policy is implemented by national authority formulating a list or catalog (“control list”) or implementing export clearance procedures. Regarding temporary control measures, Item 2, Article 9 of the Export Control Law provides that to meet the needs to protect national security and interests and fulfill international duties like the duty of non-proliferation, the state export control department can administer and announce temporary control over goods, technologies and services not included in the export control list with approval of the State Council or the State Council and the Central Military Commission. Regarding other dangerous items, Item 3, Article 12 of the Export Law provides that export operators should apply to the state export control department for clearance to export goods, technologies or services not included in controlled items on the export control list or items under temporary control that they know or should know or as stated in a notice from the state export control department could harm national security and interests or be used in massive weapons or terrorism or involve other risks.

Export operators have the duty to examine other dangerous items and should apply for clearance if they know or should know they involve risks. Moreover, they should apply for clearance after receiving a notice of potential risks involved from a government department concerned, but there is no provision on circumstances and procedures under which government departments should send such a notice. Government departments can send the notice as long as there may be risks whether they can prove the risks actually exist. The range of controlled items is open and government departments have the right to execute export control over any goods, technology and service. Subject to Article 41 of the Export Control Law, if the export control department refuses your export clearance application, you can only request for an administrative review and the decision on the administrative review request is final, which means export operators cannot bring an action for the clearance and administrative authorities have the full power to decide whether to grant the clearance.

4.Control over overseas persons

Overseas persons in the Export Control Law include exporters and end users. As exports of controlled items could affect national security and interests, the law sets out measures below for controlled items and persons involved outside China.

  • Export operators should submit to the export control department end user and use certificates issued by end users or state or local governments of end users (Article 15);
  • End users should undertake not to change end uses of or transfer to any third party controlled items without authorization. Export operators and importers should report to the state export control department concerned immediately when finding their end users or end uses may change (Article 16);
  • The state export control department should establish a risk control system for, evaluate and check and strengthen control over end users and end uses of controlled items (Article 17);
  • The control list was created to prohibit or restrict importers or end users on the list from trading (Article 18);
  • Responsibilities of overseas organizations or individuals will be pursued. (Article 44)

In the Export Control Law control of overseas persons is divided into advance control (Items (1) and (2) above), in-process control (Item (3) above) and post control (Items (4) and (5)) stages to protect national security and interests from being harmed as well as possible.

5.Export Control and List of Unreliable Persons

The Regulations on the List of Unreliable Persons promulgated by the Ministry of Commerce on 19 September 2020 also contains clauses regarding import and export restrictions. According to the Regulations, persons (including foreign business and other organizations or individuals) on the list of unreliable persons can be restricted or prohibited from doing import and export activities involving China. As the US Department of State approved sale of military products to Taiwan, the spokesman of the Ministry of Foreign Affairs announced on 26 October that persons involved would be sanctioned, perhaps by taking into action the list of unreliable persons.

The Export Control Law is aimed to regulate export of controlled items, but the List of Unreliable Persons is aimed to restrict specific overseas persons. Their application scopes are different, but part of them applies to the same persons. Item 2, Article 18 of the Export Control Law provides importers and end users that may harm national security and interests will be included in the control list. Item 1, Article 2 of the List of Unreliable Persons provides appropriate measures will be taken against overseas persons who harm China’s sovereign, security and development interests. Both of them include restrictive measures against specific overseas individuals and organizations and apply on the condition that China’s national security and interests are harmed.

The two sets of rules appeared with international trade protectionism coming up, aim to protect national security and interests and apply on the same condition. Businesses should consider both of them for compliance review.

In sum, the top aim of the Export Control Law is to protect national security and interests, to achieve which the law gives administrative authorities more powers, including full powers to define controlled items and take control measures. With international trade protectionism coming up, the number of international trade disputes is increasing and the uncertainty and political risks of exports will be aggravated.


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