On Monday, October 29th, 2018, the Department of Commerce announced that it had added Fujian Jinhua Integrated Circuit Company, Ltd (Jinhua) to the Entity List, restricting their ability to receive exports, re-exports, and transfers of commodities, software and technology subject to the EAR.
Typically, an addition to the Entity List would not be a notable event. However, in this instance, restrictions against Jinhua have been enacted pre-emptively. While U.S. chip maker, Micron Technology Inc. has accused them of stealing their chip designs, they have not yet been determined to have committed any export violations.
The actions against Jinhua are the result of the determination that they pose “a significant risk of becoming involved in activities that are contrary to the national security interests of the United States.” Their growth threatens companies involved in manufacturing defense-related items—specifically DRAM components that national security directives dictate must be manufactured by U.S.-based companies. [1]
“When a foreign company engages in activity contrary to our national security interests, we will take strong action to protect our national security. Placing Jinhua on the Entity List will limit its ability to threaten the supply chain for essential components in our military systems,” states Secretary of Commerce Wilbur Ross.
Moving forward, companies looking to sell their dual-use items to Jinhua will be required to apply for a license to do so, while the Commerce Department has advised that such applications will be reviewed with the presumption of denial—effectively signaling that Jinhua is persona non grata.
The actions taken against Jinhua further demonstrate how important it is to rescreen your customers, vendors, and other business partners, as you often won’t have any other indication that their status may have changed.
