One to watch: China’s draft Export Control Law likely to be enacted in 2018

HONG KONG – China’s Ministry of Commerce (MOFCOM) in June 2017 published a  draft Export Control Law (ECL) for public comment. In a Client Alert, lawyers Baker McKenzie says that, if enacted, the ECL will be the first set of comprehensive and unified export control legislation in China, which is aimed at upgrading the country's existing regime of various administrative regulations and rules. BM says the ECL is widely expected to be introduced in the National People's Congress within 2018.

“Given the potentially wide-sweeping impact, multinationals that may be affected are well advised to start early to understand the implications of the new law on their compliance obligations, supply chains, and business operations,” the Client Alert says.

The draft ECL sets forth four categories of controlled items (Control Lists), including dual-use items which may be used for civilian and military purposes, military items, nuclear items, as well as other goods, technologies, services and items that are related to national security.

Items outside the Control Lists could also be temporarily controlled for up to two years, subject to the approval of the State Council, the Central Military Commission and their designated authorities.

In addition, activities subject to ECL control need not involve items on the Control Lists as long as the exporter knows or should know that the export may give rise to national security and terrorism concerns, BM says. The authorities may also maintain blacklists of foreign importers and end-users that breach the ECL, and may prohibit the export of controlled items to such persons.

“Furthermore, the draft ECL provides that if China is subject to any discriminatory export control measures by any country, the State may adopt retaliatory measures against such country.

“The State may also put in place any necessary controls over the export of any goods, technologies and services in order to safeguard security and interests during wartime or urgent situations concerning international relations.

“If the draft ECL is passed in its current form, companies must be prepared to regularly monitor dynamic updates to the scope of controlled items, countries and persons in order to ensure full compliance with the law.” www.bakermckenzie.com (ATI).