On December 18, 2020, the U.S. Department of Commerce issued a notice to include 77 Chinese companies and entities in the list of entities published by the Bureau of industry and industry ("BIS") of the U.S. Department of Commerce. It also determined that its licensing regime is in accordance with the US Export Control Regulations ("EAR") 744.11, and that a presumption of denial applies in its review.

The Entity List is a list under the jurisdiction of BIS. 

According to EAR 744.11(b), natural persons, legal persons or other institutions that are reasonably suspected of participating in, may participate in, or are participating in activities that endanger the national security of the United States or are contrary to the interests of foreign policy, or engage in such acts on their behalf.

According to EAR 744.11(a), once an enterprise is listed in the Entity List, any export, re-export or transfer to an enterprise on the Entity List involving products controlled by BIS (even those with an ECCN regulation of EAR 99) requires a license issued by BIS on a case-by-case basis upon application, and its review of such licenses is overwhelmingly. The majority of these licences are reviewed by BIS on a "constructive refusal" basis.

According to EAR 734.3, the products controlled by the EAR include:

1. Products in the United States, including products in the U.S. foreign trade zone or transferred from one country to another for transit in the United States;

2. U.S. origin items;

3. (a) products made in a foreign country but containing controlled U.S. origin goods, or (b) products made in a foreign country "bundled" with controlled U.S. origin software, or (c) software made in a foreign country mixed with controlled U.S. origin software, or (d) technology made in a foreign country mixed with controlled U.S. origin technology. The proportion of the above regulated U.S. origin products;

4. Certain direct products manufactured in a foreign country using U.S. origin technology or software (direct products means products produced directly through the use of technology or software).

5. Products produced by (a) factories outside the United States, or (b) factories whose major parts are located outside the United States, using U.S.-origin technology and software;

According to the relevant provisions of EAR, any products involving software and technology of US origin will be subject to its control. Therefore, once an enterprise is included in the list of entities, the direct consequences may be:

1. Unable to purchase any products from the United States or import any goods, technology or software of American origin from the United States or a third country;

2. Unable to import from a third country, or purchase a product containing more than 25% of the value of items controlled by the United States, or the product is directly produced by using technology or software of American origin, or is produced by a factory constructed by using technology or software of American origin;

3. At present, the United States has no clear regulations on the international dollar settlement business of the listed entities, but the trend cannot exclude that listed entities may be more susceptible to trade compliance reviews by corresponding international banks and other financial institutions when conducting international U.S. dollar clearing operations.

According to the above provisions, for domestic enterprises, once they have been included in the list of entities, it is suggested to immediately conduct an inventory of the projects and formulate a plan, as well as take targeted risk prevention for future.