China's nuclear nonproliferation prohibitions were expanded by a U.S BIS rule on August 11, 2023. We examine how this affects U.S. and non U.S enterprises.
Why this amendment of the EAR?
A regulation that became effective on August 11, 2023, extended China's nuclear nonproliferation restrictions by the U.S. Department of Commerce's Bureau of Industry and Security (BIS). We look at what this means for U.S. and non-U.S. businesses.This action was taken as a part of the government's most recent initiatives to counter China's rising nuclear capabilities, efforts to upgrade its military, and integration of the military and civilian sectors.
What are the new licence requirements?
A licence is now necessary in order to export, reexport, or transfer (in-country) to China any goods that are controlled under nuclear nonproliferation column 2 (NP2) on the Commerce Country Chart (supplement no. 1 to EAR Part 738):
and are listed on the Commerce Control List (CCL) (supplement no. 1 to part 774 of the Export Administration Regulations (EAR)):
How are the ECCNs affected?
A key in determining whether an export license is needed from the Department of Commerce is knowing whether the item you intend to export has a specific Export Control Classification Number (ECCN). The ECCN is an alpha-numeric code, e.g., 3A001, that describes the item and indicates licensing requirements. All ECCNs are listed in the Commerce Control List (CCL) (Supplement No. 1 to Part 774 of the EAR):
The Export Control Classification Numbers (ECCNs) 1A290, 1C298, 2A290, 2A291, 2D290, 2E001, 2E002, and 2E290 are currently governed under NP2 rules. These include nuclear reactor equipment and generators, as well as items for nonnuclear end uses, such as deuterium, graphite, and depleted uranium.
In this example, the two items concerned are commercially traded:
Graphite with a boron content of less than 5 parts per million and a density greater than 1.5 grams per cubic centimeter that is intended for use other than in a nuclear reactor;
‘Deuterium’ not for use in a nuclear reactor.
Prior to the legislative change, China was already subject to a number of nuclear nonproliferation requirements under the EAR, such as:
the actions taken under nuclear nonproliferation column 1 (NP1) in compliance with the suggestions made by the international group Nuclear Suppliers Group.
certain end-user constraints for EAR Part 744.
Numerous Chinese companies have been included on the BIS Entity List as a result of worries about nuclear nonproliferation.
A similar order was issued by the Nuclear Regulatory Commission (NRC), which is in charge of an additional framework for export control of nuclear material, facilities, and equipment, and it went into effect on August 8, 2023.
Any further nuclear-related exports to China that come within the NRC's jurisdiction must obtain a licence in accordance with this directive.
The US government has often voiced concerns about China's growing nuclear ambitions.
For example, in October 2022, BIS called attention to "the most rapid expansion and platform diversification of [China's] nuclear arsenal in its history" and simultaneously announced an aggressive rise in export bans related to China. Building on earlier regulatory action, the BIS's most recent regulatory move seems to be directed at reducing this perceived threat by bolstering US efforts to monitor the export and ultimate use of NP2 items to China.
The new rule is applicable to China, which includes Hong Kong, which ceased to be recognised as a separate destination in 2020, and Macau, which is still recognised as a special administrative region of China. A Savings Clause in the rule permits approved exports, reexports, or transfers that, in compliance with actual instructions, were in route on a carrier on August 11, 2023, to be dispatched, provided that they are completed by September 11, 2023.
The final rule was released with approval from the Export Control Reform Act of 2018.
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