The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added 80 entities to its trade export blacklist on Tuesday, March 25, with over 50 of them being Chinese entities. The move aims to impede the Chinese Communist Party’s development in high-performance computing, quantum technology, advanced artificial intelligence, and hypersonic weapons.
This round of sanctions aims to plug loopholes and strengthen global control over advanced chips. Meghan Harris, a semiconductor policy expert at Beacon Global Strategies, stated that these sanctions mark a significant step in export control, addressing major loopholes that allowed subsidiaries of the Biden administration’s WaveCluster group to escape restrictions.
Harris added, “While the initial actions taken by the Trump team may be seen as strengthening control and correcting mistakes, more important policy decisions will take some time to formulate.”
The BIS issued two Federal Register notices on the same day, listing 80 entities subject to export restrictions, with China holding 54 spots on the list.
The Entity List is a trade blacklist formulated by the U.S. Department of Commerce’s Bureau of Industry and Security, requiring enterprises listed to obtain individual licenses from the Department to purchase U.S.-controlled technologies or products.
The first notice added 70 entities to the Entity List, over 40 of which are Chinese, as these entities utilize U.S. technology and products to assist the Chinese Communist Party in developing quantum technology, hypersonic weapons, and more.
According to the notice, Cisco Ryogaku Instruments’ Hong Kong and Shanghai branches were added to the Entity List for supplying dilution refrigerators to entities related to the Chinese defense, significantly enhancing the cooling capacity of quantum systems.
Anhui Kehua Technology Trading Co., Ltd., Lenovo Optoelectronics (Chongqing) Co., Ltd., and five other companies were listed due to their acquisition or attempted acquisition of U.S.-origin items to advance China’s quantum capabilities.
Singeton (Suzhou) Electronic Technology Co., Ltd. and Suzhou Gao Tai Electronic Technology Co., Ltd. were listed because they have sold products to entities on the Entity List (including Huawei and Hisilicon).
Additionally, dozens of Chinese entities, such as Xi’an Aircraft Computational Technology Research Institute and Air Force Engineering University, were added to the list for their significant involvement in activities related to the development of hypersonic weapons, designing and modeling hypersonic aircraft, or utilizing patented software to model weapons design and effects, supporting China’s military-civil fusion.
The notice specifies that license applications for the aforementioned entities will be reviewed under a Presumption of Denial, meaning that applications will essentially be refused.
Furthermore, entities from South Africa and the UAE were added to the list due to their cooperation with the Tactical Flying Academy of South Africa in training Chinese military personnel using Western and NATO resources, leading to their inclusion.
In 2023, following revelations that the South African Tactical Flying Academy employed Western fighter pilots, including British, to train Chinese pilots, the U.S. added it to the Entity List.
The second supplemental Entity List included 12 Chinese entities related to supercomputers and artificial intelligence.
Beijing Intelligent AI Research Institute and Beijing Zhongzhi Innovation Technology Development Co., Ltd. were added because they acquired or attempted to acquire U.S.-origin items to develop large-scale artificial intelligence (AI) models and advanced computing chips for defense purposes.
Henan Dingxin Information Industry Co., Ltd., Ningchang Information Industry (Beijing) Co., Ltd., Suma server brand under China Controlled, and China Controlled USI Electronic Co., Ltd. were listed for their involvement in the development of a billion-level supercomputer, capable of processing massive data at high speeds and conducting large-scale simulations.
The notice states that these entities provide crucial manufacturing capabilities to China.
China’s Sugon is a supercomputer manufacturer used for producing supercomputers for military terminal users, supporting China’s military modernization, and it was previously listed in 2019.
Six subsidiaries of the Chinese cloud computing and big data services provider WaveCluster were included due to their direct contribution to the development of the company’s military supercomputers through purchasing or attempting to purchase U.S. original items.
These 12 Chinese companies also fall under the Presumption of Denial principle and have been labeled with “Footnote 4 Direct Product Rule,” meaning that they are subject to global control under the Foreign-Produced Direct Product Rule (FDPR) by the U.S., even through third-party purchases.
In 2020, BIS for the first time applied the “Entity List Footnote 1 Direct Product Rule” to Huawei. In October 2022, BIS marked entities related to AI or supercomputing with “Entity List Footnote 4 Direct Product Rule.”
These Entity Lists aim to hinder China’s capabilities in the development of high-performance computing, quantum technology, advanced artificial intelligence, and hypersonic weapons.
The U.S. government has deemed the actions of these Chinese entities as violating U.S. national security or diplomatic interests.
In a statement, U.S. Secretary of Commerce Howard Lutnick said, “We will not allow adversaries to utilize American technology to enhance their military and threaten the lives of Americans. We are committed to utilizing all tools at the disposal of the Department of Commerce to ensure that our most advanced technology does not fall into the hands of those seeking to harm Americans.”
Deputy Secretary of Commerce Jeffrey I. Kessler stated in a declaration, “The BIS has sent a clear and loud message that the Trump administration will tirelessly work to prevent the misuse of U.S. technology and products in areas threatening our national security like high-performance computing, hypersonic missiles, military aircraft training, and drones, safeguarding our national security.”
The latest round of technology control has sparked discussions among international media outlets:
The Wall Street Journal also suggests that the Trump administration aims to impose stricter restrictions on Chinese access to American technology compared to the Biden administration.
Generally, U.S. allows subsidiaries of entities listed on the Entity List to purchase controlled technology, provided these subsidiaries are not on the list themselves.
After the Biden administration listed WaveCluster in the blacklist in 2023, its subsidiaries could still purchase U.S. technology. The listing of these six WaveCluster subsidiaries now closes this loophole.
Regarding the 12 Chinese companies labeled with the “Entity List Footnote 4 Direct Product Rule,” Alex Capri, a senior lecturer at the National University of Singapore, mentioned to CNBC that the new sanctions “expand the focus to third countries, transit points, and intermediaries.”
He noted that Chinese companies have managed to access U.S. strategic dual-use technology through certain third parties, whereby despite restrictions, Chinese entities could still acquire American technology.
“U.S. officials will continue to enhance monitoring and tracking operations to combat the smuggling of Nvidia Advanced Semiconductors and AMD,” he stated.