Trade sanctions placed on two dozen Chinese companies last week illustrate how the U.S. Commerce Department has been increasingly using its export blacklist as a tool to further U.S. foreign policy goals, government officials and policy observers say.
The department’s Bureau of Industry and Security added 24 Chinese companies to its entity list Wednesday for alleged involvement in advancing Beijing’s territorial claims in the contested South China Sea. The actions applied to a range of state-owned enterprises, including units of China Communications Construction Co., a leading contractor for Chinese leader Xi Jinping’s Belt and Road initiative of developing infrastructure and trade links across Asia, Africa and beyond.
Targets of the bureau’s list are restricted from receiving certain goods made or designed in the U.S. Previously, the list was tied more closely to violations of U.S. export control regulations. But the Trump administration has increasingly cited national security as a rationale for restricting exports, international trade experts say. Chinese entities are increasingly targeted.
coincides with a 2018 law that gave the Commerce Department the authorities to tighten exports of U.S. technology.
Reasons cited for designations in the past three years have more frequently included alleged human rights abuses, allegations of dealing with sanctioned jurisdictions, concerns over technological competitiveness and alleged violations of U.S. trade controls, according to the firm.
“The Commerce Department is the only part of the federal government that has the tools to engage with both national security and economic growth together,” a senior administration official said in an interview. He added that the department uses its authorities to protect U.S. interests “against a closed, autocratic, authoritarian system that uses technology in oppressive ways” while honoring Western democratic ideals, such as freedom of speech.
Export restrictions have been one of the focal points of U.S.-China relations in recent years.
On Friday, China announced new restrictions on exports of technology, including artificial-intelligence technology, computing and data-processing technologies and speech modeling. Technologies on the list can’t be exported without a license from local commerce authorities, according to China’s ministries in charge of commerce and science and technology. The new rules have slowed an expected deal to sell TikTok’s U.S. operations, a transaction pushed by President Trump, who has said TikTok poses an economic and national-security threat to U.S. interests.
U.S. officials have expressed concerns that the Chinese government would have access to the data TikTok collects from users, including Americans. A TikTok spokesman said the company “would not hand over TikTok user data to the Chinese government if asked.”
Last year, the U.S. put Chinese telecom giant Huawei Technologies Co. on the Commerce Department’s export blacklist, citing national security concerns. U.S. officials have said Huawei products could be used to spy on or disrupt telecommunications networks, claims the company has denied. The Commerce Department issued new rules in May curbing Huawei’s access to foreign-made chips, which were broadened and finalized in mid-August.
The restrictions on Huawei followed a 2018 move by the Commerce Department to ban U.S. companies from selling to ZTE Corp. as punishment for what the U.S. said was a failure by the company to honor an agreement to resolve sanctions-busting sales to North Korea and Iran. The department lifted the sales ban after ZTE agreed to pay a $1 billion fine.
A spokesman for Huawei didn’t immediately provide a comment. China Communications Construction and ZTE didn’t immediately respond to requests for comment.
“It is unjustified for the U.S. to impose sanctions on Chinese companies and individuals for their involvement in relevant construction activities in their own country,” Chinese Foreign Affairs Ministry’s spokesperson Zhao Lijian said at a briefing last week. “The move by the U.S. side grossly interferes in China’s internal affairs and violates international law and basic norms governing international relations.”
U.S. export restrictions aren’t as strict as the economic and trade sanctions imposed by the U.S. Treasury Department, which block entities’ assets and prohibit U.S.-based companies and individuals from transacting with them. But being on the Commerce Department’s list can still exact devastating consequences to designated companies, lawyers say.
Blacklisted companies could also face difficulty accessing the U.S. financial system. The costs associated with vetting transactions involving U.S. goods to prohibited entities may cause some banks to stop doing business with entities on the list, said Judith Alison Lee, a partner specializing in international trade at Gibson Dunn.
“Everyone would have to look at you twice,” she said, referring to the designated companies.
The senior administration official said the Commerce Department is mindful of potential unintended consequences of its actions. The department tries to be very clear about its reasoning and expectations of companies’ compliance, he said.
“Companies have a responsibility to know who they are doing business with,” the official said. A company should stop transacting with an entity that may have committed human rights abuses, such as allegedly employing forced labor, he said.
“If they are doing it and they persist in doing it, there will be an enforcement action brought against them,” the official said.
Write to Mengqi Sun at email@example.com