The U.S. Commerce Department on Feb. 7 announced it has added 33 Chinese entities to its red flag list, warning American companies that they should treat them with extra caution.
The majority of the flagged companies are electronic firms, but the list also includes an optics company, a turbine blade company, a state-run university laboratory, and a university department, according to a notice (
pdf) in the Federal Register.
The red flag list is officially known as the “Unverified List,” meaning that U.S. officials cannot verify the legitimacy of these firms. Additionally, U.S. companies can no longer use license exceptions to export products to any of the companies on the list but instead will need to get a new license.
“The ability to verify the legitimacy and reliability of foreign parties receiving U.S. exports through the timely completion of end-use checks is a core principle of our export control system,” Matthew Axelrod, assistant secretary for export enforcement at the department’s Bureau of Industry and Security, said in Feb. 7 statement (
pdf).
Axelrod added that the addition of 33 entities based in China “will assist U.S. exporters in conducting due diligence and assessing transaction risk, and signal to the PRC [People’s Republic of China] government the importance of their cooperation in scheduling end-use checks.”
The department’s announcement came a week after FBI Director Christopher Wray
warned that “no country that presents a broader threat to our ideas, innovation, and economic security than China.”
Wray also said that his bureau has over 2,000 investigations focusing on Beijing’s effort in trying to steal U.S. technology, and the bureau “is opening new cases to counter China’s intelligence operations about every 12 hours.”
The Commerce Department conducts checks on some foreign companies buying from the United States to ensure that they are legitimate businesses and that their purchased products are being used for the stated purposes. That’s a particular concern in China, where the Chinese Communist Party (CCP) deploys a strategy known as “
military-civil fusion” (MCF) to divert commercial technologies to advance its military modernization.
The U.S. State Department
has warned that theft is part of the communist regime’s MCF strategy.
This is not the first time that Chinese firms have been added to the “Unverified List.” In April 2019, 37 Chinese companies and schools and six organizations in Hong Kong
were added to the list.
One newly flagged entity is the State Key Lab of Chemo/Biosensing and Chemometrics at China’s Hunan University. The school, supervised by the State Administration of Science, Technology and Industry for National Defense, is
home to two of China’s defense laboratories, according to a 2019 report (
pdf) by the Australian Strategic Policy Institute (ASPI).
The report pointed to an example in Hunan University—where a big data scientist served as a specially-appointed expert for China’s Ministry of State Security—as to how the ministry can leverage “civilian universities for training, research, technical advice and possibly direct participation in cyber espionage.”
The Department of Mechanical and Energy Engineering at China’s Southern University of Science and Technology (SUSTech) was also added to the list on Monday. In June last year, the university’s website reported that Xu Shaolin, a professor at the department,
was chosen to be the secretary of the department’s CCP committee.
In September 2021, SUSTech
reported on social media that the university’s College of Engineering held a Party committee meeting. During the meeting, Wang Hong, the college’s Party secretary, said that the college’s development should be “driven by the Party’s political-building.”
Aside from the “Unverified List,” the Commerce Department currently has maintained two trade blacklists—the “
Entity List” and the “
Military End User List”—to warn U.S. exporters.
The Associated Press contributed to the article.
