On December 30, 2022, the Ministry of Commerce of People’s Republic of China (“MOFCOM”) published the “Catalogue of Technologies Prohibited and Restricted from Export (‘the Catalogue’) (For Soliciting Public Comment),” proposing significant changes to the Catalogue.1 As discussed below, the proposed revisions would loosen controls in areas where “international technological cooperation” is desired, while tightening controls in areas where China may enjoy a technological advantage.
China is generally considered to have two distinct export control regimes: (1) the regime pursuant to the Foreign Trade Law of People’s Republic of China (last revised in 2022); and (2) the regime pursuant to the Export Control Law of People’s Republic of China (promulgated in 2020). The Catalogue is an important export control list under the first regime.
Under the Foreign Trade Law, all “exports” (broadly defined) of technology are subject to certain levels of government oversight and are classified into three categories:
- Prohibited technologies: “export” of such technology is prohibited;
- Restricted technologies: “export” of such technology requires an advance export license; and
- Unrestricted technologies: “export” of such technology requires registration of the proper transaction document(s) with the relevant Chinese authority.
The Catalogue is the key legal instrument defining what technologies fall into the “prohibited” and “restricted” categories. It was first published in 2001 and last updated in 2020.
As explained in MOFCOM’s publication notice, the latest proposed revisions would delete 32 controlled items, modify 36 controlled items, and add 7 new controlled items. The most affected industries are internet/information technology, solar/new energy, autonomous driving, and biotechnology.
Specifically, the revisions propose to remove from the “prohibited” and “restricted” categories items involving crop processing technology, agricultural machinery manufacturing technology, chemical pesticide production technology, photosensitive material production technology, industrial detonator production technology, construction machinery application technology, and electrical material production technology. Such removal is presumably for the purpose of “strengthening international technological cooperation.”2
As another positive sign to the trade community, the revisions also propose more detailed definitions for, and hence would potentially narrow the scope of, controlled technologies in several areas including nonferrous metal metallurgy technology, unmanned aerial vehicle technology, computer hardware and peripheral equipment manufacturing technology, communication technology, computer network technology, information processing technology, high-performance detection technology, and acoustic engineering technology.
Meanwhile, the seven newly controlled items focus on photovoltaic silicon wafer manufacturing technology, laser radar system technology (specifically, vehicle-mounted laser detection and ranging system), human cell cloning and gene editing technology, CRISPR gene editing technology, synthetic biology technology, crop hybridization advantage utilization technology, and bulk material handling and transportation technology.
Regarding the proposed revisions, it is particularly worth noting:
- Examples would be added for “personalized information push technology based on data analysis,” which has been restricted for export since 2020. Such examples include user personalized preference learning technology based on continuous model training and optimization using massive data, user personalized preference real-time identification technology, content feature modeling technology, user preference and content matching analysis technology, and technology related to large-scale distributed real-time computing to support algorithms for recommendation;
- The proposed additions of photovoltaic silicon wafer manufacturing technology and vehicle-mounted laser detection and ranging system (related to autonomous driving) coincide with market perceptions that certain Chinese companies possesses industry-leading technologies in these areas; and
- Biotechnology, which sees multiple new items proposed for control, is also a priority area for US export controls related to China.
The timing for issuance of the final revised Catalogue is uncertain, but interested parties should carefully monitor related developments and take note that China may consider protecting its technological edge to be a core national interest warranting imposition of export controls.
1 http://fms.mofcom.gov.cn/article/tongjiziliao/202212/20221203376696.shtml; Exhibit 1. Public comments were due on January 28, 2023.
May 252023Global Financial Markets Podcast