The US Department of Commerce said on Wednesday it would add a dozen companies based in China to a restricted trade list for their alleged roles in facilitating the purchase and use of American components and tech found in the weaponised drones said to be operated by Houthi rebels.
According to a final rule published in the Federal Register, ten Chinese companies were designated for the United States Commerce Department’s “entity list” for facilitating the purchase of components found in these drones. Another Chinese company was added to the list for being part of an “illicit network” that obtains and supplies drones and other components for weapons to what the Commerce Department said are “front companies” acting for the Islamic Revolutionary Guard Corps in the Iranian armed forces. Companies based in Turkey and the United Arab Emirates were also added to the list.
The United States uses the entity list to identify and ban activities by related companies deemed to be endangering American national security and interests. Licenses are required to export to companies on the list and are likely to be denied.
The latest move follows actions at the end of September, when the Commerce Department expanded an entity list to cover subsidiaries of companies already on the list to “address diversion concerns”, such as the formation of new foreign companies to evade restrictions.
Under the new rule, subsidiaries that are at least 50 per cent owned by one or more listed entities will also be automatically subject to the list’s restrictions.
These companies and their subsidiaries will not have access to certain US items and advanced technologies without government authorization.
While the shift under the Commerce Department’s notice is a broad move affecting global companies, it is likely to have a notable impact on those in China, given that Washington has targeted numerous China-based entities in recent times amid the intensifying tech rivalry between the two countries.
In response, China has restricted transactions with a growing number of US firms on national security grounds and for weapon non-proliferation, with the latest move last month that added six US firms, mainly military equipment makers that provide services to the US military, to China’s unreliable entity list.
The moves by U.S and China come against the backdrop of their stabilizing ties. After a phone call between their two leaders in September running nearly two hours, US President Donald Trump said that he plans to meet Chinese leader Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation Summit in South Korea this month.