Chinese Unreliable Entries List Expands Towards Commercial Business

In 2020, the Chinese Ministry of Commerce (MOFCOM) instituted a punitive trade sanction program called the Unreliable Entries List (UEL) with a broad mandate to protect Chinese national security and trade. Larger in scope than the US DoC Denied Persons List, the UEL sanctions specific people, organizations, and companies for the purpose of, in the words of MOFCOM Order No. 4 (2020),  “safeguarding national sovereignty, security and development interests, maintaining fair and free international economic and trade order, protecting the legitimate rights and interests of enterprises, other organizations, and individuals of China.”

The first entries to be added to China’s UEL were Lockheed Martin Corporation and Raytheon Missiles & Defense. To date, 140 entities have been put on the list, most of them US politicians or companies that produce military equipment for the US government. Recent actions, however, hint at a move towards expansion of the list into more commercial industries.

On May 20, 2024, MOFCOM added three additional US companies, General Atomics Aeronautical Systems, General Dynamics Land Systems, and Boeing Defense, Space & Security to the UEL, but additionally ordered  Chinese entities to perform a review of  US company Caplugs on the grounds that it violated sanctions against Lockheed Martin and Raytheon by transferring China-purchased goods to them. Caplugs is a manufacturer of plastic caps and plugs for a variety of industrial applications.

Subsequently, in September, 2024, MOFCOM announced an investigation into the US PVH Corp, the global fashion company owning the brands Tommy Hilfiger and Calvin Klein, on the grounds that they were boycotting Xinjian cotton companies to avoid sourcing textiles produced by forced labor from the Uyghur ethnic group. The head the Security and Regulatory Bureau of MOFCOM stated: “the US PVH Group is suspected of violating normal market trading principles and unreasonably boycotting Xinjiang cotton and other products without factual basis, which seriously damages the legitimate rights and interests of relevant Chinese companies.”

While the investigation against PVH Corp is ongoing, this incident and the investigation into Caplugs marks a sea change in the scope of China’s application of their UEL – for one in that vendors for US companies associated with military or strategic US industry could be subject to Chinese sanction (as well their Chinese OEMs), but also now for companies that produce consumer goods unrelated to or downstream from US political interests.

Any escalations of trade war between the USA and China will accelerate these trends, to the point that it is now conceivable that US business compliance with the US Uyghur Forced Labor Prevention Act (UFLPA) or ancillary relationships with US military suppliers could cause US companies to be disbarred by the Chinese government from trade with Chinese companies.

Allyn International’s service suite includes consultation on current and developing issues in the US trade community. Reach Allyn Here for a consultation or, contact us sales@allynintl.com or 239-489-9900.

Contributor: Andrew Dosher

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