The new rules will require licenses for US companies to sell certain items to military entities in China even if they are for civilian use, and do away with a civilian exception that allows certain US technology to be exported without a license, if they are for a non-military entity.
The rules, which were posted for public inspection and will be published in the Federal Register on Tuesday, could hurt the semiconductor industry and sales of civil aviation equipment to China.
“It is important to consider the ramifications of doing business with countries that have histories of diverting goods purchased from US companies for military applications,” said Commerce Secretary Wilbur Ross.
Washington trade lawyer Kevin Wolf said the rules are a response to China’s policy of finding military applications for civilian items.
He said the regulatory definitions of military use and user are broad and go beyond purchases by entities such as the People’s Liberation Army.
For example, Wolf said, if a car company in China repairs a military vehicle, that car company is now a military end user, even if the item being exported is for another part of the business.
“A military end user is not limited to military organisations,” Wolf said. “A military end user is also a civilian company whose actions are intended to support the operation of a military item.”
The other rule is expected to affect items like field programmable gate array integrated circuit, eliminating license exceptions for Chinese importers and Chinese nationals. Other affected items include certain telecommunications equipment, radar and high-end computers.
The administration also posted a third proposed rule change that would force foreign companies shipping certain American goods to China to seek approval not only from their own governments but from the United States as well.
The actions come as relations between the United States and China have deteriorated amid the new coronavirus outbreak.