Abstract: With the implementation of The Export Control Law of the People's Republic of China on December 1, 2020, China's export control legal system with this law as the core has become the focus of attention, especially in the context of the increasingly complex political and economic situation at home and abroad and the in-depth adjustment and reconstruction of the global industrial chain. The internal review, advance judgment and compliance of export control compliance risks have evolved from “reactive compliance” to “proactive compliance”. Contrary to the huge potential risks and strong compliance needs, many enterprises are still ignorant of China's legal system of export control and lack of understanding of Customs supervision methods in export control.

In view of this, this Customs note focuses on the following issues:

Current situation of China's export Control legal system since the implementation of Export Control Law

Cross - supervision of technologies export control

How does the Customs control and supervise in the export

Key words：China's export control, legal system, technologies export, Customs supervision

(I)An overview of current export control legal system in China

1.China's export control legal system with four levels of effectiveness

Since the implementation of the Export Control Law of the People's Republic of China on December 1, 2020 (hereinafter referred to as the Export Control Law), China has formed a legal system for export control covering nuclear, biological, chemical, missile and arms with the Law as the core. From the level of effectiveness, China's current export control legal system consists of four levels: law, administrative regulation, departmental rules and normative documents, with guidance documents issued by export control administrative departments as supplements and references.

Note: Although guidance documents do not have legal effect, their guiding role in practice cannot be ignored. Therefore, the export control legal system described in this article contains guidance documents, which together with normative documents are collectively referred to as “document provisions”.

2.The current  export control legal system of each level of effectiveness of the provisions listed

（II）Six questions summarize the main points of supervision of Export Control Law

1.What are export control?

Export control refers to measures taken by the State to prohibit or restrict the transfer of controlled items from inside China to outside China and the provision of controlled items by Chinese citizens, legal persons and unincorporated organizations to foreign organizations and individuals.

2.What are the scope of export control items?

It includes dual-use items, arms, nuclear products and other goods, technologies and services related to safeguarding national security and interests and fulfilling international obligations such as non-proliferation. Specifically, export control items cover :(1) tangible goods; (2) Intangible services and technologies; (3) Technical data related to the controlled items.

3.What acts are subject to export control?

As shown in Graphic 3, the definition of Export Control Law to control acts relatively broad, including not only traditional exports, regarded as export, re-export, transit, transshipment and through transport control items, or export from bonded areas, export processing areas and other special Customs supervision areas, export supervision warehouses, bonded logistics centers and other bonded supervision areas to overseas, is also export within the meaning of the Export Control Law.

4.What subjects are subject to export control?

Export Control Law includes not only the transfer of controlled items from within China to outside China, but also the supply of controlled items by Chinese citizens, legal persons and unincorporated organizations to foreign organizations and individuals. Therefore, not only the exporters of export goods in the normal sense can be the subject of application, but also other Chinese citizens, legal persons and unincorporated organizations can be the subject of application. Specific can be summarized as the following five categories :(1) export operators; (2) other Chinese citizens, legal persons and unincorporated organizations engaged in regulatory acts; (3) foreign subjects; (4) subjects violating export control provisions within the territory of China; (5) re-export controlled items purchased from China abroad.

Note: Article 44 of the Export Control Law stipulates the extraterritorial effect of the law, that is, if a foreign subject violates the provisions of the Export control Law at home or re-export controlled items purchased from China abroad and violates the provisions of the Export control Law, the foreign subject shall be the control subject. However, it is unclear in theory and law enforcement how China exercises extra-territorial long-arm jurisdiction, as well as other issues related to re-export, such as whether foreign products containing China controlled items or products produced using Chinese technology are re-export controlled items.

5. What is the way of control?

States mainly through the formulation of control list, control name list as well as the enforcement of export licensing control to supervise and manage the controlled items, subjects and acts.

(1) Control list

It mainly includes the Catalogue of Dual-use Items and Technologies Subject to the Administration of Import and Export Licenses, arms export administration list and the Provisional Control List.

Except for the arms export administration list, the list of other items is basically incorporated into the Catalogue of Dual-use Items and Technologies Subject to the Administration of Import and Export License, which lists the corresponding Customs commodity HS codes of relevant items and helps enterprises to compare and screen. The catalogue includes Catalogue of Dual-Use Items and Technologies Subject to Administration of Import License (collectively referred to as “Import Catalogue”) and Catalogue of Dual-Use Items and Technologies subject to Administration Export License (collectively referred to as “Export Catalogue”). Import Catalogue and Export Catalogue are composed of different lists of items, as shown in Graphic 4:

(1) Control name list

If the importer or end-user violates the state requirements on end-user or end-use administration, may endanger national security and interests, or uses the controlled items for terrorist purposes, the importer or end-user may be included in the control name list by the export control administration department according to law. The control name list system is an export control measure adopted by the state for importer and end-user.

Once importer and end-user are included in the list, their transactions in the controlled items may be prohibited or restricted, and the export of the controlled items may be ordered to suspend.

In addition, the Export Control Law also stipulates the removal procedure of the control name list, namely, importer and end-user listed in the control name list may apply to the state export control administration department for removal from the list if they no longer have the corresponding circumstances after taking measures.

(2) Implement administration of export license

The state shall implement licensing administration for the export of control items, if the goods, technologies, service and relevant data to be exported fall into the control list or temporary control list, or may have specified risks, the exporter shall apply to the state export control administration departments for permission before export, and submit relevant license to the Customs when the goods are cleared.

6. Legal liability for violation of Export Control Law

Violation of Export Control Law may lead to administrative or even criminal responsibility. The legal liability will be covered in detail in the next Customs Note.

(I)There may be cross-regulatory problems in technology export

The subject matter of Export Control Law includes technology, technical data and other data. In addition to the Export Control Law to control the export of technology, the state also provides for prohibition, restriction and free administration of technology export. Although both in such aspects as administrative perspective, regulation and technical properties are different, such as technology transfer under the latter focuses on economic activity, while the former is not limited to the act of technology transfer abroad under trade, investment or economic and technological cooperation, technology transfer under non-economic activities may also be regulated. However, in practice, multi-departments and multi-institutions often cross, leading to a lot of confusion for enterprises about technology export.

Q1：Technology export may involve the requirements of export control, prohibition, restriction and even voluntary export

Theoretically, when the export technology falls into the control list of export controlled items, it shall comply with the requirements of the export control legal system on the exporter. When the technology falls into the Catalogue of Technologies Prohibited or Restricted from Export by China, it shall comply with the national regulations on the prohibition and restriction of technology export. However, the reality is often complicated, and the same technology may fall into both the control list of export controlled items and Catalogue of Technologies Prohibited or Restricted.

Q2：It is not clear how the regulation of technology export is connected, which increases the difficulty for enterprises to self-evaluate

Under the legal system of export control, enterprises often screen whether the export technologies fall into the control list of export controlled items (including Catalogue of Dual-use Items and Technologies Subject to the Administration of Import and Export Licenses, arms export administration list and the Provisional Control List.）through the Customs commodity HS code during self-evaluation.

From the perspective of technology export control, enterprises tend to self-evaluate the export technologies one by one against the Catalogue of Technologies Prohibited or Restricted from Export by China to confirm whether the relevant technologies are prohibited or restricted export technologies.

Unfortunately, the Catalogue of Technologies Prohibited or Restricted from Export by China and arms export administration list do not provide Customs commodity HS codes, and enterprises lack reference standards for comparison screening, thus increasing the difficulty of investigation and evaluation.

(II)Technology regarded as export lacks evaluation criteria

According to Guiding Opinions of Ministry of Commerce on Establishing the Internal Compliance Mechanism for Export Control by Exporters of Dual-use Items, Internal Compliance Guide for the Export Control of Dual-use Items（hereinafter referred to as Announcement [2021] No.10 of the Ministry of Commerce）regulation，the employment of foreign employees to engage in the work related to controlled technology, or the release of controlled technology information at trade exhibition may constitute export and require the approval of export control authorities. In addition, technical communication and transmission in daily operation, such as electronic transmission of technical information in email, telephone, fax and social media at home and abroad, storage or transmission of software and technology in online storage mode such as “cloud” may also have export control compliance risks.

For multinational companies, it is common to employ foreign employees to undertake relevant work and carry out technical exchange and transmission in daily operation. In addition, the aforementioned provisions are relatively general and the corresponding evaluation criteria are not yet clear, which makes it difficult for enterprises to determine and confirm them in practice.

（III） Compliance advices for technology export

1.Understand the official regulations on cross-supervision

Regarding the cross-supervision of technology export, Announcement of the Ministry of Commerce and the Ministry of Science and Technology [2020] No.38 on Adjusting and Promulgating the Catalogue of Technologies Prohibited or Restricted from Export by China stipulates that technologies that are dual-use technologies for military and civilian use shall be included in export control administration. Article 42 of the Administrative Regulations on Import and Export of Technologies stipulates that Export of export control technologies such as nuclear technology, technologies related to dual-purpose nuclear products, controlled chemicals production technologies, military technologies etc. shall be subject to the provisions of the relevant administrative regulations. The author understands that relevant administrative regulations point to Regulations on the Control of Nuclear Export, Regulations on the Export Control of Dual-Use Nuclear Items and Related Technologies, Regulations on the Administration of Controlled Chemicals, Measures on Export Control of Certain Chemicals and Related Equipment and Technologies, Regulations on Administration of Arms Export, Regulations on Export Control of Missiles and Missile-related Items and Technologies etc. That is to say, export technologies belonging to nuclear, biological, chemical and missilry technologies shall be subject to export control.

2. The principle of control in practice

(1) If the export technology belongs to dual-use technology, it shall be handled in accordance with the regulatory requirements of export control.

(2) If the export technology belongs to nuclear, biological, chemical or missilry technology, it shall be handled in accordance with the regulatory requirements of export control.

(3) If enterprise employs foreign employees to engage in the work related to controlled technology, or releases controlled technology information at the trade exhibition, it shall be regarded as export, and shall be subject to export control administration, and shall apply for control permission from the competent department of export control.

(4) If enterprise is unable to assess and confirm whether the exported technology falls under the circumstances described in (1), (2) or (3) above, or whether the technology exchange and transmission in daily operation involve technology export control, it is better to consult a professional lawyer in time or consult the national export control administration department.

(I) Position of Customs in export control

In China's export control and supervision system, Customs, Ministry of Commerce, Ministry of Foreign Affairs, State Administration of Science, Technology and Industry for National Defense, Entry-exit border inspection and Maritime Affairs coordinate and cooperate with each other to perform their respective duties. Before 2018, Customs and Entry-exit inspection and quarantine authorities were the core departments of clearance supervision at ports. In 2018, the duties and teams of Entry-exit inspection and quarantine were assigned to the Customs, and the Customs is playing a decisive role in the administration of entry and exit. Generally speaking, Customs as an important enforcement agency of export control in China, is mainly responsible for the export supervision of controlled items, and participates in the investigation and handling of relevant illegal cases according to law.

（II）Export control and trade control in the context of Customs supervision

Graphic 5 summarizes what export control and trade control mean to Customs in the context of Customs supervision. Article 40 of the Customs Law provides for trade control “Where the State has regulated to prohibit or restrict inbound and outbound goods and articles, Customs shall carry out supervision and administration in accordance with laws and administrative regulations, State Council regulations or regulations made by relevant departments under the delegated power of the State Council in accordance with laws and administrative regulations.” To put it simply, trade control refers to measures taken by the Customs to prohibit import and export, restrict import and export and other administration of goods and items in accordance with national laws and administrative regulations. Export control is the supervision of the Customs on the controlled items in the export link.

In other words, although trade control and export control involve overlapping and different fields, in the context of Customs supervision, the Customs performs the import and export supervision and administration responsibilities in accordance with the relevant laws and regulations, and performs their duties in basically the same way. For the convenience of understanding and response, we might as well say that Customs enforcement of national trade control measures also includes the enforcement of the legal system of export control.

In a sense, the opening way of export control in Customs business is the enforcement of Customs trade control measures.

（The author discusses this in detail in The opening Way of Export Control in Customs Business - Introduction to Customs Trade Control and Compliance Risk Prevention and Control. You may click to read it）

(III) Main ways of Customs supervision over export controlled items

The author classifies them into three categories:

First, licensing documents verification.

Currently, the Customs and license-issuing departments have all realized online supervision on export licenses of dual-use items and technologies, and the Customs will automatically verify relevant licenses in the system.

Note: From the perspective of enterprise compliance risk prevention, the license here is best understood in a broad sense, including not only the Catalogue of Dual-use Items and Technologies Subject to the Administration of Import and Export Licenses, arms export administration list and the Provisional Control List, but also the Catalogue of Technologies Prohibited or Restricted from Export by China etc.

Second, verification or questioning

In accordance with the Provisions of the Export Control Law, if the consignor of export goods has not submitted the license certificate to the Customs for examination, and the Customs has evidence that the export goods may fall within the scope of export control, it shall question the consignor of export goods. Customs may propose organizational verification to the state administrative department of export control and deal with the matter according to the verification conclusion made by the state administrative department of export control. During the period of verification or questioning, the Customs shall not release export goods.

Third, investigation and administrative penalty

Article 40 of the Export Control Law stipulates that the Customs shall punish illegal export control acts according to laws and administrative regulations. This regulation clarifies the duties and authorities of Customs in investigating and dealing with illegal acts of export control.