US expands export blacklist to include subsidiaries

The U.S. on Monday cracked down on companies in China and other countries that use subsidiaries to get around curbs on chipmaking equipment and other technology.

The Commerce Department issued a new rule, expanding its restricted export list, known as the Entity List, to automatically include subsidiaries owned 50 percent or more by a company on the list, according to a posting in the U.S. Federal Register. The action greatly increases the number of companies that require licenses to receive American goods and services.

The rule is likely to disrupt supply chains. It will also make it more difficult for companies to determine whether exports to a customer or supplier are restricted. According to the rule, certain transactions may be allowed for 60 days.

The affiliates rule is similar to the "50 percent rule" for entities sanctioned by the Treasury Department's Office of Foreign Assets Control.

If a company is owned 50 percent or more by an entity on the list, licenses will be required for U.S. exporters to ship goods or technology to the subsidiary, just as they are for listed entities, with many licenses likely to be denied.