U.S. Cracks Down on Export Evasion Loopholes

The U.S. has tightened export controls to prevent companies in China and other countries from using subsidiaries to circumvent restrictions on chipmaking equipment exports. The rule, expanding the Entity List, impacts supply chains and requires more rigorous checks on ownership. China's Commerce Ministry criticized the move.

The U.S. took significant steps on Monday to clamp down on companies in China and other regions using foreign affiliates to dodge export restrictions on critical goods, including chipmaking equipment. A new rule from the Commerce Department mandates that subsidiaries owned 50% or more by listed entities automatically require export licenses, escalating the number of restricted companies.

This rule, aimed at plugging existing regulatory loopholes, poses challenges for companies trying to ensure compliance and is expected to disrupt global supply chains, particularly affecting Chinese entities. The decision arrives amid ongoing U.S.-China trade talks, adding tension and further complicating diplomatic negotiations.

Chinese tech firms like Huawei and DJI may be heavily affected, while criticism from China's Commerce Ministry highlights international friction. Despite being deemed a significant move toward strengthening export controls, experts like trade lawyer Dan Fisher-Owens warn that companies will find new methods to bypass regulations, keeping the cat-and-mouse game active.

(With inputs from agencies.)