Export Controls and the Entity List

The Export Administration Regulations, administered by the Commerce Department's Bureau of Industry and Security, govern the export, re-export, and in-country transfer of dual-use goods, software, and technology. The EAR applies to items with both commercial and potential military applications — a category that has expanded dramatically as semiconductor technology has become central to modern weapons systems, surveillance infrastructure, and artificial intelligence.

The EAR classifies controlled items using Export Control Classification Numbers. Items requiring a license for export to China are listed on the Commerce Control List, organized by category: nuclear materials, materials processing, electronics, computers, telecommunications, sensors, lasers, navigation, marine, and aerospace. China is subject to controls under multiple reasons: national security, regional stability, anti-terrorism, and crime control.

License requirements are triggered by the item's ECCN, the destination country, the end user, and the end use. BIS maintains a presumption of denial for license applications involving items that would make a material contribution to China's military modernization — a standard that has been applied with increasing frequency since 2018.

The Entity List, maintained under 15 C.F.R. Part 744, identifies foreign persons — companies, research institutions, government organizations, and individuals — for whom BIS has determined there is reasonable cause to believe they have been involved, or pose a significant risk of being involved, in activities contrary to U.S. national security or foreign policy interests. Designation triggers a license requirement for all items subject to the EAR, with a presumption of denial.

Huawei Technologies was added to the Entity List in May 2019, triggering a cascade of supply chain disruptions that reshaped the global telecommunications equipment market. The designation required U.S. suppliers — and foreign suppliers using U.S. technology — to obtain licenses before shipping components to Huawei. The initial designation was followed by a Temporary General License that allowed limited transactions to continue while carriers transitioned away from Huawei equipment.

Subsequent additions have targeted semiconductor manufacturers (SMIC, added October 2020), surveillance technology companies (Hikvision, Dahua, SenseTime, Megvii), drone manufacturers (DJI, added December 2020), and military-civil fusion entities across aerospace, AI, and quantum computing. The Entity List has grown from a narrow tool targeting specific proliferation risks to a broad instrument of technology competition policy.

On October 7, 2022, BIS published the most sweeping U.S. export control action since the Cold War. The rules imposed new license requirements — with a presumption of denial — for exports to China of advanced computing chips (above specified performance thresholds), semiconductor manufacturing equipment capable of producing advanced chips, and items destined for supercomputer or advanced semiconductor fabrication end uses.

The performance thresholds targeted chips at or above the level of Nvidia's A100 and H100 GPUs — the workhorses of large-scale AI training. The rules also imposed new restrictions on U.S. persons working in China's semiconductor industry, requiring them to obtain a license before supporting the development or production of advanced chips at Chinese facilities. This provision effectively required American engineers and executives to choose between their employment and their citizenship.

The October 2022 rules were updated and expanded in October 2023, closing loopholes that had allowed Chinese companies to acquire chips just below the original performance thresholds. The 2023 rules also extended controls to additional countries to prevent transshipment, and added new restrictions on advanced chip exports to entities with Chinese ownership stakes above specified thresholds.

The Foreign Direct Product Rule extends U.S. export control jurisdiction beyond items physically located in the United States to cover foreign-made products that are the direct product of U.S.-origin technology or software. The FDPR was first applied to Huawei in May 2020, after it became clear that Huawei was circumventing the Entity List designation by sourcing chips from foreign foundries — primarily TSMC — that used U.S. semiconductor manufacturing equipment.

The Huawei FDPR required foreign foundries to obtain a BIS license before manufacturing chips designed by Huawei using U.S. equipment. TSMC announced it would stop taking new orders from Huawei within 120 days of the rule's publication. The FDPR effectively cut Huawei off from the global foundry ecosystem, forcing it to rely on older, less capable chips from SMIC — which was itself subsequently added to the Entity List.

The FDPR was subsequently expanded to cover SMIC and, in the October 2022 rules, to apply broadly to advanced chip manufacturing equipment destined for China regardless of the specific end user. The expanded FDPR means that foreign manufacturers of semiconductor equipment — including ASML in the Netherlands, Tokyo Electron in Japan, and others — must obtain U.S. licenses before selling advanced equipment to Chinese customers, even when the equipment itself contains no U.S.-origin components.

The effectiveness of U.S. export controls depends substantially on allied coordination. Unilateral U.S. controls can be circumvented if allied countries with comparable technology do not impose parallel restrictions. The Biden administration invested significant diplomatic effort in persuading the Netherlands and Japan — home to ASML and Tokyo Electron, the two most critical suppliers of advanced chip-making equipment — to impose their own export restrictions on China.

The Netherlands announced restrictions on ASML's extreme ultraviolet lithography machines in January 2023, and Japan announced parallel restrictions on 23 categories of semiconductor manufacturing equipment in March 2023. These restrictions significantly tightened the multilateral control regime, though gaps remain — particularly regarding deep ultraviolet lithography equipment, which China has been acquiring in large quantities ahead of anticipated restrictions.

Enforcement remains a persistent challenge. BIS has limited investigative resources relative to the scale of controlled trade flows. Transshipment through third countries — particularly in Southeast Asia and the Middle East — has been documented in multiple enforcement cases. The agency has pursued criminal prosecutions and administrative penalties against export control violators, but the volume of potential violations substantially exceeds enforcement capacity.

BIS has pursued a series of high-profile enforcement actions against Chinese technology companies and their supply chain intermediaries. ZTE Corporation was subject to a denial order in 2018 after BIS determined it had violated the terms of a 2017 settlement agreement by continuing to ship controlled items to Iran and North Korea. The denial order — which would have cut ZTE off from U.S. components — was ultimately lifted after ZTE paid a $1 billion fine, replaced its board, and submitted to a compliance monitor.

The ZTE enforcement action demonstrated both the leverage that export controls provide over Chinese technology companies dependent on U.S. components and the political constraints on using that leverage to its full extent. The Trump administration's decision to lift the denial order over the objections of the Commerce Department's enforcement staff was widely criticized as undermining the credibility of the export control regime.

Subsequent enforcement actions have targeted smaller intermediaries — trading companies, freight forwarders, and shell companies used to procure controlled items for Chinese military and intelligence end users. BIS has worked with the Justice Department to bring criminal prosecutions in cases involving willful violations, and has coordinated with allied export control authorities to pursue transshipment networks operating through third countries.