Beijing Recasts its Draft for an Export Control Law

Peking, China © 06photo

Late December 2019, Chinese authorities published a second draft of the People’s Republic’s export controls law. The revision is now much more closely aligned with international export controls standards. Nevertheless, there is still room for improvement.

The Chinese government is attempting to centrally regulate the country’s export controls with a comprehensive national law. In principle, this is a step in the right direction. Increasingly, the People’s Republic is exporting security-relevant high-tech products which must be regulated. This reform will streamline the large number of already existing export controls regulations.

The Chinese government put forward a first legislative proposal in June 2017. This highly problematic draft had significantly expanded the objectives and scope of Chinese export controls: Not only were legal terms vague. The first draft also mixed classic export controls objectives with the objective of regulating those exports, that appear to be contrary to China’s economic development agenda. Thus, terms such as “economic development” or “competitiveness” were repeatedly linked with the application of the law. Moreover, the provisions threatened to have extraterritorial implications.

The revision shows some improvements. The draft is now much more closely aligned with internationally established export controls standards. China appears to have at least partly responded to the criticism of economic operators, demonstrating that it wants to improve its role as a responsible international economic power. 

However, more needs to be done. Regarding the still necessary clarifications of undefined legal terms, it is important to ensure that the law does not generate any extraterritorial effect. Moreover, the use of blacklists should be completely avoided. Companies should also be protected more effectively against potentially arbitrary official prosecution. It is also important that official responsibilities for export controls are defined more clearly. Last but not least, the proposed expert mechanism needs to be further specified.

Status Quo of the Legislative Process

In a first step, the Chinese Ministry of Commerce (MOFCOM) presented the draft legislation in 2017 and asked for comments. In a second step, the draft was sent to the legal department of the Chinese State Council for further revision. The Legal Office, which has since been merged with the Ministry of Justice, had the task of reviewing and, if necessary, implementing any changes requested.

Late December 2019, the new and largely revised draft of the Export Controls Law was published for comment. The BDI office in Beijing initiated the re-evaluation of the law within the BDI and its member associations, translated the updated position paper into Chinese and submitted it to the National People’s Congress as a commentary on the draft law. After the first reading at the end of 2019, the draft will most likely be discussed there two more times. An exact timetable for the final adoption of the law by the National People’s Congress is yet to be determined.

Deepening the Dialogue with China

China’s export controls law could have far-reaching consequences: for the organization of supply chains, for collaborative research projects and the investment decisions of companies. German industry calls on the German Federal Government to further deepen the dialogue with the Chinese government on export controls. German and European experiences and best practices should continue to be incorporated into the regulatory formulation of the law.