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China sanctions U.S. companies for first time under Unreliable Entity List

On 16 February 2023, the Ministry of Commerce of the People’s Republic of China (MOFCOM) announced measures to add Lockheed Martin Corporation and Raytheon Missiles & Defense to its Unreliable Entity List. It is the first time that the working mechanism set out under the Provisions on the Unreliable Entity List, which was enacted by MOFCOM on 9 September 2020, has been used to implement the Provisions. The measures come amid heightened tensions after the U.S. military shot down what it says was a Chinese spy balloon, and a day after Beijing warned of “countermeasures against relevant U.S. entities that undermine China’s sovereignty and security”.

Authors

Zeldar Wang, Barbara Li, Eric Lin, Amy Yin, Katherine Yang, Lianjun Li

MOFCOM has imposed the following five sanction measures on the two U.S. companies:

  • prohibiting any import and export trade with China;
  • prohibiting any new investment in China;
  • refusing the entry into China of any senior management of the companies;
  • cancelling the visas, work permits and residence permits of the senior management of the two companies; and
  • imposing a fine that is double the contracted amounts of the military sales to Taiwan by the two companies since the enactment of the Provisions on the Unreliable Entity List and ordering the two companies to pay the fines within 15 days after the announcement to avoid being subject to additional fines.

A MOFCOM spokesperson pointed out that the two U.S. companies were added to the Unreliable Entity List as a result of their participation in the supply of missiles, fighter jets and other offensive weapons to Taiwan in recent years in disregard of China’s strong opposition.

In view of the limited corporate presence in China of the two companies, the effects of the sanction measures (including the imposition of the monetary fines) remain to be seen.

For more information on the legislative framework of the Unreliable Entity List, please refer to our briefing of June 2021.

Client Alert 2023-058

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