【By Observer Net, Yuan Jiaqi】

At the end of September, the United States issued a so-called "penetrating rule" on export controls, automatically adding most equity subsidiaries of enterprises on the U.S. "Entity List" to the so-called "blacklist." The U.S. has been trying to hit China with bad intentions, but it turned out that American companies themselves were jumping up first.

According to Reuters on October 21, a business lobbying group that includes board members from leading American companies such as Oracle, Amazon, and ExxonMobil is urging the Trump administration to immediately suspend this new trade regulation. The group warned that this new regulation has already caused billions of dollars in stalled U.S. exports and will prompt countries like China to remove U.S. companies from their supply chains. Neither the White House nor the U.S. Department of Commerce responded to requests for comments.

According to the letter content obtained by Reuters, in a letter dated October 3 addressed to President Trump, the chairman of the National Foreign Trade Council (NFTC), Jake Colvin, directly criticized the "penetrating rule," stating bluntly, "This rule has immediately suspended exports worth billions of dollars in the United States, which is contrary to your goal of reducing the trade deficit and increasing U.S. global exports."

He further warned that if the rule remains unchanged, it will encourage other countries to turn to non-U.S.-made goods, ultimately damaging U.S. national security because countries led by China will remove U.S. nodes from their supply chains.

The letter also accused the U.S. Department of Commerce of significantly slowing down, or even temporarily halting, the approval process for export license applications, especially those for Chinese customers. NFTC said that the U.S. Department of Commerce currently has thousands of license applications worth billions of dollars in arrears.

NFTC did not comment on the content of the letter. Reuters pointed out that for a long time, Washington's "China hawks" have sought to further strike Chinese companies under sanctions through the so-called "penetrating rule," but this letter exposed the opposition and dissatisfaction of the U.S. private sector with this controversial rule.

On the evening of September 29, the U.S. Department of Commerce issued the export control penetrating rule, imposing equal export control sanctions on subsidiaries that hold more than 50% of the shares of enterprises listed on the U.S. "Entity List." A few days later, on October 8, the U.S. announced the addition of several Chinese entities to the export control "Entity List."

"For a long time, loopholes have allowed exports that harm U.S. national security and foreign policy interests to exist," said Jeffrey Kessler, the Deputy Secretary of the U.S. Department of Commerce's Bureau of Industry and Security, after the new rules were introduced, claiming: "Under this administration, the U.S. Department of Commerce's Bureau of Industry and Security is closing loopholes to ensure that export controls work as intended."

Photo: Jeffrey Kessler, video screenshot

U.S. media Bloomberg reported that the U.S. Department of Commerce's latest published regulations are "long-planned," aiming to prevent sanctioned enterprises, particularly Chinese companies, from obtaining restricted U.S. goods through affiliated companies.

Bloomberg cited some industry experts' views, saying they are worried that the change in regulations aims to solve the so-called "whack-a-mole" problem in the enforcement of U.S. export controls, but this could cause trouble for companies, making it harder for them to determine whether potential customers are subject to additional restrictions.

The UK's Financial Times also interpreted that although the U.S. new regulations do not explicitly name China, the target includes several Chinese companies. The report emphasized that this new regulation is one of the first actions taken by the Trump administration to address concerns about "Chinese access to U.S. technology that may help modernize the PLA."

The Financial Times cited preliminary analysis data from the research institution WireScreen, indicating that the new regulations will affect thousands of Chinese state-owned groups and other enterprises' subsidiaries.

Regarding the U.S. implementation of penetrating sanctions against multiple Chinese entities, on October 10, the spokesperson for the Chinese Ministry of Commerce responded, stating that China has noticed the situation. The U.S. continues to generalize the concept of national security, abuse export control measures, and impose extraterritorial jurisdiction, implementing penetrating sanctions against multiple entities, including Chinese companies. This move by the U.S. seriously harms the legitimate rights and interests of enterprises, disrupts the safety and stability of the global supply chain, and China firmly opposes it. China urges the U.S. to quickly correct its erroneous practices and will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese entities.

It is worth noting that on October 9, the Chinese Ministry of Commerce announced that China will implement export controls on certain foreign-made rare earth-related items containing Chinese components and rare earth-related technologies.

The new regulations cover rare earth magnets and some semiconductor materials manufactured abroad that contain 0.1% or more of Chinese heavy rare earth components, as well as items produced overseas using technologies related to the mining, smelting, metal smelting, magnet manufacturing, and secondary resource recycling of rare earths originally from China. These items will be subject to the new regulations starting December 1; for some items originally from China, the new regulations will apply immediately.

Additionally, for most military use export licenses, China will "principally not approve" them. For export applications involving the development of AI with potential military use, China will "review each case individually."

Foreign media generally interpret that China's move strikes at the U.S. automotive supply chain, forcing the Trump administration back to the negotiating table.

On October 9, the spokesperson for the Ministry of Commerce responded to questions about strengthening the export control of rare earth-related items, stating that rare earth-related items have dual-use attributes and implementing export controls is an international practice. Therefore, the Chinese government is legally controlling certain foreign-made rare earth-related items containing Chinese components, with the aim of better safeguarding national security and interests, and fulfilling international obligations such as non-proliferation.

As a responsible major country, China's implementation of controls on relevant items reflects its firm commitment to maintaining world peace and regional stability, actively participating in international efforts to prevent proliferation. China is willing to strengthen communication and cooperation with all parties through multilateral and bilateral export control dialogue mechanisms, promote compliant trade, and ensure the safety and stability of the global supply chain.

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