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FAQ for compliance support: Unreliable Entity List China

China's trade controls

Unreliable Entity List China: FAQ and how to ensure compliance

China's Unreliable Entity List is official. Find out what it is about in AEB's FAQ and how to best ensure compliance in your business transactions.

Olga Pramberger

31.12.2022

The Unreliable Entity List (UEL): How we got here
Who is affected by the new regulation and does it apply to you?
Sanctions list compliance relies on screening automation
Your questions and our answers: Unreliable Entity List FAQ

The Unreliable Entity List (UEL): Where we stand

The introduction of the Provisions on the Unreliable Entity List (UEL) on September 19, 2020, made it clear that China’s trade compliance controls had made significant progress. But while the new list took effect on the day it was published, it has taken more than 2 years for first entries to be made official. But this milestone has now been reached as well. For businesses, other organizations, and individuals based in China, it is crucial to incorporate UEL regulations into existing trade compliance programs.

Who is affected by the new regulation and does it apply to you?

Companies, other organizations, and individuals based in China are required to comply with the new regulation since the Provisions on the Unreliable Entity List took effect.

Many authorities across the globe publish official sanctions lists. It is important to understand the scope and implications of China's Unreliable Entity List with its new, official provision released by the Ministry of Commerce (MOFCOM). It represents a key cornerstone of China’s new export control regime and the range of activities that can lead to designations is comprehensive.

Sanctions list compliance relies on screening automation

Various authorities around the globe publish official sanctions lists. The US OFAC and the EU are just two examples. With the Unreliable Entity List, China has joined the wide range of nations in maintaining its own sanctions list that restrict trade with listed entities. Restricted party screening is a key component in effective trade compliance programs.

Compliance Screening from AEB offers various plans to meet different needs and secure global trade transactions. The AEB solution also offers convenient machine translation of non-Latin characters – including Chinese. This delivers even more comprehensive coverage of your business partner screening.

Automatically updated sanctions lists

AEB's Compliance Screening software runs automated business partner screening in the background of your transactions. Optional integration into your ERP/CRM systems such as SAP^®, Salesforce, Microsoft Dynamics 365, and more. And with extended content from Dow Jones and Reguvis.

More information

Your questions and our answers: Unreliable Entity List FAQ

Trade compliance involves an abundance of national and international regulations. It is an area of dynamic developments and regular changes. China has made great progress in their national export control program in 2020 and there are many questions around the Unreliable Entity List. In this FAQ, our Global Trade Expert Olga Pramberger delivers insights.

When was the Unreliable Entity List (UEL) developed and its Provisions released?

What is the purpose of the new Provisions on the Unreliable Entity List?

The new Provisions on the UEL detail the following goals:

Safeguard China’s national sovereignty, security, and development interests
Maintain a fair and free international economic and trade-related order
Protect the legitimate rights and interests of enterprises, other organizations, and individuals of China

Trade compliance experts and various media publications summarize the UEL Provisions' goal as "protecting China's business and government interests".

Which authority in China is implementing and enforcing the UEL Provisions?

The new Provisions on the Unreliable Entity List do not mention one authority in particular. Instead, they describe a "Working Mechanism" that refers to relevant central governmental authorities in China. The Office of the Working Mechanism is located at the competent department of commerce of the State Council. This Working Mechanism is in charge of organization and implementation of the UEL system. In this context, it is authorized to decide to announce investigations on the actions taken by relevant foreign entities based on:

Its administrative duties and functions or
Suggestions or reports by relevant parties.

Who can be designated on the Unreliable Entity List?

Which activities will trigger designations on the Unreliable Entity List?

Activities that endanger the national sovereignty, security, or development interests of China
Behaviours that interrupt normal transactions with a Chinese enterprise, other organization, or individual of China
Behaviours that apply discriminatory measures against enterprises, other organizations, or individuals of China, which violates regular market transaction principles and causes serious damage to the legitimate rights and interests of these enterprises, organizations, or individuals

How will the Working Mechanism decide on Unreliable Entity List designations?

If the facts about the relevant activities by foreign entities are clear, the Working Mechanism may directly take decisions to designate such entities. If the facts are not clear, the investigation results of the Working Mechanism will determine whether or not relevant foreign entities will be listed on the UEL. In either case, the following factors will be considered (at the discretion of the Working Mechanism) for the final decision :

The degree of danger to national sovereignty, security, or development interests of China
The degree of damage to the legitimate rights and interests of enterprises, other organizations, or individuals of China
Compliance with internationally accepted economic and trade rules
Other relevant factors

What are the consequences of Unreliable Entity List designations?

One or more measures will be imposed on the relevant foreign entity following its designation on the UEL. These will be decided and announced by the Working Mechanism. This announcement may include an alert about the risks of conducting transactions with the designated foreign entity. It may also determine a time period for the relevant foreign entity to rectify its actions during which the measures will not be implemented. But should the entity fail to rectify its actions during the given time, the relevant measures will be imposed. Measures that will be imposed following UEL designation include:

Restricting or prohibiting the foreign entity from engaging in China-related import or export activities
Restricting or prohibiting the foreign entity from investing in China
Restricting or prohibiting the foreign entity’s relevant staff or transport vehicles from entering China
Restricting or revoking the relevant staff’s work permits and status of stay or residence in China
Imposing fines in accordance with the severity of the circumstances
Other necessary restrictive measures

What does it mean for Chinese enterprises, other organizations, or individuals if a foreign entity is listed on the UEL?

Chinese enterprises, other organizations, or individuals are not allowed to conduct import and export transactions with designated foreign entities that are restricted or prohibited from engaging in China-related import or export activities.
Exception: Under special circumstances where it is necessary for a Chinese entity to conduct transactions with a designated foreign entity under restrictive measures, the Chinese entity can apply for an exception from the Working Mechanism. If the Working Mechanism approves the transaction, the Chinese entity can continue undertaking transactions with the foreign entity in line with the approval.

What are the Provisions on the Unreliable Entity List based on?