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WASHINGTON: The Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, preventing them from buying a variety of American products and technology, according to a preliminary copy of the list seen by Reuters.
The list, if released, could further increase trade tensions with Beijing and hurt US companies that sell civil aviation parts and components to China, among other industries.
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A spokesman for the United States Department of Commerce, which produced the list, declined to comment.
Speaking in Beijing, Chinese Foreign Ministry spokesman Zhao Lijian said China “strongly opposes the unprovoked crackdown on Chinese companies by the United States.”
What the United States is doing seriously violates the principle of market competition and international trade and investment rules that the US claims to uphold, he added.
Chinese companies have always operated in accordance with the law and strictly follow local laws and regulations when operating abroad, including in the United States, Zhao said.
Commercial Aircraft Corp of China (COMAC), which is spearheading Chinese efforts to compete with Boeing and Airbus, is on the list, as is Aviation Industry Corporation of China (AVIC) and 10 of its related entities.
The list is included in a draft rule that identifies Chinese and Russian companies that the United States considers “military end users,” a designation that means that US suppliers must seek licenses to sell them a wide swath of commercially available items.
According to the rule, applications for such licenses are more likely to be denied than granted.
US President Donald Trump has stepped up his actions against China in recent months. Ten days ago, he released an executive order banning US investments in Chinese companies that Washington says are owned or controlled by the Chinese military.
The pending list comes after the Commerce Department expanded the definition of “military end user” in April.
The April rule includes not only the armed service and the national police, but also any person or entity that supports or contributes to the maintenance or production of military items, even if their business is not primarily military.
The export restriction applies to items as diverse as computer software such as word processing, scientific equipment such as digital oscilloscopes, and aircraft parts and components.
In aircraft terms, the elements include everything from flight control box mounts to the engines themselves.
The news of the listing comes at a sensitive time for the US aerospace industry, as Boeing seeks Chinese approval for its 737 MAX after it was approved by US regulators last week. In March 2019, China was the first country to ground the plane after two fatal accidents and it is already expected to wait months to lift the ban. A Boeing spokesman declined to comment.
Washington trade attorney Kevin Wolf, a former Commerce official, said Commerce had shared the draft standard with a technical advisory committee of industry representatives, and that it should have been kept confidential.
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Wolf said the rule and list could still be changed and time was running out for it to take effect under the Trump administration as it would have to be approved and submitted to the Federal Register, the official US publication – December.
In the draft rule seen by Reuters, the Commerce Department said that being able to control the flow of American technology to publicly traded companies was “vital to protecting the national security interests of the United States.”
But a former US official who did not want to be named said “simply creating a list and populating it is an act of provocation.” A source from the aerospace industry said it could incite China to retaliate.
The inclusion of COMAC would come as a surprise to at least one of the major US suppliers, which had determined that the company was not a military end user, the industry source said.
A list would also provide European competitors an opportunity to promote their manufacturers, noting that they do not have to overcome those hurdles, even if the United States grants the licenses, the industry source said.
General Electric and Honeywell International supply COMAC and have joint ventures with AVIC.
A spokesman for General Electric said its global joint ventures operate in compliance with all laws, and that the company has worked to obtain licenses related to military end users.
A Honeywell spokeswoman declined to comment.
In addition to the 89 Chinese listings, the draft rule also designates 28 Russian entities, including Irkut, which also aims to enter the Boeing market with the development of its MC-21 airliner.
The list of 117 companies “is not exhaustive”, according to the draft of the rule, and is considered an “initial tranche.”
