Attn. Legislative Affairs Commission, Standing Committee,
National People's Congress (NPC), People’s Republic of China
From: The Computing Technology Industry Association (CompTIA), U.S.

National Association of Manufacturers, U.S.
Center for Information on Security Trade Control (CISTEC), Japan
Japan Business Federation (KEIDANREN)
The Japan Chamber of Commerce and Industry (JCCI)Japan Machinery Center for Trade and Investment (JMC)
Japan Foreign Trade Council, Inc. (JFTC)Japan Electronics and Information Technology Industries Association (JEITA)
Japan Business Machine and Information System Industries Association (JBMIA)
Japan Chemical Exporters and Importers Association（JCEIA）
Communications and Information Network Association of Japan（CIAJ）
Japan Chemical Industry Association (JCIA)
Date:

August 11, 2020
1Joint Comments by Industrial Associations of the United States and Japanon China’s Draft Export Control Law (Second Review Draft) of July 2020
The industrial associations of the United States and Japan welcome the opportunity
to provide comments on China’s Draft Export Control Law (Second Review Draft). Ourassociations have previously submitted joint comments on China’s Draft Export Control
Law in response to (1) the Chinese Ministry of Commerce’s draft of June 2017 and (2)the first draft by the Standing Committee of the National People’s Congress (NPC) ofDecember 2019 on the basis of our mutual interest in promoting trade and investment
between China and the other foreign countries.
The second draft of July 2020 contains new language which reflects points raised in
our above-mentioned joint comments on the first draft. It also retains existing languagethat we are still concerned is unclear, and new language that raises new concerns. We
respectfully request that appropriate consideration be given to our comments below sothat the Export Control Law meets universally accepted standards in the international
community and does not hinder the investment and trade environment in and withChina.

1. New Concerns
We believe the following points, which have been added or modified in the July 2020version, lack clarity, predictability, and a clear scope, making it difficult to interpret thegovernment’s intention.
(1) Extraterritorial Application of Article 44
Article 44 has been newly added and stipulates that “organizations and individuals
outside the territory of the People’s Republic of China that violate relevant export control
provisions under this Law, obstruct performance of international obligations including
non-proliferation, or endanger the national security and interests of the People’sRepublic of China, shall be handled in accordance with the law, and with legalresponsibility pursued.”
It is our understanding that this provision would only be invoked if all three conditions
were met: (1) “violations of export control provisions”; and (2) “obstruction of performanceof international obligations” and (3) “endangering the national security and interests of2

China.” (Chinese law firms have also offered similar interpretations). If this is the case,there are several points which would benefit from clarification.
First, regarding the above-quoted first condition that organizations and individuals
outside the territory of the People’s Republic of China violate “relevant export controlprovisions” under this Law, it is not clear which provisions of the Law are being referred
to. Even if there are cases involving “organizations and individuals outside of China,”such cases would seem to be extremely rare.
For example, this could refer to potential violations of Article 16, such as violation of
the end-user’s commitment that it shall not alter the end-use of the underlying controlled
item, transfer it to any third party, or violate the importer’s reporting obligations.
However, the penalties for these violations are already stipulated in Article 18 (1) and(3): specifically, importers and end-users would be listed on an export control list andexporters would be prohibited from conducting transactions with these importers andend-users.
Alternatively, it is conceivable that Chinese companies or individuals outside of Chinamight provide controlled items to foreign companies or individuals overseas, as one typeof deemed export in Article 2, but this case concerns Chinese companies or individuals
and so it could mean a series of penalties may be applicable.
Other possibilities would appear to include the prohibition on providing services forexport operators engaged in export control violations in Article 20. Or perhaps if the reexport rule in Article 45 contemplates the re-export controls (i.e., controls on the reexport from countries other than China of items previously exported from China), thenthis prohibition would be relevant. However, Article 20 should not go beyond theterritorial principle in international law, and it seems there is no precedent in the legal
systems of export control around the world where such an aiding and abetting-type
entity is penalized through the extraterritorial application of the law. As for Article 45,
as explained in our previous joint comments, this is not a general system agreed by theinternational export control regime, and so is not appropriate.
The second question on the new Article 44 is that, while penalties for any violations
are already stipulated, as described above, Article 44 specifies that violators "of relevant
export control provisions under this Law" “shall be handled in accordance with the law,and with legal responsibility pursued.” In Article 44, “this Law” and “the law” are written3differently, and so it is unclear what “the law” actually means and what “legalresponsibility” specifically refers to. If there is a case where “the law” (rather than “thisLaw”) is used to pursue “legal responsibility,” then on the basis of criminal statutory
principles one cannot be penalized for doing something that is not specifically prohibitedby law. It must be made explicitly clear which types of legal responsibilities are to bepursued in which kinds of cases, and under which laws. (In Article 43 stating, “Wherethe violation of the provisions herein constitutes a crime, the criminal liability of theparty concerned shall be investigated in accordance with the law,” we assume that wouldencompass the offenses of smuggling or conducting illegal business. However, Article 44
does not bring to mind any specific cases or related laws connected with violations of theprovisions of this Law.)
In any case, the purpose and specific contents of this newly created Article 44 areunclear, and this article is questionable under the territorial principle in internationallaw, and also under the general legal principle that there should be no penalty imposed
without a specific prohibition under the law. Moreover, since we believe this article will
make the position of foreign companies doing business with China extremely unstable
and will have a significantly negative impact on business with China, we request that
this article be re-examined, or removed altogether from the draft.
Article 18 (previously Article 20) imposes restrictions/prohibitions on importers andend-users listed on the control list; we recommend specifying how Chinese regulatory
authorities would implement this for importers and end-users outside of China.
(2) Supervision and Inspection Rules for Export Activities
Article 17 states, “National Export Control Authorities establish end-user and end-use
risk management systems to evaluate and verify end-users and end-uses of controlled
items, and strengthen end-user and end-use management.” However, in the first draft ofDecember 2019, Article 19 stipulated “National Export Control Authorities shallestablish end-user and end-use risk management systems to evaluate end-user and enduse certification documents submitted by export operators.” The phrase “evaluate enduser and end-use certification documents” has been amended and expanded in the second
draft to “evaluate and verify end-users and end-uses.”
The purpose and impact of this text change is unclear, and so is its interpretation.
Some law firms have interpreted it to be a reinstatement of the rule in the Ministry of4

Commerce’s draft of June 2017 to conduct on-site inspections at end-user offices in thecountry or region of the end-user. We understand the reason is likely as follows: Article
30 of the first draft of December 2019 stipulates the National Export Control Authorities
shall supervise and audit citizens, legal persons and other organizations engaged in theexport of controlled items; however, Article 28 of the second draft of July 2020 stipulates
the National Export Control Authorities shall supervise and inspect the export activities
of controlled items. Therefore, we assume those involved in export activities might
include the offices and factories of end-users and importers under the second draft ofJuly 2020.
The necessity of conducting appropriate checks to validate and resolve any potential
red flags over the end-user and end-use is a fundamental principle of export controls andnaturally understood. However, the method for implementing such checks could beproblematic. If there is any doubt about the authenticity of the end-use, it would be usualinternational export control practice for competent authorities to make necessaryinquiries to the end-user (usually by asking the end-user to submit a writtencertification). Export control authorities conducting on-site inspections at the end-user’ssite in the importing country is not appropriate because it would be the exercise of public
powers outside of their jurisdiction, and is not a generally accepted international export
control practice. It is our understanding, on the basis of the above, that the wording “onsite inspection” in the Ministry of Commerce’s draft of June 2017 was in fact deleted in
the first draft of December 2019.
We understand that Article 28 concerns export operators only and does not include onsite inspections of end-users or importers in the importing country, for the above andfollowing reasons:1) It is export operators who carry out the export activities that are subject tosupervision and inspection and Article 38 stipulates that if an export operator
refuses or obstructs the supervision and inspection, it shall be fined.
2) It appears that if the Chinese authorities have doubts about the end-user or enduse, they will request confirmation from the importing country’s government
agency as follows:·In Article 15, end-use certificates can be requested to be issued by thegovernment agency of the country and region where the end-user is located.

·The newly added Article 32 stipulates “National Export Control Authorities
shall carry out collaboration and communication on export control with othercountries, regions and international organizations, in accordance with the5

international treaties they signed or joined, or the principles of equality andreciprocity.”
In any case, whether or not on-site inspections of end-users are included is a major
concern, and we respectfully request clarification that such inspections are not within
the scope of Article 28.
Article 32 deals with the export of controlled information by organizations andindividuals in China. We recommend revisions to clearly specify 1) scope of controlled
information; 2) means of transfer subject to control (such as, via email, phone calls,meetings, through media like memory disks, etc.) 3) whether in-country transfer to aforeign person or entity is subject to control; 4) whether licensing management
requirements and procedures apply the same as for export of tangible controlled goods.

2. Points We Would Like To Reiterate
The following points continue to be of great concern, and we have requested that they
be examined in all three sets of our Joint Industry Comments, beginning with theMinistry of Commerce’s draft of June 2017.
Since these concerns are related to the fundamental principles of export control laws
and represent a divergence from the general framework of the international export
control regime, we continue to be deeply concerned about them. As such, we would liketo explain the problems again and request that they be taken into consideration andaddressed.
(1) Re-export Controls
The same language set out in Article 45 of the first draft of December 2019 has beenretained in the second draft of July 2020, and it still remains unclear whether thewording of “re-export” in this Article means only “re-export from China of items exported
to China” (i.e. reshipment / transshipment), or “re-export” stipulated in Article 64 of theMinistry of Commerce’s draft of June 2017. Article 64 of the Ministry of Commerce’s
draft of June 2017 stipulated re-export controls (i.e., controls on the re-export fromcountries other than China of items previously exported from China) and it wasunderstood that a de minimis rule applied.
Our understanding is that “re-export” in Article 45 in the first draft of December 20196

and the second draft of July 2020 does not mean the above-mentioned re-export controls,
but rather refers to “re-export from China of items previously exported to China” (i.e.
reshipment / transshipment) because the above-mentioned Article 64 of the Ministry ofCommerce’s draft of June 2017 was deleted and because of the wording which appears
before and after Article 45.
We ask that this issue be clarified. As we have explained in our previous jointcomments, if the above-mentioned re-export controls as set out in the original Article 64
are implemented, it will have a very negative effect. We therefore would like to request
again that no such system be put in place.
(2) Deemed Export Controls
Deemed export controls are stipulated in Article 2 and the provisions remain basicallyunchanged from the first draft of December 2019. However, deemed export controls are
not stipulated in any of international export control regimes, and Japan, Europe and theUnited States have all adopted distinct and more limited deemed export control systems
and practices.
Regarding the deemed export controls set out in Article 2, they apply not only totechnologies but also to all controlled items, including controlled commodities, and also
apply to sharing technologies with foreign national employees within a company. As aresult, there is a concern that this will deviate greatly from international practices andmay interfere with daily corporate activities.
In our joint comments on the first draft of December 2019, we requested that the scopeof deemed export controls be limited and we would like to ask once again that thefollowing limitations be stipulated:·Excluding employees of companies and organizations in China (this includes limiting
the deemed export controls to foreign students, contractors, independent researchers,etc.);·Restricting controls to the provision in China only of technologies and source code
controlled by international export control regimes (not commodities); and·Developing comprehensive license systems and license exception systems.
We are not sure whether these requests will be reflected in the law itself or in the7subordinate regulations; however, we do hope that these requests will be reflected in theChina Export Control Law itself as much as possible in order to prevent widespread
concerns among overseas companies doing business in or with China.
(3) Other Points
The following points were raised in our joint comments on the first draft of December
2019. They are important and so we would like to repeat our requests once again.
1) Curbing unreasonable demands for technology disclosures in export reviews andprotecting confidential business information
2) Relaxing the obligation to uniformly submit documents in license applications(practices on the basis of the sensitivity of controlled items)
3) Avoiding the cycle of opposition and retaliation based on the “Equality Principle”
provision of the Foreign Trade Law4) Avoiding the use of export controls as a political means, such as those of “importantstrategic rare materials,” etc.

3. Points Now Reflecting Our Previous Joint Comments
We understand that the following development reflects our previous joint commentson the first draft of December 2019 and would like to express our gratitude.
·The removal of the legal obligation for exporters to establish an internal
compliance program (ICP), and instead, encouraging them to establish an ICP andstipulating that export control authorities may grant more favorable treatment,such as general licenses to exporters establishing appropriate ICPs.

4. Requests Regarding Subordinate Regulations and their Application(1) Publishing Submitted Comments and Issuing Guidance
Regarding China’s Draft Export Control Law, we have submitted joint comments on
three separate occasions in response to requests for public comments on the Ministryof Commerce’s draft of June 2017, and the Standing Committee’s first draft ofDecember 2019 and second draft of July 2020.

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However, we are unsure how our submitted joint comments are being addressed andwhat or how the authorities seeking such public comments are thinking about them.
With respect to the interpretation of the text of the draft law, even law firms in China
do not always agree among themselves, often expressing contradictory views on
important parts of the text.
Of those comments submitted by various parties, we assume that a considerable
number of them are not suitable to be reflected in the law itself but rather are suitable
to be reflected in the subordinate regulations and their application. However, for thosecompanies engaged in business with China, their approach to complying with the law
would differ greatly depending on whether or not these comments are reflected in thesubordinate regulations and their application. As they prepare for the future, theymust be able to fully understand the policies and plans of the appropriate authorities.
Therefore, we would like to request that the relevant authorities answer theinquiries in the submitted comments as to whether they will reflect the comments inthe law or subordinate regulations, and on the other points that remain unclear. We
also would like to request the authorities to publish guidance on these issues as soon
as possible.
(2) Ensure Opportunities to Submit Comments on Subordinate Regulations, etc.
In addition to the above-mentioned requests, we also made a number of otherrequests in our previous joint comments on the first draft of December 2019. We
understand that a considerable number of these requests are more suited to beingreflected in the subordinate regulations. Even if our joint comments are included in
the subordinate regulations, they should be stipulated in detail and so theseregulations are very important.
Therefore, we would like to request that the authorities seek public comments on
the subordinate regulations so that we may have the opportunity to submit commentson them, as is conducted in other major countries.
(3) Ensure Sufficient Period of Time For Preparation Before The Effective Date of The
Law

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The enactment of the Export Control Law would change the legal environments forinvestment and trade related to China. In order to appropriately comply with the law,
it would be necessary for companies to fully understand the law and its subordinate
regulations and to develop corporate compliance systems.
We therefore would request that the authorities ensure several years are provided
before the law’s effective date to allow sufficient time for companies to adequately
adjust, prepare for and comply with the law.

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