Boeing Snared in Chinese Sanctions

After deftly avoiding the sanctions levied in the past on US Defense contractors by Beijing for their transactions with Taipei,  Boeing’s Defense, Space & Security unit has been placed on the Ministry of Commerce's (MofCom) “unreliable entities list" (UEL).

The sanctions forbid their further investment in China, as well as travel bans on senior management for the companies.  Unaffected for now are the aerospace giant's civilian aircraft operations.

In April MofCom sanctioned dronemaker General Atomics and General Dynamics Land Systems, while the announcement omitted Boeing, the maker of Taipei's Harpoon anti-ship misssile system.  The May 20 announcement reiterates the April actions, adding Boeing [12041] 

In February 2023, Lockheed Martin and Raytheon Missiles & Defence were added to the UEL [8768]

A compelling aspect of the UEL Provisions is their extraterritorial reach, applying to activities that involve Chinese goods and services, regardless of where these activities occur. This means that Chinese companies and nationals must comply with the UEL Provisions even if their business operations are based outside of China.

The UEL List

Central to the UEL Provisions are the anti-circumvention mechanisms, designed to prevent any actions that might indirectly allow the sanctioned entities to access Chinese goods or services, thereby nullifying the impact of the trade bans, notes Zhong Lun Law Firm in a client note. 

"Interestingly, while similar to the U.S. SDN list in intent—aiming to cut off the sanctioned entities from engaging in trade and investment activities in China—the UEL Provisions do not explicitly adopt the “50% Rule” used in U.S. sanctions.

"This rule typically applies restrictions to entities owned 50% or more by sanctioned parties. However, MofCom’s enforcement suggests a similar intent to curb not only the activities of the directly sanctioned entities but also those of their affiliates and controlled entities, aiming to close any potential loopholes that might be exploited," the firm continues.

These mechanisms extend to both direct and indirect business relations, ensuring that Chinese products do not contribute to the military operations of the sanctioned entities