Commerce outlines benefits of proposed China end-user validation

Commerce outlines benefits of proposed China end-user validation    The U.S. Commerce Department is attempting to drum up support for a proposed rule that creates a validated end-user program for Chinese companies seeking to buy U.S. technology, and promises fewer administrative burdens for American shippers who would otherwise require a license to export to these Chinese firms.
   “The concept is simple,” said Christopher Padilla, Commerce’s assistant secretary for export administration, at a conference on export controls and policy in Washington on Monday. “For customers who have demonstrated their ability to use controlled items responsibly, and have agreed to periodic audits, fewer export licenses will be required.”
   The “validated end-user” (VEU) program is part of a Commerce Department Bureau of Industry and Security proposed rulemaking released on July 6 that attempts to reshape and clarify existing export control rules pertaining to China.
   Padilla said the VEU program won’t be limited to China and may eventually apply to importers in India and other countries.
   “For the first time, we will create an export authorization that will act as a market-based incentive for firms in controlled countries to demonstrate good export control behavior,” he said. “Customers who act responsibly with sensitive products would have better access to such technology than their domestic competitors.
   “And U.S. exporters would be able to sell more efficiently to their best civilian customers,” Padilla added. “We hope that customers will be anxious to earn this treatment — showing that market competition and counter-proliferation can be mutually reinforcing.”
   Padilla told reporters he expects that large companies with license requirements for routine shipments will benefit most from the VEU program.
   Prospective validated end-users would need to meet a number of criteria. They must demonstrate a compliant track record with U.S. export control regulations and have no connection to weapons development programs. Other evaluation criteria include:
   * Ability to comply with the VEU requirements.
   * Agreement to on-site compliance reviews by U.S. officials.
   * Provide insights into relationships with U.S. and overseas companies.
   Participation in the VEU program is voluntary.
   “Of course, exporters will be welcome to continue filing for individual licenses if they want to; no one will be forced to use VEU,” Padilla said. “But exporters and customers who ignore VEU will run the risk of turning their backs on a significant opportunity to facilitate their business in highly competitive markets. It is an opportunity their competitors may not pass up.”
   Through more outreach to U.S. and Chinese businesses, Commerce hopes to clear up any misunderstanding of the scope and purpose of the proposed rulemaking.
   “It is simply wrong to label it a ‘catch-all,'” Padilla said. “It would apply only to a clearly defined set of products, under a clearly defined set of circumstances that have clear national security implications.”
   The Commerce Department has recently extended the comment period for the proposed rulemaking through Dec. 3. It has also published supplemental guidance specific to the VEU proposal, which is available online at https://www.bis.doc.gov/finalChina.html.