On September 19, 2020, China’s Ministry of Commerce (MOFCOM) issued the Provisions on the Unreliable Entity List, which immediately came into effect.
Who will be subject to the Unreliable Entity List?
The Unreliable Entity List System aims at “foreign entities”, a term that refers to an enterprise, other organization, or individual of a foreign country, which have taken actions in international economic, trade and other relevant activities:
- Endanger China’s national sovereignty, security and development interest;
- Suspending normal transactions with an enterprise, other organization, or individual of China or applying discriminatory measures against an enterprise, other organization, or individual of China, which violates normal market transaction principles and causes serious damage to the legitimate rights and interests of the enterprise, other organization, or individual of China.
What are the consequences of being included in the Unreliable Entity List?
If a foreign entity is included in the Unreliable Entity List, an alert about the risks of conducting transactions with the said foreign entity may be made. In addition, the time limit for the foreign entity to rectify its actions may also be specified based on actual circumstances.
Furthermore, the Provisions provide the Working Mechanism, based on actual circumstances, may decide to take one or several of the following measures with respect to the foreign entity which is included in the Unreliable Entity List, and make an announcement of the decision:
- 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 personnel or means of transportation from entering into China;
- Restricting or revoking the relevant personnel’s work permit, status of stay or residence in China;
- Imposing a fine in an amount commeasurable to the severity of the conducts.
- Other necessary measures.
The full announcement can be found here.
Source: China's Ministry of Commerce