On June 24, 2020, the US Department of Defense (“DoD”) sent a letter to Senator Tom Cotton enclosing a list of twenty companies headquartered in the People’s Republic of China (“PRC”) which DoD determined are operating directly or indirectly in the United States and are “Communist Chinese military companies.” Titled “Qualifying Entities Prepared in Response to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (PUBLIC LAW 105-261),” the “DoD List” includes some Chinese companies frequently associated with the Chinese military, and others that may not have been previously associated with the Chinese military.
For companies doing business with the US government, the US government may consider the inclusion of any of the listed companies in a government contractor’s supply chain as a “supply chain risk” that must be assessed, particularly in connection with information technology. DoD contractors are already prohibited by their contracts from acquiring certain items and services from “any Communist Chinese military company.”
While not a sanctions list itself, the DoD List may lead to sanctions actions by the US government, as well as reactions from business partners assessing the risk of further action against the listed companies by the US government, particularly for listed companies that are not currently subject to US sanctions. Pressure from Congress may continue for the administration to continue to update this list, and to impose restrictions on the companies on this list.
Continue Reading US Department of Defense Publishes List of “Communist Chinese Military Companies” Operating Directly or Indirectly in United States Pursuant to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (the “Act”)