Errors and Outdated Information Plague US Trade Blacklist on China

HONG KONG/SHENZHEN - A review of the U.S. trade blacklist targeting Chinese companies has revealed significant inaccuracies and outdated information, raising questions about its reliability. One notable case involves Doris Au, a Hong Kong-based seller of door locks, who found her business account frozen by DBS Group after being erroneously linked to a blacklisted company with a similar name.

The U.S. trade blacklist, an instrument designed to restrict technology transfers to nations such as Russia and China, has expanded significantly under the Trump administration. An analysis conducted by Reuters of nearly 100 Chinese and Hong Kong firms listed on the blacklist in 2023 and 2024 uncovered that over 25% contained erroneous details, including incorrect names, addresses, and outdated information.

Upon investigation, it was found that many of the addresses cited by the U.S. were no longer associated with the listed entities. Instead, they housed unrelated businesses such as beauty salons and tutoring firms. In some instances, locations had been demolished years prior, leaving only remnants of former factories.

While some listed entities indeed engage in trade involving restricted items, the challenges in tracking such transactions are compounded by the existence of front companies and sophisticated networks operating in the shipping industry. The Bureau of Industry and Security (BIS), the agency responsible for managing the entity list, has faced criticism for being under-resourced, which complicates efforts to maintain accurate records.

Former U.S. officials have acknowledged the difficulties in updating the blacklist, attributing these issues to limited personnel and resources. Matthew Borman, a former senior BIS official, noted the fluid nature of these entities, which can easily change names and addresses, making enforcement challenging.

Despite the challenges, the U.S. government continues to ramp up its efforts to restrict access to sensitive technologies. Under the current administration, the focus remains on preventing China's acquisition of advanced technology, particularly in areas like artificial intelligence and military modernization. U.S. Commerce Secretary Howard Lutnick has emphasized the importance of controlling chip exports to China, citing the potential implications for national security.

The effectiveness of these controls has been mixed. Reports suggest that a significant portion of high-priority items sought by Russia for military purposes is being routed through China and Hong Kong, indicating that loopholes still exist. An analysis by Ukraine's KSE Institute found that 76% of items likely to be procured by Russia for its weapons programs were sourced from these regions.

Entities listed on the blacklist are prohibited from receiving U.S. goods, but transactions with them are not outright banned, provided that due diligence is exercised. However, the automatic compliance protocols adopted by banks can lead to mistaken rejections of legitimate businesses like Au's, which have no ties to illicit activities.

Au's business, Win Key (China-Hong Kong) Limited, was mistakenly linked to a company involved in questionable transactions. Since her address was blacklisted, she has faced significant financial losses, estimated at over $600,000, as suppliers and couriers have refused to work with her.

Despite her attempts to resolve the issue through the BIS appeal process, she has not received any substantial feedback. Experts indicate that the process for contesting listings is often met with skepticism, leaving many businesses trapped in a cycle of unintentional consequences stemming from errors in the blacklist.

In conclusion, the inaccuracies within the U.S. trade blacklist not only affect businesses like Au's but also highlight the broader challenges faced by the U.S. administration in enforcing technology controls amidst a rapidly evolving global landscape.