List of Unreliable Companies: Who Is Affected?

China is countering the USA. In September 2020, the Chinese Ministry of Commerce (MOFCOM) issued the first provisions for a list of unreliable companies, organizations and individuals that could have far-reaching implications for China’s foreign trade. 

In future, foreign institutions and individuals whose activities endanger China’s national sovereignty, security or development interests are to be placed on the Unreliable Entity List (UEL). Foreign companies that violate the principles of normal market transactions, suspend normal transactions with a Chinese company or apply discriminatory measures against Chinese companies may also be listed in the future.

The consequences of listing can be drastic. For example, MOFCOM may prohibit the foreign corporation from participating in import or export activities relating to China or from investing in China. In addition, the entry of personnel and the use of means of transport may be restricted or prohibited altogether. The Unreliable Entity List will be publicly available, which will lead to negative reactions from Chinese partners, customers and suppliers.  

We expect that the UEL will be used flexibly by China as a means of political pressure in response to US sanctions. Foreign companies operating in China should already now address the specific criteria for a listing and the planned cancellation procedure for a possible de-listing. 

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