U.S. puts 37 Chinese companies and schools on red-flag 'unverified' list

[April 11, 2019]   By Diane Bartz and Karen Freifeld

WASHINGTON (Reuters) - The U.S. Commerce Department said on Wednesday that is adding 37 Chinese companies and schools to a red-flag list of "unverified" entities that U.S. companies should treat with caution, according to a notice in the Federal Register.

The list, which takes effect on Thursday, also includes six organizations in Hong Kong, four in the United Arab Emirates, two in Malaysia and one in Indonesia.

One company on the list is the Aisin Nantong Technical Center, a Chinese subsidiary of a Japanese auto parts manufacturer. Another is Beijing Bayi Space LCD Materials Technology Co Ltd, which has received patents for high-end screen technology.

Several other of the companies named specialize in precision optics, electronics, machine tools or aviation.

The listing means that the U.S. companies will treat the organizations with caution, said Kevin Wolf, a former assistant secretary of commerce for export administration.

China's commerce ministry, when asked on Thursday about its response, said it opposed abuses of national security and export control rules, adding the U.S. action has smeared Chinese firms and disrupted normal trade flow.

The U.S. government should correct its "wrong" behavior by removing the relevant Chinese companies from the list as soon as possible, ministry spokesman Gao Feng told reporters in a regular briefing in Beijing.

Being put on an "unverified" list means that U.S. suppliers to the unverified companies and schools can no longer use license exceptions to, for example, sell products to repair goods that were sold previously but instead will have to get a new license, said Wolf, now at the law firm Akin Gump.

 The seal of the Department of Commerce is pictured in Washington, D.C., U.S. March 10, 2017. REUTERS/Eric Thayer/File Photo

"Even though it's not an embargo, because of the hassle sometimes suppliers will treat it as an embargo. It has a practical effect that's greater than the legal effect," said Wolf.

The Commerce Department will put entities on the "unverified" list if the organizations decline to answer questions about how U.S. goods are used.

Schools on the list include the Changchun Institute of Applied Chemistry, whose website says it specializes in physics and chemistry research aimed at defense and economic development as well as training graduate students.

Other schools on the list are the Guangdong University of Technology in Guangzhou, Renmin University, Tongji University in Shanghai and two schools in Xi'an, China.

The listing also removes five Russian companies, three Chinese entities and one Finnish firm from the list.

(Reporting by Diane Bartz; Additional Reporting by Yawen Chen in BEIJING; editing by Jonathan Oatis

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