[img src="133" /] too small: width=5 Industry Overview
[img src="133" /] too small: width=5 Export Controls
[img src="133" /] too small: width=5 U.S. Commercial Service Contacts in China
Industry Overview
China’s safety and security market demand is growing rapidly. The market has expanded from its traditional base in the financial, insurance, custom, police, airport and IT sectors to the construction, transportation, and education fields. In 2003, the Chinese safety and security equipment market was US$7 billion. Industry experts estimate that by 2020 China’s safety and security market will reach USD 30 billion. From September 11, 2001 through 2004, the Chinese government has invested USD 130 million to cope with anti-terrorism security issues, many involving air travel.
By 2010 China will have 240 airports, up 132 from its current number. With 108 new airports to be constructed in the next five years, airport security has become a critical safety issue for the Chinese government. Increasing tourism and a rise in air cargo volume will also necessitate an upgrade of security technology at existing major airports to improve safety and efficiency.
Much of the safety and security demand will focus on high-tech equipment, such as digital technology, entrance guard communication systems, network technology for inspection control systems, and warning systems.
- Inspection control systems: This has been a high-growth area in recent years and remains very competitive. Panasonic, Samsung, Sony, JVC, and Sanyo occupy a majority of the market share in China’s high-grade inspection control market.
- Entrance guard communication systems: China’s domestic enterprises occupy the majority share in the entrance guard systems sector, and foreign enterprises, such as US companies BII and HID, UK company TDSI, and Israeli company DDS, occupy the majority share of communication systems market.
- Warning systems: there is major demand for intelligent airport systems. Foreign companies dominate the market for high-grade products, leading the trend towards integrated safety and security systems.
- Detection Equipment: As China’s domestic manufacturers lack capacity to produce enough equipment, foreign products in this field are in high demand.
- Fire Protection Equipment: Domestic competition in this sector is strong, though all imported equipment must first obtain safety certification from the China Fire Bureau.
In the next five years, China will invest USD 150 million in security infrastructure for new and existing airports.
Beijing’s new airport is currently under construction, with investment of USD 30 million for security equipment alone. Fire protection equipment, X-ray scanners, metal detectors, portable detectors, and other equipment are needed. Most bids for this security equipment will open this year.
Export Controls
In April 2002, the Bureau of Export Administration changed its name to the Bureau of Industry and Security (BIS). The contact numbers remain the same, but the new website address is www.bis.doc.gov.
The Tiananmen Sanctions of 1990 are still in effect and sharply curtail U.S. exporter opportunities to sell crime control equipment to China's police agencies and defense electronics equipment to the Chinese military. The Tiananmen Sanctions prohibit the export of items listed on the U.S. Munitions List and crime controlled items listed in the Export Administration Regulations (EAR). These sanctions explicitly prohibit the exportation of crime control and crime detection instruments and equipment. These restrictions apply regardless of the end user in China. The sale of these items to third parties as a means of circumventing the Tiananmen Sanctions is also prohibited.
The United States Government's Enhanced Proliferation Control Initiative (EPCI), requires the U.S. Department of Commerce (USDOC) and exporters to scrutinize end-users of U.S. exports of all kinds. This regulation requires a Validated License application if the exporter has "reason to know" that the end-users might be involved in missile, nuclear or chemical weapons proliferation. Periodically, both the State Department and U.S. Department of Commerce (USDOC) identify sensitive end-users and add them to the USDOC Entity List. For such identified firms, U.S. exports and U.S. origin re-exports require an individual validated license for virtually all shipments to these entities. Currently, nineteen Chinese companies appear on the Entity List, which can be viewed at the USDOC Bureau of Industry and Security website at www.bis.doc.gov.
On June 14, 2002, the BIS published the Unverified List. This is a list of companies where BIS was unable to conduct pre-license checks (PLCs) or post shipment verifications (PSVs) for reasons outside the control of the U.S. Government. The list notifies exporters that involvement of a listed person as a party to a proposed transaction constitutes a red flag as described in the guidance set forth in Supplement No. 3 to 15 CFR part 732 of the EAR. Under that guidance, the red flag requires heightened scrutiny by the exporter before proceeding with a transaction in which a listed person is a party. Currently, six Chinese companies are on the Unverified List. The Unverified List can be viewed on the BIS website at www.bis.doc.gov.
On January 3, 2005, the U.S. State Department published in the Federal Register sanctions against eight Chinese entities for violating the Iran Nonproliferation Act of 2000. On January 24 and May 16, 2002, the U.S. State Department published in the Federal Register, sanctions against a total of 11 Chinese entities for violating the Iran Nonproliferation Act of 2000. These sanctions prohibit the sale of any item on the U.S. Munitions List, defense articles, defense services, or design and construction services controlled under the Arms Export Control Act to the listed entities. They also require a denial of new licenses and the suspension of existing licenses for the sale items controlled under the Export Administration Act (EAA) or the EAR to the listed entities. A list of the sanctioned entities can be found in the federal register publications.
On May 23, 2003, the U.S. State Department published in the federal register sanctions against the North China Industries Corporation (NORINCO) for engaging in missile technology proliferation activities that required the imposition of measures under Executive Order 12938, as amended by Executive Order 13094 (Proliferation of Weapons of Mass Destruction). This sanction prohibits the importation into the United Sates of any goods, technology, or services, produced or provided by this entity, its subunits, and successors, other than information or information materials as defined in the International Emergency Economic Powers Act (IEEPA). The sanction also prohibits the export of defense articles and services from the United States and of United States origin defense articles and services from foreign to this entity, its subunits, and successors. The sanction is in effect for two years.
A law passed by Congress in late 1997 requires that the U.S. government conduct Post Shipment Verification visits (PSVs) on all High Performance Computers (HPC) shipped to one of 50 countries including China. As of March 8, 2002, the definition of a HPC with respect to China is any computer with a MTOPS (million theoretical operations per second) level of 190,000 or greater. There is a USDOC requirement that a MOFCOM issued end-user certificate (EUC) must be obtained by the exporter before the computer is shipped to China. Ordinarily the computer importer or re-seller in China applies for this document and passes it to the exporter. For information on this regulation see the BIS web page at www.bis.doc.gov/HPCs .
USDOC Dual-Use Export Applications: A USDOC dual-use export license application that does not present to the USDOC reviewers serious Chinese end-user concerns is usually approved by the USDOC in about one week. In the case of a Pre-License Check (PLC) requirement, USDOC requests permission from the Chinese Ministry of Commerce (MOFCOM) for a Commercial Officer from the U.S. Embassy to visit the site of an end-user to determine the bona fides of the end-user for the actual end-use of the product. This must be done before USDOC will act further on the export license application. The amount of time needed to complete the entire PLC process is usually two to three months. If the U.S. government is not permitted to conduct a PLC by the Chinese government, an export license may not be issued.
In April 2004, BIS reached an agreement with MOFCOM regarding end-use visits. Such visits, which include PLCs and PSVs, help ensure that U.S. exports of controlled dual-use item are being used by their intended recipients for their intended purposes. The End Use Visit Agreement provides a framework for timely and transparent processing of PLCs/PSVs, which will facilitate licensing determinations.
If an exporter needs information on the regulations relating to the sale of its goods to China, they can request an advisory opinion from BIS. The advisory opinion will supply the exporter with a commodity classification and any restrictions on the export of that item to China. For more information about advisory opinions or U.S. dual-use export controls, exporters should view the BIS website at www.bis.doc.gov or contact:
BIS Exporter Services Division
Washington, D.C. Tel: 202-482-4811 Fax: 202-482-3322
Western Regional Office Tel: 949-660-0144 Fax: 949-660-9347
U.S. Embassy-Beijing, Commercial Section
Jeannette Chu, BIS Officer Tel: (86-10) 8529-6655 x810 Fax: (86-10) 8529-6558
The U.S. State Department’s Office of Defense Trade Controls, under the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR), controls the export of items listed on the U.S. Munitions List, including satellites and related technology. For information on State Department export licensing procedures see the relevant State Dept website of the Office of Defense Trade Controls at http://www.pmdtc.org. A point of contact for State Department Licensing business advocacy matters at the State Dept is David Nobles, Tel. 202-647-1817. In the U.S. Embassy in Beijing, the point of contact for State Dept. Licensing matters is the Economic Section, Tel: 86-10-6532-3431, Fax 86-10-6532-6422.
U.S. Commercial Service Contacts in China
Beijing Office:
Tel: (86-10)8529-6655
Fax: (86-10)8529-6558/9
Zhao Peining
Shanghai Office:
Tel: (86-21)6279-7930
Fax: (86-21)6279-7639
Francis Peters
Jane Shen
Guangzhou Office:
Tel: (86-20)8667-4011
Fax: (86-20)8666-6409
Cathy Wang
or