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Home >News > 2007 - China VEU Announcement

FOR IMMEDIATE RELEASE	BUREAU OF INDUSTRY AND SECURITY
Thursday, October 18, 2007	Office of Public Affairs
www.bis.doc.gov	202-482-2721

New BIS Program Changes Export Rules on Targeted Products For Select Companies in China
Positive Compliance History, Enhanced Oversight, Part of Reduced Paperwork Regulations

WASHINGTON - The Commerce Department's Bureau of Industry and Security (BIS) today announced the approval of five screened companies in China for Validated End-User (VEU) status. VEU will remove individual license requirements on exports of certain U.S.-controlled items to those companies to facilitate and help increase bilateral high technology trade while maintaining a secure U.S. export control system.

"The approval of these VEU candidates is the latest step in implementing our dual-use export control policy towards China, which strikes the right balance in our complex relationship," said Bureau of Industry and Security Under Secretary Mario Mancuso. "The steps we are taking today are good for American exporters and jobs, and good for national security. This common-sense approach makes it easier for U.S. companies to sell to pre-screened civilian customers in China consistent with our national security requirements."

The VEU program for China will make transactions easier, faster and more reliable with customers that meet rigorous security requirements established by an interagency review process, and will help U.S. exporters remain competitive in one of the fastest-growing markets for American companies. The VEU program is an innovative way to facilitate exports to civilian end-users in China.

By removing routine exports to specific, security screened companies from the traditional interagency review process, BIS and other relevant agencies can better focus their resources on review of exports that raise greater security concerns.

These companies in China have qualified for VEU status and will be authorized to receive certain U.S.-controlled items without individual export licenses. As the program expands and matures, it could facilitate millions of dollars of U.S. exports to China. The increased trade with China will help to keep high paying, good quality technology jobs in the United States. BIS will continue to rigorously monitor compliance with the Regulations.

In 2006, these companies imported nearly $54.3 million dollars worth of U.S.-goods under licenses, or about 18 percent of total licensed exports to China. This is the first group approved for this program in China, which had been established as part of a broader update to U.S. export control policy for China. Today's Rule change should help U.S. businesses maintain a leadership role the China market.

The program will also allow U.S. companies to better compete in China, particularly in trade sectors where foreign competitors are already selling similar items. Sectors likely to benefit from the VEU program include electronics, semiconductor equipment, and chemicals.

Companies granted VEU status will be published in the Federal Register and added to a list maintained in the Export Administration Regulations. The five companies that were just announced as VEUs are:

Applied Materials China: A subsidiary of Applied Materials, USA, and a supplier of semiconductor manufacturing equipment. The Applied Materials China facility performs maintenance, installation and warranty support for Applied Materials' customers in China. The approved facilities are located in Beijing, Shanghai, and Wuxi and the approved items include pressure transducers, semiconductor raw materials and spare parts for ion implantation, etching, wafer handling, and lithography equipment.

Boeing Hexcel AVIC I Joint Venture: The Boeing Hexcel AVIC I Joint venture (BHA) composites manufacturing facility produces composite parts for secondary structures and interior applications for commercial aircraft, including the Boeing 787. The approved facility is located in Tianjin and the approved items include raw materials for producing composite structures and machine tools for composite manufacturing.

National Semiconductor Corporation: National Semiconductor Corporation is a manufacturer of electronic components such as analog-to-digital converters. National operates three sales and marketing representative offices in China, engaged in National Semiconductor products primarily through authorized local distributors. The approved facilities are located in Beijing, Shanghai, and Shenzhen and the approved items are analog-to-digital converters.

Semiconductor Manufacturing International Corporation (SMIC): SMIC is a pure-play integrated circuits (IC) foundry which offers IC manufacturing services. The approved facilities are located in Beijing, Chengdu, Shanghai, and Tianjin and the approved items include pressure transducers, chemical handling equipment, chemicals, semiconductor raw materials, and semiconductor manufacturing equipment.

Shanghai Hua Hong NEC Corporation (HHNEC): HHNEC is a pure-play integrated circuits (IC) foundry that produces a variety of integrated circuits. The approved facilities are located in Shanghai and the approved items include pressure transducers, chemical handling equipment, chemicals, semiconductor raw materials, and semiconductor manufacturing equipment.

These companies, which accounted for 150 licenses between 2002 and 2006, were approved for VEU status after a thorough review of such factors as the entity's record of exclusive engagement in civil end-use activities; the entity's compliance with U.S. export controls; the need for an on-site review prior to approval; the entity's capability of complying with the requirements of authorization VEU; the entity's agreement to on-site reviews to ensure adherence to the conditions of the VEU authorization by representatives of the U. S. Government; and the entity's relationships with U.S. and foreign companies.

These approvals are the latest step in the Commerce Department's implementation of a June 2007 update to U.S. dual-use export control policy towards China. In addition to establishing the VEU program, the China policy rule imposed new licensing requirements on a targeted list of dual-use items that could contribute to China's military modernization. The list of items covers 31 entries on the Commerce Control List, including items such as aircraft and aircraft engines, avionics and inertial navigation systems, lasers, depleted uranium, underwater cameras and propulsion systems, certain composite materials, and some telecommunications equipment for space communications or air defense. This list was carefully developed by the Departments of Commerce, Defense and State to target militarily useful items not widely available on world markets. These controls are consistent with the longstanding U.S. embargo on arms exports to China.

BACKGROUND

Led by Under Secretary Mario Mancuso, the Commerce Department's Bureau of Industry and Security (BIS) promotes continued U.S. strategic technology leadership and advances national security, foreign policy and economic objectives by ensuring an effective dual-use export control and treaty compliance system. Dual-use items have commercial uses, but also have conventional military and weapons of mass destruction applications.

For more information on the application process and benefits of the program, visit www.bis.doc.gov

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