Washington: The U.S. Commerce Department has introduced a new regulation aimed at preventing Chinese companies, which are listed for security and other risks, from acquiring U.S. technologies through their affiliates. This move is part of ongoing efforts by Washington to limit China’s technological progress amidst a growing Sino-U.S. rivalry.

According to Yonhap News Agency, the Bureau of Industry and Security (BIS) of the Commerce Department has issued this rule. It states that any entity with at least 50 percent ownership by one or more entities on the “Entity List” or the “Military End-User (MEU) List” will automatically face the same restrictions as those on the lists. These lists are managed by the BIS and identify entities that pose potential risks to U.S. national security or foreign policy interests. Entities listed are subject to U.S. license requirements for the export, re-export, or transfer of U.S. technologies.

The rule also stipulates that “significant” minority ownership by a company on the Entity List or MEU List will require additional due diligence by exporters, as outlined by the BIS. Jeffrey Kessler, Under Secretary of Commerce for Industry and Security, stated that the administration is closing loopholes that previously allowed exports undermining American national security and foreign policy interests.

Some industry observers have noted that the implementation of this rule could impact business operations involving joint ventures between South Korean or other third-country companies and Chinese enterprises on the Entity List. The new restrictions will take effect 60 days after their publication in the Federal Register, scheduled for Tuesday.