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US adds subsidiaries to its export blacklist

The U.S. took action on Monday against companies in China and elsewhere that used subsidiaries to circumvent restrictions on chipmaking technology and equipment.

According to a Federal Register posting, the Commerce Department has issued a new regulation that expands its restricted export list (known as the Entity list) to include automatically subsidiaries owned by a company listed at 50% or more. This action has increased the number of companies who need licenses in order to receive American products and services.

This rule will disrupt supply chains. The rule will make it harder for companies to determine if exports are restricted to a particular customer or supplier. According to the rule certain transactions can be permitted for 60 days.

The Affiliates Rule is similar to "50% rule" for entities sanctioned through the Treasury Department Office of Foreign Assets Control.

If an entity is listed as owning 50 percent or greater of a subsidiary, then licenses are required to export goods or technologies to that subsidiary. Many licenses may be denied. (Reporting and editing by Doina chiacu and Chris Sanders; Reporting by Karen Freifeld)

(source: Reuters)