US Commerce Department Considers Sanctions Over Companies Profiting From Xinjiang

By Charles Rollet, Published Oct 04, 2018, 09:28am EDT

The US Commerce Department is considering its own sanctions for businesses alleged to be enabling repression in the Chinese region of Xinjiang such as Hikvision and Dahua, potentially making it near-impossible for American companies to export key components to them.

This is new and in addition to the Treasury and State departments considering their own separate set of “Global Magnitsky” sanctions for Hikvision and Dahua over the firms’ Xinjiang involvement. (Trump Administration Considers Sanctions Against Dahua and Hikvision).

In this note, we examine the multiple efforts and how this would impact Dahua and Hikvision.

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Comments (6)

Undisclosed Manufacturer #1

10/04/18 01:39pm

There has to be more to why the U.S. govt is focused on these two manufactures.  Perhaps the hardware backdoor has been discovered inside Chinese cameras also?

The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

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Undisclosed Manufacturer #2

In reply to Undisclosed Manufacturer #1 | 10/04/18 08:58pm

Our voluntary dependence on a country with such a robust hardware hacking organization leaves virtually everyone vulnerable. 

I don't sense many people appreciate the asymmetrical conflict of China vs. the free world.  In our world, many people view selling a hacked product as a distraction to making today's money.  Chinese leadership is willing to sacrifice their reputation as the world's biggest factory for the ability to someday dominate us.  We're thinking about this quarter, they are thinking about this century.

It's the beginnings of how ghost fleet turns from fiction to reality. 

I suspect the Xinjiang situation is simply cover for a much bigger battle.  There are many oppressed groups globally, why is the US acting for this one?

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Charles Rollet

In reply to Undisclosed Manufacturer #2 | 10/05/18 02:24pm

Of course, there are many other oppressed groups in the world - but it seems clear that the main reason Xinjiang is getting attention from the US is the sheer scale of the oppression taking place. By some estimates, 1 million out of 11 million total Uyghurs are being indefinitely detained in political re-education camps, mostly for "offenses" like attending mosque too often or traveling abroad. The detainees' children are being sent to orphanages en masse, while facial recognition cameras are being installed in hundreds of mosques (by none other than Hikvision) to monitor peoples' religious activities 24/7 and possibly flag them for detention.

This is the sort of thing unseen since the gulags of the USSR, except with a high-tech twist. And it's not taking place in a complex warzone like Syria or Yemen, but in China, a country at peace which remains the US' top trading partner.

If anything, the US response has been somewhat slow. As of today, there are no sanctions whatsoever to anyone doing business in Xinjiang, where many Fortune 500 companies are still operating.

I also don't think the US needs to use Xinjiang as cover for its broader economic conflict with China - the US government has already made a very detailed case for things like tariffs based mainly on claims on unfair competition, espionage, etc. (Read the Section 301 "Report into China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation" for just one example.)

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Rich Moore

10/04/18 03:20pm

I'm curious if everyone thinks this will eventually lead to a ban on any Chinese Camera Manufacturers or Non TAA Compliant manufacturers from doing business in the US.  If so, would manufacturers need to disclose if any of their components are made in China?

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Robert Shih

Independent
In reply to Rich Moore | 10/05/18 09:24pm

Well, as a denizen of the electronic wild west, all I can say is: I believe that would be the right course of action, but as it stands making such a sweeping change now is trying to corral the herd bit late into the stampede.

The question now is, who's going to provide a true alternative that allows us to properly wean ourselves off of this dependency?

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Charles Rollet

In reply to Rich Moore | 10/06/18 06:10am

It's hard to tell. The Entity List is very specific and doesn't target broad categories like "all Chinese camera maufacturers" - they single out individual companies one-by-one.  There are also some Chinese manufacturers that are not meaningfully involved in Xinjiang, so by definition those firms could not be added to the Entity List or Magnitsky for complicity in human rights abuses there.

You're right that in the worst case scenario, Hikvision, Dahua, and possibly other Chinese manufacturers with a significant presence in Xinjiang could have Magnitsky sanctions imposed on them. This may not cover all the players, but definitely a big chunk, effectively blocking most Chinese cameras from coming into the US at all. 

This scenario would effectively ban Hikvision or Dahua components coming into the US too. But it wouldn't necessarily affect components from other Chinese companies that don't have significant a Xinjiang presence.

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