The introduction of new US export rules for exporting specific goods to China may apply the brakes on tech companies’ plans about expanding in Beijing, Shanghai and Shenzhen but how valid are these worries?
The U.S. Department of Commerce, Bureau of Industry and Security announced further rules associated with exporting certain US goods into countries deemed a threat to US national security. The suspicion is that some countries may use civilian supply chains to obtain technology which are then used for military applications. These rules prevent the flow of technology and innovation into areas deemed a security risk.
“Certain entities in China, Russia, and Venezuela have sought to circumvent America’s export controls, and undermine American interests in general, and so we will remain vigilant to ensure US technology does not get into the wrong hands.“
Wilbur Ross, U.S Secretary of Commerce
China is the third largest importer of US goods, according to The U.S Census Bureau. So, any changes may to these US Export Rules have a significant impact on US industries that export to China.
How will it affect US businesses?
Many US companies collaborate with China for part or all their production process as they provide a fast and often cost-effective approach to manufacturing. Typically, a US company may either have a Chinese company create the parts or entire goods and then ship them to the US. Some businesses establish themselves locally and handle production more directly.
These new US export rules mean that US companies may now need to rethink their operating model or even relocate their production entirely. While it is still unclear which products are affected by the Commerce Control List, the categories are clearly defined and offer an insight into potentially problematic areas.
Commerce Control List Categories
The development shouldn’t come as a surprise to many as last September, the US government asked US businesses with operations in China to leave the country, according to the NY Times.
Alternative bases to china for US companies
Global businesses already operating in China may be seeking ways to navigate the new rules and potentially looking for alternative destinations with similar benefits to China.
While it is unlikely that the manufacturing powerhouse of China will lose many companies to other countries, some will move and will need support to minimize the disruption and costs to both the supply chain and the wider business. Fortunately, there are solutions to overcome this challenge.
For organizations seeking rapid expansion into another country, or even those wanting to test a region, it’s important to speak with experts who specialize in simplifying global expansion into new regions.
Speed to market solutions to simplify overseas expansion
Employer of Record Services offer unique speed to market solutions for short- and long-term expansion into other countries. This solution enables organizations without an entity to relocate or even hire in a country without any of the challenges or risks usually associated with creating a local entity.
This service is beneficial for any US company looking for a new operational base in Asia, regardless if they are moving operations or simply adding to their global scope.
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Elements Global Services is an award-winning HR technology & services company. Elements provides employment solutions in over 160 countries – covering everything from payroll, benefits, HR, local compliance to visa & mobility. Headquartered in Barcelona, Spain, Elements has a global network of offices and employees delivering innovative solutions to its growing customer base. Elements’ Direct Employer of Record model helps companies expand, onboard, manage & pay employees worldwide. Visit elementsgs.com or LinkedIn for more information.