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US chip ban left back door in Beijing-controlled Macau for months

Until Tuesday, when the former Portuguese colony was added to the 'You Shall Not Pass' list

Amendments removing the exclusion of China's Special Administrative Region (SAR) Macau from US technology export restrictions on China went into effect on Tuesday, addressing concerns that the territory was used as a back door through which banned goods could make their way into the Middle Kingdom.

Previously, the US's technology export bans excluded Macau from requirements intended to prevent export of semiconductor and computer technologies the US government considers "force multipliers for military modernization and human rights abuses."

An FAQ [PDF] from the US Commerce Department's Bureau of Industry and Security (BIS) explained:

Hong Kong has the same license requirements as the People's Republic of China … and is therefore subject to the requirements of the advanced computing rule.

However, BIS treats Macau as a distinct destination from China and therefore it is not subject to license requirements specific to China. However, exporters and reexporters are encouraged to conduct due diligence and be aware of red flags when shipping to Macau.

But as of Tuesday, updated US policy [PDF] added Macau to the "don't export tech here or else" list. "Potential risk of diversion of items subject to the export administration regulations (EAR) from Macau to China" is cited as the reason for the change.

"For purposes of the EAR, this rule does not change the status of Macau; it will continue to be treated as a separate destination from China," added the Bureau.

The concerns are not unfounded. Smugglers have historically been known to use Macau as an entry point to China for illicit goods. Just last month, a woman faked a pregnancy and wore a prosthetic to sneak hundreds of CPUs and iPhones into the Middle Kingdom and avoid paying import taxes.

Macau has been a SAR of China since 1999, when it was returned to Chinese sovereignty by Portugal. While Macau's defense and foreign relations are Beijing's job, the territory has some autonomy in economic and commercial relations under a "one country, two system" principle.

In September of 2021, China revealed plans to create a semiconductor-focused economic center in Macau. The new zone would expand economic opportunities for the SAR at a time when the gambling industry was enduring COVID-restriction knocks. On top of that, the plan was intended to "promote the interconnection of innovation chains between Hong Kong, Macau and the mainland."

Countries like the Netherlands have resisted playing along with some of the export restrictions imposed on China by the US. White House Press Secretary Karine Jean-Pierre denied on Tuesday that the United States coerces countries into joining efforts to restrict China's access to technology.

"We don't push any of our allies or our partners. We consult with them closely, and they make their own decisions. And this is how we move forward with our relationship, again, with our allies and partners," she said.

Jean-Pierre indicated that President Biden had recently discussed the matter with leaders in Japan and the Netherlands, along with a host of other regional and global issues. ®

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