The Struggles of Shipping Dual-Use Goods to China
Two US Department of Commerce Programs Encourage Exports to China but also Add Red Tape for Both Sides Corr, Christopher F., Hungerford, Jason T.

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US exports to China have risen rapidly in recent years, totaling $69.7 billion in 2008, up nearly 30 percent from 2006. As demand fell during the global economic slowdown, US exports to China dropped but still accounted for 6.2 percent of total US exports, up from 5.5 percent in 2008. China's importance to the United States as an export market continues to grow despite sometimes-onerous US export control restrictions. US export controls are more stringent than those of competitor nations, in part because of their complexity and resulting potential to delay transactions.

Though the value of US exports to China is increasing, the US-China trade deficit continues to expand, reaching $268 billion in 2008, a 3.7 percent increase year on year. The best way to remedy this imbalance is to increase exports to China, where the economy expanded even as the global economy soured.

The United States faces fierce competition as emerging markets with inexpensive labor compete on price for sales of commodity goods and developed countries compete for sales in value-added sectors. Even in the high-tech sector, where the United States enjoys a competitive advantage, stringent US export controls hamper growth.

To ease regulatory burdens for US exporters that seek to tap the enormous China market, the US Department of Commerce Bureau of Industry and Security recently introduced two programs: the Validated End User authorization program, which began in June 2007, and the proposed Intracompany Transfer License Exception program. Though these new initiatives could make life easier for US exporters and boost US exports to China, they expose participants — especially Chinese end users — to heightened US government scrutiny and increased administrative burdens. Whether companies perceive the risks and burdens as outweighing the programs’ benefits remains to be seen, but early indications are not promising.