The road to listing of Ant Group is unexpectedly difficult. In fact, as early as the beginning of 10, it was reported that the possibility of adding China to the entity list was already being discussed in the White House.
However, unlike China, where ants almost monopolize the domestic market and prudently manage it based on realistic risk prevention and control factors, the share of ants in overseas markets is still very small. In this case, it is an extremely important change that the United States issued the threat of sanctions early.
The United States sanctioned ZTE and Huawei on the grounds that they illegally did business with Iran and tried to fight a factual war. The United States sanctioned Tik Tok because it occupied the American market and "may" affect national security. Neither of these ants is satisfied. You didn't violate American laws, and you didn't threaten the American market. If it succeeds in China, it may be sanctioned by the United States?
After Ant suspended its listing plan, it was reported in Reuters that the Trump administration also shelved its plan to blacklist Ant Group. According to three people familiar with the matter, the factors that led Trump to shelve the plan included not wanting to confront Wall Street before the election and the possibility of facing litigation.
However, the game between China and the United States will not end with the election. Why can the U.S. government brandish sanctions sticks more and more casually? Under the new situation, how should China government and China enterprises fight back? Observer Network interviewed Wade Weems, a lawyer of Shanghai Gaobojin Law Firm. Gao Law Firm has represented China enterprises such as Fujian Jinhua to deal with US sanctions.
Lawyer Wade of Gaobojin Law Firm in Shanghai Representative Office
Observer Network: Bloomberg reported that the White House recently discussed the possibility of imposing sanctions on Ant Group. In fact, the ant group has very little business in the United States at present. Even if sanctions occur, how much impact will it have?
Wade: Sanctions haven't happened yet, so we don't know what possible reasons are involved in the so-called White House discussions. However, according to media reports, Ant Financial may be added to the entity list.
Being added to the list of entities means that enterprises will not be able to obtain any exports from the United States, including American products, American technology, American software and so on. Moreover, the list has a wide range of restrictions, not only direct sales, but also secondary and tertiary sales in other countries. As long as products, software and technology from the United States cannot be transferred to any entity on the list.
Therefore, although the market share of ants in the United States is relatively small, it will be affected as long as American products are used. The dependence of ants on American products will determine the impact of a potential ban in the United States.
Observer Network: The reason for the potential sanctions in the United States is that Ant Group may monopolize the global digital payment system, grasp the financial information of the United States, and threaten the national security of the United States. But since the market share of ant group in the United States is almost zero, is the above accusation too far-fetched and arbitrary? What is the legal basis?
Wade: It is relatively easy for the U.S. government to adopt the tool of entity list. Because relatively speaking, the criteria for adding foreign companies to the entity list are relatively low, and there is no need for very strong evidence. The administrative organs have considerable discretion in determining the threat to national security.
Sometimes, when the U.S. government makes a decision on sanctions, it may not only consider the economic effects of sanctions. Sometimes the U.S. government knows that some sanctioned enterprises may be less dependent on American exports, but it still has to make a decision to include them in the entity list, because it will have some symbolic significance.
For example, the United States recently listed several enterprises in Xinjiang as entities. Some Xinjiang enterprises, such as ordinary textile enterprises, are not closely related to the United States and do not rely on American raw materials and equipment. They are all on the entity list, and the actual impact is relatively small. The us government still has to do this, mainly to express some political positions.
Only by really putting ants on the entity list can we see what the reason given by the US government is and whether it makes sense. If it is really the reason that "the global payment system may monopolize", it will be more novel.
Observer Network: In fact, the recent US sanctions against China enterprises have reflected some new trends. Ant tribe is not an isolated case?
Wade: We also believe that there have been some new trends in US trade sanctions in recent years. In the first case, when the US government imposed trade sanctions, it expanded the scope of application of existing tools in the past, such as the national security issue we just mentioned.
Jinhua, Fujian is such an example. When the United States added Fujian Jinhua to the entity list, it did not give a clear reason for some time. Jinhua originally had an intellectual property dispute with Micron and was sued by Micron for stealing trade secrets. Therefore, it can only be understood that stealing trade secrets may also be related to national security. Now the definition of national security in the United States seems to be more and more broad, and the relevant authorities can define many things that endanger national security more broadly. If, as you said, monopolizing the global payment system can also be regarded as endangering national security, this is also a relatively novel definition.
In addition, the United States has also developed some new trade sanctions and tools. For example, listing companies on the entity list on the grounds of human rights, which used to be a rare reason, has now begun to appear in large numbers.
Observer Network: Indeed, as you said, the US government has great discretion in the definition of national security. It thinks that stealing trade secrets threatens our national security, so it can add you to the entity list. Then, will this administrative discretion be restricted by the judicial system? Can the court decide that the government's discretion is wrong and stop the sanctions?
Wade: First of all, we need to know the basic system of US sanctions and export control. In the United States, the power to regulate trade ultimately belongs to Congress. Congress delegated some of these powers to the executive authorities, especially in the fields of dealing with foreign countries, such as foreign trade and foreign affairs. Congress gives the administrative organs the power of sanctions and export control.
Within the administrative organs, there are mainly two institutions that exercise this power. One is the Ministry of Commerce, which is mainly responsible for the flow of goods, that is, the export of goods. The other part of the power belongs to the Ministry of Finance, which is responsible for implementing economic sanctions. In both cases, they were authorized by Congress. According to these authorizations, their decisions can be exempted from judicial review to some extent.
What do you mean, not subject to judicial review? In other words, the factual part of each of their rulings, or the substantive part of their rulings, is generally not subject to court review. For example, it is difficult for the company to directly question the decision of the administrative organ, saying that its facts are wrong and its theoretical basis is wrong. These ordinary courts will not listen. These decisions belong to the discretion of the administrative organs themselves, and the courts cannot interfere.
Under what circumstances can a court hear a lawsuit against an American administrative agency? Mainly when there are procedural problems. For example, in the case handling mechanism, the government should hold a hearing to let me submit some evidence materials, or in some procedures, it should give me reasonable notice to give me a chance to reply. If the procedural rights are infringed, the parties may ask the court for relief. This is the general situation.
Of course, there are some special circumstances. We can't directly attack the judgment itself, but if the collateral consequences caused by this judgment are not allowed by law, then the court can also intervene.
Once the administrative organ excessively expands the power entrusted to it by Congress, it may conflict with other requirements of American law. The lawsuit between WeChat and Tik Tok is a good example. In these lawsuits, the relevant enterprises can't say that the reasons why the US government decided to sanction them are wrong, but they can argue that sanctions based on the reasons advocated by the government will lead to excessive violation of the right to freedom of speech protected by the First Amendment to the US Constitution. Therefore, the court must decide whether the government can impose this sanction.
In addition, there are some feasible methods. For example, in sanctions cases involving human rights, the US government's accusations against enterprises are often based only on reports submitted by some non-governmental organizations. These enterprises can attack the report itself, and the report based on the US government may be untrue. Or the enterprise requires the NGO that issued this report to change the content of the report and clarify that there is actually no problem with a specific enterprise.
Observer Network: Gao also helped Jinhua appeal the sanctions. What exactly did you do in this situation?
Wade: Generally speaking, when an enterprise is sanctioned by the United States, we can first try to communicate with the American government to understand the real purpose of their sanctions, and then seek ways to change the other party's decision.
Of course, an obvious problem is that China enterprises now want to seek such a dialogue in Washington, and the other side is not very interested. This is very different from the past. In the past, the United States government imposed sanctions only to change some practices of foreign enterprises that the United States did not like. It takes sanctions as a bargaining chip and wants to negotiate with you, saying that I don't like some of your practices, and if I can't change them, I will sanction you. At this time, enterprises will have the opportunity to discuss with relevant US departments how to dispel US concerns about national security or other aspects.
ZTE is an example. One of the purposes of including ZTE in the list of American entities is to urge ZTE to sit at the negotiating table and solve a series of criminal and civil lawsuits it faces in the United States. When ZTE began to compromise in the lawsuit, it was removed from the entity list.
This is the most common way to use the entity list for a long time. The U.S. government imposed sanctions in order to cooperate with other departments and force foreign enterprises involved in U.S. law enforcement actions to negotiate and settle.
Especially in 20 18, the United States Department of Justice issued the so-called "China Action Plan", and the law enforcement against China enterprises became the focus of work. The sanctions imposed by the US economic management department are largely coordinated with other departments.
But now the situation has changed a lot. For China enterprises, this negotiation process does not exist. The US government basically refused to respond to the negotiation demands of China enterprises. In this case, what should China enterprises do after being sanctioned? It must find a way to get the American government back to the negotiating table. One way to achieve this goal is to go to court. In the field of litigation, the government must respond. In this way, the two sides also changed the venue of the battle and had a better game platform. This is a basic strategy.
Observer Network: Take Jinhua as an example. Is micron's accusation of stealing Jinhua's trade secrets established? Is there any political purpose behind it, that is, to target the whole country of China?
Wade: politically, I can't comment. However, the case of Jinhua, Fujian can also highlight a trend: in the face of cross-border intellectual property disputes, enterprises should not treat it as an intellectual property issue in isolation, but should consider whether such disputes will trigger a series of possible market risks and legal risks, such as anti-unfair competition, anti-monopoly or even national security. Therefore, enterprises in China must have forward-looking forecasts and need comprehensive and all-round coping strategies.
Observer Network: Which types of China enterprises are more vulnerable to US sanctions?
In the second aspect, for each different reason, the sanctions or control measures taken by the US government are different. Enterprises should also consider what sanctions the U.S. government will generally take against their high-risk industries.
The third aspect is how threatened you are once you are sanctioned. As I said just now, some enterprises may have less contact with the United States and less dependence on American exports. The United States put it on the entity list, which may not have much influence on it. If you rely more on the United States, the risk is relatively greater.
Observer Network: So what are the better preventive measures for high-risk enterprises?
Wade: First of all, if your own risk point is uncontrollable and inevitable, then you should be prepared for the risk you take. You should consider the internal process operation of the whole company, the upstream and downstream supply chains, and the payment direction, and how to carry out some restructuring to minimize the impact of US sanctions.
Second, in addition to prevention, you should also prepare a set of countermeasures after being sanctioned in advance. You can't wait until this hanging sword falls on your head before you start to deal with it. You need to come up with some creative or relatively radical measures instead of sticking to the old ways and seeking negotiations with the US government. Now direct negotiations can only waste a lot of time and get nothing.
If you make a military analogy, your response can't be just a frontal attack, but a detour. Just like the litigation strategy just discussed, it is not attacking the decision itself, but attacking the basic basis of the other party's decision and forcing the other party to return to the negotiating table.
To do this, we need to have a good understanding of the working methods of the US government, the coordination mechanisms of different government agencies and their weaknesses, and find the right wing to attack.
Observer Network: The US election is just around the corner. If Biden wins, will his attitude towards China be relatively mild? Will the long-term trend of more and more enterprises in China encountering trade sanctions remain unchanged?
Wade: Political events are hard to predict. No one knows what will happen. However, it is a basic fact that the Trump administration's China policy in the past few years is a rare policy that he won bipartisan support in Congress. This means that no matter who is elected, the law enforcement policy toward China is likely to continue after the election. Perhaps there will be some changes in the specific details of law enforcement, but the general direction will not change, because we have not seen anyone proposing a China policy that is completely opposite to the Trump administration.
Observer Network: We see that the administrative department of China has also introduced the list of unreliable entities and other means to sanction American enterprises. In Jinhua's case, Jinhua also filed a lawsuit in China court, demanding that the sales of Meguiar's related products be banned in China. At present, China still relies on American products in many fields. Is it wise to carry out a reciprocal counterattack?
Wade: Indeed, just like the mirror reaction, many practices adopted by the United States have gradually developed in China, including the list of unreliable entities, including the implementation of the export control law, which are obviously similar to those adopted by the United States.
Any sanctions, whether export control or not, are definitely a double-edged sword, which is also harmful to the sanctions party. The same is true in America. Every time a foreign enterprise is listed in the entity list, it will have a bad influence at home and make American suppliers bear the losses.
Therefore, every sanction decision is a calculation, and we must weigh the effect of this policy overseas and the losses caused at home. Naturally, we can't calculate for the China government, nor can we guess how the government calculated these losses, but I believe the government must have considered the corresponding consequences. The best situation is, of course, that everyone can find a constructive solution, so that both sides can cooperate with each other and avoid losses.