China is one of the three most important partners for the German economy. Politically, Germany tries to stay out of the rivalry between the USA and China. But maintaining neutrality is only possible to a limited extent. This is shown by the pressure to exclude Huawei as an equipment supplier to German telecommunications providers and the tightening of the rules for testing the 'trustworthiness' of suppliers that is being discussed in this respect.
However, German companies that do business with Chinese partners may suffer disadvantages in their activities on the US market. This risk arises if China businesses violate sanctions imposed by the USA on China. In the following, a few typical case constellations will be described. The US not only applies sanctions against US companies, but also enforces them against foreign companies.
Among other things, the sanctions apply to the supply of products to Chinese companies if they contain a certain amount of US technology (so-called de minimis rule). In addition, transactions with certain Chinese citizens who are on the corresponding lists (the list of blocked persons and Specially Designated Nationals - SDN list) must be taken into account. These restrictions are particularly important in the financial sector. In addition, the US Department of Commerce maintains a list, the Entity List, on which (Chinese) companies subject to trade restrictions are named. The list includes Huawei. German companies whose products use certain US technology or software should take care not to sell these products to Chinese companies.
The USA has decided to impose sanctions not only on exports to China but also on imports of products from China: there are import restrictions on products originating from the province of Xinjiang or intended for telecommunications equipment. Also to be considered are possible punitive tariffs imposed by the USA on certain goods.
Finally, there is another aspect to consider: German companies planning to invest in the USA must - depending on their size and structure - notify the Committee on Foreign Investment in the United States (CFIUS) in advance. In this process, the company's activities in the Chinese market can also be checked. Violations of sanctions imposed on US companies may result in the rejection of the company's involvement in the US.
It is largely unknown in Germany that US sanctions against China can have an impact on German companies. However, similar experiences have been made in Germany with the US trade restrictions against Iran and Russia. The American Chamber of Commerce in Germany (AmCham) is organizing a webinar on the effects of the US sanctions on China on October 15, 2020 from 5:00 to 6:00 p.m. with experts from the US and a German entrepreneur who has been active in China for many years.
Further information can be found here.
The topic and concept of the event were developed by Dr. Hermann Knott, a German and New York lawyer, Cologne, who specializes in US transactions and who will also moderate the webinar