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US entity list contains many inaccuracies for China, HK

firms

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Errors include wrong names, addresses, Reuters found

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Former US officials acknowledge challenges in managing

blacklist

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Some China, HK firms shipped US-restricted items to Russia

By James Pomfret, David Kirton

HONG KONG/SHENZHEN, May 2 (Reuters) - Doris Au, a seller

of door locks and hardware in Hong Kong for 25 years, received a

letter from her bank, DBS Group, last June stating that her

business account would be closed. The bank gave little

explanation but subsequently froze the account, killing her

business with international suppliers, she said.

Au discovered after searching online that another firm with a

similar name was added to the U.S. trade blacklist in October

2023 for "providing support to Russia's military and/or defense

industrial base." The entry identified two addresses, one of

which was Au's warehouse.

"We are not that company. It's totally a mistake," Au told

Reuters in her warehouse stacked with locks, hinges and

sliding-door kits from well-known brands.

Au's predicament captures the challenge facing the

administration of U.S. President Donald Trump as it ramps up

limits on China's access to American technology by adding dozens

of Chinese firms to its blacklist.

A Reuters review of almost 100 Chinese and Hong Kong

companies added to the U.S. entity list in 2023 and 2024 found

more than a quarter, or 26 entries, contained erroneous details,

such as incorrect names and addresses and outdated information.

For each listed entity, Reuters visited at least one address

identified by the U.S. to determine whether the blacklisted

firms were still there. Businesses at those locations included a

beauty salon, a tutoring firm, a massage parlour and a

counselling center.

At one site in Shenzhen, Reuters found weed-covered remnants

of a factory locals said was demolished years earlier.

Yet Reuters also found evidence of trade in restricted items

by some entities, aided by loopholes, paper companies and

networks of freight forwarders and shipping agents, illustrating

the challenge of containing access to sensitive technology.

The entity list, established in 1997, has become an

increasingly important tool for the U.S. to limit technology

transfers to Russia and China, including semiconductors, that

might undermine U.S. security. It is managed by the Bureau of

Industry and Security (BIS), a Commerce Department agency.

Five former U.S. officials acknowledged difficulties in

evaluating possible cases of mistaken identity and updating

information on the entity list, due in part to limited staffing.

BIS is "woefully under-resourced," one said.

Many listed entities are front companies, said Matthew

Borman, who until March was a senior BIS official overseeing

U.S. export controls, including those targeting China and

Russia.

"The challenge is that they can move to a different address

with a different name," he said.

BIS and the Commerce Department didn't respond to detailed

questions about errors on the trade blacklist and any actions to

rectify them.

Singapore-based DBS declined to comment on Au's

case. In its letter to Au, DBS didn't mention the entity list

but said it had reviewed her business account and found

"activity/information that is not consistent with your account

profile."

TRADE FLOWS

Under the Biden administration, the U.S. sought to limit

transfers of technology that Russia needed for its war in

Ukraine. The U.S. added hundreds of entities to contain Moscow's

access to such components, many made in China. It also used the

list to limit China's access to advanced capabilities in AI,

military modernisation and quantum technology.

That trend is continuing under Trump.

U.S. Commerce Secretary Howard Lutnick said in March that China

must be prevented from getting U.S. chips, noting the success of

Chinese AI startup DeepSeek. He said the U.S. would bring export

controls into future trade deals.

The Commerce Department has claimed some success from its export

controls in stemming chip flows to Russia via Hong Kong and

China. But they don't catch everything.

Ukraine's KSE Institute think tank found 76% of all common

high priority items likely to be procured by Russia for its

weapons programs, including semiconductors, radar and

communications gear, were routed through China and Hong Kong in

2023.

Russian customs records show 20 of the 92 entity-listed

companies visited by Reuters were exporting restricted items to

Russia in December 2023, the most recent month for which a

complete dataset was available. Those items, including

semiconductors, were valued at $7.5 million.

A Hong Kong government spokesperson said the region had

robust controls of strategic trade in line with international

standards, but it would not implement unilateral sanctions

imposed by other countries.

China's Commerce Ministry didn't respond to questions about

trade in U.S.-restricted items with Russia. Moscow's embassy in

Washington also didn't respond to questions.

Blacklisted companies and addresses are barred from

receiving restricted U.S. goods. Transactions with listed

entities aren't necessarily prohibited but should be treated

with a "red flag," and parties involved should conduct due

diligence, BIS says on its website.

Borman said entities are listed based on BIS analysts'

review of open-source and classified information, and the

process involves the Commerce, State, Defense, and Energy

departments.

Denis Makkaveev, the Hong Kong-based director of Global

Broker Solutions Limited, a freight-forwarding company that was

entity-listed in 2023, told Reuters he was visited by two BIS

agents in October.

In an email seen by Reuters, BIS told Makkaveev it wanted to

conduct a "post shipment verification" on a 2024 shipment "to

discuss the end use and the end user of the item".

The item wasn't specified and Makkaveev told Reuters he had

no idea what it was.

"I'm the forwarder, the logistics guy. I don't trade

military goods," Makkaveev said in his office in an industrial

building, showing some of the semiconductors he was shipping.

Makkaveev said he got around his company's blacklisting by

setting up two new firms on Hong Kong's Companies Registry,

which took less than a week. He said he used e-commerce

platforms to process payments after banks shunned him.

GHOSTS OF ENTITIES PAST

Around half of the entity-listed locations Reuters visited

were company secretarial, or COMSEC, firms. They act as host

addresses for businesses formed by overseas and China-based

individuals on Hong Kong's Companies Registry.

Some had overspilling mailboxes. Others were tiny cubicles

in dilapidated industrial buildings.

Staff at nine COMSEC firms whose addresses were identified

by the U.S. as hosting blacklisted companies told Reuters the

entities in question were no longer on their books. At one

COMSEC firm, Inter Group, a manager surnamed Yang said it still

represented hundreds of companies linked to people in Russia.

Banks that facilitate transactions for entities shipping

restricted goods to Russia or China can face hefty fines from

the U.S. Accordingly, Reuters found some banks monitored

customers for any links to the entity list.

That's also where errors in the list came into play.

Crystal Ng, who owns Tsz Yu Beauty salon in Hong Kong, said HSBC ( HSBC )

and Dah Sing Bank rejected her applications

for accounts last year.

She said she learned from one of the banks that her office

address was entity-listed when she moved there in late 2023,

adding that the former tenant was a company secretarial firm.

In the end, Ng moved her salon to another address, after

which she was able to open a business account with Dah Sing, she

said.

Benjamin Kostrzewa, a former U.S. official and trade lawyer

who advises financial institutions on export controls, said some

addresses were "haunted by ghosts of sanctioned entities past."

Many banks have compliance protocols that automatically

screen thousands of names daily to ensure they don't fall afoul

of U.S. authorities, Kostrzewa said.

"In my experience, banks are often over-compliant," he

added, "and sometimes they make mistakes."

HSBC ( HSBC ) declined to comment on Ng's case. Dah Sing didn't

respond to questions.

LOCKED OUT

Au's business name, Win Key (China-Hong Kong) Limited,

resembles Win Key and its aliases Win Key Ltd and Win Key

Limited, which BIS added to the entity list in 2023.

Russian customs data provided by Olena Bilousova, senior

researcher at the KSE Institute, and reviewed by Reuters show

Win Key Ltd shipped $147 million of goods to Russia that year,

including $104 million in restricted items such as chips and

communications equipment. The data show none of the goods came

from Au's warehouse.

The second address for Win Key Ltd identified by BIS was

occupied by a company secretarial firm, Linkage Secretary

Limited. It declined to comment about Win Key Ltd, which

registry records show was dissolved in May 2024.

Lee Jan-chi, the Taiwan-based director of Win Key Ltd,

couldn't be reached for comment at his residential address.

Taiwan joined the U.S. and its allies in enforcing export

controls on Russia after it invaded Ukraine. The island's

economy ministry told Reuters it couldn't comment on specific

cases, but said Hong Kong's Win Key Ltd had been added to

Taiwan's trade blacklist last October.

Since her address was blacklisted by Washington, Au says,

U.S. and other foreign suppliers and couriers have refused to

ship goods to her. She estimated her losses at over $600,000.

BIS says on its website that people can submit a request for

an entity's listing to be removed or modified.

Au said she emailed BIS accordingly. She said she got a

response in December seeking further information, which she

provided, but hasn't heard more.

Two former U.S. officials said the appeal process is rarely

used and tends to be treated with skepticism by U.S.

authorities.

The entity list is "like the Hotel California," said Steve

Coonen, a former export control expert and foreign affairs

adviser for the U.S. government.

"You can probably check in anytime you want, but you can't

ever leave."