The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule effective March 2, 2023, amending the Export Administration Regulations (EAR) by adding 37 entities to the Entity List, including certain subsidiaries of Beijing Genomics Institute (BGI) Group. BGI Group is among the world’s largest next generation sequencing (NGS) companies in the world. Consequently, a license would be required to export or reexport any goods, software, technology, or biological materials that are subject to the EAR with these listed BGI Group subsidiaries. Since most items are subject to a licensing policy of denial, the inability to share items subject to the EAR with the listed subsidiaries may provide a competitive advantage to companies developing competing NGS technologies.

Background

BIS has added hundreds of Chinese companies to the Entity List over the last three years coinciding with the enactment of the Export Control Reform Act of 2018 (ECRA), 50 U.S.C. 4801-4852, which gives BIS the legislative authority to restrict exports of items, technology, and software. This latest addition of 37 entities in BIS’s final rule includes three subsidiaries of Beijing Genomics Institute (BGI) Group: BGI Research, BGI Tech Solutions (Hongkong) Co., Ltd., and Forensic Genomics International.

The Entity List consists of foreign end-users that, in the view of BIS, are engaged in activities contrary to U.S. national security and/or foreign policy interests or otherwise pose an unacceptable risk of diverting U.S. exports and related technology to alternate destinations. Accordingly, exports, reexports, or transfers of any item (which for purposes of this alert includes software, technology, biological material, and technical information) subject to the EAR destined to those entities require a license. Items subject to the EAR include all items that are exported from the United States, regardless of their origin, all U.S.-made or U.S.-originating items that are reexported from outside of the United States, foreign-made items that incorporate more than a de minimis amount of U.S. content, and foreign-made items that are based on certain U.S. technologies.

The listing of the BGI entities on the Entity List adds immediate license requirements on all exports, reexports, and transfers of items that are subject to the EAR to these entities, which can have deleterious consequences on international business transactions. The licensing policy for nearly all items is a presumption of denial.

BGI Research was added to the Entity List along with following four aliases:

• BGI Genomics Institute,
• Shenzhen BGI Life Science Research Institute,
• Shenzhen Huada Gene Research Inst., and
• Shenzhen Huada Gene Research Institute.

BGI Tech Solutions (Hongkong) Co., Ltd. was added to the Entity List along with the following three aliases:

• BGI Tech Solutions (Hongkong) Co., Ltd.,
• Hong Kong Huada Gene Technology Service Co., Ltd., and
• Hong Kong Huada Laboratory Co., Ltd.

Forensic Genomics International was added to the Entity List along with the following five aliases:

• BGI Forensic Technology (Shenzhen) Co., Ltd,
• BGI Judicial,
• FGI,
• Huada Judicial, and
• Shenzhen Huada Forensic Technology Co., Ltd.

Two other BGI subsidiaries, Xinjiang Silk Road BGI and Beijing Liuhe BGI, were added to the Entity List in July 2020. At that time, the Commerce Department noted that they were added to the Entity List for “conducting genetic analyses used to further the repression of Muslim minority groups.” Similarly, the Commerce Department attributed the recent addition of the three BGI entities to “information that indicates their collection and analysis of genetic data poses a significant risk of contributing to monitoring and surveillance by the government of China, which has been utilized in the repression of ethnic minorities in China” and also noted that “information also indicates that the actions of these entities concerning the collection and analysis of genetic data present a significant risk of diversion to China’s military programs.”

Takeaway

BGI Group gained a foothold in the global NGS market after its purchase of more than 100 HiSeq2000 genomic sequencers from U.S.-based Illumina in 2010, and later, its acquisition of U.S.-based NGS firm, Complete Genomics, in 2013. BGI Group also relies on investment and collaboration in the U.S. biotechnology sector to provide access to large volumes of genomic data according to a 2019 report by the U.S.-China Economic and Security Review Commission.

BIS’s decision to add BGI Research, BGI Tech Solutions (Hongkong) Co., Ltd., and Forensic Genomics International to the Entity List is likely to have significant consequences for companies developing competing NGS technologies, particularly as the demand for genomic data and software offerings to handle such data increases. This action demonstrates an expansion of the broad crackdown on shipments of sensitive U.S. technology to China. Practically speaking, transactions between U.S. entities and BGI will certainly suffer as a result of these new Entity List designations, and exports to China of items such as samples for sequencing, sequencer components, and components of library preparation and sequencing kits will likely dwindle at a critical time for the rapidly evolving NGS industry.

We will continue to closely monitor the evolving regulations.

For more information, please contact a member of the patents and innovations practice or the national security practice at Wilson Sonsini Goodrich & Rosati.

Josephine Aiello LeBeau, Sara Patak, Kara Millard, Ali Alemozafar, and Vern Norviel contributed to the preparation of this Wilson Sonsini Alert.