On Friday, the Office of Foreign Assets Control at the U.S. Treasury Department added the Chinese company SenseTime to its non-SDN Chinese Military-Industrial Complex Companies List, which would effectively mean that Americans are prohibited from trading shares in the company. SenseTime uses AI technology for a range of applications, including education, medical diagnosis, smart city, transportation, and communications and entertainment.
The Treasury Department press release cites Executive Order 13959, which was issued by President Trump but later amended by President Biden in Executive Order 14032. Under these executive orders, U.S. persons are prohibited from trading the securities of the designated companies. In Executive Order 14032, President Biden said that "the use of Chinese surveillance technology outside the PRC and the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuse constituted unusual and extraordinary threats to the national security, foreign policy, and economy of the United States, and I expanded the national emergency to address these threats."
The press release explains the rationale for including SenseTime on the list as follows:
SenseTime owns or controls, directly or indirectly, a person who operates or has operated in the surveillance technology sector of the PRC’s economy. SenseTime 100 percent owns Shenzhen Sensetime Technology Co. Ltd., which has developed facial recognition programs that can determine a target’s ethnicity, with a particular focus on identifying ethnic Uyghurs. When applying for patent applications, Shenzhen Sensetime Technology Co. Ltd. has highlighted its ability to identify Uyghurs wearing beards, sunglasses, and masks.
According to the Wall Street Journal, the Treasury Department action led to delays in SenseTime's Hong Kong IPO, which has now been withdrawn and further postponed.
A couple years ago, SenseTime was added the Commerce Department's Entity List, which meant that U.S. companies looking to sell to SenseTime would need to get authorization first. In the October 2019 Final Rule where this addition took place, the Commerce Department stated that:
This final rule amends the Export Administration Regulations (EAR) by adding twenty-eight entities to the Entity List. These twenty-eight entities have been determined by the U.S. Government to be acting contrary to the foreign policy interests of the United States and will be listed on the Entity List under the destination of the People's Republic of China (China).
A Commerce Department press release stated that: "This action constricts the export of items subject to the Export Administration Regulations (EAR) to entities that have been implicated in human rights violations and abuses in China’s campaign targeting Uighurs and other predominantly Muslim ethnic minorities in the Xinjiang Uighur Autonomous Region (XUAR)." It also noted this statement from Wilbur Ross (the Commerce Secretary at the time): "The U.S. Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China. This action will ensure that our technologies, fostered in an environment of individual liberty and free enterprise, are not used to repress defenseless minority populations.”
SenseTime offered the following statement upon being added to the Entity List
We are deeply disappointed with this decision by the US Department of Commerce. We will work closely with all relevant authorities to fully understand and resolve the situation.
SenseTime is focused on computer vision and deep learning. We work with customers all over the world to leverage AI technology for a range of applications, including education, medical diagnosis, smart city, transportation, communications and entertainment, among many others.
We abide by all relevant laws and regulations of the jurisdictions in which we operate. We have been actively developing our AI code of ethics to ensure our technologies are used in a responsible way. In the meantime, we remain focused on protecting the interests of our customers, partners, investors and employees.