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Congress Members Want Human Rights Sanctions on Two Chinese Tech Firms. The Case Illustrates Supply Chain Risks for International Technology Companies.

Congress members are calling for the imposition of Global Magnitsky Sanctions on Chinese officials and two technology firms for their role and complicity in abuses against minority groups in China. The development illustrates how small and interconnected the world really is, and how seemingly unrelated legal “practice areas” increasingly overlap today.

Some Congress members are lobbying the Administration to impose human rights sanctions on Chinese officials and companies responsible for or complicit in abuses against China’s Uighur Muslim minority and other minorities. Two companies named, Dahua Technology and Hikvision, are very large, China-based global firms that produce surveillance products and systems (the John S. McCain National Defense Authorization Act for Fiscal 2019 prohibits federal agencies from, among other business, procuring the products and services of Dahua and Hikvision). The Congress members have identified these firms as having provided, through contracts with the Chinese government, the tools used to carry out state abuse.

Two key big picture points are noteworthy for now:

  • The named firms are not local players. They are global and part of U.S. and other firms’ supply and business chains (they also have U.S. presence). If sanctioned under Global Magnitsky Sanctions (analyzed extensively by MassPoint), U.S. persons will be prohibited from doing business with them, and other restrictions will apply.
  • There is a potential issue of reputational risk for firms and others that deal with the named firms, or others that are or will be (and this is inevitable) singled out for providing technology products or services that are used to commit wrongs or engage in unethical/objectionable conduct.

Of course it is not yet clear what action, if any, will be taken in this case. Nor is it clear that, if Chinese officials are sanctioned, that tech firms/private companies will be too. Nevertheless, this matter should be viewed in the context of the Trump Administration, which uses sanctions to advance other objectives, such as international trade goals and restricting foreign access to U.S. tech (particularly Chinese). (Marco Rubio, a key proponent of sanctions in this case, also embraces the notion of using sanctions to restrict Chinese access to U.S. tech, as he did in the case of ZTE).

This is not a new appeal from Congress (or elsewhere), and the calls to impose sanctions on Chinese officials/others have grown louder and more numerous in the past few months. The bottom line is that tech companies and others (such as investors) should take note of the development (even if no sanctions are imposed), as it foreshadows the legal and reputation risk issues they will, without doubt, face in connection with tech-enabled human rights abuses, privacy encroachments, and other conduct by consumers of tech products and services.

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For more information about this post and MassPoint’s related services and insights, please contact the author Hdeel Abdelhady.

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