The recently updated U.S. government ‘trade blacklist’ of Chinese companies could ultimately have a widespread effect on future development of cameras, artificial intelligence (AI) and facial recognition technology for the physical security industry.
In early October, the U.S. Department of Commerce issued a rule that placed Dahua and Hikvision, two of the world’s largest surveillance manufacturers, among eight Chinese companies and 20 Chinese public security bureaus on the U.S. Bureau of Industry and Security (BIS) Entity List. The Entity List, part of the Export Administration Regulations (EAR), prohibits the purchase and installation of video surveillance equipment from these Chinese manufacturers and bars government agencies from accepting bids from contractors that use their equipment and services. In addition to major security surveillance manufacturers, the list includes start-ups and developers specializing in AI, data analytics, voice recognition and other technologies.
The updated list includes the XUAR People’s Government Public Security Bureau, 19 subordinate elements and eight commercial firms. The complete list of entities can be viewed here.
The listed entities were implicated in violating civil and human rights, repression of certain minority populations and invasive high-technology surveillance measures. In the case of Hikvision and Dahua, their addition to the Entity List stems from a prior 2017 ban that barred federal agencies from purchasing their products because of a lack of cybersecurity and ineffective cyber hardening.
What is an Entity List?
The BIS publishes the names of certain foreign persons--including businesses, research institutions, government and private organizations, individuals and others--subject to specific license requirements for the export, re-export and/or transfer (in-country) of specified items. Section 744 of EAR defines the Entity List as identifying people or organizations, “reasonably believed to be involved, or to pose a significant risk of being or becoming involved in activities contrary to national security or the foreign policy interests of the United States.”
The final rule issued in October amends an earlier rule by adding the 28 organizations determined by the U.S. government as acting contrary to foreign policy interests.
According to a press release issued by the Department of Commerce, Secretary of Commerce Wilbur Ross stated that the U.S. government “would 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.”
Financial costs and business reputation are the cost of being on the list. With facial recognition hitting mainstream stride, bolstered by AI, chipset and camera advancements, the even greater implication could be suppression of technology research and development.
According to Steve Surfaro, chair of the Security Industry Association’s public safety working group and an independent consultant with more than 30 years of experience in physical security and smart city deployments, the Entity List is based on human rights violations--and doesn’t have a place in the security industry.
“There’s also the larger and more impactful aspect of slowing down industry acceptance of facial recognition, and it’s pretty sad,” Surfaro said. Since major exporters cannot easily obtain export licenses for the 28 companies, the physical inventory of new products will be difficult to transport to the United States. As a consequence, prices will rise.
“Hikvision and Dahua are in the top 10 video surveillance providers, and there are two AI startups on the Entity List. It does a disservice to the industry from an advancement standpoint,” Surfaro said.
Although not a formal embargo, the rule will also require government approval before any U.S.-based provider can sell goods to the listed companies. “It could also restrict an integrator, reseller or solutions provider that does business with the 28 listed entities from doing business with the U.S. government or even federal loan or grant fund recipients,” Surfaro said.