Errors on U.S. Trade Blacklist Leave Innocent Firms Caught in the Crossfire

 HONG KONG/SHENZHEN/WASHINGTON – May 2 — Doris Au, a veteran hardware merchant in Hong Kong, was blindsided when DBS Group informed her in June that her business account was being closed, citing unexplained discrepancies. The abrupt action soon escalated when the bank froze the account, effectively severing her business ties with overseas suppliers and crippling her operations.

After conducting her own research, Au discovered that a similarly named company had been added to the U.S. Department of Commerce’s Entity List in October 2023 for allegedly supporting Russia’s military and defense industries. One of the listed addresses matched that of her warehouse. “We are not that company. It’s totally a mistake,” she said, surrounded by rows of locksets and sliding-door hardware in her warehouse.

Au’s experience reflects a broader issue plaguing the U.S. government's increasingly aggressive efforts to restrict the flow of sensitive technologies to China and Russia. A Reuters investigation into nearly 100 Chinese and Hong Kong companies added to the Entity List in 2023 and 2024 found that more than 25% were listed with inaccurate or outdated information, including incorrect business names and addresses.

Field visits to the physical locations of these blacklisted entities revealed a wide disparity between the list and reality: some premises were occupied by beauty salons, tutoring centers, massage parlors, and even defunct companies. In Shenzhen, one listed location turned out to be an overgrown lot where locals said a factory had been demolished years earlier.

Yet despite these discrepancies, Reuters also uncovered instances of genuine violations, with some firms using shell companies, freight forwarders, and third-party payment platforms to circumvent restrictions. According to Russian customs data, 20 of the listed companies exported restricted items worth $7.5 million to Russia in December 2023 alone—including semiconductors and communication devices.

Compliance Challenges and Resource Constraints

The Entity List, first established in 1997 and overseen by the U.S. Bureau of Industry and Security (BIS), has become a cornerstone of U.S. export controls targeting nations seen as threats to national security. However, five former U.S. officials acknowledged that the list’s maintenance is plagued by limited resources and the difficulty of tracking evasive companies.

“Many of these are front companies. The challenge is that they can change names and addresses easily,” said Matthew Borman, who served as the BIS’s top export control official until March.

Despite BIS's formal appeal process for delisting, Au’s efforts to clear her business name have stalled. After she submitted documentation to BIS in December, she received an initial acknowledgment but has heard nothing since.

“The list is like the Hotel California,” said Steve Coonen, a former export control adviser to the U.S. government. “You can check in anytime you want, but you can’t ever leave.”

Collateral Damage

The listing of innocuous businesses has real-world consequences. Banks, fearful of violating U.S. sanctions, often act with an abundance of caution. Crystal Ng, the owner of Tsz Yu Beauty in Hong Kong, had her bank applications rejected after learning her office address—previously occupied by a secretarial firm—was tied to a blacklisted entity. She ultimately had to relocate her salon to open a new account.

“Banks are often over-compliant, and sometimes they make mistakes,” said Benjamin Kostrzewa, a former U.S. trade official who now advises banks on sanctions compliance. Many institutions run daily automated screenings of thousands of records to avoid regulatory penalties.

Singapore-based DBS Group declined to comment on Au’s case, citing client confidentiality. In its letter to her, the bank noted unspecified inconsistencies in her account activity but did not reference the Entity List.

Russian customs records reviewed by Reuters and the KSE Institute confirm that a company named Win Key Ltd—bearing a similar name to Au’s firm—shipped over $147 million worth of goods to Russia in 2023, including $104 million in restricted technologies. However, none of these shipments originated from Au’s warehouse.

The second address associated with Win Key Ltd is registered to a secretarial service provider in Hong Kong, which declined to comment. Official records show the listed company was dissolved in May 2024. Its Taiwan-based director could not be reached for comment.

Escalating Geopolitical Pressures

The U.S. has intensified its use of export controls to curb the flow of sensitive technologies to adversaries, a strategy that spans both the Biden and Trump administrations. Washington has focused on stemming Russia’s access to components crucial for its war in Ukraine, while also targeting China’s ambitions in artificial intelligence, quantum computing, and military modernization.

Commerce Secretary Howard Lutnick emphasized in March that the U.S. would continue integrating export controls into trade agreements to prevent countries like China from acquiring American-made semiconductors. Despite these efforts, data from Ukraine’s KSE Institute shows that 76% of high-priority items used in Russian weapon systems were routed through China and Hong Kong in 2023.

For entrepreneurs like Au, caught between geopolitical enforcement and bureaucratic inertia, the costs are devastating. She estimates her business losses at more than $600,000 due to shipping blockades and canceled supplier contracts.

“My business has been destroyed over a name,” she said.