The US government has labeled shipping company COSCO, technology giant Tencent and battery manufacturing company CATL as ‘Chinese miliary company’, escalating further tension between the two countries.
In a notice on Jan 7, Department of Defense blacklisted the companies under in accordance with the William M. (Mac) Thornberry National Defense Authorization Act.
According to Section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Pub. L. 116-283), the Secretary of Defense is mandated to annually identify and publish a list of “Chinese military companies” through December 31, 2030.
While being on the Pentagon’s blacklist carries no specific penalties, it discourages US firms from dealing with these companies that Washington views as military entities.
Tencent and CATL called it a “mistake’, while COSCO did not respond to Commodity Insights’ query at the time of publishing.
“Tencent’s inclusion on this list is clearly a mistake. We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding,” a Tencent spokesperson told S&P Global Commodity Insights.
Market participants were caught by surprise and stated that it was too soon to predict the impact on shipping to the US.
“Rate will increase for US if government ban COSCO completely, but let’s wait and see,” a China based forwarder said.
“It will not impact any business unless, importers in US have been pushed not to use COSCO by the US government. Everyone is enjoying lower rates through COSCO and ONE,” another forwarder said.
“CATL has never engaged in any military-related business or activities, so this designation by the Department of Defense is a mistake. It does not restrict CATL from conducting business with entities other than DoD and is expected to have no substantially adverse impact on our business,” CATL told Commodity Insights. “We will proactively engage with DoD to address the false designation, including legal action, if necessary, to protect the interests of our company and shareholders as a whole.”
“If COSCO is banned, OOCL will get banned too,” a source mentioned.
According to data by PIERS, S&P Global Market Intelligence, COSCO moved 39.68 million TEUs to and from US in 2024, majority originating from China, Vietnam, Thailand, and Malaysia.
Source: Platts
