The Commerce Department’s Bureau of Industry and Security’s (BIS) Assistant Secretary for Export Enforcement, Matthew Axelrod, sounded all the right notes at a speech to the Society for International Affairs on May 16th. Recognizing that adversaries like Russia and China advance their own interests at the expense of the United States, Axelrod previewed strengthened civil penalties from BIS designed to deter American firms from violating export control laws. The proposed new penalties include:
- BIS publicly disclosing which companies it investigates for export control violations when a case opens, not when it is resolved, often years later
- Forcing companies to admit wrongdoing if they are found to have violated export control laws
- Increasing financial penalties for violations
These ideas are welcome news. Last December, China Tech Threat’s Future of BIS project released a report recommending that, “As the PRC has emerged as the leading threat to the U.S., an enhanced set of tools and skills is likely required to detect, identify, prosecute, penalize and deter violations.” These new penalties should cause American companies to run away from the red line, rather than adopt a cost-benefit analysis that sees penalties as an acceptable tradeoff for committing export control violations.
These harsher penalties should make American companies rethink their business with Chinese chipmaking giant and military-aligned fab YMTC, which is reportedly under investigation for doing business with Huawei, a Chinese company currently subject to U.S. export controls. As CTT explained last month, “If YMTC is in fact found to be supplying Huawei with chips made with help from American tech firms like Lam Research, Applied Materials, and KLA, all of which are acknowledged suppliers of YMTC, then those companies can be held legally responsible for running afoul of U.S. export control law.” More below as Roslyn Reacts.
Finally, tougher measures could indicate a greater shift in BIS’ willingness to use export controls to protect American national security. It was recently reported that BIS is moving to put YMTC on the Entity List, an event that suggests that BIS is using its power more fully than ever before, and appropriately so. As Axelrod said during his speech, “Preventing sensitive U.S. technologies and goods from being used for malign purposes by those would do us harm has never been more important, never been more central, to the national-security threats we face.” A BIS decision to place YMTC on the Entity List is necessary to disempower this military fab and to ensure American national security. In any case, hats off to Axelrod for taking some much-needed steps toward tougher enforcement penalties.
For more on YMTC and Huawei, watch Roslyn Reacts: