One month ago, the Department of Commerce unleashed a round of China-focused export controls which are already creating massive disruption for China’s semiconductor firms. As China Tech Threat noted in a subsequent memo, the new controls are a much-welcome step, but the Commerce Department – and specifically, the Bureau of Industry and Security (BIS) – needs to keep its foot on the gas and apply various enforcement provisions on their proper timelines.
We aren’t the only ones thinking this way. On November 1, Congressman Michael McCaul, Ranking Member of the House Foreign Affairs Committee, sent a letter to Secretary of Commerce Gina Raimondo requesting data surrounding BIS licensing decisions, noting that “Export control rules are only as strong as their licensing policy.” In light of BIS having a poor track record of denying sensitive American technologies from making their way to China, Rep. McCaul is out to make sure that Commerce follows through on the new rules and tightens up its licensing standards.
A failure to both cooperate with Congress and to deny greater levels of critical technologies to China could spell changes for BIS. With policymakers recognizing that the Bureau is a more important tool than ever for stopping China from using American technology for its own military purposes, some legislators are making noise that perhaps the Department of Defense would be a better home for it.
On October 28, Congressman Jim Banks, Ranking Member of the House Armed Services Subcommittee on Cyber, Innovative Technologies, and Information Systems, introduced a bill “To provide for the transfer of export control authorities from the Department of Commerce to the Department of Defense, and for other purposes.” The best way for Commerce to ensure that it holds on to BIS is to break from past ineptitude and sustain aggressive action in restricting sensitive technology exports to China – and a spot on the Entity List for state subsidized, national chip champions like YMTC and CXMT would be a great start. The clock is already ticking on YMTC as it got added to the Unverified List on October 7.
One sign of a new sense of mission at BIS are reports that the U.S. is making a push for allies like Japan and the Netherlands to institute new export controls that will be complementary to those BIS has just announced. Nikkei reports that Tokyo has “begun internal decisions at Washington’s request” and are “weighing which restrictions can be adopted in Japan.” Bloomberg reports that BIS Under Secretary Alan Estevez is preparing to travel to the Netherlands to push the country to stop ASML from providing technologies below the most advanced level to China (ASML already doesn’t ship the highest-grade tech there).
We wish Estevez all the success in his diplomatic endeavors. In the meantime, BIS should continue to do what it is doing in its unilateral power to deliver on its national security mission and establish the U.S. as the world leader in counteracting Chinese tech threats. Sustaining the momentum generated by the latest round of export controls through rigorous end-use checks and appropriate movement of Chinese firms to the Entity List if they don’t comply is imperative. Without these actions, what credibility will Estevez have in appealing to our allies to implement new rules of their own?
We’ll be watching closely to make sure BIS upholds the enforcement provisions of the new rules. So will Congress and our friends overseas.