By Steve Coonen
As I established in my paper Willful Blindness released in May, the Commerce Department’s Bureau of Industry and Security (the unit within the U.S. government primarily responsible for stopping the Chinese military from obtaining American technologies) has become a rubber stamp for the export of controlled technologies to China. Case in point: In 2022, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) approved over 91% of applications for the export of controlled technologies to China, even greater than 2021’s 88% rate.
Yes, BIS needs to do a better job of denying tech exports to China. But BIS is not entirely at fault—it is just one cog in the broken federal machine tasked with defending U.S. national security interests. This month, the Wall Street Journal reported on how the Treasury and Commerce Departments recently fought against plans to prevent DuPont from selling a sensitive chemical to China which could be used as a base for advanced explosives. This example is characteristic of how the federal bureaucracy’s inherent interests are more aligned with U.S. commercial interests, rather than with U.S. national security interests. I saw this firsthand even at the Department of Defense: In November 2021, I voluntarily resigned in protest from my post because the Defense Technology Security Administration routinely acquiesced to BIS reviews for the transfer of militarily useful American technologies to China.
The problems with the interagency process of determining export controls are many. By way of background, the federal agencies which decide on export controls—the Operating Committee (OC)—are the Department of Commerce, Department of Defense (DOD), Department of Energy, and Department of State. One might think that agencies responsible for America’s national security would be more aggressive in proposing new controls. But my experience inside government showed me that officials are often too timid in defending their equities—lest they lose bureaucratic turf wars and gain reputations as boat-rockers. BIS rubber stamps applications unless there is specific intelligence that proves diversion by the Chinese military or security services. The problem with that approach is it is obviously extremely difficult to obtain intelligence on diversion, even though U.S. officials know it is happening; that controlled U.S. technologies were used on the PLA spy-balloon serves as the most immediate example. Thus, officials from other agencies who want to impose stricter controls lose out to BIS.
BIS controls the Operating Committee, and its defenders argue that any department can elevate any case of concern through the Advisory Committee on Export Policy (ACEP), Export Administration Review Board (EARB), or even to the President. But the current BIS-dominated structure does not provide for adequate equities in contested licensing decisions. The chairs of both the OC and ACEP argue the Department of Commerce position rather than acting as an objective arbiter of the facts. Thus, Commerce has two voices at the table and preponderantly controls the narrative of the discussion. When the Operating Committee approves a case, the U.S. government establishes a precedent for further exports of similar technologies, thereby opening the floodgates for additional similar technologies to make their way to China.
Other times, federal agencies choose not to challenge BIS at all. The Departments of State and Energy sometimes invoke their “delegation of authority” prerogative for cases in which they have limited experience or interest. This “delegation of authority” assigns their votes in disputed cases to BIS. Since BIS has hardly ever disapproved an escalated case, and never unilaterally denies an escalated case, such delegation of authority guarantees approval. Most disappointingly, DOD has escalated fewer and fewer cases to the Advisory Committee on Export Policy (ACEP) over the years. The latest BIS data available indicates that in 2021, out of 41,000 license applications, the interagency had disagreements on less than 300 cases at the Operating Committee level, of which the vast majority were approved. Only 57 out of 41,000 were referred to senior agency decisionmakers for scrutiny—and some of these challenges were not China-related.
Congress should revamp the interagency process to resolve disagreement between federal agencies on export control decisions. BIS’s track record of rubber-stamping export licenses and the irresponsibly high rates of approvals for the export of militarily useful technology to the China should prompt Congress to divest some of BIS’s authorities to the other interagency stakeholders. For instance, DOD should have a greater voice and ability to deny technologies controlled for national security reasons, since DOD will need to counter China’s military capabilities in any potential future conflict. DOD should have a greater ability to restrict technology transfers of any military consequence through a veto-like provision or some other weighted mechanism.
Additionally, the voting process for the Operating Committee should be updated so that a majority vote for a denial shall be the Operating Committee’s final disposition, with no prospect for elevating the decision to ACEP (where BIS almost always overrules all objections). In the event of a two-to-two tie vote, the license should be denied. Elevation to the Advisory Committee on Export Policy (ACEP), comprised of the same entities, should only be allowed in instances when agencies on the Operating Committee seeks to overturn the approval of a license at the Operating Committee level. When it comes to China, U.S. foreign policy, non-proliferation, and national defense concerns must trump commercial interests. Congress should reform the interagency export control review process in a way that reflects the challenge our country is facing.