Commerce Should Strengthen Tech Controls Against China, House Republicans Say

The Commerce Department needs to address several “urgent shortcomings” in its export control policies toward China (see 2110180016) and impose stricter export restrictions and license denials for sensitive goods and suppliers of Chinese military companies, a group of Republican lawmakers said in a letter to Secretary Gina Raimondo. The 17 Republicans, all members of the House’s China Task Force, also said the Bureau of Industry and Security should commit to a timeline for releasing more emerging and foundational technology controls and issue “appropriate” restrictions on fundamental research and open-source technology platforms.

Commerce should commit to working with Congress on all those issues before Alan Estevez, the nominee to lead BIS as undersecretary (see 2109210058), is confirmed, the letter said. “We hope any Under Secretary would commit to these commonsense proposals that would significantly advance BIS’ national security mission,” the lawmakers said in the Oct. 22 letter, which was released publicly Oct. 25.

The letter lists 10 specific export control recommendations, including an updated and expanded licensing policy for China’s top chipmaker Semiconductor Manufacturing International Corporation (SMIC), more restrictions on certain items used in advanced foundries in China and a broader use of the foreign direct product rule (see 2005150058) for companies with ties to China’s military. While the direct product rule has been “extremely effective in cutting Huawei off from U.S. technology,” entity listings for other Chinese companies “have been described as ‘toothless’ because workarounds are used too easily,” the lawmakers said.

BIS also should update the Commerce Country Chart “to better address the unique and evolving risks of technology trade” with China and control more advanced semiconductor equipment, including ​​designs and photomasks developed using U.S. electronic design automation (EDA) software. U.S. companies have a “near monopoly” on EDA tools, the letter said, “representing a clear chokepoint with no foreign availability.” BIS could impose controls that could “deprive [Chinese] fabs of customers, shifting semiconductor production to other countries -- mainly democracies.”

The task force members also said BIS should be more transparent about its emerging and foundational technology control effort under the Export Control Reform Act of 2018 and “commit to time-bound metrics” for issuing controls. The task force previously criticized BIS for moving too slowly and threatened to move the responsibility under ECRA to another agency (see 2010010020). Republican senators also voiced similar criticism (see 2106160012) after a congressional commission this summer said Commerce had “failed” to carry out its export control responsibilities over emerging and foundational technologies (see 2106020024). “There has been a significant delay in forming this list along with a lack of clarity on the process and methodology,” a footnote in the letter said.

In another recommendation, the task force said Commerce should work with Congress to issue final rules on controls for fundamental research (see 2012020044) and open-source technology platforms. U.S. export control policies toward fundamental research are “based on an outdated national security directive that does not address the unique risk of technology transfer to the PRC,” the lawmakers said. They added that open-source technology platforms are “experiencing growing participation” by Chinese companies that are sanctioned by the U.S. and “may be rapidly developing in a direction that could be used to exploit gray areas or gaps in U.S. export controls.”

A Commerce spokesperson said the agency "always prioritizes the national security interests of the United States in carrying out its export control requirements involving China," adding that "many" of those requirements "were developed by the Trump Administration." The Trump administration last year announced a more lenient license review policy for certain exports to Huawei of telecommunication devices below the 5G level (see 2008170029) and for exports to SMIC of items that produce semiconductors at advanced technology nodes above 10 nanometers (see 2012180039).

"The Biden Administration has maintained and built upon those restrictions by, among other things, adding seven Chinese supercomputing entities to the Entity List for their support to China’s military modernization and adding 14 entities to the Entity List that enabled China’s human rights abuses," the spokesperson said. Commerce "will continue to engage with Congress on its oversight."

BIS has previously said there is “ample evidence” it’s making progress under ECRA and has repeatedly stressed that it doesn’t plan to release a finished, exhaustive list of emerging technologies that are subject to controls, because technology is constantly evolving. But it has also said it’s willing to speed up the process (see 2109080062). The agency has issued about 40 emerging technology controls so far, including new restrictions this month over certain biological equipment software. BIS is also considering several more controls, including restrictions for certain brain-computer interface (BCI) technologies (see 2110250011).