BIS Needs Better Enforcement of FDP Rule to Protect US Tech, Senate Republicans Say

The Bureau of Industry and Security needs to better enforce its foreign direct product (FDP) rule, which is not adequately stopping Huawei and other Chinese companies from acquiring certain sensitive U.S.-produced technology, eight Republican senators said in a Nov. 15 letter to Commerce Secretary Gina Raimondo. The senators said Commerce’s “lax enforcement” of the rule has encouraged other technology firms to sell to companies on the Entity List, said the lawmakers, who all serve on the Senate Committee on Commerce, Science and Transportation.

“Unless BIS enforces this rule with the speed the situation necessitates,” the letter said, “additional suppliers of sensitive technology will likely engage in unlawful trade practices with companies closely connected to adversarial governments.” The FDP rule, amended last year, increased restrictions on certain foreign-made exports to Huawei and other Entity List companies when U.S. software or technology is the basis for those foreign-made items (see 2012210044).

The lawmakers also continued to criticize BIS for moving too slowly on its apparent investigation of Seagate Technologies, which the Senate Commerce Committee in October said likely violated U.S. export controls against Huawei (see 2110260040). Commerce has said it’s open to briefing Congress on its investigations after they are complete. “We understand that compliance investigations require thoroughness,” the senators said, “but they also must be conducted swiftly to determine whether violations demand the attention of law enforcement.”

The lawmakers warned that “poorly enforced regulations carry neither the force of law nor the respect of the private sector” and urged Commerce to move more “quickly” to prevent illegal exports to Huawei. “Take action to ensure that BIS is equipped to enforce the full arsenal of the Department’s export control regulations -- and meet the challenges posed by this precarious moment -- considering the harms to national security they are intended to prevent.”

A Commerce spokesperson said BIS is "committed to fully investigating any allegation of violations" of the foreign direct product rule, "including any attempts to procure or divert export controlled items to Huawei" or its affiliates. "Enforcement actions can be made public at the end of the investigation," the spokesperson said Nov. 16, adding that BIS "looks forward to continued dialogue with Congress on our national security and economic interests related to" China.

The letter, led by Sen. Roger Wicker of Mississippi, the committee’s top Republican, was one of several letters recently sent by Republicans critical of BIS’s enforcement work. In October, 17 House Republicans said the agency needed to address shortcomings in its export control policies toward China and speed up its effort to control emerging and foundational technologies (see 2110250035). A few months earlier, 10 Republican senators threatened to strip Commerce of its export control responsibilities for moving too slowly on the emerging and foundational effort (see 2106160012).