New UVL Policies Could Lead to More Entity Listings, Former BIS Official Says

The Bureau of Industry and Security’s new Unverified List policies, which allow the agency to move a company from the UVL to the Entity List if it can’t complete an end-use check within 60 days, likely will lead to an uptick in companies added to the Entity List, said Nazak Nikahtar, former acting BIS undersecretary. Nikakhtar said she believes many Chinese companies added to the UVL won’t participate in an end-use check that meets the U.S.’s standards.

She said “it's great if China authorizes an end-use check," but those checks can sometimes lack transparency. "Are we going to be satisfied when we walk away from the end-use check" that "none of the books and materials that we reviewed are doctored?" Nikakhtar said during an online event hosted this week by China Tech Threat. "I think the result of that is very likely to be no." She added that "you're going to find more and more companies first going to the Unverified List and then making it to the Entity List.”

BIS announced the policy change in October and simultaneously added 31 Chinese companies to the UVL, including Yangtze Memory Technologies Corp., a semiconductor firm that U.S. lawmakers for months have urged BIS to add to the more restrictive Entity List (see 2210070006). The agency could move YMTC and the other companies to the Entity List next month if no end-use checks have been completed.

Nikahktar, now a trade lawyer with Wiley Rein, said China’s Ministry of Commerce routinely “constrained” Commerce’s ability to complete end-use checks when she was in government. Sometimes they would only give BIS officials half a day to complete a check, she said. “I think Matt Axelrod is absolutely correct,” Nikakhtar said, referring to BIS’s top export enforcement official, who announced the policy change in an October memo. “If we can't conduct adequate end-use checks, we move you to the Entity List.”

BIS is implementing the new policies, along with a set of China-related chip controls (see 2211010042), as Republicans take control of the House, which will likely lead to more oversight actions of BIS and its Chinese export control policies. Rep. Michael McCaul of Texas, the top Republican on the House Foreign Affairs Committee, plans to initiate a 90-day review of the agency, including its progress in restricting emerging and foundational technologies under the Export Control Reform Act and whether U.S. export control authority should be moved to a different department (see 2210030068).

Nikakhtar said the effort could include a “thorough review” of BIS licensing policies and the decisions the administration makes on specific license applications. “I think they're going to be aggressive on that,” she said. “Make no mistake, this is going to be a whole-scale review of everything that BIS does to figure out where every single problem is and what measures are required to fix those problems.”

Dustin Carmack, a research fellow at the Heritage Foundation, said Republicans aren’t the only ones interested in more accountability for BIS. “There should be a better oversight of what's going on over at Commerce and BIS in this space,” he said during the event. “I think there's definitely interest on both sides of the aisle in tackling this.”