Raimondo Outlines Vision for More ‘Muscular’ Export Controls, Says BIS Needs More Funding

The U.S. will increasingly look to apply new export licensing requirements to entire countries rather than to specific companies, which could lead to a shift away from the Entity List, Commerce Secretary Gina Riamondo said. She also said the agency will continue targeting new artificial intelligence-related products developed by American semiconductor companies, such as Nvidia, that fall just below U.S. export control thresholds.

Raimondo, in a candid export control discussion during the Dec. 2 annual Reagan National Security Forum in California, said U.S. chip company CEOs “were a little cranky with me” after Commerce released new semiconductor-related export controls on Oct. 7, 2022, and earlier this year (see 2310170055 and 2310180005).

“Such is life,” she said. “Protecting our national security matters more than short-term revenue, and so that's what we're gonna do.”

Raimondo has previously spoken about the need to restrict critical technology exports to China and has pushed for more funding for BIS (see 2309190052 and 2308300036). She expounded on both of those issues during a question-and-answer session at the forum, calling the recent spate of new U.S. export controls “definitely not a flash in the pan” and warning the technology industry there is more to come, particularly around semiconductors.

Since she joined the agency, she said, Commerce has added “100 people” working specifically on chip issues. “I think we're building a more muscular Commerce Department to take on these challenges,” Raimondo said. “And I think you will see that that's here to stay.”

Part of that effort will lead to a shift away from reflexively placing new license requirements on individual Chinese companies, Raimondo said, adding that she wants to instead pursue country-wide restrictions. She said the Oct. 7 chip controls were the “first time ever that we denied an entire country” access to a “suite of semiconductors and equipment. We're going to continue to go in that direction.”

Although BIS will still use the Entity List, she said the list often “gets us into a [game of] whack-a-mole,” where newly restricted companies create other businesses that aren’t subject to the same license requirements and are able to import U.S.-origin dual-use goods.

“If you're just doing this whack-a-mole approach, then we find one company that's a problem and we put them on the list. Literally, a week from now, there'll be another company,” she said. “So I think we're getting more serious about country-wide controls.”

She said those controls make it more difficult for Chinese companies to evade strict export license requirements. “The nature of the threat is changing, and we need to therefore change our strategy,” she said. “We have to get smarter about, what are the technologies where we are ahead of China? They're capable of doing very bad things, and we're going to deny the entire country this class of equipment.”

The recently updated BIS chip controls set new export control parameters on certain advanced computing chips, including certain semiconductors Nvidia had purposefully designed to fall just below U.S. export license requirements while still complying with export control laws. Raimondo said Commerce is looking to end the cycle of the U.S. releasing new export controls only for chip companies to develop new products that comply with those controls but that can still give Chinese companies the capabilities the Biden administration is trying to prevent.

"That's what industry does, that's what we've taught them to do. That's the way export controls work," Raimondo said. But she also said: “That's not productive.”

Raimondo and BIS Undersecretary Alan Estevez are developing a “new way to have a continuous dialogue with industry,” so BIS engineers can “go toe to toe” with industry engineers and they can better communicate the intent of new export controls, she said.

“If you redesign a chip around a particular cut line that enables [China] to do AI, I'm going to control it the very next day,” Raimondo said. “So we have to get to a place with industry where we say our national security goal is to have no AI special sauce in your chip.” The agency must “have a more continuous back and forth with industry where we make our intentions clear.”

She also said the “burden is on us” to communicate that “this is our intention. This is the effect we need to have.” And “then industry needs to comply.”

Although the most recent chip controls had a delayed effective date, the U.S. informed Nvidia that several of its products were subject to the new controls immediately (see 2310240020). Raimondo said there’s a “natural tension” between her agency and industry, but she tries to explain to companies that complying with U.S. export controls may hurt short-term profits but will benefit the U.S. technology industry in the long term.

“Newsflash: democracy is good for your businesses. Rule of law here and around the world is good for your businesses,” Raimondo said “So it might make for a tough quarterly shareholder call, but in the long run, it's worth you working with us to defend our country's national security.”

Raimondo also used the forum to lobby for more BIS funding, saying the agency has the “same budget today as it did a decade ago” but is receiving twice as many export licensing requests. She said she gets calls “constantly” from both Republicans and Democrats asking for stricter controls or more enforcement, but the agency has limited resources.

“I have a $200 million budget. That's like the cost of a few fighter jets. Come on,” Raimondo said. “If we're serious, let's go. Fund this operation like it needs to be funded so we can do what we need to do to protect America.”

Along with semiconductors, Raimondo said BIS is targeting biotechnology, AI products, cloud computing and supercomputing for potential new export restrictions, particularly for exports to China.

“There's a lot of commerce to be done with China” that “won't affect our national security,” she said. “But on matters of national security, we’ve got to be eyes wide open about the threat. This is the biggest threat we've ever had, and we need to meet the moment.”