BIS Seems to Be Ramping Up Enforcement, Former US Officials Say

The Bureau of Industry and Security appears to be making good on its pledge to step up export control enforcement to protect sensitive American technology from China, two former U.S. government officials said Oct. 15.

One sign of that enforcement push is the $5.8 million fine the agency imposed in August on Pennsylvania electronics firm TE Connectivity Corporation and its Hong Kong affiliate for illegal exports to China (see 2408150050), said Melissa Mannino, a BakerHostetler partner and a former Commerce Department official.

“I believe we will see more cases like that,” Mannino said during a webinar hosted by risk intelligence firm Kharon. “I think there are a lot of cases bubbling within BIS that we haven’t sort of seen, but I think we will start to see a lot of cases come out. The talk is clear. I’m surprised we haven’t seen more but I do think they’re coming.”

Another sign that more enforcement is on the way is increased staffing, including the recent appointment of the first BIS corporate enforcement chief (see 2409120007), said Howard Mendelsohn, a former Treasury Department official who is now Kharon's president of global business development and engagement.

BIS officials have indicated that they plan more enforcement. Matthew Axelrod, the agency's top export enforcement official, said in January that BIS was preparing to announce more "significant" export penalties this year (see 2401260040).

Turning to outbound investment restrictions, Mannino said it’s unclear when Treasury will finalize its proposed rule to impose new prohibitions and notification requirements on China’s artificial intelligence, quantum and semiconductor sectors (see 2405080039). The restrictions are intended to be narrowly targeted, and Mannino believes the Biden administration hopes U.S. allies will adopt something similar.

"I think they would say it's not [in] any of those allied countries' interests to have people investing in those sectors in China because of the national security concerns and risks," she said.

With export controls and outbound investment restrictions both enjoying broad bipartisan support, Mannino doesn’t expect the U.S. government’s approach to those areas to change dramatically when a new administration takes office in January.

“Maybe one [presidential candidate] will use sanctions more, but I think it will be more of generally the same,” she said.