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BIS Needs More Resources, 'Culture Shift,' House Subcommittee Hears

The Bureau of Industry and Security needs much more funding to carry out its export control work, lawmakers and former officials said during a House hearing this week. Kevin Wolf, a former senior official at BIS, said Congress should consider doubling -- perhaps quadrupling -- the agency’s resources.

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“The demands on BIS now are radically and substantially different than they were when I was there,” Wolf said during a May 11 House Foreign Affairs Oversight and Accountability Subcommittee hearing. The agency needs “at least a doubling of their current budget and the resources and the people and the expertise to go along with it.”

Several lawmakers agreed. Rep. Jason Crow, the top Democrat on the subcommittee, said BIS’ staffing has “frankly not kept up with the growing mandate that we have given it.” Wolf, an export control lawyer with Akin Gump, said some of the agency’s needs include more data analytics employees and “dramatically more enforcement resources to follow up on leads and track down and work with the allies.”

He also said there should be a “specific office” within the Commerce Department to “evaluate the effectiveness and the impact” of all its export controls rules. He said the Treasury Department recently created a similar office to assess its sanctions programs, but “surprisingly” Commerce doesn’t have one. “There are a lot of decisions based upon gut and anecdote and partial data,” Wolf said, “but no major system to collect data and organize it and analyze it to know the impact and what more can be done.”

Giovanna Cinelli, a trade lawyer with Morgan Lewis and former Navy intelligence officer, said more funding would help BIS better classify items that should be subject to export controls. “There should be significant resources devoted to the proper classification and the development of the Commerce Control List,” she said.

But she also suggested BIS should take steps to simplify its rulemakings, which could help exporters better comply with restrictions. “While export controls require flexibility, focus and nimbleness,” Cinelli said, “if the rules are so complicated and so convoluted that in order to implement them you need a technical person, an economist and a lawyer, the question becomes: How are they best protecting interests?” The semiconductor industry has struggled to decipher the agency’s October chip restrictions on China, calling them some of the most complex export control regulations ever issued (see 2211010042 and 2302020034).

Other witnesses during the hearing said BIS doesn’t need more resources as much as it needs a different approach to adjudicating export license applications. Nazak Nikakhtar, former BIS acting undersecretary and now a trade lawyer with Wiley Rein, said Commerce is “bifurcated” between export enforcement officials who take a harder line on national security issues and licensing officials who are “pro-business,” which has led to more approvals for exports to China than should be allowed.

“I think what needs to happen at BIS is a complete culture shift on the licensing side,” Nikakhtar said. “They need to see the threats for what it is and they need to really understand that continuing to do business with China and the revenue stream we get from them is not going to be the ticket out of this mess.”

Nikakhtar also said too many entities on the Entity List have a case-by-case license review policy, which “for all intents and purposes … essentially removes them from the Entity List.” Steve Coonen, a former Pentagon official who said BIS should impose a presumption of denial review policy on a wider set of items, said the agency is “failing to prioritize national security in its decision making” (see 2305100033).

“From my vantage point, the main problem is that BIS takes a business-first view of applications,” Coonen said. “Though there are scores of military uses for controlled technologies, the U.S. will rubber stamp applications unless they have specific indications or intelligence of diversion.” He said evidence of diversion is “extremely difficult to obtain.”

Wolf noted that the export control review process has become much more challenging in recent years, saying it used to be “easier” to tell the difference between commercial and military applications. “All of those things have been evolving and changed,” he said. “The national security threat landscape with respect to China has become far more complicated.”

He called for “much more” coordination between the U.S. and close allies on export licensing policies and enforcement. Wolf said he’s a “big advocate” for “substantial changes” to the International Traffic in Arms Regulations, calling the Torpedo Act -- the ITAR reform bill recently introduced in the Senate (see 2305050063) -- “terrific.” One provision would require Commerce to propose a new export license exception for certain close allies.

“It's basically what we tried to do when I was in government,” Wolf said, adding that the U.S. should spend “more time focusing on countries of concern.”