Export Enforcement Risks to Continue Rising No Matter Election Outcome, BIS Official Says

Axelrod, speaking during an Oct. 31 event hosted by risk intelligence firm Kharon, acknowledged that some policies experience “stark reveals” when a new U.S. administration takes over. “This is not one of them,” he said of export controls. “It's been a straight-line trajectory, and I expect that straight-line trajectory to continue no matter what happens next week.”

Axelrod’s comments came amid a record-setting pace of export control enforcement in recent years, heightened by U.S. restrictions imposed against Russia for its 2022 invasion of Ukraine and efforts to curb advanced chip exports to China. In 2023, the government reached the most-ever number of export control-related convictions and issued the highest-ever number of temporary denial orders and post-conviction denial orders in a single year, according to BIS (see 2401030074).

The current “national security threat picture” suggests that level of enforcement may continue, Axelrod said. He noted that technology is “only increasing in its advancement and its military capabilities,” which means U.S. adversaries are likely to try harder to obtain sensitive American technology.

“The trend lines, they're just not reversing anytime soon,” he said. “The U.S. government's responsibility and efforts to protect those technologies, no matter what happens next week in our election -- because this isn't a partisan issue, this is a national security issue where actually there's broad bipartisan support -- those tools are going to continue to be incredibly important.”

U.S. policymakers have “come to realize the importance of these tools and how essential they are to safeguarding these technologies,” he added, and are increasingly making the connection between how protecting those technologies can aid U.S. national security.

“I think you're going to continue to see an all-hands-on-deck push to make sure that the U.S. government is doing everything it can to protect those technologies,” he said.

Axelrod said that may mean more U.S. government outreach with industry to make sure they’re complying with export controls, specifically mentioning manufacturers, distributors and freight forwarders. He also spoke about financial institutions, including an October guidance that outlined BIS due diligence expectations for banks (see 2410090027).

Asked whether BIS specifically aimed the guidance at banks or whether it expects similar compliance from financial technology companies, crypto firms and online marketplaces, Axelrod said the “principles underlying the guidance and the legal framework in the guidance is relevant to everyone.”

BIS may recommend different best practices to compliance teams at a bank compared to a fintech firm, Axelrod said, but both could still face penalties under General Prohibition 10 of the Export Administration Regulations, which restricts those companies from financing or servicing any item subject to the EAR if they have knowledge an EAR violation has occurred, is about to occur or is intended to occur.

“They're exposed to the risk of liability just like financial institutions are,” he said.

“Our focus on making sure that we are doing everything we can in getting after every vector involved in the transfer of our sensitive items abroad means that the risk of enforcement is increasing,” Axelrod said, “and we want everyone to sort of focus on stepping up their compliance game.”