New NDAA Calls for Reports on China’s Export Control Evasion, Japan’s Possible AUKUS Role

The director of national intelligence would write the China report, which would address the country’s “plans and intentions” to get around a host of national security regulations, including dual-use export controls, the Commerce Department’s Entity List, the Treasury Department’s Specially Designated Nationals and Blocked Persons list and the Defense Department’s Section 1260H list of Chinese military companies. Other regulations covered by the report would include Executive Order 14105, which addresses U.S. outbound investment in certain technology sectors in China (see 2308090066), and forced-labor import restrictions implemented by Customs and Border Protection.

The U.S.-China Economic and Security Review Commission, a bipartisan, congressionally mandated panel, said in a November report that while export controls have become a “central tool” for denying China access to critical dual-use technology, “a number of operational challenges diminish their effectiveness, including lack of coordination among key allies, compliance challenges, and uneven enforcement" (see 2411190053).

The NDAA would direct the State and Defense departments to assess Japan’s potential contribution to AUKUS Pillar II, which calls for jointly developing artificial intelligence, quantum computing, hypersonics and other advanced technologies. The departments also would examine the effectiveness of Japan’s export controls and identify areas that might need strengthening.

Lawmakers have said that Japan is a logical first partner for AUKUS expansion, given its large, technologically advanced economy and substantial manufacturing capacity (see 2405090004).

The NDAA also would require reports on ties that Russia and Venezuela have to foreign terrorist organizations and state sponsors of terrorism. Venezuela is on the list of countries that aren’t cooperating fully with U.S. counterterrorism efforts (see 2405170040), and some lawmakers have proposed designating Russia as a state sponsor of terrorism (see 2406200050). Another report would look at how China is supporting the biotechnology sector, including through foreign direct investment.

The NDAA would direct DOD to develop a plan to improve the tracking of defense equipment transfers. It would create a continuous process improvement board to find ways to improve DOD’s foreign military sales process, and would require a study on whether a dedicated contracting capacity should be created to support the FMS process.

Although the NDAA had been mentioned as a possible vehicle for proposals to restrict U.S. outbound investment in China, such restrictions did not make it into the defense bill. However, House and Senate leaders continue to discuss adding China-related provisions to another vehicle, such as a temporary government funding bill, also known as a continuing resolution.

"During the course of negotiations on the annual defense bill, significant progress was made towards achieving consensus on provisions to counter China and strengthen our economic security," House Speaker Mike Johnson, R-La., said in an emailed statement Dec. 9. "That momentum remains and more time is needed to get that important work done with the goal of passage before the end of the year.”

The House and Senate Armed Services committees unveiled the NDAA Dec. 7. Full-chamber consideration is expected to begin in the House this week.