BIS Should Require Export Compliance Programs to Include Specific Elements, Senate Report Says
The Bureau of Industry and Security should increase its enforcement of semiconductor export controls to prevent American-made computing chips from ending up in Russian weapons and Chinese artificial intelligence systems, the Democratic majority staff of the Senate Permanent Subcommittee on Investigations said in a new report released this week.
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Despite having “significant authority” to enforce export controls, BIS does not fully use it, enabling chips to continue flowing illegally to Russia and China, says the 32-page report, unveiled by Sen. Richard Blumenthal, D-Conn., the subcommittee’s chair. The document says the agency fails to require chip manufacturers to include specific components in their export control compliance programs, has not adequately charged companies for “knowing” violations of export controls, and has not imposed significant fines for export control violations despite acknowledging the need for larger penalties.
“The subcommittee’s inquiry has revealed that enforcement of export controls is a shadow of what it should be, and inadequate at every level,” the majority staff wrote. Blumenthal called for an "aggressive crackdown" to "make export controls effective against both Russia and China."
The report recommends that BIS accelerate plans to impose higher fines on violators, charge companies with “knowing” violations when they ignore indications that a diversion is likely to occur and require that chipmakers’ export control plans undergo periodic reviews by outside entities.
"BIS has never brought significant penalties against companies for violating export controls even when companies knew there was a high probability that the transaction breached or could lead to a breach of the law," Blumenthal's press release says.
The report also said BIS should mandate that export control compliance programs contain "specific components," adding that the agency "relies too significantly on voluntary compliance with its suggested practices," especially among semiconductor companies. Although BIS officials told the subcommittee that voluntary compliance allows its enforcement agents "to be nimbler" and make quick compliance requests of companies, and helps ensure businesses can tailor compliance procedures to their own risks, the subcommittee disagreed.
It said some requests BIS has made to American chip companies -- including Analog Devices, Intel, Texas Instruments and AMD -- are things those companies should already have been doing. "Making more components of export control programs mandatory could remedy these issues, and larger fines would likely compel more proactive compliance," the report says.
The report asserts that BIS could also benefit from increased funding to conduct more end-use checks and modernize its antiquated information technology systems. "BIS’s workload and responsibilities tied to national security have drastically increased since 2010, but its funding has remained mostly stagnant," the majority staff wrote. "BIS cannot afford the modern IT infrastructure needed to analyze the full range of data available to combat efforts at export control diversion."
A Commerce Department spokesperson said in a statement Dec. 19 that “BIS has implemented the most robust export controls in history, and crucially, we’ve done so in concert with our allies to deny Russia the items it needs to maintain its war machine.” With additional resources, the agency would be “even better equipped” to do its job, the spokesperson added, noting that Commerce Secretary Gina Raimondo has sought budget increases for BIS (see 2312040041).
In a letter released with the report, Blumenthal urged Raimondo to open an investigation on “recent allegations of continued export control compliance failures" at U.S. chipmaker Texas Instruments. The allegations involve TI missing “clear warning signs that three companies in its distribution chain had been diverting products to Russia, including that the three companies surged their demand for purchases and listed themselves at Hong Kong addresses commonly used as fronts.”
TI said in a statement that it "strongly opposes the use of our chips in Russian military equipment and the illicit diversion of our products to Russia. It is our policy to comply with export control laws, and any shipments of TI chips into Russia are illicit and unauthorized. If we find evidence indicating product diversion, we investigate and take action."
An earlier report by the subcommittee’s majority staff focused on four U.S. chipmakers, including TI, saying they should do more to stem the flow of their export-controlled products to Russia’s defense industrial base (see 2409100069). The chip firms have said they’re increasing their scrutiny of products found in Russian arms (see 2409110064).