Regulatory intelligence for US exporters

BIS Must Speed Up Foundational Tech Controls or Lose ECRA Authority, Expert Says

If the Bureau of Industry and Security’s new undersecretary doesn’t quickly prove he can make progress on export controls for foundational technologies, Congress should consider moving the authority to a different agency, said Derek Scissors, a China economics expert with the American Enterprise Institute. Although lawmakers have previously threatened to revoke BIS’s authority under the Export Control Reform Act (see 2111170064 and 2110250035), Scissors said they should wait to first hear whether newly confirmed undersecretary Alan Estevez has a plan to speed up the agency, which has been criticized for moving too slowly on the controls.

“You're coming up on four years now,” Scissors, speaking during an April 5 event hosted by China Tech Threat, said about ECRA’s passage in 2018. Since the bill was signed into law, BIS has published dozens of controls over emerging technologies but has yet to issue a foundational technology restriction. “BIS has been infuriating in its treatment of this issue,” Scissors said. “I don't know any other way to put it.”

BIS officials say placing export restrictions on foundational technologies has proven more challenging than placing controls on emerging technologies, partly because foundational technologies are items already widely and commercially available by foreign suppliers (see 1906280057). The agency is concerned that if it doesn’t first gain multilateral buy-in from trading partners on the controls, customers will simply buy the products from other countries, which would only hurt American companies,

But Scissors said the agency shouldn’t be prioritizing industry concerns over national security issues. BIS isn't "an export promotion agency. It's not a business promotion agency,” Scissors said. “BIS’s working definition of national security, in my opinion, is tilted wrongly and badly towards economics.”

The agency’s delay in issuing a foundational technology control is nearing a “semi-constitutional issue,” Scissors said, adding that BIS -- under both the Trump and the Biden administrations -- appears to be defying a congressional mandate. "Congress didn't create the foundational technology category where BIS can decide, 'nah, this isn't going to work,'" Scissors said. "It isn't their job to do that. It’s their job to implement the law even if they don't like the law."

He said Congress should ask Estevez to provide an update on the agency’s ECRA efforts later this year to make sure progress is being made and a plan is in place. And if Congress isn’t satisfied, Scissors said, it should explore revoking the agency’s authority.

“Either BIS has to change fairly significantly, or it needs to be moved to another authority,” Scissors said. “The world is very different than it was 15 years ago, and I'm not sure that BIS is sufficiently different.”

A BIS spokesperson didn't comment. BIS in February said it’s preparing to “soon” issue another set of export controls that will cover both emerging and foundational technologies (see 2202100026).

Revoking BIS’s ECRA authority and moving it to a new agency would create a host of challenges, said Kevin Wolf, an Akin Gump lawyer and former senior BIS official. He argued that BIS is best suited to handle the mandate, especially because it already has the “infrastructure” and familiarity with industry to implement the controls.

“Look at what they did with the Russia export controls, how clever and creative and effective” they are, Wolf said during the event. “That could only have happened with a group of people that are at BIS now who are true subject-matter experts, who really know how the levels work and really know how industry works.” He said “if any agency has proved it's worthy of being able to achieve these really novel challenges,” it's “the staff at BIS, and Alan [Estevez] can really take and lead that effort.”

But Wolf also said BIS can benefit from more resources, including additional staff composed of advanced technology experts. Congress recently approved millions of additional dollars in funding for export control work at the agency (see 2203100014 and 2203110011). “That will radically and dramatically advance the ability to not only get to the right answer,” Wolf said, “but ask the right questions to implement a new spirit and purpose in export controls.”

Wolf also said BIS should lead an effort to create another multilateral export control regime by taking advantage of its recent close collaboration with allies on Russian sanctions. Experts say the regimes -- including the Australia Group, the Missile Technology Control Regime, the Nuclear Suppliers Group and the Wassenaar Arrangement -- need to be modernized to address new export and proliferation controls surrounding emerging technologies (see 2001020029 and 2009290042). Wolf said several of the existing regimes could soon become “less effective,” partly because Russia is a member.

BIS has an “opportunity to create a fifth export control regime,” Wolf said, adding that it has already created a “de facto alliance of the willing” through the multilateral Russian sanctions. “The response to Russia has done in a month what would have taken I think years and years of outreach to the allies to accomplish,” he said.