Regulatory intelligence for US exporters

House Foreign Affairs to Initiate Oversight Review of BIS If Republicans Flip House

If Republicans retake control of the House after the midterm elections in November, the chamber’s Foreign Affairs Committee will initiate a review of the Bureau of Industry and Security and its export control procedures, said Rep. Michael McCaul, R-Texas. McCaul said the review would examine BIS’ progress in restricting emerging and foundational technologies under the Export Control Reform Act and study whether U.S. export control authority should be moved to a different agency.

Start A Trial

“If I'm fortunate enough to become the next chairman, I'm going to implement a 90-day review of this office and what they're doing, because they've never had any real oversight,” McCaul, currently the committee’s top Republican, said during an Oct. 3 event hosted by the Atlantic Council. He said he would call on BIS officials to testify to “find out what they are doing."

McCaul, other lawmakers and a bipartisan congressional commission have criticized BIS for moving too slowly to impose export restrictions under ECRA and have suggested its export control responsibilities be moved to another agency or a new office in the White House (see 2111170064, 2010010020, 2110250035 and 2106020024). BIS has released more than 40 emerging technology controls since ECRA was enacted in 2018 but has said the process has proven challenging (see 2204080033). The agency in May decided to stop categorizing the technologies as either emerging or foundational, which it hopes will speed up control decisions (see 2205200017).

McCaul said he wants more transparency from BIS. In 2021 he released statistics that showed BIS approved more than a combined $100 billion worth of export licenses for shipments to Huawei and Chinese top chipmaker SMIC from Nov. 9, 2020, through April 20, 2021 (see 2110210073). Although BIS said the approved license applications didn't necessarily represent actual shipments and didn't reflect applications in the agency's “intent to deny” process (see 2110220037), McCaul said the numbers were a red flag.

“I think for too long [BIS has] been ignored, probably to their delight, by Congress, because they don't want to be on the radar,” he said. “But they will be on the radar, and I'm going to be looking under the hood of the car.”

McCaul said there isn’t a cohesive government strategy toward export controls, adding that various lists, including the Entity List maintained by the Commerce Department and the Chinese military company list maintained by the Defense Department, aren’t well coordinated. “I think we need to have a clearer picture to industry that says ‘look, there's one entities list,” McCaul said. “And if you invest or send exports to these companies that we have identified are part of [China’s] military, that's going to be denied.”

He said the U.S. “has to stop selling” critical technologies to China, saying America is “literally aiding and abetting the Chinese war machine that will be turned against Taiwan.” McCaul specifically pointed to China’s development of hypersonic missiles that he said was “built on the backbone of American technology” (see 2110180016).

But the U.S. strategy can’t entirely be based around export controls, McCaul said. The government and Congress should be educating businesses about the risks of doing business and selling to China, he said, adding that “a lot” of CEOs ask him for advice before investing in China. “Be wary. Know that if you do, your [intellectual property] is probably going to be stolen. It's a matter of time,” McCaul said he tells CEOs. “But that's the risk they have to weigh as to whether it's worth it.”

McCaul also stressed the importance of export control cooperation with allies, calling multilateral work “absolutely essential.” He said he believes more coordination is likely.

“If we tell our companies in the United States [that] you can't do this, but then our allies export to China, it doesn't stop the problem,” he said. “We have to do this in concert with our allies, and I think given the nature of the [North Atlantic Treaty Organizations] alliance right now, I think it's very achievable.”

McCaul also said he wants to prioritize work on an outbound investment screening mechanism to further restrict technology flows to China. Although some in the Senate are hoping to include a congressional proposal for a new outbound investment screening mechanism in the upcoming National Defense Authorization Act (see 2209290043), McCaul suggested the White House may soon release its own executive order.