Moolenaar Urges Raimondo to Close Dangerous Loopholes in New Export Control Rules
WASHINGTON, D.C.-- Chairman John Moolenaar sent a letter to Secretary of Commerce Gina Raimondo regarding the newly released December 2nd export control rule on American advanced semiconductor technology going to China. The Chairman wrote with concern that these rules create loopholes that will continue to allow Chinese bad actors to access US technology and raise questions about the undue influence of the semiconductor industry over the Bureau of Industry and Security's decision-making.
The Chairman wrote, "There is no national security justification for these loopholes. Rather, their existence seems to imply that press reporting on industry influence over BIS are accurate. I ask that with your remaining time at the Department of Commerce, you work to close these loopholes as quickly as possible. I also ask that the Department of Commerce preserve all documents and communications in its custody referring to or related to this most recent export control update so that the transition team can properly identify any other loopholes created over the course of this latest round of updates."
The new export control rule included several key loopholes, like:
an exception that allows specific semiconductor manufacturing facilities, known as fabs, operated by blacklisted entities, to continue to receive U.S. technology. This further weakens our Entity List and jeopardizes our national security.
loopholes for Huawei to continue circumvent US restrictions using its network of semiconductor fabrication facilities and took no action against ChangXin Memory Technologies (CXMT), which is poised to become a leader in advanced semiconductors.
a loophole for PRC semiconductor champion, Semiconductor Manufacturing International Corporation (SMIC) to continue to access U.S. technology, despite being on the Entity List.
Click HERE to view the letter or read the text of the letter below.
I am writing regarding the Bureau of Industry and Security’s (BIS) recent December 2, 2024, export control rule on advanced semiconductor technology going to the People’s Republic of China (PRC). The placement of some of Huawei’s semiconductor facilities to the Entity List, which our Committee called to be put on the Entity List earlier this year, was a positive step. In addition, BIS’s new controls on high-bandwidth memory (HBM) technologies are important and will further challenge the PRC’s ability to manufacture their own advanced semiconductors.
However, I was disappointed to see BIS’s new rule created several loopholes that will still allow bad PRC actors continued access to U.S. technology. The scope, frequency, and brazen nature of these loopholes raise real questions about the culture at BIS and why BIS continues to facilitate shipments of U.S. technology to PRC entities like Semiconductor Manufacturing International Corporation (SMIC) an entity that has broken U.S. law. These observations are not Congress’s alone; a recent Center for Strategic and International Studies (CSIS) report found that BIS’s implementation of export controls have “both helped and hindered PRC firms.” It remains a mystery why BIS would purposefully design their controls in a way that helps PRC firms.
Specifically, the new update created a new “License Exception Restricted Fabrication Facility” which is yet another list-based approach that will be insufficient to protect U.S. national security. It is deeply confusing that, at a time when the U.S. government’s entity-byentity approach is already facing challenges from PRC circumvention, BIS would try a fab-byfab approach. For example, BIS’s licensing policy towards SMIC Beijing is “presumption of denial”, but SMIC Shanghai has a special carve out for “items designed for production of 200mm wafers”, while SMIC Shenzhen has yet another, different licensing policy.
The new rule also created new loopholes for Huawei’s network of semiconductor fabrication facilities. While I was encouraged that BIS added Si’En Qingdao to the Entity List with a “presumption of denial” licensing policy, other Huawei firms such as SwaySure Technology and Shenzhen Pengxinxu Technology got special carve outs to continue to access certain types of U.S. technology. Meanwhile, BIS has taken no action against ChangXin Memory Technologies (CXMT) which is poised to become a leader in the very same HBM technology BIS just export controlled.
In yet another example, BIS created a new loophole for U.S. companies to continue shipping advanced technology to blacklisted PRC semiconductor fabs that are connected to unlisted fabs via bridges or tunnels. We have long known this is a problem, with a recent report finding that SMIC had used a “wafer bridge” to connect their two facilities – one with a harsh BIS licensing policy, the other with more lax restrictions. SMIC could easily use such a tunnel to transfer sensitive U.S. technology between facilities, in violation of U.S. export control law. BIS needs to establish stronger, not weaker, counter-diversion restrictions for facilities near each other.
There is no national security justification for these loopholes. Rather, their existence seems to imply that press reporting on industry influence over BIS are accurate. I ask that with your remaining time at the Department of Commerce, you work to close these loopholes as quickly as possible. I also ask that the Department of Commerce preserve all documents and communications in its custody referring to or related to this most recent export control update so that the transition team can properly identify any other loopholes created over the course of this latest round of updates.
Thank you for your attention to this important matter.