Exports to China

The Bureau of Industry and Security fined a U.S. semiconductor manufacturer $469,060 for working with others to export chip-making equipment to Chinese companies on the U.S. Entity List, BIS said in an Aug. 16 order. The company, California-based Dynatex International, violated the Export Administration Regulations because it didn’t obtain the required BIS license before shipping the equipment. Although BIS said Dynatex knew it was shipping items to blacklisted companies, the agency substantially reduced the fine as part of a settlement agreement.

Taiwan is preparing for Beijing foreign policy to grow more aggressive in the coming months and is expecting a strong retaliatory response if it signs a free trade deal with the U.S., a senior Taiwan official said. But the official stressed that the country wants to complete a trade and investment agreement with the U.S. and other democracies, which could strengthen its position as a leading global provider of semiconductors.

The Biden administration should continue to increase Chinese trade restrictions but has done a good job pressuring the country so far, said Nazak Nikakhtar, a former acting head of the Bureau of Industry and Security during the Trump administration. Nikakhtar recently told Nikkei Asia she and others were initially “nervous” that President Joe Biden would ease some restrictions but has been pleased to see a continuation of many of the same export control measures begun under President Donald Trump.

The Biden administration will maintain a Trump-era policy that loosened export restrictions on certain unmanned drones, a decision that drew applause from the aerospace defense industry last year but sparked concern from some lawmakers.

A group of House Republicans called on the Commerce Department to add Chinese smartphone maker Honor Device Co. Ltd. to the Entity List and asked for a briefing with the agency’s End-User Review Committee to ensure the administration is “moving with enough speed” on export controls. Because Huawei sold Honor Device Co., the company can access technology that “should be restricted,” the lawmakers said in an Aug. 6 letter to Commerce Secretary Gina Raimondo.

The U.S. needs to expand export and investment restrictions to prevent China from acquiring advanced semiconductor equipment and other sensitive technologies, former national security officials told Congress this week. One official specifically said the Commerce Department’s Bureau of Industry and Security should impose export controls more actively. Another said the Committee on Foreign Investment in the U.S. needs more resources.

The House’s Republican Study Committee released a counterproposal to the Senate’s Endless Frontier Act that would call for a host of new sanctions against China, continue U.S. export control authorities and make some changes to the Committee on Foreign Investment in the U.S. The committee’s Countering Communist China Act, released July 29, calls for broad U.S. sanctions actions, including designations against Chinese technology applications, various senior government officials, foreign people that steal U.S. intellectual property and “foreign persons that knowingly spread malign disinformation … for purposes of political warfare.” The Treasury Department’s Office of Foreign Assets Control would also be authorized to hire 10 new employees to “carry out activities of the Office associated with the People’s Republic of China.”

Congress should establish a rebuttable presumption that certain technology exports sold to China will be used to violate human rights, said Rep. Tom Malinowski, D-N.J. Malinowski, a member of the House Foreign Affairs Committee, said he pushed to include that language in a previous House version of the Ensuring American Global Leadership and Engagement (EAGLE) Act but the wording “kept on getting stripped by the Senate” for “mysterious” reasons. “There is a very strong behind-the-scenes lobby against that from whatever elements of corporate America continue to profit from that trade,” Malinowski said in a Capitol hallway interview July 27, specifically pointing to facial recognition technology.

The U.S. shouldn’t rely on export controls on semiconductors to stay ahead of China because the strategy would likely “backfire,” a former Department of Defense official told Congress this week. Lisa Porter, the former deputy undersecretary of defense for research and engineering, said government intervention in supply chains can “distort the market in ways that are hard to predict” and could lead to unintended consequences for the microelectronics industry.

The U.S. released an advisory to highlight the sanctions and export controls risks for companies doing business in Hong Kong and announced a new set of Hong Kong designations July 16. The advisory, issued by the State, Treasury, Commerce and Homeland Security departments, describes “considerations” for businesses operating in “this new legal landscape,” which includes several sanctions regimes targeting Beijing and Hong Kong.