The House-passed 2022 National Defense Authorization Act includes a provision that would mandate new sanctions against the Nord Stream 2 gas pipeline project. The amendment, proposed by Rep. Michael McCaul, R-Texas, would authorize sanctions against the project, “excluding the national security waiver,” to attempt to stop its completion. The Biden administration has issued some sanctions against the Russia-to-Germany pipeline project (see 2108230057) but has also said more U.S. sanctions wouldn’t stop the pipeline from being completed and would only cause tension with Germany (see 2107220008).
Exports to China
Although the Committee on Foreign Investment in the U.S. allowed Magnachip Semiconductor Corp. to refile its proposed acquisition by Beijing-based Wise Road Capital (see 2109160037), the deal seems highly unlikely to pass CFIUS scrutiny, trade lawyers said. Finding pathways to mitigate the national security risks identified by CFIUS will be extremely challenging, they said, particularly as the U.S. increases its focus on stopping China from acquiring advanced semiconductor equipment.
Rep. Michael McCaul, R-Texas, recently offered several amendments to the 2022 National Defense Authorization Act, including provisions relating to export control statistics, the Entity List and sanctions.
Several U.S. national security agencies are split on whether to add Chinese smartphone maker Honor Device to the Entity List, The Washington Post reported Sept. 19. While the Commerce and State departments said Honor shouldn't be added to the list, the Defense and Energy departments last week supported adding the company. Federal Communications Commissioner Brendan Carr said Honor should be blacklisted because Huawei, which formerly owned Honor as its smartphone company, is using it to evade U.S. export restrictions. “This isn't a close call,” Carr said in a Sept. 20 tweet. The issue has been “appealed to the political-appointee level” at each of the agencies, the report said, and could be escalated to the Cabinet level and eventually President Joe Biden in the case of a deadlock.
Two nominees to lead the Bureau of Industry and Security said they will prioritize stopping illegal technology exports to China and are willing to bypass multilateral controls on certain sensitive technologies if unilateral restrictions are warranted. But Alan Estevez, President Joe Biden’s nominee for BIS undersecretary, and Thea Kendler, the nominee for assistant secretary for export administration, also stressed that export control cooperation with allies is crucial and committed to working to convince trade partners to adopt more controls.
An investment and research firm expects the Bureau of Industry and Security to issue several proposed rules for export controls related to semiconductors this fall and said BIS is considering other restrictions on certain Chinese technology companies. In a Sept. 17 report, the Cowen Washington Research Group said BIS is “likely” to soon issue several notices of proposed rulemaking to request industry comment on new controls for semiconductor capital equipment, mostly so the U.S. is prepared with new proposals for the next Wassenaar Arrangement cycle.
The Bureau of Industry and Security should establish a blanket exemption for U.S. people and companies to participate in standards-setting bodies that have members designated on the Entity List, industry officials said. Although BIS has been working on a final rule (see 2012150037) that would clarify how export restrictions apply to the release of controlled technology at standards-setting organizations, officials from the telecommunications industry and other technology sectors are unsure how the rule’s final language will read and are concerned some of the agency’s restrictions, which they view as unnecessary, may continue.
The U.S. should use the upcoming inaugural meeting of the U.S.-European Union Trade and Technology Council (see 2109090004) to convince the European Union to adopt more measures to “constrain China,” including stricter export controls and investment screening, the Information Technology and Innovation Foundation said Sept. 13. If used correctly, the council could become a significant and useful U.S. tool to increase multilateral trade restrictions on China, the group said. “U.S. negotiators need to define success not as becoming more like the EU or increasing cooperation for cooperation’s sake,” ITIF said, “but rather in increasing cooperation while also advancing key U.S. national interests and maintaining core elements of the U.S. technology policy ecosystem.”
The top Republican on the House Foreign Affairs Committee said the acting head of the Bureau of Industry and Security misrepresented facts in front of a congressional commission last week (see 2109080062), saying he wasn't straightforward about the agency’s “delayed and incomplete” provision of export licensing decisions to Congress. Although BIS Acting Undersecretary Jeremy Pelter told the commission that BIS has complied with all laws regarding the disclosure of licensing information to Congress, Rep. Michael McCaul said the agency hasn’t been transparent.
The U.S. government needs more resources, including better expertise, to identify emerging and foundational technologies under the Export Control Reform Act of 2018, said Kevin Wolf, the Commerce Department’s former assistant secretary for export administration. Speaking before a U.S.-China Economic and Security Review Commission hearing last week, Wolf said export controls are more “complex” now than they have been in decades, mostly due to Chinese technology acquisition efforts and the continued development of advanced technologies.