The Commerce Department is trying to find a way to screen outbound investments in a way that protects domestic commercial interests but limits collateral damage to businesses with interests outside the U.S., said Marisa Lago, the agency’s undersecretary for international trade. Lago’s comments came one day after Samm Sacks, an expert on U.S.-China technology policy issues, said the Biden administration hasn’t yet released an executive order to create an outbound investment screening regime because of discussions surrounding implementation challenges.
Exports to China
The U.S. is making “good progress” on aligning export controls over sensitive technologies with allies, Deputy Secretary of State Wendy Sherman said this week, adding that almost all the administration's recent discussions with trading partners have involved China technology issues. She also said the agency is working to counter a growing oil partnership between China and Iran, but said preventing China’s purchases has proven challenging.
The Biden administration’s implementation of its new China chip export controls (see 2210070049) has been “mixed,” and it remains unclear how far allies will go to impose similar restrictions, said Clete Willems, who was a National Security Council official during the Trump administration. Willems, in written testimony this week to the House Financial Services Committee, said he doesn’t understand why the administration didn’t initially coordinate the October export control rule with allies, a shortcoming that could be hurting U.S. companies now.
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Although former national security officials agreed that the U.S. should consider outbound investment review restrictions, they panned a congressional proposal that would have granted a new interagency committee “sweeping” power to restrict capital flows to China. Speaking during a House Financial Services Committee hearing this week, some of the former officials said Congress should rethink the proposal and also urged the Biden administration against issuing a unilateral executive order to establish an outbound investment review regime.
Russian customs data shows the country’s sanctioned defense companies are buying navigation equipment, jamming technology, jet-fighter parts and more from China, The Wall Street Journal reported Feb. 4. Russia has imported tens of thousands of shipments of dual-use goods since its invasion of Ukraine last year, most of them from China, the report said. Although the U.S. and other Western nations have imposed strict export controls on technology to stop sensitive items from being sent to Russia, Moscow is able to sustain its military needs through countries that haven’t joined the U.S.-led sanctions effort, the report said, including Turkey and the United Arab Emirates. But Chinese companies are the “dominant exporters” of dual-use items to Russia, the report said.
In West Virginia, where the first House Ways and Means Committee hearing of the new Congress was held since the Republicans won the majority, the members asked questions of business owners, and were hosted by a mid-sized business that sells hardwood lumber to furniture makers, cabinetmakers and flooring manufacturers.
The U.S. should “acknowledge” the national security risks associated with outbound investments into China, said Nathaniel Fick, the first ambassador at large of the State Department’s recently established Bureau of Cyberspace and Digital Policy. Fick, speaking during a Feb. 2 event hosted by the German Marshall Fund, suggested he’s expecting government action around outbound investments soon.
New U.S. chip export controls are among the most complex export regulatory provisions ever published and have caused significant uncertainty in the semiconductor industry, trade groups and technology firms told the Bureau of Industry and Security in comments that were due this week. More than 40 companies, trade associations, law firms and others asked BIS to revise parts of the regulations or offer more guidance to avoid hurting U.S. competitiveness, with some saying the new controls may force foreign companies to stop using U.S.-origin items altogether rather than deal with the added compliance obligations.
The Biden administration recently notified companies it no longer will approve license applications for technology shipments to Huawei, moving toward a “total ban” on U.S. sales to the Chinese telecommunications company, the Financial Times reported this week. The Commerce Department already employs a strict licensing policy for exports to the company, but the report said the administration is looking to take “an even tougher stance on China, particularly in the area of cutting-edge technology.”