A report released earlier this month by House Foreign Affairs Committee Chairman Michael McCaul was sharply critical of the Bureau of Industry and Security and called for a number of reforms to the agency and the export controls it administers.

If the U.S. is to outcompete China, the report states, “the fossilized licensing bureaucracy that oversees export controls must break free from its post-Cold War, free trade mentality” and “regain its raison d’etre in identifying and controlling technology and being the vanguard of strategic competition.” Currently, however, the report alleges, BIS “too often makes business and commerce the priority over national security.” For example, “in 2020 nearly 98 percent of [Commerce Control List] items exported to China went without a license,” and “even when a license is required, data indicate that BIS almost never denies it.”

The report thus concludes that “BIS’ current organizational structure and policies no longer work” and calls for “major reforming to ensure the national security  mission is not undermined by countervailing goals – such as export promotion.” Other recommended actions include the following.

- The entire corporate network of listed companies should be incorporated into each Entity List designation, and at the very least BIS should adopt OFAC’s 50 percent rule when listing a company.

- There should be a policy of denial for exports of all items controlled for national security reasons to China.

- BIS should seriously review EAR 99 technologies, which BIS refers to as “low-technology consumer goods” but which the report says “can be high-tech and militarily useful,” and control or re-control items on the Commerce Control List.

- BIS should apply a presumption of denial for exports of all items subject to the EAR to companies on the Entity List, and “presumption of denial” should be defined in law or regulation to mean that a license will be denied essentially in every instance no matter the item.

- Because BIS “struggles to get criminal prosecutions due to a statutory requirement to prove ‘willfulness,’” Congress should legislate a new standard for such prosecutions to support enforcement actions that deter future evasion or violations.

- The Department of Commerce should renegotiate its end-use check agreement with China, which limits BIS’ ability to conduct checks on its own terms and schedules, or impose greater restrictions on exports to China.

- The U.S. should push for bilateral and plurilateral export control agreements on semiconductors, artificial intelligence, quantum technology, and biotechnology that require participants to adopt the same legal and regulatory requirements.

- Approval processes for export licensing must be reformed to adequately include input from national security bodies.

- U.S. law should be amended so BIS can charge fees on licenses to support enforcement efforts.

McCaul also said BIS “must institute necessary reforms to keep U.S. technology from our adversaries” before Congress agrees to provide additional funds for the agency, which Commerce Secretary Gina Raimondo said recently are needed to increase its enforcement efforts.

McCaul’s committee unanimously approved Dec. 13 several bills that would amend export laws to advance some of the reforms called for in the report.

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