Federal agencies are “hyper-focused” on enforcing export restrictions aimed at preventing China from illegally obtaining sensitive U.S. items, witnesses told the Senate Committee on Banking, Housing, and Urban Affairs at a recent hearing.
Elizabeth Rosenberg, assistant treasury secretary for terrorist financing and financial crimes, said the U.S. seeks a “constructive and fair economic relationship with China … that fosters growth and innovation in both countries through healthy competition.” Thea Rozman Kendler, assistant secretary of commerce for export administration, added that even as the U.S. is “de-risking and diversifying” with respect to China on “a narrow slice of technologies,” it is “not interested in decoupling” from China and the two sides “should continue to engage in commercial trade that does not impact U.S. national security or foreign policy interests.”
At the same time, Rosenberg also emphasized that ensuring the national security of the U.S. and its partners is one of the primary objectives of the Biden administration’s economic approach to China. Paul Rosen, assistant treasury secretary for investment security, added that while the U.S. does not “use our national security tools to gain competitive economic advantage or to stop China from growing,” it will also “zealously exercise” those tools to protect national security and “will not compromise on national security concerns – even when they force trade-offs with our economic interests.” Matthew Axelrod, assistant secretary of commerce for export enforcement, agreed, saying the U.S. “remains hyper-focused on preventing [China] from illegally obtaining sensitive U.S. items” through efforts to enhance enforcement capabilities, increase collaboration with partner countries, and aggressively pursue both administrative and criminal enforcement actions.
These officials offered the following insights on the ways their agencies are pursuing national security interests with respect to exports to China.
- Rosenberg said that as trade between China and Russia has increased in the wake of Western sanctions against Moscow, the U.S. has identified some of those transactions as “circumventing U.S. sanctions and export control laws.”
- Rosen noted that, following a congressional expansion of the Committee on Foreign Investment in the United States’ authority via the Foreign Investment Risk Review Modernization Act in 2013, the number of filings processed by CFIUS increased from 237 in 2017 to 436 in 2021, and CFIUS anticipates that the number of cases it handles will “continue at this heightened level.”
- Kendler said the U.S. has had to impose “stronger export controls [on China] targeting predominantly commercial items that can be used in military applications” because Beijing “uses a military-civil fusion strategy to deliberately blur lines between commercial sectors and military programs.”
- Kendler added that the U.S. is ensuring enforcement of these controls by carefully reviewing license applications submitted by exporters and reexporters to send items to China; these had an average processing time of about 90 days in 2022, up from 76 days in 2021 and compared to 43 days for non-China cases. She suggested that this tougher enforcement was also a reason that applications for exports to China dropped by 26.2 percent from 2021 to 2022.
- Nearly 700 Chinese entities are currently on the Entity List, more than 200 of which have been added during the past 30 months. Exports of controlled items to Entity List companies require a license, and applications for such licenses are frequently reviewed under a presumption of denial.
- Axelrod said that since a Bureau of Industry and Security rule change in October 2022 the agency has completed more than 90 end-use checks of exports to China after Beijing had not allowed any such checks for more than two years.
For more information on ensuring your company’s compliance with China export controls, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.
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