Ian Cohen

The U.S. should impose stricter export controls on advanced chip manufacturing equipment to prevent China from getting more of its own semiconductor technologies, experts told the Commerce Department’s Information Systems Technical Advisory Committee meeting. Success of U.S. export controls depends on cooperation with allies, said Carrick Flynn and Saif Khan, research fellows with Georgetown University's Center for Security and Emerging Technology. “Doing this without full buy-in from all partners is going to be worse than doing nothing at all,” Khan said. “That always has to be an overriding principle." Khan predicts China needs “at least a decade” to develop industry-leading advanced semiconductor manufacturing equipment. Flynn suggested the U.S. take risks to prevent China from becoming the world’s leader in advanced technology development. “We do not want the Chinese government to have access to advanced computer chips,” he said. An artificial intelligence "arms race, or a hypersonic missile arms race, or any other technology arms race is not in the best interest of the United States or global security,” he said. China's Washington embassy didn't comment Thursday.

The State Department’s Directorate of Defense Trade Controls is considering permanently revising international traffic in arms regulations so industry employees involved in ITAR can work remotely, said Wednesday's Federal Register. DDTC said, due to industry requests, it will extend through this year temporary telework measures, which had been set to expire July 31. The agency will use that time to “fully investigate the possibility and ramifications of making this modification, or a variation thereof, a permanent revision,” and may seek comments. DDTC said the extension will “provide regulated entities with staffing flexibilities” during the pandemic and it seems "regulated entities will continue to engage in social distancing measures for the foreseeable future.”

Industry and some lawmakers applauded the U.S. loosening export restrictions on drones. The State Department's Friday announcement means it will no longer subject exports of certain unmanned aerial systems to a “strong presumption of denial,” instead imposing a case-by-case review policy on a “subset” of unmanned aircrafts that fly at speeds below 800 kph. The change “acknowledges the evolution” in unmanned aircraft technology, the Aerospace Industry Association said Monday. Northrop Grumman said the new export policy could benefit its “Fire Scout” helicopters, which are unmanned and autonomous. Senate Foreign Relations Committee Chairman Sen. Jim Risch, R-Idaho, urged the administration to continue loosening export restrictions. Risch said “the permanent fix for this issue must be to treat unmanned aircraft the same as other aircraft for the purposes of export.” Committee ranking member Sen. Bob Menendez, D-N.J., called the move “reckless,” saying it may lead to the U.S. exporting unmanned aircraft to human rights abusers. It's “another reckless move by an administration fixated with eliminating the international cooperation that has made the United States and other countries safer for decades,” he said. U.S. export policy for unmanned aircraft was in “dire need of modernization,” the White House said.

The Bureau of Industry and Security has begun a broad review of new export controls on surveillance technologies going to China, which may also include additions to the agency’s entity list, said acting Commerce Department Undersecretary for Industry and Security Cordell Hull. Hull called the review “comprehensive” and “in-depth,” saying it could lead to controls over advanced surveillance tools, artificial intelligence software and biometric technologies. The effort included a business advisory for companies with supply chains in China’s Xinjiang region and a request for industry feedback on the impact of controls on facial recognition software and other surveillance technology (see 2007170024). “We have put the business community on notice,” Hull told Wednesday's U.S. Commission on International Religious Freedom hearing. Hull said BIS is pleased with the impact of its export control regime, saying the restrictions hurt China’s ability to source sensitive U.S technologies. “We believe it's working. We believe our entity listings have impacted millions of dollars of items going to these entities,” Hull said. China's embassy in Washington didn't comment Thursday.

U.K. Foreign Secretary Dominic Raab said his country wasn't “strong-armed” by the U.S. into recent actions against Beijing, saying the U.K. shares many of the same policy goals as the U.S. Instead, Raab said recent U.S. restrictions against Huawei and Chinese officials factored into U.K. policymaking. His country recently announced it's banning Huawei from its 5G network (see 2007140023). “The reality is as a result of U.S. sanctions, we’ve, of course, got to look with a clear-sighted perspective at what that means,” Raab told a news conference Tuesday in London with U.S. Secretary of State Mike Pompeo. The U.K.’s measures are “reflective" of what Prime Minister Boris Johnson believed was in "the best interests of the” British people, said Pompeo. He said he thinks Britain "made a good decision," not because the U.S. said it was a good decision but because U.K. leadership concluded it was "the right thing to do.”

The Commerce Department's new Bureau of Industry and Security agenda touches on several technology issues, our review shows. It mentions an NPRM in BIS’ effort to control emerging and foundational technologies that will request comment about how export controls might affect “legitimate commercial or scientific applications.” BIS said it aims to issue the proposed rule this month. The agenda newly mentions a final rule to adopt new emerging technology controls agreed to at the 2019 Wassenaar plenary. The new controls will cover dual-use goods and technologies. BIS said it aims to issue the rule this month. The agenda includes a new mention of a rule to control “software” for some genetics operations that need export controls.

The Treasury Department Office of Foreign Assets Control fined Amazon more than $130,000 for allegedly violating U.S. sanctions. The company processed online orders sent to a range of sanctioned countries in the Middle East and Asia, and didn't follow reporting requirements for more than 300 transactions done under a Crimea general license, OFAC said Wednesday. The company also processed orders for people “located in or employed by the foreign missions” of Cuba, Iran, North Korea, Sudan and Syria. Amazon’s sanctions screening program “failed to fully analyze all transaction and customer data,” which led to gaps in compliance, the U.S. said. The maximum penalty was more than $1 billion, but OFAC said Amazon self-disclosed the violations. Additional mitigating factors included that Amazon hadn't committed a violation in the previous five years, cooperated with the investigation and conducted an internal probe. The company didn't comment Thursday.

The U.S. government has been slow to incentivize R&D in the semiconductor industry, ceding ground to foreign governments that have been heavily investing in advanced technologies for “decades,” said Semiconductor Industry Association CEO John Neuffer. He praised a recent push by Congress and the administration to provide more such federal funding and said much more is needed. “These would be very, very important first steps,” Neuffer said in an American Enterprise Institute interview Monday. “But when you compare to some other governments, it’s insufficient.” The Trump administration has taken what it says are significant measures to attract semiconductor manufacturing and counter rising competition from China, including convincing Taiwan Semiconductor Manufacturing Co. to build a factory in Arizona (see 2006240045) and increasing license restrictions for foreign exports of semiconductors to Huawei. Instead of more restrictions on China, Neuffer said he wants more domestic spending to aid U.S. companies. He said other governments “identified semiconductors as strategic industries long ago” and “they’ve been plowing substantial amounts into attracting semiconductor manufacturing.” Neuffer said the administration “has been working behind the scenes” on incentives for the semiconductor industry, and encouraged it and Congress to move faster and raise funding levels. The White House didn't comment Tuesday.

The U.S. shouldn't address U.S. and Chinese trade tensions through decoupling, experts told the U.S.-China Economic and Security Review Commission. Instead, they recommended investing more heavily in technology research while pursuing more involvement at international standards bodies. “We need to accept that this is going to go on for the long term,” said David Finkelstein, director of the China and Indo-Pacific security affairs division at CNA, a nonprofit research group. “It's just not enough to [only] confront. We have to be positioned to compete.” The panel is preparing a report on U.S.-China competition to present to Congress in November. Kristine Lee, U.S.-China relations expert at the Center for a New American Security, said “there are a number of important elections coming up” for international bodies. The Commerce Department recently issued a rule to allow U.S. companies to more easily participate in standards setting bodies in which Huawei is a member (see 2006170031). Others advocated Wednesday for more technology investment, especially as China continues to pursue advancements in 5G and artificial intelligence. “Let's put some money into experimental, high-quality AI network-driven infrastructure,” said Barry Naughton, chair of Chinese international affairs at the University of California-San Diego. The White House didn't comment Thursday,

The Committee on Foreign Investment in the U.S. is focused on sectors including semiconductors, monitoring Chinese firms that could try to evade recent stricter U.S. license restrictions on sales of chips and other technology to China and Huawei, trade lawyers said on a Crowell & Moring panel. Another expert called for a balanced U.S. approach to China, speaking on a podcast also released Tuesday. Adelicia Cliffe of Crowell & Moring said CFIUS is increasing scrutiny in an attempt to catch Chinese investors that “may take advantage of vulnerable companies that have been affected by the pandemic.” Cliffe expects “a lot of scrutiny, particularly in the technology sector, for smaller emerging companies that may be desperate for capital during this time.” CFIUS also is taking a closer look at transactions involving personal information and customer data sets, said Caroline Brown, also of the law firm. “But semiconductors, as we know, are front and center,” she said. “It'd be surprising if any deal involving a semiconductor target would not receive scrutiny on the basis of its critical technology.” Increasingly stringent CFIUS reviews and tight export controls against China are expected to continue regardless of the outcome of the upcoming presidential election, said Maria Alejandra del-Cerro, also of Crowell & Moring. “We've seen bipartisan support for export controls on new commercial technology to China. We've seen Democratic leaders just as active and questioning the Commerce Department's decision to issue certain export licenses … for Huawei,” she said. “That pressure on China would continue.” CFIUS didn't comment Wednesday. In Samm Sacks' work on Chinese issues, she keeps in mind that there's a paradox, she told the newly released Technology Policy Institute podcast. "How do we maintain the openness of the U.S. system" while "knowing that that openness has been exploited," asked New America Cybersecurity Policy and China Digital Economy Fellow Sacks. "Are we putting those guardrails in the right places? And I would argue that we probably aren’t right now, but we need them." She mentioned U.S. actions involving Huawei, chips and CFIUS investigating TikTok. TPI President Scott Wallsten called the latter company "a particularly fascinating case." The Chinese platform, which didn't comment now, "falls into all of these debates," noted Wallsten, the podcast's co-emcee. "On the other hand, it is providing direct competition to Facebook and Instagram and all of these companies that so many of the same people who are critical of China, those same people also worry about competition among big tech companies."