Congressional Panel Calls for New White House Office to Oversee ECRA Effort

Among its 32 recommendations, the commission said Congress should establish a new group in the White House to speed up controls on emerging and foundational technologies and oversee multilateral work on foreign investment reviews. It also said lawmakers should improve the government’s ability to verify whether export-controlled goods are being sent to the correct end-user, add more Chinese universities to the Entity List, broaden investment restrictions against Chinese military companies and take other actions to counter the growing economic, trade and national security risks posed by the Chinese government.

The commissioners’ recommendations could make “substantial changes to rationalize and make consistent the U.S. approach to sanctions and export controls,” Vice-Chair Robin Cleveland said during a virtual event announcing the report. The commissioners partly justified its aggressive recommendations by pointing to recent moves by Beijing to counter U.S. trade restrictions, including establishing its own sanctions and export control regimes (see 2107080057). Those regulations are “aimed especially” at weakening “U.S. export controls on Chinese companies and financial sanctions on Chinese individuals,” the report said.

The commission recommended several steps to “ensure the effective implementation” of the Export Control Reform Act of 2018, which requires the Bureau of Industry and Security to control emerging and foundational technologies. It said Congress should instead create a Technology Transfer Review Group (TTRG) at the White House that would be “responsible” for identifying emerging and foundational technologies. The group -- which would be chaired by the secretary of defense and include other Cabinet secretaries or “designees,” including from Commerce -- would “direct” BIS to implement the controls, the commission said.

That procedure would be a shift from the current process, whereby interagency “sprint groups” created by Commerce work to identify those technologies and craft controls. The recommendation follows a June report by the commission that said Commerce has “failed” to carry out its export control responsibilities under ECRA (see 2106020024), and comes amid criticism from Republican lawmakers who say the agency is moving too slowly to impose controls (see 2110250035). Commerce officials have said the agency has made progress under ECRA, and that the control effort is a continuous process that will not result in an exhaustive list of controlled emerging and foundational technologies.

Along with directing BIS’s export control efforts, the TTRG would also “oversee” U.S. engagement with allies on export controls and foreign investment screening issues. The group would also work with BIS, the Justice Department and other agencies to "align" U.S. deemed export controls with Chinese talent recruitment programs, including the 1,000 Talents Program, that are “designed to acquire U.S. technology and capabilities.”

Another recommendation would seek to better harmonize U.S. export controls and sanctions across all agencies. The commission said Congress should introduce legislation that would require any Chinese entity sanctioned under one U.S. authority to “be automatically sanctioned under other authorities,” unless the entity receives a waiver from the president or the sanctioning agency. This requirement could ensure, for example, that all companies on BIS’s Entity List are also placed on the Treasury Department’s Specially Designated Nationals List, the commission said.

Several commissioners said this recommendation would represent a more “rational” approach to U.S. sanctions policy. Companies should not be able to “skirt our laws by being on one list but not on others,” Commissioner Michael Wessel said.

Commissioner Derek Scissors agreed, adding that the U.S. should also change its policies to better sanction subsidiaries of their designated parent companies, and vice versa. “If the parent has done something we really don't like and U.S. sanctions are justified, all of its subsidiaries should be sanctioned. Similarly, if a subsidiary has done something we really don't like that deserves U.S. sanctions,” its parent company should be sanctioned, Scissors said. “That’s an obvious step in U.S. policymaking that we have not implemented yet.”

He also said U.S. export control policies should be better aligned with financing restrictions so American money isn’t inadvertently helping China work around export restrictions. “If we’ve already decided that technology shouldn’t be shared, we certainly don't want to give the Chinese money to develop that technology,” Scissors said. “If the technology is restricted, then money to support that technology should also be restricted. That's just sensible American policy.”

Congress should also devote more resources to expanding the government’s end-user verification efforts for export-controlled goods, the commission said. The report said export licenses to certain entities should “receive strict scrutiny,” including companies that contribute to Chinese civil-military fusion efforts or that have “direct and formal ties” to the Chinese government. “The inability to identify end-user facilities and, if identified, the lack of adequate and timely access to these facilities should strongly inform investigating officials and licensing officials,” the commission said.

Commissioners also urged Congress and the administration to more broadly review whether the U.S. is appropriately applying export restrictions and sanctions, particularly in research and academic environments. Congress should identify more Chinese universities and research institutes that should be added to the Entity list, especially those that work with the Chinese Academy of Engineering Physics, the Northwest Institute of Nuclear Technology and other “Chinese institutions involved in nuclear weapons development,” the report said.

As part of this effort, the administration should impose a license policy of presumption of denial for certain exports to those entities, the report said. The government should also maintain a list of “all academic partnerships in fields with applications to nuclear weapons development” between Chinese and U.S. universities that receive federal funding. The government can use that list to determine whether any of those academic partnership activities should be subject to export controls, the commission said.

Congress should also expand the U.S. investment ban against Chinese military companies (see 2106030067) and create a “more comprehensive list” of companies that support the Chinese military-industrial complex. The list should include companies designated by Chinese securities issuing and trading entities as supporting the military-industrial complex.