The Biden administration should take an “end-user list-based approach” to restricting investments in Chinese artificial intelligence companies as part of its recent executive order on outbound investment (see 2308090066 and 2308100045), researchers with Georgetown’s Center for Security and Emerging Technology said in a report this week. The report said the Treasury Department can use its Chinese Military-Industrial Complex Companies (CMIC) List as a “foundation” by updating and expanding it to restrict AI investments beyond publicly traded securities.
Ian Cohen
Ian Cohen, Deputy Managing Editor, is a reporter with Export Compliance Daily and its sister publications International Trade Today and Trade Law Daily, where he covers export controls, sanctions and international trade issues. He previously worked as a local government reporter in South Florida. Ian graduated with a journalism degree from the University of Florida in 2017 and lives in Washington, D.C. He joined the staff of Warren Communications News in 2019.
The Bureau of Industry and Security will now be able to renew its temporary denial orders for one year instead of the previous maximum of 180 days, the agency said in a final rule. BIS said it can now request extended renewals of TDOs if it demonstrates the parties subject to the orders -- which generally suspend them from participating in transactions subject to the Export Administration Regulations -- have “engaged in a pattern of repeated, ongoing and/or continuous apparent violations of the EAR.”
The State Department fined a U.S.-based specialty chemicals supplier $850,000 for allegedly violating defense export regulations and failing to voluntarily disclose those violations, the agency announced in an order and settlement agreement this week. The Directorate of Defense Trade Controls said Island Pyrochemical Industries Corp. illegally acted as a broker between Brazilian and Chinese companies for shipments of chemicals used in explosives and made false statements on a license application to DDTC.
The U.S. and China launched a new commercial trade working group and a new pathway to exchange information on export control enforcement, two initiatives to allow the countries to better communicate around sensitive trade issues, the Commerce Department announced during meetings between Washington and Beijing officials this week. The export enforcement information sharing initiative, which will meet for the first time this week, is aimed at reducing “misunderstanding” surrounding U.S. policies toward China, Commerce said, including export restrictions on critical and sensitive technologies.
The Committee on Foreign Investment in the U.S. may continue to see a drop in short-form declarations, particularly if more declarations continue to result in full filings, said Laura Fraedrich, a lawyer with Lowenstein Sandler. She said the decrease in declarations submitted to CFIUS last year -- the first drop since the concept was introduced in 2018 -- highlights the challenges investors face in assessing how best to approach CFIUS.
American chipmaker Nvidia continued to raise alarms this week about the potential of additional export restrictions on the U.S. semiconductor industry, saying new rules will hurt its long-term sales to China.
U.S. national security agencies recently warned the American space industry about increasing risks of theft from foreign intelligence services, saying companies need to be vigilant to protect their technology, data and intellectual property. A joint alert issued this month by the FBI, the National Counterintelligence and Security Center and the Air Force includes a list of red flags that may signal IP theft from foreign intelligence bodies and explains how the space industry can mitigate those risks.
The Biden administration’s road to implement regulations for its outbound investment executive order will be “incredibly complex,” particularly if agencies disagree on how narrow or broad to scope the restrictions,Thomas Feddo, a former Treasury Department official, said during a webinar this week. Lawyers on the webinar said investors are “very concerned” about the rules having a potential “chilling” effect on a broad range of investments, especially if the government fails to adequately define a range of key terms in the executive order.
The U.S. and Europe should create a shared list of companies subject to investment restrictions, which would help both sides better harmonize their inbound and outbound screening rules and create a “level playing field” for investors, said Zongyuan Zoe Liu, a China studies fellow at the Council on Foreign Relations. She also said the two sides could create a shared “white list” of foreign investors that would be exempt from the restrictions, streamlining filings before the Committee on Foreign Investment in the U.S. and reviews conducted by EU member states.
The Treasury Department is putting eight more military bases under the jurisdiction of the Committee on Foreign Investment in the U.S. after proposing the additions in May (see 2305040052). The expansion, effective Sept. 22, includes the Grand Forks Air Force Base in North Dakota that was the subject of a controversial CFIUS decision last year (see 2212150035, 2212290023 and 2208310066) as well as bases in Texas, California, South Dakota, Iowa and Arizona. CFIUS will be able to intervene in certain land purchases by foreign buyers if they are near any of those sensitive military bases.