The Trump administration is prioritizing efforts surrounding its export controls, investment screening and diplomacy to restrict China from acquiring sensitive dual-use technologies, a senior State Department official said. The official, speaking to reporters March 12, said China has ramped up technology theft and said companies and research institutions should be cautious of any attempts by Chinese companies to divert their products for military end-use, which are often masked in “incentives and inducements.”
Exports to China
Continued U.S. restrictions on exports of technology to Chinese companies could have “profound negative repercussions” for the U.S. semiconductor industry, significantly depleting their global competitive standing, according to a March 9 report from the Boston Consulting Group. If current export control trends continue or escalate, leading to a further decoupling between U.S. and China, U.S. semiconductor companies could lose “8 percentage points of global share and 16% of their revenues,” the report said. And if the U.S. bans semiconductor companies from selling to Chinese customers, U.S. companies would lose nearly 40 percent of their revenues, the report said, leading to “severe” cuts in research and development and losses of thousands of jobs.
The Commerce Department is “pushing forward” on increased restrictions of foreign exports to Huawei that contain U.S. content, Secretary Wilbur Ross said during a March 5 Senate hearing. Sen. Chris Van Hollen, D-Md., told Ross he hopes Commerce follows through with the restrictions -- which would include changes to the de minimis rule and the Direct Product Rule (see 2002050047) -- adding that Commerce has been “appropriately aggressive” in pursuing more stringent controls on technology exports to Huawei and China. But Van Hollen noted that Commerce has faced pushback from other parts of the Trump administration, including the Defense and the Treasury Departments (see 2001240012).
China should address and clarify several of its proposed export control provisions announced in its draft export law (see 2002040059 and 2001100047), more than 10 U.S., European and Japanese trade associations said in comments. The comments, released in February by the Center for Information on Security Trade Control, said the country should take “careful consideration” before finalizing the law and said trade associations have “significant outstanding concerns.” The comments were endorsed by the U.S. Computing Technology Industry Association and the National Association of Manufacturers.
Discussions within the Commerce Department to expand U.S. export control jurisdiction over foreign exports to Huawei and beyond would have a chilling effect on the U.S. semiconductor industry, said John Neuffer, president of the Semiconductor Industry Association. Neuffer said current U.S. export restrictions on Huawei are already hurting the industry’s ability to sell to China -- which represents about 35% of U.S. semiconductor sales -- and more restrictions would further alienate Chinese customers who are weary of being added to Commerce’s Entity List. “Some of them are afraid they’re next,” Neuffer said during a Feb. 18 panel hosted by the Information Technology and Innovation Foundation.
The Commerce Department Bureau of Industry and Security asked for an 8% boost in funding for the 2021 fiscal year to increase export control compliance and enforcement, bolster initiatives to counter China, and to better identify emerging and foundational technologies. BIS’s request for a $10 million budget increase, submitted to Congress last week, comes as the agency plans to roll out a series of export controls on sensitive technologies (see 1912160032), which will increase its involvement in the Trump administration's effort to sustain the U.S.'s technological advantage over China. BIS specifically asked for just over $1 million and five new positions to help it control emerging and foundational technologies and enforce those controls.
The coronavirus outbreak could impact China’s purchase commitments involving U.S. agricultural products under the phase one trade deal, White House national security adviser Robert O’Brien said. The virus could have its biggest impact on the first year of the deal, O’Brien said, which was expected to include $40 billion in U.S. agricultural exports to China (see 2001150073). The virus may also impact what the U.S. Department of Agriculture secretary said would be a “record year” for U.S. agricultural exports (see 2001210031).
North Korea continued to violate United Nations Security Council sanctions in 2019 with the help of China, according to a Feb. 10 Reuters report. North Korea continued improving its missile programs, imported refined petroleum and exported about $370 million worth of coal using Chinese barges, Reuters said, referencing a not-yet-released UN report expected to be issued next month. Most of North Korea’s illegal coal exports were conducted through ship-to-ship transfers from North Korean vessels to Chinese barges, the report said, which delivered the coal directly to ports in China’s Hangzhou Bay and facilities along the Yangtze River.
A Chinese national and former Raytheon engineer was charged with violating the International Traffic in Arms Regulations after he took a company laptop with sensitive military technology data to China, according to an indictment filed Jan. 29. Wei Sun, who worked as an electrical engineer for Raytheon Missile Systems from 2009 to 2019, had access to “advanced and sensitive defense-related technology” on his laptop, the indictment said, and his trip overseas constituted an illegal export of ITAR-controlled defense articles. Sun’s computer contained controlled data covered under Categories 4 (launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs and mines) and 11 (military electronics) of the ITAR, including a “Field Programmable Gate Array,” according to an unsealed complaint.
China took a “few positive steps” to revise the draft of its export control law (see 2001100047) but should address several key areas of concern for U.S. and Chinese companies, the U.S. China Business Council said in comments released this week. The USCBC asked China to clarify the scope of its export controls and the term “national security,” provide a clearer definition for activities that are “deemed exports,” and consider more relaxed requirements for end-user statements and certificates.