Tech Industry Pushing Back on Potential Expanded Export Restrictions

Technology and semiconductor trade groups are objecting to increased export restrictions under consideration by the Trump administration, saying the controls could lead to industry uncertainty with significant impacts on semiconductor companies. In an April 6 letter to Commerce Secretary Wilbur Ross, the groups urged the administration to request industry input before finalizing the rule, which reportedly includes three measures to tighten restrictions on China’s ability to obtain advanced U.S. technology (see 2004020012).

If approved by Trump, the measures could block Huawei and other Chinese companies from buying U.S. semiconductors. The administration has discussed the changes for months (see 1912100033), which has included broader discussions on expanding Commerce’s export control jurisdiction to a broader array of foreign sales containing U.S. goods that go beyond exports to just Huawei (see 2002050047).

Some industry representatives are optimistic that the initial, upcoming changes will be narrow. “Initially there was some talk about a generic change in de minimis,” said Richard Sawaya, vice president of the National Foreign Trade Council, which was one of nine trade groups that signed the letter to Ross. “I think the effort within the interagency process is to narrow that and tailor it as much as possible so that it is Huawei-specific.” Sawaya said NFTC has received “positive” signals that the scope of the change will be narrow.

The administration understands industries’ concerns, Sawaya said, suggesting they are moving forward cautiously. “The intergovernmental process well understands that while their campaign against Huawei on national security grounds … is legitimate,” Sawaya said, “using export controls to affect that has to be taken very carefully.” Sawaya also pointed to potential pushback from China, which may retaliate if the U.S. follows through on the restrictions (see 2003310053). Sawaya said the restrictions could lead to U.S. intellectual property being “designed out of the supply chain.”

As the changes have gained footing within the administration, one of industry’s main concerns is ensuring they are proposed for public comment before being finalized, Sawaya said. He said the administration should adhere to the “same discipline” outlined under the Export Control Reform Act, which lists a strong preference for public comment. “If you're going to make the national security argument” to impose the export controls, “then make it specific and show us the cards,” Sawaya said. “Give all the stakeholders enough time to get enough of their fact-specific concerns on the table with the regulators.”

In the letter, the groups said a public comment period is “critical” to ensure the rule is designed to protect U.S. national security while also avoiding “unintended adverse consequences” on U.S. industry. “Abrupt changes to the export controls regulations for semiconductors will create uncertainty for the entire technology industry,” the letter said. “It is imperative that any regulatory changes be narrowly tailored and minimize damage to industry.” The groups also cited the COVID-19 pandemic, which is causing “unprecedented … economic disruption.” A public comment period “would help ensure that Commerce benefits from the industry’s views and avoids unintentionally exacerbating an already difficult economic situation.” Commerce did not comment.