Export controls need to be improved following reports that the Chinese spy balloon shot down by the U.S. earlier this year contained American technology, Reps. Michael McCaul, R-Texas, and Bill Hagerty, R-Tenn., said in an emailed statement June 29. The lawmakers cited a Wall Street Journal report that said the spy balloon was “loaded with American-made equipment” that allowed it to collect information.
Exports to China
Proposed U.S. guardrails around the Chips Act aren’t likely to stop semiconductor companies from applying for funding, Michael Schmidt, the Commerce Department official in charge of the program, said this week. While Semiconductor Industry Association CEO John Neuffer agreed, he also urged the government to coordinate any chip-related restrictions with trading partners or risk U.S. companies losing Chinese market share, calling the idea of decoupling a “protectionist fairy tale.”
China’s recent restrictions on Micron products are having broader than expected consequences for U.S. exporters, a trade industry conference heard last week, and may portend how future Chinese retaliatory actions will affect U.S. companies.
Many companies are grappling with how best to comply with the Commerce Department’s foreign direct product rule, “one of the key areas” still “unaddressed” by the agency’s regulations and guidance, said Kim Strosnider, a trade lawyer with Covington. She said Commerce’s compliance expectations for the FDP rule are rising despite due diligence challenges faced by industry, pointing to the agency’s record $300 million penalty against Seagate Technology in April (see 2305080029 and 2304190071).
House Select Committee on China Chair Mike Gallagher, R-Wis., is asking the Commerce Department for export licensing information involving Chinese companies with ties to Beijing’s expanding “signals intelligence” presence in Cuba. In a June 20 letter to Commerce and the Office of the Director of National Intelligence, Gallagher said China’s reported effort to expand its military and spy facilities in Cuba (see 2306130062) is likely being “aided” by Chinese telecommunications companies, including those that have violated U.S. export controls to acquire American intellectual property.
The Bureau of Industry and Security is working “day-in and day-out” on a final rule that will make tweaks to its China-related chip export controls released in October (see 2210070049), said BIS Senior Export Policy Analyst Sharron Cook. But a public release of the rule isn’t imminent -- the agency hasn’t yet sent the changes to be reviewed by other agencies, said Hillary Hess, regulatory policy director at BIS.
Even as Europe comes to see China as a systemic rival, the entanglement of the German and Chinese economies continues unabated, and what "de-risking" should look like is hotly contested, witnesses told the U.S.-China Economic and Security Review Commission at a hearing late last week.
Although the Bureau of Industry and Security last month said it doesn’t have a draft rule in place to increase export licensing requirements for Huawei, exporters would be wise to still expect a tightening of restrictions against the Chinese telecommunications company, industry officials said this week. They also didn’t rule out BIS soon increasing export controls against China in other ways, including by potentially adding more items to the scope of its military end-use and end-user (MEU) rule requirements.
China “firmly” opposed the U.S. additions of Chinese entities to its Entity List this week, a Foreign Ministry spokesperson said, calling on the Biden administration to “immediately stop using military and human rights-related issues as pretexts to politicize, instrumentalize and weaponize trade and tech issues.” The U.S. should “stop abusing export control tools such as entity lists to keep Chinese companies down,” the spokesperson said during a regular press conference June 13. The export controls targeted companies in China and elsewhere for supporting China’s military or the government’s human rights abuses in Xinjiang (see 2306120030).
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