Congress Considers Legislation to Transfer Export Control Jurisdiction from Commerce Department – ​​Publications

LawFlash






November 07, 2022

Based on consistent feedback from the U.S. Congress, think tanks, and the U.S.-China Economic and Security Review Commission, several members of Congress have proposed legislation to transfer the Commerce export control jurisdiction at the Defense Technology Security Administration.

On October 28, 2022, House Representatives Banks, Wittman, and Steube introduced HR 9241, the National Security Priority in Export Controls Act of 2022. On the same day, the bill was referred to the Foreign Affairs, Armed Forces, and Appropriations Committees. for exam. This bill marks the culmination of extensive discussions over the past few years regarding the Department of Commerce’s ability to manage export controls covering dual-use goods, software, and technology. Unsurprisingly, the bill outlines the findings that form the basis of the proposed transfer of jurisdiction out of Commerce, including the following:

  • Commerce, through the Bureau of Industry and Security (BIS), has failed to meet the requirements of the 2018 Export Control Reform Act (ECRA) to tighten restrictions on emerging and foundational technologies, especially for countries of concern.
  • The agency remains unable to manage its conflicting missions of protecting national security and encouraging legitimate trade.
  • The BRI has taken a more relaxed approach to licensing, even for “particularly important technologies”, as the agency has approved nearly all permits sought for exports to China.
  • BIS has been ineffective in identifying and designating Chinese companies that meet military end-user requirements – citing statistics that indicate BIS has only designated 70 parties on the Entity List while there are “tens of thousands of Chinese entities” that may meet the criteria.
  • BIS has not taken any steps to restrict Fundamental Technologies as required by ECRA.

In this context, the bill proposes to transfer the licenses and related powers delegated to Commerce under ECRA and other authorities to the Defense Technology Security Administration (DTSA) within the Department of Defense. As part of this transfer, the invoice:

  • Ensure that 20% of the funding currently allocated to Commerce is reallocated to the DTSA for the execution of the new DTSA authorizations
  • Prohibits the transfer of any Senior Executive Service Commerce personnel to the DTSA to fulfill statutory responsibilities

It appears that the proposed bill seeks to address at least three fundamental national security concerns:

  • An “apparent equity imbalance”, i.e. whether national security considerations are sufficiently weighed when juxtaposed with economic factors. Based on the statement of license made in the Whereas clause, the bill emphasizes that exports continue relatively uninterrupted to China, regardless of the discoveries made in recent years regarding US-China tensions. .
  • Commerce ineffectively fulfills the congressional mandates included in ECRA, both in the designation of emerging and foundational technologies as well as in its China-related licensing position.
  • Trade appears equally ineffective in managing threats posed by organizations or entities that pose national security concerns. In this vein, the Whereas clause cites the number of Chinese entities currently on the Entity List as an indication of slow or weak responses to the threats posed.

The proposed legislation raises a number of lingering concerns that can be seen to impact U.S. national security and foreign policy objectives and interests. Assuming the bill makes progress through Congress and makes it to President Biden’s desk — and it’s unclear how likely that is given the upcoming election, potential outcome, and a range of legislative priorities — the bill can solve a host of problems that have plagued the Export Administration Regulations (EAR) since the 1970s, including:

  • Trade Control List (CCL) duplications and inefficiencies – i.e. the list is out of date by the time it is published because it is so granular
  • The release of the CCL creates national security concerns – that is, as currently written, the CCL provides a granular technical roadmap to competitors and adversaries regarding technical areas of concern and sensitivity for the US government
  • The process is not designed to provide the U.S. government with visibility into export activities, whether overseas or in the U.S. i.e. the EAR and CCL adopt a “catch and release” approach to managing what can be exported. As a result, broad categories of items are included in the CCL, but few licenses apply. As a result, the trade, through its many pre-cleared versions under license exceptions, lacks visibility into ongoing transfers, as parties do not file license applications or submit reports on post-export activities. , unless necessary. The timing of when these licenses are required remains low, as millions of exports take place each year and the volume of licenses is statistically insignificant in this context.

Should this bill become law, we expect a change in the overall analytical framework that will apply to export licensing, as well as the way products, technologies and software are identified and licensed.

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