Export Controls: Key Challenges

Export Controls: Key Challenges

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Updated January 14, 2021
Export Controls: Key Challenges
Overview
policy, or supply shortages. National security controls are
Congress has authorized the President to control the export
based on a common multilateral control list, known as the
of various items for national security, foreign policy, and
Wassenaar Arrangement (WA). Foreign policy controls
economic reasons. Separate programs and statutes exist for
may be unilateral or multilateral in nature. The EAR
controlling different types of exports, including nuclear
unilaterally control items for antiterrorism, regional
materials and technology, defense articles and services, and
stability, sanctions, or crime control purposes.
dual-use items and technology—items that have both
civilian and military uses. Under each program, U.S.
The EAR also comprises lists of sanctioned, denied, or
government review and licenses of various types are
unverified parties, subject to a license policy of denial. It
required before export. The Departments of Commerce,
also sets out licensing procedures and civil and criminal
State, and Energy administer these programs, in
penalties for violations. While nearly all exports are subject
cooperation with input from other relevant agencies. At the
to the EAR, the Commerce Control List (CCL) establishes
same time, Congress also legislates country-specific
controls on specific items either on a multilateral or
sanctions that restrict aid, trade, and other transactions to
unilateral basis. Sanctioned countries or entities are subject
address U.S. policy concerns about weapons proliferation,
to a policy of denial for all products, whether on the CCL or
regional stability, and human rights, some of which are
not. Table 1 lists the types of items on the CCL.
administered by the Treasury Department.
Table 1. Commerce Control List Categories
Export Control Reform Act (ECRA)
0 – Nuclear Materials, Facilities & Equipment (and Misc. items).
Export controls have become part of the debate over U.S.
technological leadership and attempts by other nations to
1 – Materials, Chemicals, Microorganisms, Toxins.
obtain critical U.S. technology legally or illegally. Congress
2 – Materials Processing.
passed the Export Control Act of 2018 (ECRA) (Subtitle B,
3 – Electronic Design, Development, and Production.
Part 1, P.L. 115-232) as part of a wider effort to revise U.S.
4 – Computers.
trade and investment policy that also included passage of
the Foreign Investment Risk Review Modernization Act
5.1 – Telecommunications.
(FIRRMA) (Title XVII of the same act).
5.2 – Information Security.
6 – Sensors and Lasers.
ECRA replaces most of the expired Export Administration
7 – Navigation and Avionics.
Act of 1979 and provides a permanent statutory basis for
controlling the export of dual-use goods and certain military
8 – Marine.
parts and components. ECRA requires the President to
9 – Aerospace and Propulsion.
control “the export, reexport, and in-country transfer of
Source: Export Administration Regulations, Part 774.
items subject to the jurisdiction of the United States,
whether by United States persons or by foreign persons.”
Issues for Congress
The ECRA requires the Secretary of Commerce to
“
With the passage of ECRA, some Members of Congress
establish and maintain a list” of controlled items, foreign
have expressed interest in expanding and strengthening the
persons, and end-uses determined to be a threat to U.S.
application of export controls, including controls over
national security and foreign policy. The legislation also
emerging, surveillance and repression technologies; deemed
calls on Commerce to require export licenses; “prohibit
exports; and exports to Hong Kong.
unauthorized exports, reexports, and in-country transfers of
controlled items”; and “monitor shipments and other means
Emerging and Foundational Technology
of transfer.”
Perhaps the most significant change in ECRA requires the
President to establish an interagency process—led by
ECRA largely maintains the current system as codified
Commerce, including Defense, State, Energy, and other
under the Export Administration Regulations (EAR) (15
agencies—to identify emerging and foundational
C.F.R. 730 et seq.), which had been maintained under the
technologies. Commerce then is to establish a licensing
International Emergency Economic Powers Act (P.L. 95-
policy for those items. ECRA stipulated that at a minimum,
223) for nearly a quarter-century. Under Commerce, the
countries subject to general U.S. embargoes, or a U.S. arms
Bureau of Industry and Security (BIS) continues to
embargo—including the People’s Republic of China (PRC,
administer the dual-use export control system and the EAR,
or China)—would require a license for export of such
which contains the licensing policy for dual-use items and
technology. Currently, BIS is determining this policy by
certain military parts and components. The regulations
seeking industry and national security stakeholder input on
control items for reasons of national security, foreign
defining emerging technology and the criteria to determine
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whether specific technologies (Table 2) can or should be
to a certain destination, an academic institution or firm
controlled. As a result of this process, BIS has implemented
would need a license to engage a person from that
controls on a few technologies, and has sought to include
destination to allow that person to work with that
them in the WA dual-use list.
technology. The focus on illicit technology transfer has
heightened concerns about the efficacy of deemed export
Table 2. Emerging and Foundational Technologies
licensing.

Additive manufacturing

Surveillance and Repression Technology Controls

Advanced computing technology

Some observers have expressed concern about the need to

Advanced materials

strengthen export controls on items that assist repressive

Advanced surveillance technology

regimes to surveil and control their populations. Some of

Artificial intelligence (AI) and machine learning

these technologies are on the emerging and foundational list

Biotechnology

(see Table 2) and may yet be subject to export controls.

Brain-computer interfaces

Data analytics technology
Recently, Congress has paid particular attention to the

Hypersonics
export of surveillance equipment, including facial and voice

Logistics technologies
recognition technologies, as well as DNA sequencing

Microprocessor technology
technology of potential use by repressive regimes.

Position, navigation and timing (PNT) technology
Legislation (S. 178, H.R. 649) considered in the 116th

Quantum information and sensing technology
Congress to support the Uyghur minority in China’s

Robotics
Xinjiang province would have directed the Commerce
Source: Bureau of Industry and Security.
Secretary to identify and control technology used to
“suppress individual privacy, freedom of movement, and
other basic human rights.”
This process also serves to identify technologies to be
BIS has added 42 entities to the
included in potential reviews of national security
entity list due to their role in human rights abuses in the
implications of certain foreign investment transactions.
province.
Under FIRRMA, the critical technologies selected by this
Hong Kong
process would receive additional screening by the
China’
Committee on Foreign Investment in the United States
s enactment of a national security law for Hong
(CFIUS). This process responds to concerns that potential
Kong in June 2020, as well as other actions of the PRC and
adversaries could obtain nascent technology through
Hong Kong governments, contributed to President Trump
investment in U.S. firms, although the arguably slow pace
issuing Executive Order 13936 (EO13936) in July 2020,
of identification of these technologies may delay
which eliminated or suspended different and preferential
implementation of key provisions of FIRRMA and ECRA.
treatment for Hong Kong. EO13936 also suspended Hong
Kong’s separate treatment under the Arms Export Control
Entity List
Act. Under the 1992 Hong Kong Policy Act, the U.S.
The Trump Administration made use of the Entity List as a
government recognized Hong Kong as a separate customs
key policy tool to restrict the export of U.S. dual-use
territory and maintained special export controls agreements
technologies to Chinese entities of concern. The Entity List
with the Hong Kong government predicated on Hong Kong
maintaining a “high degree of autonomy” under the “one
was first published in 1997 as a way to inform the public of
country, two systems” policy enshrined in
entities engaged in the diversion of items to weapons of
the Joint
mass destruction (WMD) programs. Over time, the list has
Declaration. Some policymakers had expressed concern,
grown to include entities subject to State Department
given the perceived erosion of Hong Kong autonomy in
sanctions, as well as entities acting “contrary of the national
other areas, about Hong Kong’s continued ability to prevent
security and foreign policy interests of the United States.”
diversion of sensitive goods to China.
Exports to these entities require licenses and many face a
Multilateral Controls
presumption of denial, although some applications are
examined and licenses are issued on a case-by-case basis.
Most observers would concur that multilateral controls are
The Trump Administration added China’s state-led national
more effective than unilateral controls in preventing the
champions, such as ZTE, Huawei, and Semiconductor
unwanted dissemination of strategic goods and technology.
However, other governments’ commercial considerations
Manufacturing and Industry Corp (SMIC). It also added
other entities: linked to China’s military; involved in
and differing threat perceptions have complicated reaching
reclaiming disputed territory in the South China Sea;
agreement on such controls. The WA list is a common
furthering surveillance and human rights abuses; engaging
control list, but each member state determines the manner
in theft of trade secrets; and state security services.
in which those controls are applied. Identifying foreign
availability in the licensing process can inform decisions on
Deemed Exports
specific and general controls to avoid undermining U.S.
Congress is also giving attention to “deemed exports.”
industry competitiveness. Congress may urge the incoming
When an item is exported, the technology and software
Biden Administration to engage in greater adoption of
associated with that item are also exported. An item is
common export control policies among like-minded
“deemed” to be exported when a foreign national receives
countries and any needed reforms in multilateral regimes.
information about controlled technology in the United
States, whether through academic research or work in a
Ian F. Fergusson, Specialist in International Trade and
company laboratory. If an item requires a license for export
Finance
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Export Controls: Key Challenges

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