U.S. Export Controls and China

U.S. Export Controls and China

Updated March 24, 2022
U.S. Export Controls and China
Since 2018, Congress and the executive branch have
specific destinations, end use, and end user controls. On the
revised—through legislation, regulation, and licensing
CCL, national security (NS) controlled items are on the
practices—the U.S. export control system that regulates
Wassenaar Arrangement’s multilateral control list. The
dual-use exports (goods and technology that may have both
EAR presumes denial for license applications of NS items
civilian and military uses). Much of the legislative reform
that would make a direct and significant contribution to
has focused on controlling emerging and foundational
China’s military. Separate statutes and regulations control
technologies, strengthening other technology controls and
nuclear materials and technology and defense articles and
licensing practices, engaging multilaterally to ensure U.S.
services. U.S. law has prohibited arms sales to China since
controls are effective, and considering the impact of
1989. Congress has also mandated a policy of denial for
controls on the U.S. economy, including the foreign
exports of satellite and space equipment to China.
availability of U.S. products subject to control. Many of
these changes were efforts to address concerns about the
Figure 1. 2020 U.S. Exports to China and BIS Actions
People’s Republic of China’s (PRC or China) pursuit of
civilian and military leadership in advanced technologies
through U.S. commercial ties. Congress plays a key role in
overseeing the reforms it enacted and shaping the U.S.
export control regime to address U.S. national security and
foreign policy concerns, including those posed by China.
China’s Industrial Policies
China’s

state-led industrial policies, such as Made in China
Source: CRS with reporting data from BIS.
2025 (MIC 2025), seek to create competitive advantages for
Note: EAR99 items are subject to the EAR, but are not control ed.
China in strategic industries, in part by obtaining
Percentages are based on the value of U.S. exports.
technology from U.S. and foreign firms. MIC 2025 aims to
establish China’s leadership in emerging technologies

critical to future commercial, government, and military
U.S. Licensing Approach
capabilities. Priority areas include advanced manufacturing,
The U.S. government only controls or restricts a small
aerospace, artificial intelligence, information technology,
percentage of U.S. technology exports to China in practice.
new materials, robotics, and semiconductors. China’s
BIS has removed from the CCL or waived licensing
military-civil fusion (MCF) program also seeks to leverage
requirements for much of U.S. technology trade to China
MIC 2025 technological advancements for military
since the 1990s as certain technologies have become more
development. Some experts say that China’s approach blurs
widely available globally and in response to U.S. business
commercial and military distinctions and may challenge the
interests in the China market. Before new rules in May
U.S. export control regime’s ability to distinguish between
2020, BIS waived license requirements for NS items
military and civilian end use and end users. China’s policies
destined for civilian end use in China in sectors such as
in strategic sectors often require a PRC partner, frequently
aerospace, computing, and semiconductors. An estimated
state-tied, to own or otherwise control U.S. technology that
18.1% of $124.6 billion in U.S. exports to China in 2020
is transferred to China, potentially increasing risks that U.S.
($22.6 billion) involved dual-use technologies on the CCL
technology could support China’s military.
and subject to controls. BIS required licenses for 2.1%, or
$478 million of these CCL technology exports. Most CCL
U.S. Dual-Use Export Controls
technology exports—97.9% or $22.1 billion—went to
The Export Control Reform Act of 2018 (ECRA) (P.L. 115-
China without a license. (Figure 1).
232) reestablished nonemergency authority for the
President to control dual-use exports for national security
Separately, BIS reported that it reviewed $112 billion in
and foreign policy reasons and to coordinate with
licenses for U.S. software and technology exports to China
multilateral export control regimes, and provided policy
in 2020 and denied 2.2% ($471 million). The $112 billion
requirements for setting controls. The Bureau of Industry
in licenses in 2020 increased from $6.9 billion in 2019; the
and Security (BIS) of the Department of Commerce
increase might reflect licenses, including for EAR 99 items,
administers dual-use export controls and chairs an
required for PRC firms added to the EL since 2019. EAR
interagency process that includes the Departments of
99 includes nonsensitive products and potentially sensitive
Defense (DOD), State, and Energy. BIS administers these
technologies in light of China’s dual-use programs. ECRA
controls through the Export Administration Regulations
called for a review of the CCL and EAR99 to determine
(EAR, 15 C.F.R. 730 et seq.), which includes the
whether some EAR99 technologies should be added to the
Commerce Control List (CCL) of dual-use technologies
CCL. In 2020, BIS denied three of 482 licenses to release
subject to controls. The EAR sets licensing policy for
U.S.-controlled technology and knowhow to PRC nationals.
https://crsreports.congress.gov

U.S. Export Controls and China
BIS Entity List
 Clarifying that existing U.S. controls apply to re-
Since 2018, the U.S. government has increased use of the
exports, regardless of the structure of the underlying
BIS Entity List (EL) to restrict some dual-use trade with
transaction, including identifying and considering any
China by placing certain PRC firms of concern on the list.
foreign party to a license with a significant ownership
The EL identifies persons involved, or with the potential to
interest. This requires more detail on ultimate end users
be involved, in activities contrary to U.S. national security
and scrutiny of joint ventures. Additionally, after the
or foreign policy interests. BIS typically requires a license
U.S. government decision in June 2020 to no longer
for any U.S. export of EAR items to those listed. EL listings
treat Hong Kong separately from China, BIS imposed
often presume an export denial, but licensing guidance—
new licensing conditions for U.S. exports to Hong Kong
such as narrow or low technology thresholds, partial listing
and re-exports from Hong Kong to mainland China.
of firms, and case-by-case approval—appears to facilitate
 Requiring the President to create an interagency process
the export of some U.S. technology and CCL items to PRC
to create controls on “emerging and foundational
firms on the EL. A lack of restrictions on 4G, 6G, cloud,
technologies” of concern—including through a review
and, until recently, undersea cable technologies has allowed
of the CCL—and regulate their release to foreign
Huawei to purchase U.S. technology. In 2020, Huawei sold
persons by, at a minimum, requiring an export license.
its Honor 5G mobile business to the PRC government. BIS
has not added Honor to the EL to extend Huawei
 Reviewing the interagency dispute resolution process
restrictions to the firm. EL restrictions for China’s foundry,
and requiring BIS to work with DOD on commodity
Semiconductor Manufacturing International Corporation
classifications to determine when a license is required.
(SMIC), apply to technology below 10 nanometers (nm),
 Adding a role for the Director of National Intelligence
allowing trade at and above 14 nm to continue. In October
and considering the U.S. industrial base in setting
2021, the House Foreign Affairs Committee released BIS
controls and in licensing decisions.
licensing data for Huawei and SMIC from November 2020
to April 2021. Much of it involved semiconductor
 Defining dual-use to include law-enforcement
technology: BIS approved 113 licenses for Huawei ($61.4
applications. Relatedly, crime control equipment exports
billion); and returned 48 ($29.8 billion) without action. BIS
to China require a license. Concerns about China’s
approved 188 licenses for SMIC ($41.9 billion), and
human rights abuses and surveillance activities have led
returned 17 ($1.2 billion) without action.
to tighter scrutiny of these exports to China.

In August 2020, BIS amended the foreign-direct product
Issues for Congress
rule to restrict Huawei’s ability to acquire chips from any
Some Members have expressed concerns about a slow pace
source using U.S.-controlled equipment or software, such as
of implementing some of the reforms required by statute.
TSMC in Taiwan; other PRC firms are not restricted. In
For example, while BIS has initiated a rulemaking process
April 2021, BIS added PRC firm Pythium to the EL for the
for emerging technologies and proposed an approach for
firm’s role in China’s hypersonic weapons program—BIS
foundational technologies, it has established few new
does not appear to restrict Pythium’s and other PRC firms’
controls. This, some argue, could impede congressional
use of U.S. open source technology platforms and U.S.
reforms that expanded the authority of the Committee on
software tools to design and test advanced chips for China’s
Foreign Investment in the United States (CFIUS) to review
strategic advanced computing programs. In December
PRC and other foreign investments in critical and emerging
2021, BIS added China’s Academy of Military Medical
technologies below thresholds of foreign control. Issues for
Sciences and eleven of its institutes to the EL; these
possible oversight or legislative action include:
controls may not pertain to U.S. research ties with China.
 The status of ECRA implementation and whether the pace and
scope of actions are sufficient without greater oversight or
Military-Tied Firms
changes to the export control regime.
In late 2020, BIS extended licensing requirements for PRC
 The impact of the pace and scope of ECRA’s implementation
firms identified as military-end users; it presumed denial for
on other congressional reforms like CFIUS.
certain, but not all, CCL exports to these firms. Many PRC
 The global context of export controls and practices to ascertain
military firms do not appear to be on the BIS military-end
whether to pursue more multilateral controls and reforms.
users list or the EL. The BIS lists include a subset of the
 The status of controlling emerging and existing technologies,
PRC military firms that Congress requires DOD to identify
and reforming the process for classification determinations and
in accordance with Section 1260H of the National Defense
licensing decisions, including for escalated cases.
Authorization Act for Fiscal Year 2021 (P.L. 116-283). In
 The operating committee’s current voting structure and BIS’s
some cases, BIS lists only parts of these firms.
role as chair in determining licensing decision outcomes.
 The level of congressional scrutiny of licensing decisions,
ECRA Reforms
justifications, waivers, and exceptions, and whether to pursue
ECRA has provisions—which impact U.S. dual-use exports
more frequent and regularized reporting to Congress to
to China—to reform or augment export control decision-
strengthen its oversight of export controls in practice.
making, licensing, and technology controls, including:

Karen M. Sutter, Specialist in Asian Trade and Finance
Determining foreign availability by considering
Christopher A. Casey, Analyst in International Trade and
comparable quality in ascertaining whether a global
Finance
alternative is comparable to a U.S. technology. Foreign
availability determinations can affect decisions on
IF11627
whether to apply specific or general controls.
https://crsreports.congress.gov

U.S. Export Controls and China

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https://crsreports.congress.gov | IF11627 · VERSION 5 · UPDATED