WSJ: House Republicans Tell Commerce Dept. to Get Tougher on China

According to an article published today in the Wall Street Journal, Republicans on the House Foreign Affairs Committee are continuing to apply pressure to the Commerce Department to fortify export controls.

In a letter led by Rep. Michael McCaul (R-TX) and a group of top Republicans called for the “strengthening of export controls on semiconductors.” Signers included all other members of the China Task Force, Reps. Liz Cheney (R-WY), Andy Barr (R-KY), Mike Gallagher (R-WI), Michael Waltz (R-FL), Anthony Gonzalez (R-OH), Darin LaHood (R-IL), Guy Reschenthaler (R-PA), Chris Stewart (R-UT), Robert J. Wittman (R-VA), Scott Perry (R-PA), Neal Dunn (R-FL), Mark Green (R-TN), Mike Garcia (R-CA), Austin Scott (R-GA), Diana Harshbarger (R-TN) and Young Kim (R-CA).

This follows a move this month by Republican Sens. Tom Cotton of Arkansas and Bill Hagerty of Tennessee to hold up confirmation of Alan Estevez, President Biden’s nominee to lead the Commerce unit in charge of export controls, the Bureau of Industry and Security.

China Tech Threat has been following Mr. Estevez’s nomination closely and has called for the Biden Administration to fill the position swiftly. In their letter, the House Republicans backed the hold on Mr. Estevez until, they said, Ms. Raimondo acts on their requests because “these actions are critical to stemming the flow of technology into our foremost foreign adversary.”

In their letter to Ms. Raimondo, the Congressmen signaled frustration with Commerce’s failure to create lists of “emerging and foundational” U.S. technologies designated for safeguarding as mandated by a 2018 law, according to the Wall Street Journal. Further, the lawmakers called on the department to further restrict exports to Semiconductor Manufacturing International Corporation (SMIC), China’s largest chipmaker.

This is not the first time Rep. McCaul in particular has urged the Commerce Department to get tougher as it relates to China. In fact, over the summer, he and Sen. Hagerty urged Secretary Raimondo to add YMTC to the entity list, describing it as “the PRC state-owned national champion for memory chips with ties to the CCP military.”

It is imperative the administration continues to apply pressure and use a full range of tools at the country’s disposal to ensure the privacy, security, and prosperity of all Americans. To read more about export controls, Commerce’s role, and Mr. Estevez, please see China Tech Threat’s website

5 Key Takeaways from President Biden’s Export Administrator Nominee

This week the Senate Banking Committee advanced Thea Kendler, President Biden’s nominee to serve as Assistant Secretary of Commerce for Export Administration, for a full Senate confirmation vote later this fall. If confirmed, Ms. Kendler will help shape export control policy, a frontline defense against the People’s Republic of China’s (PRC’s) weaponization of U.S. technologies.

Here are five key takeaways from Ms. Kendler’s responses to lawmakers’ Questions for the Record.

  • The PRC’s technological, military and economic rise poses “one of the greatest” threats to U.S. national security.Asked if she agreed, Ms. Kendler wrote, “Yes.” The PRC’s “diversion of dual-use technologies to military uses; theft of intellectual property; human rights abuses; and anti-competitive, unfair and coercive trade practices… threaten our national security, foreign policy, and economic security.”

  • Ms. Kendler recognizes the danger of the PRC’s Military-Civil Fusion Strategy—what Senator Tim Scott (R-SC) called a “total breakdown between China’s private sector and the Chinese Communist Party and its military.” The PRC seeks “U.S. technologies to further its military modernization,” Ms. Kendler wrote, including “diverting items from civilian to military applications.” “I am deeply concerned.”

  • Securing U.S. leadership in semiconductor capabilities must be a top priority for export-control policy. “It is critical for the United States to have diverse, resilient and secure supply chains in critical areas like semiconductors,” which are an “important component” of U.S. competitiveness, Ms. Kendra wrote.

  • Export controls are a critical tool to stop adversaries from stealing and weaponizing sensitive U.S.-made technologies. “I will appropriately use the tools and authorities available at BIS to protect our cutting-edge semiconductor technology, which is crucial to U.S. national and economic security,” Ms. Kendler stated. She added that she would “prioritize identifying and implementing appropriate [export] controls” to limit “the proliferation of emerging and foundational technologies to foreign countries.”

  • A demur on whether national security interests ought to outweigh industry profits? Asked whether U.S. export controls are strong enough to “dissuade” companies like Huawei from “engaging in export violations,” Ms. Kendler left room for interpretation that companies ought to have greater influence:

    “I believe BIS and its interagency partners strive to enhance the effectiveness of U.S. export controls and sanctions regimes by conducting extensive outreach with industry, academia, and other partners to raise awareness of export control requirements and best practices for compliance.” [Emphasis added]

Ms. Kendler was nominated by President Biden to serve as Assistant Secretary of Commerce for Export Administration, an office with the Commerce Department’s Bureau of Industry and Security (BIS), in July. Her bio is available here.

BIS Nominee “Deeply Concerned” about China’s Military-Civil Fusion Threat

By a voice vote on Tuesday, the Senate Banking Committee endorsed Alan Estevez and Thea Kendler to serve as Under Secretary of Commerce for Industry and Security (BIS) and as Assistant Secretary of Commerce for Export Administration, respectively. The vote advances President Biden’s nominees—who, if confirmed, will play pivotal roles in shaping U.S. export control policy—for consideration by the full Senate this fall.

In response to prepared Questions for the Record, Mr. Estevez stated that the People’s Republic of China (PRC) poses “one of our most difficult challenges related to U.S. national security and foreign policy objectives, including our ability to maintain U.S. technological leadership in critical areas.”

“I am deeply concerned about the People’s Republic of China’s (PRC) efforts to seek U.S. technologies to further its military modernization, such as through diverting items from civilian to military applications (i.e., its military-civil fusion strategy), creating illicit procurement networks, and stealing intellectual property, among other destabilizing activities,” Mr. Estevez wrote. “If confirmed, I [will] appropriately use the authorities of BIS under the Export Control Reform Act (ECRA) of 2018 to protect our national security and foreign policy interests while strengthening our technological innovation and leadership.”

Acknowledging that the PRC’s siphoning of dual-use technologies to military end-users threatens “our values and interests, as well as those of our allies and partners,” Mr. Estevez pledged to secure critical U.S. supply chains, specifically naming semiconductors.

“A vibrant domestic semiconductor manufacturing capability” is critical to American competitiveness, he noted. “I will support the Commerce Department’s work… to tackle near-term bottlenecks in the semiconductor industry and to strengthen U.S. leadership in semiconductor manufacturing.” He added that, if approved, he would direct staff to implement investments authorized by Congress to “shore up” domestic supply chains.

Mr. Estevez did not appear to shy away from applying export controls to prevent adversaries like the PRC from acquiring sensitive U.S.-developed technologies. “I do not see a reason to remove Huawei from the Entity List,” he wrote—a commitment some Republican lawmakers questioned of Commerce Secretary Gina Raimondo after she said “all aspects of the approach to U.S. economic and technological competition are up for review” during confirmation hearings in February.

“I will ensure that BIS adheres to the regulatory requirements for removing any party from the Entity List,” Mr. Estevez continued. “I will prioritize identifying and implementing appropriate controls on exports of emerging and foundational technologies, consistent with the Export Control Reform Act (ECRA) of 2018.”

Whether Mr. Estevez will prioritize stopping the flow of U.S. technology to the PRC and its military over American companies’ sales to China could determine the outcome of the power struggle between both countries. Eric Hirschhorn, BIS director for President Obama, stated it plainly earlier this summer: “You don’t balance national security with sales—you can’t.”

Former BIS Directors React to Estevez Hearing

On Tuesday, the Senate Banking Committee held the nomination hearing of Alan Estevez to be Undersecretary for Industry and Security of the Department of Commerce. Throughout the process, Mr. Estevez answered thoughtfully and provided welcome clarity regarding how he would use the full arsenal of the Bureau of Industry and Security’s (BIS) tools to counter China’s anticompetitive and unfair practices, human rights abuses, and tactics to maneuver around our nation’s regulatory structures. China Tech Threat looks forward to the swift confirmation of Mr. Estevez. Please read Roslyn Layton’s full testimony here

To garner a wide understanding of reactions to the hearing, China Tech Threat reached out to former BIS leaders.

Mario Mancuso, who led BIS during George W. Bush’s Administration, noted that:

“While a sharp, focused, free-standing U.S. policy posture is vital to counter the China threat, it will also be important for the next undersecretary to engage in technology diplomacy–to lean in with allies and partners in Europe (e.g., UK, Germany) and Asia (e.g., AUS, Japan, Taiwan, Singapore and ROK) to develop a common operating picture with respect to the global landscape and threat, especially with respect to semiconductors and emerging technologies.”

William Reinsch, Undersecretary of Commerce for Export Administration during Bill Clinton’s Administration, commented on the questions in the hearing, noting:

“They were exactly what one would expect in a confirmation hearing – avoid confrontation and agree with the questioners. The interesting one was on the use of unilateral controls. That was probably the right thing to say in a confirmation hearing, but it is not quite the same tone that acting U/S Pelter set when he testified before the U.S.-China Economic and Security Review Commission. The other comment is simply to note that it’s a misconception to think that the BIS Undersecretary is going to be making these decisions with respect to China. They’re going to be made in the White House, and he will be tasked with implementing them. He will probably be in the room when the decisions are made, but he won’t have the last word.”

Continue to follow Mr. Estevez’s path to this ever critical position at

China Tech Threat’s Statement on Alan Estevez’s Nomination Hearing Today

“Mr. Estevez’s testimony today provided welcome clarity regarding how he would use the full arsenal of BIS tools to counter China’s anticompetitive and unfair practices, human rights abuses, and tactics to maneuver around our nation’s regulatory structures,” said China Tech Threat Co-Founder Dr. Roslyn Layton. “His stated commitment to use the authority granted by the Export Control Reform Act, commitment to produce to Congress the required lists of foundational and emerging technologies, defense of U.S. Intellectual Property, and his willingness to consider unilateral controls should give senators the confidence they need that confirming Estevez brings a solid leader who will ensure security at the Bureau of Industry and Security.”

CTT’s Statement on Tomorrow’s Estevez Hearing

“It has been four years since the Senate Banking Committee last confirmed a BIS Under Secretary, which is why tomorrow’s confirmation hearing is a pivotal moment for our nation’s effectiveness in leveraging strategic trade controls as U.S.-China relations continue to escalate,” said China Tech Threat Co-Founder Dr. Roslyn Layton. “While we value the strong national security and defense technology expertise Alan Estevez brings with him, we expect focused and detailed questions by Committee members to better understand Mr. Estevez’s point of view on China, the threat posed by its military civil fusion strategy and how BIS should act to protect national security.” 

Part II: More Experts Weigh in on Estevez for Top BIS Position

Alan Estevez will appear before the Senate Banking Committee on Tuesday as the nominee to lead the Bureau of Industry and Security (BIS) during the Biden administration. What are people saying about his nomination and what that means for the future of BIS? Last week, China Tech Threat published assessments from two risk management experts. Today, we are sharing additional commentary.

Coalition for a Prosperous America’s (CPA) Jeff Ferry, who co-authored a paper with China Tech Threat earlier this year on “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats,” observed of Estevez:

  • The Pentagon has been more aggressive in advocating for U.S. economic strength than any other government department, and Estevez’s 36 years at the Pentagon is good preparation for the BIS. The BIS and the Department of Commerce needs to be more aggressive in advocating U.S. national economic interests, not merely reflecting what it hears from the corporate sector. Many of our problems in our strategic competition with China reflect the short-term views of private tech companies. The U.S. has a long-term strategic interest in rebuilding our entire tech supply chain, from R&D through to manufacturing and from components through to complete systems. 

Others have observed that BIS needs to step up on the security front. Derek Scissors, Commissioner of the U.S.-China Economic and Security Review Commission and resident scholar at the American Enterprise Institute (AEI), has critiqued the agency for not implementing the Export Control Reform Act (ECRA) requirements to develop lists on foundational and emerging technologies for export controls, noting that the requirement is outstanding since 2018. He asked Acting BIS Under Secretary Jeremy Pelter, “How many years should Congress, having passed ECRA, wait on foundational technology for the sake of BIS finding the multilateral system sufficiently accommodated? It‘s been three years and we’ve done almost nothing. Are we looking at three more years for action?” He observed that the BIS leader nomination is not prioritized “because the Congress is unhappy with BIS for not implementing the 2018 export control legislation. And the administration should see this as an opportunity for China policy, but doesn’t seem to.”

In recent years, the agency has gained currency in the larger context of U.S.-China policy as it maintains the Entity List, which regulates whether and how U.S. actors can do business with actors determined to be threats to national security. Notably the Chinese military-aligned Huawei and more than 40 affiliates were added in 2019. Congress significantly strengthened and expanded the authority of the agency in ECRA, which allows actors to be designated as Military End Users and for restrictions to be imposed for violations of human rights.

Where is Mr. Estevez on U.S.-China policy? As China Tech Threat noted in an initial assessment following the news of his nomination, there is little known publically about his policy positions and stance on China. The Senate Banking Committee—which will oversee his confirmation—must ask direct questions to understand his stance on the Chinese government’s threat. More to come.

Part II: USCC Hearing on Export Controls – Kevin Wolf’s Insight

Late last week China Tech Threat published a blog outlining the testimony given by Jeremy Pelter, Acting Undersecretary and Deputy Undersecretary, Bureau of Industry and Security (BIS) at a U.S.-China Economic and Security Review Commission (USCC) hearing entitled “U.S.-China Relations in 2021: Emerging Risks.”

While Mr. Pelter gave insight into BIS’ actions from a current leadership position, Kevin Wolf, former BIS official and noted export control lawyer presented another view. Mr. Wolf, a veteran of the bureau, developed the sanctions on ZTE. He is currently an attorney at Akin Gump where he advises clients on regulations related to export administration, arms control, trade, foreign investment, and foreign asset control.

In his testimony to USCC, Mr. Wolf offered suggestions on how the US could better meet its objectives with unilateral and multilateral controls. Wolf observes: “To put it more simply, unilateral controls are quick and responsive, but are usually eventually counterproductive and ineffective. Multilateral controls under the current system are eventually effective, but are either slow in creation given the need for regime member consensus or impossible, if not based on traditional, destination-agnostic non-proliferation objectives.”

Most notably, Mr. Wolf gives four key recommendations for the Biden Administration to ensure export controls are administered in the most effective way. He notes that the Administration should:

  • Develop “an actionable definition what ‘national security’ means in the context of using export controls to address China-specific policies that are outside the scope of traditional non-proliferation objectives.”

  • Work with “close allies in countries that produce the core technologies of concern to convince them to (a) expand their legal authorities to impose controls for reasons not related to traditional non-proliferation objectives and (b) align their China- and other country-specific licensing policies and enforcement priorities for already-controlled items.”

  • “Provide clear direction, robust funding, and political support to the export control agencies to implement the objectives of ECRA’s emerging and foundational technologies provision based on the (a) the standards and process set out in ECRA and (b) agreed-upon definition of ‘national security’ to address threats outside the context of traditional non-proliferation-related concerns.”

  • “Remember to give adequate attention and resources to all other export control issues, such as (a) running an efficient licensing system, (b) controlling and enforcing the export of dual-use items that have proliferation-related uses elsewhere in the world, and (c) reducing unnecessary barriers on controlled trade with close allies.”

Mr. Wolf makes it clear through his testimony that he believes the incoming leadership of BIS must have a clear understanding of the role export controls will play in the fight against Chinese aggression in the technology space. At China Tech Threat, we agree with this sentiment and believe that national security must take priority when looking at way to address China-specific export controls and export control policies. Follow along at as we dig deeper into the future of BIS and its leadership.

Part I: USCC Hearing on Export Controls – Jeremy Pelter’s Insights

Earlier this week the U.S.-China Economic and Security Review Commission held a hearing entitled “U.S.-China Relations in 2021: Emerging Risks.” In a panel entitled Administration Views on U.S. Export Controls, Jeremy Pelter, Acting Undersecretary and Deputy Undersecretary, Bureau of Industry and Security (BIS) discussed the growing use of BIS to curb the sale of sensitive technology to China. Mr. Pelter has been serving in a senior capacity at BIS for about 2 years and brings important skills to the role.

Mr. Pelter led his testimony by discussing key BIS accomplishments. Most notably, he highlighted that investigations by BIS into China-related transactions have resulted in 226 months of prison time, $1,858,000 in criminal fines, and $4,048,000 in civil penalties so far this year. That compares with 80 months of prison time and $60,000 in criminal fines doled out in 2020, Pelter told USCC.

Further, in 2021, BIS added 7 Chinese supercomputing entities to the Entity List due to concerns involving these organizations’ support for China’s military actors, its destabilizing military modernization efforts, and/or its weapons of mass destruction programs. BIS also penalized a US company some $500k for exporting semiconductor manufacturing-related items to PRC entities involved in the illicit procurement of commodities and technologies for unauthorized military end-use in China.

Mr. Pelter also addressed the critique that BIS has slow-walked the lists that are required for foundational and emerging technologies as part of the 2018 Export Control Reform Act (ECRA). Derek Scissors, a USCC commissioner, raised this issue asking, “How many years should Congress, having passed ECRA, wait on foundational technology for the sake of BIS finding the multilateral system sufficiently accommodated?” He added that “It‘s been three years and we’ve done almost nothing. Are we looking at three more years for action?”

Of 37 emerging technologies added to the Commerce Department’s export control list as a result of ECRA, 36 of them were also implemented under multilateral export control regimes, “which both further protects such technologies from being acquired from other supplier countries and enhances US national security”, Pelter said in prepared testimony.

Finally, Mr. Pelter highlighted BIS’ work to address China’s militarization. Specifically he noted that in 2021, BIS implemented new controls for items intended for military-intelligence end use or a military-intelligence end user in a certain set of countries.

China Tech Threat is closely following BIS, which has an abundance of tools and authority, recently minted from Congress, but it hasn’t acted to deem known Chinese military fabs YMTC and CXMT to the Entity List or the Military End User List, despite substantial evidence. This illustrates a key critique of the agency: it sometimes fails to act when security is at stake because companies’ can succeed to stop, slow, or change a BIS determination. Notably US firms like Applied Materials, KLA, and Lam Research want to sell their semiconductor manufacturing equipment to China, even though it could endanger Americans’ security and empowers an adversary with cutting-edge equipment.

BIS performs many important duties, but it is not being used to its full potential. China Tech Threat will continue to monitor the agency, particularly as President Biden’s nominee Alan Estevez, a career Department of Defense expert on secure supply chain strategy, is expected to take the helm at BIS.

Part I: Risk Management Experts Assess Estevez for Top BIS Position

Alan Estevez was nominated to be the next Undersecretary of the Bureau of Industry and Security (BIS) at the Department of Commerce, an important but little-known federal agency responsible for export control, treaty compliance, and leadership in strategic technology. Not a lawyer steeped in the statues of export controls, Estevez is considered an interesting choice for his defense background, the selection of which could signal greater emphasis on security concerns.

Notably Estevez won the National Security Medal for his efforts to transform military logistics for the 21st century. Consider this: During Desert Storm, the US military did not have an efficient way to track and locate containers. Hence the supplies in more than half of 40,000 containers went unused, some $2 billion in wasted resources. As Assistant Deputy Under Secretary of Defense for Supply Chain Integration, Estevez studied how Wal-Mart used RFID to manage the flow of goods in and out of warehouses and developed the In-Transit Visibility network, which allows forces in the field to locate supplies in minutes rather than days. In his role, he managed some 60,000 vendors at DoD.

Leading professionals and observers of the field weighed in on his nomination. Chairman of the risk management firm The Providence Group, Dan Caprio, then a Commerce official charged with technology policy, worked with Estevez in an intra-agency collaboration and subsequent report on the use of RFID. He describes working with Estevez as “very positive”, calls Estevez “eminently qualified from the perspective of substance [and] knows his way around government”, and says he is a “solid person”, not a political appointee.

Another risk management expert, John Lash of Darkhorse Strategies, calls Estevez a pragmatic national security thinker, skilled in the complexities of trade, policy, and technology, and has the ability to work effectively across agencies, a critical role for the BIS post. He also says Estevez is a proven collaborator when it comes to the intersection of public and private sectors.

Stay tuned for a follow up post with observations from other experts on Estevez’s nomination and the Future of BIS. In the meantime, check out CTT’s backgrounder on his career and policy positions.