The Bureau of Industry and Security (BIS) – the agency Washington relies on to implement export licensing controls to ensure sanctioned technology doesn’t reach certain nations – revealed on Tuesday it’s struggling to handle a massively increased workload caused by the ever-growing number of Chinese companies added to the US Entity List, thanks to geriatric technology and systems.
“Over the last six years, BIS policies have subjected an increased volume of trade to the [Peoples Republic of China] PRC to licensing requirements, and BIS has applied strategic reviews to these applications, including with Entity Listed entities, stated BIS in a review [PDF] of its recent task overseeing trade with the Middle Kingdom.
The regulatory agency detailed that the number of Chinese entities on the Entity List – Uncle Sam’s catalog of orgs with which US businesses are not allowed to trade – rose from 218 in 2018 to 787 in 2023. The BIS handled nearly 4,000 license applications involving Chinese Entity List parties across those years.
The agency attributed a “substantial” increase in the total number of license applications to the inclusion on the List of Huawei and SMIC, in 2019 and 2020 respectively.
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BIS has historically used a heavily manual process designed in 2006 to collect licensing data – a method it acknowledged occupies considerable resources and subjects it to the risk of human error.
The bureau said it has been working to improve internal systems and processes that will in turn enhance internal analytical capabilities.
“However, the state of the foundational systems that were not designed to communicate seamlessly with one another, coupled with the need for human verification of the accuracy of the underlying data once extracted, have required a substantial commitment of staff time to execute in a manner that ensures an accurate product,” it conceded.
The regulatory agency declared it is committed to working with Congress to secure funding that will allow it to modernize the central licensing system.
One of the reasons for the increase in demand on the agency – and subsequent system overload – is that the Entity List has shifted beyond its original intention. When it debuted in 1997, it was meant “to inform the public of entities that have engaged in activities that could result in an increased risk of the diversion of items to weapons of mass destruction programs.”
The grounds for inclusion greatly expanded over the years, and even now include foreign persons that could be involved in matters contrary to national security.
But just because BIS processes are the same doesn’t mean its policies are. For example, it’s introduced a Foreign Direct Product Rule (FDPR) which it has applied to Huawei – a move it defends as having “[given] the US government unprecedented control over and insight into these entities’ access to US technology and foreign-produced items” subjected to the rule.
The agency also claimed its increasing focus on country-wide controls allowed it to identify strategic sectors and items based on technological capabilities – an approach it called “more durable and effective” than case-by-case license reviews.
As for those nearly 4000 Entity List applications reviewed by BIS over the past six years, around two thirds (worth $335 billion) were approved. The rest (worth an even larger $545 billion) were denied or revoked.
BIS also let it slip that since the beginning of 2024 it has already revoked eight additional licenses involving Huawei. ®
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