The Commerce Department's Bureau of Industry and Security renewed its temporary export control on certain artificial intelligence software, extending it a year from Jan. 6, said that day's Federal Register. BIS originally added the software to temporary controls under export administration regulations because it intended to propose it for multilateral control for the 2020 Wassenaar Arrangement. But Wassenaar’s annual plenary wasn't held last year due to COVID-19. BIS said the extension helps the U.S. “continue its effort at the Wassenaar Arrangement in 2021.”
The Commerce Department Bureau of Industry and Security added more than 60 companies, including Semiconductor Manufacturing International Corp., China’s largest chipmaker, to the entity list “to protect U.S. national security,” said BIS Friday. This stems from China’s “military-civil fusion doctrine” and evidence of collaboration between SMIC and “entities of concern in the Chinese military industrial complex,” it said. SMIC denied the allegations, saying it supplies products and services only for “civilian end users” (see 2011120011). The company didn't comment Friday. The new restriction “limits SMIC's ability to acquire certain U.S. technology by requiring U.S. exporters to apply for a license to sell to the company,” said BIS. “Items uniquely required to produce semiconductors at advanced technology nodes -- 10 nanometers or below -- will be subject to a presumption of denial.” China urges the U.S. “to stop its wrong behavior of oppression of foreign companies,” said a Foreign Affairs Ministry spokesperson Friday in anticipation of the BIS action. “China will continue to take necessary measures to safeguard the legitimate rights and interests of Chinese companies.”
The Commerce Department Bureau of Industry and Security's handling of emerging and foundational technologies drew rhetorical fire on a Center for Strategic and International Studies webinar. Experts said Friday the lengthy process is impeding Committee on Foreign Investment in the U.S. work. “It’s a hard list," said Wiley's Nova Daly of BIS work to come up with information on such technologies that need curbs when involving certain other countries. "Emerging technologies shift and change.” Putting controls on emerging and foundational technologies is "a requirement by law," the expert added. "It will help CFIUS do its job in terms of being able to make sure we don't lose those critical technologies.” The Foreign Investment Risk Review Modernization Act (FIRRMA) let CFIUS review transactions involving such tech. Because of some BIS delays in issuing those controls, CFIUS may not have a clear definition for what technologies to target, experts say. Making CFIUS partly dependent on BIS “was a really bad idea, and I think it needs to be re-looked,” said David Hanke, who helped draft FIRRMA and now is at Arent Fox. “There needs to be more agility, there needs to be more speed, the ability for [Treasury] to see something coming, and whether or not it's covered by BIS and the commerce control list, to be able to designate that in a quick manner.” Thomas Feddo, Treasury's CFIUS lead, cautioned critics from placing too much blame on BIS. “I'm not an export controls expert. I wish Commerce was here to defend themselves,” he said. “I think they might make some argument that they're making a great deal of progress.” Feddo said CFIUS doesn't necessarily need BIS to designate critical technologies for the committee to target transactions. BIS didn't comment Monday. A BIS spokesperson Friday pointed to its notice that day announcing six additional emerging technology controls. The agency hasn't issued foundational tech final controls (see 2008260013).
Intel got U.S. export licenses to supply certain products to Huawei, emailed an Intel spokesperson Wednesday. There are increased U.S. restrictions against the Chinese technology company, including Commerce Department Bureau of Industry and Security August revisions to the foreign direct product rule that were intended to block Huawei’s ability to access U.S. technology (see 2008170043). A BIS spokesperson said the agency doesn't comment on licensing.
The Commerce Department Bureau of Industry and Security is preparing industry guidance for its August restrictions on Huawei (see 2008170043), said Deputy Assistant Secretary of Commerce-Export Administration Matt Borman. BIS will issue FAQs similar to its “fairly extensive” FAQs for new licensing restrictions for military-related exports, he told BIS' Material and Equipment Technical Advisory Committee meeting. He asked METAC members and industry to provide input on the pre-rule for foundational technologies (see 2008260013). The agency is looking for more candidates for emerging technology controls and wants to get back into the “process” of using industry comments to develop its own controls, Borman said Thursday.
IBM said the Commerce Department Bureau of Industry and Security should impose targeted export controls on specific facial recognition software, not restrict the entire category, since some of the technology can be used for benign purposes. There are “clear use-cases that must be off limits” for export, such as artificial intelligence-powered software used for mass surveillance and human rights abuses, but other technologies are safe for everyday uses, said Friday comments on a July BIS notice on potential license requirements for items that may be used for crowd control reasons and human rights abuses. IBM said BIS should control facial recognition technologies that use “‘1-to-many’ matching end uses.” Comments are due Tuesday.
President Donald Trump's administration “is committed to bold, decisive action" against China that protects U.S. national and economic security interests, said Commerce Secretary Wilbur Ross during a Wednesday Commerce Department Bureau of Industry and Security virtual event. He cited BIS' additional export restrictions on Huawei (see 2008170043) and Trump’s Aug. 6 executive order banning U.S. transactions with the parent companies of TikTok and WeChat. TikTok parent ByteDance is suing the administration to block the EO (see 2008240047). The new restrictions on Huawei “directly impact” the company’s “ability to work through third parties to harness advanced U.S. technology to meet the Communist Party’s objectives, and they will level the playing field by ensuring that both U.S. and foreign companies must receive the Commerce Department license to sell covered products to Huawei, Ross said. He said the TikTok/WeChat ban is necessary because the app’s parent companies “are in China, and these mobile apps collect personal and proprietary information that constitutes possible threats to our national security, foreign policy and economy.” Some experts predict Trump’s re-election campaign will use the Huawei restrictions to depict him as tough on China (see 2008270051). Former National Security Adviser John Bolton, in The Room Where It Happened: A White House Memoir, said Trump tried to use Huawei as leverage in the U.S.-China trade talks.
Comments are due Oct. 26 on a Commerce Department Bureau of Industry and Security advance NPRM to decide if there are “specific foundational technologies” that warrant “more restrictive” export controls, says Thursday's Federal Register. “Foundational technologies essential to the national security are those that may warrant stricter controls if a present or potential application or capability of that technology poses a national security threat,” it says. Foundational technologies “could include items that are currently subject to control for military end use,” it says. “Many of these items, including semiconductor manufacturing equipment and associated software tools, lasers, sensors, and underwater systems, can be tied to indigenous military innovation efforts in China, Russia or Venezuela. Accordingly, they may pose a national security threat.” The ANPRM is in docket BIS-2020-0029 at Regulations.gov.
Last week's tightening of U.S. restrictions on Huawei (see 2008170043) took the semiconductor industry by surprise, and many in the sector worry about short-term supply chain disruptions due to the new measures, said industry officials and experts we canvassed. Many said they think the initial restrictions in May were sufficient, expressing frustration that the Commerce Department's Bureau of Industry and Security didn't seek industry feedback before imposing the new requirements. Though chipmakers are bracing for short-term complications, officials said they're also concerned about the long-term impacts of a U.S. national security policy that seems to continually target U.S. industry, even if indirectly. “We're now encouraging customers in China to move away from U.S. technology and semiconductors,” one semiconductor industry official said. “Why would they in the future use U.S. technology if they’ll be subject to all these rules?” The new rule expanded on a May policy that further restricted non-U.S. companies from selling chips using U.S. technology to Huawei. Officials said semiconductor supply chains will inevitably be impacted, but many remain unsure how broadly the impacts will be felt. The scope of the restrictions will depend on how strictly Commerce Department officials review license applications, which can range from case-by-case reviews to presumptions of denial. Much depends on whether Commerce "is serious about implementing this new rule literally,” said Alen Lin, a technology industry expert and analyst with Fitch Ratings. “If they do that, it does effectively cut off Huawei from any type of semiconductors.” Even though companies are still assessing the impact, industry officials expect many more chipmakers to be affected by the new restrictions than by the measures issued in May. Officials thought those requirements worked in targeting Huawei, which is why some said they were surprised when BIS issued more restrictions last week. “We were caught off guard,” one semiconductor industry official said. “We thought the original May rule was working. The objective seemed to have been achieved.” But Commerce Secretary Wilbur Ross said Huawei was working with third parties to evade the restrictions, necessitating the tougher measures. The US-China Business Council said it's “deeply concerned” about the risk of “overly broad” restrictions resulting from the rule. It could lead to “unintended consequences … that deliver a bonanza of new business to our competitors while doing nothing to improve national security,” USCBC spokesperson Doug Barry said. He said more communication between government and industry would help: “The Trump administration needs to listen carefully to the industry perspective and learn more about their business models.”
The Commerce Department's Bureau of Industry and Security added 38 Huawei affiliates to the entity list and refined a May amendment to its foreign direct product rule, further restricting the Chinese company's access to U.S. technology. BIS said the direct product rule also applies to transactions where U.S. software or technology is “the basis” for a foreign-made item produced or purchased by Huawei, or when such an entity is “a party to such a transaction.” Secretary of State Mike Pompeo said Huawei "has continuously tried to evade" the previous changes to the foreign direct product rule. The telecom gearmaker didn't comment.