US Export Control System Has 'Gaping Holes,' Former BIS Official Says
The U.S. should take steps to address a range of loopholes in its export control regimes, including its inability to conduct end-use checks in China and unregulated technology transfers resulting from outbound investments, said Nazak Nikakhtar, former acting head of the Bureau of Industry and Security. “We have a lot of gaping holes in our export control system,” Nikakhtar told the Senate Intelligence Committee May 11. “I think we really need to tighten those up.”
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Nikakhtar said the U.S. needs an export control system “configured to allow us to run faster while at the same time blocking China’s ability to benefit from our technology.” She said China’s military has specifically been able to make advancements in hypersonic weapons because of technology transfers from U.S. companies that should have been stopped. Some lawmakers have also said U.S. software and tools contributed to the advancements of Chinese weapons systems (see 2110180016).
“One company’s short-term profits years ago now threatens global security,” said Nikakhtar, a trade lawyer with Wiley Rein. “Our export system failed. We need to fix it.”
She also called for increased controls on exports of sensitive data, which can be “weaponized by our adversaries to conduct massive surveillance and develop dangerous” artificial intelligence-powered weapons.
But even when technologies are controlled and are allowed to be exported to China, Nikakhtar said, the U.S. struggles to conduct end-use checks to verify that the item is being used as intended. “We can't even be sure our technology is not being used for military purposes when it goes to China, and not being used for weapons of mass destruction,” she said. “China restricts our ability to conduct end-use checks, and it has for a long time.”
One way to strengthen oversight of technology transfers is through an outbound investment regime, Nikakhtar said. She said U.S.-Chinese joint ventures, which are “happening all the time" in China, allow U.S. companies to provide the Chinese military with “manufacturing know-how.”
“We absolutely need outbound investment reviews,” she said. “When technology is developed abroad, that falls outside export control jurisdictions.”
James Mulvenon, a China analyst who was rumored last year to be under consideration for BIS undersecretary (see 2102120034), said he also thinks an outbound investment regime is necessary. He said he was “very happy” that the Foreign Investment Risk Review Modernization Act passed (see 2001140060), but he believes an outbound investment mechanism is “missing.” He supports a bipartisan bill introduced last year that would establish an interagency outbound investment review committee (see 2201140038), adding that the U.S. should be the first to create such a committee and allies will follow.
Along with an outbound regime, Nikakhtar also said the U.S. should strengthen its ability to review greenfield foreign direct investments through the Committee on Foreign Investment in the U.S (see 2103030057). “China buys land here, conducts surveillance, connects to our energy grid, accesses our controlled technology from within our own borders and wipes out our domestic industries by underpricing from within our own borders,” she said. “This is a problem.”