Larger BIS Budget Would Mean More Outreach, Enforcement, Former Senior BIS Agent Says

“I think that export controls are going to continue to be a tool employed by this administration,” Dunlap, who left BIS in May to join Akin as a senior regulatory adviser, said in an interview. “They've been around since the founding of the country, and they're going to be around for a long, long time to come.”

The Trump administration has so far penalized multiple companies for illegal exports, including last week when it fined California chip developer and supplier Alpha and Omega Semiconductor $4.25 million for violating U.S. export controls against Huawei (see 2507020033). Both Undersecretary Jeffrey Kessler (see 2503280039) and Commerce Secretary Howard Lutnick (see 2503180041) have promised significant increases in export penalties, and Dunlap said the penalty shows that BIS remains busy.

“I think that those that maybe thought there would be a pause in enforcement actions are now seeing that that's not the case,” Dunlap said.

He also said the fine highlights that semiconductor cases are “obviously the highest priority for BIS right now.” And if Congress approves the agency’s request for a major budget hike, which Kessler said he would use in part to hire hundreds of new export enforcement agents and overseas export control officers (see 2506120073), Dunlap said companies can expect an uptick in enforcement activity.

He said most BIS field offices have about 10 to 12 agents covering multiple states. If the Office of Export Enforcement were to post a job hiring announcement today, Dunlap said, he wouldn't be surprised if the agency received “thousands” of applicants.

BIS “used to be, in my opinion, sort of this hidden gem within the federal law enforcement community,” he said. “The profile has been raised.”

Although it could take months or longer to train new agents and get them comfortable enough with the Export Administration Regulations to carry out an investigation, Dunlap said, exporters eventually will feel the impact.

If BIS receives the increased funding, he said, companies should expect more “industry outreach” to the point where both larger and smaller companies “are probably going to have some interaction with BIS. Perhaps in the past, that wasn't the case.” Dunlap also said BIS likely would bring a higher volume of administrative and criminal cases.

“If you're in the semiconductor space, if you're involved in aerospace, if you're involved in some of these other advanced technologies, you should definitely expect, at the very least, to have an OEE agent conduct an industry outreach with you,” he said, adding that there’s “probably a lot more attention being focused on those types of companies in those specific sectors.”

Kessler, during a congressional hearing in June, told lawmakers that he would use the increased funding to also hire engineering and technical experts to support BIS enforcement efforts, including to help agents determine whether a license was required for an export that already took place.

Dunlap said that could be a boon to OEE’s ability to carry out speedier investigations, especially because agents typically must communicate with the agency’s Export Administration’s division in Washington for help determining whether a particular commodity needs a license. If BIS hires those technical experts to aid OEE, “that indicates that they may want to bring that in-house [expertise] on the enforcement side, which is going to, of course, move investigations more quickly.”

Along with more OEE agents and resources, Dunlap said BIS could use more analysts and administrative officials in Washington. He also said an upgraded IT system and better data analytics will help the agency “identify violations more easily.”

Some lawmakers and industry observers have criticized BIS for not moving quickly enough to investigate and penalize companies for violating export controls, particularly related to China (see 2312060072 and 2412030041). Matthew Axelrod, the former chief of export enforcement for BIS, has said BIS worked urgently on those investigations, but that they also were time-consuming (see 2501020005).

Dunlap said there are many “talented investigators” within OEE, but they’re limited by the current BIS budget.

Some lawmakers may think BIS agents are “driving a Ferrari,” but the agents “feel like they're driving a Pinto at times,” he said. “I think if there's increased funding, hopefully they get to that Honda Accord level, and maybe eventually, if it's a substantial increase, then, sure, we might move into those luxury vehicle areas.”

Dunlap, who also served in intelligence roles at DOJ and the Pentagon, added that OEE agents are busy, and many might be managing 30 cases at any one time, even if BIS isn’t the lead on every one. “When you're carrying that type of caseload, and it's complicated stuff,” he said, “it's going to take years to fully investigate it.”

To aid BIS enforcement, a bipartisan group of lawmakers recently proposed new legislation that would require shipments of export-controlled advanced chips to contain location verification mechanisms (see 2506250027 and 2505090015). The bill, called the Chip Security Act, would require chipmaker companies to submit periodic reports to BIS and order the agency to study more advanced ways to ensure those chips are not diverted to China.

BIS officials last year expressed skepticism that location-tracking would solve chip-related diversion problems (see 2403270047), and researchers have acknowledged that some of those features -- including on-chip governance mechanisms that would automatically bar chips from being used in ways that violate U.S. export restrictions -- could take years for companies to implement (see 2401080060).

Dunlap said he doesn’t believe companies are “ready” to implement those features into their chips. “I think it's a little bit misplaced at this time.”

He said companies would likely run into many “false positives,” which would waste the time of both industry and BIS, which would have to investigate “each time that a company reports something.” To boost enforcement, Dunlap said a more efficient avenue likely involves increased funding for BIS along with strengthened end-use monitoring and better industry due diligence.

“Traceability is probably more realistic,” he said. “Paperwork, end-use checks, understanding where semiconductors move within the supply chain -- those are how you parallel, reconstruct and put investigations together.”

BIS has issued several guidance documents over the last year urging exporters, financial institutions, forwarders and other companies to carry out more due diligence, including to comply with General Prohibition 10 of the EAR, which places restrictions on exporters and others if they have knowledge that a violation of the EAR has occurred, is about to occur or is intended to occur (see 2410090027, 2411010030). [Ref:2506060006). Law firms have said recent BIS guidance may be laying the groundwork for future enforcement, especially if a company has “knowledge” -- which includes an awareness of a high probability -- that a transaction would have violated the EAR.

Dunlap noted that the recent BIS penalty against Alpha and Omega faulted the firm for having reason to know -- including the awareness of a high probability -- that an EAR violation would occur. During his time at BIS, Dunlap said, larger companies with “very sophisticated export compliance programs” tended to grasp the high-probability concept better than smaller companies, which may have fewer resources to dedicate to compliance.

Although at times it was a “mix,” Dunlap said, most companies “understood the difference between a criminal case and an administrative case, and the difference between willfulness and strict liability.”

Either way, he said, “clearly this order demonstrates that they're going to continue to pursue these cases and charge these cases.”