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Senate Homeland Security Committee: Improving Export Controls Enforcement

Senate Committee on Homeland Security & Governmental Affairs

Subcommittee on Emerging Threats and Spending Oversight

Improving Export Controls Enforcement

Wednesday, April 10, 2024

Topline

  • Members from both parties discussed concerns over the tactics that adversarial states like China, Russia, and Iran are using to avoid U.S. enforcement efforts and illegally obtain sensitive advanced technologies.
  • Members from both parties questioned the witnesses on collaboration with the private sector.

Witnesses

  • Eun Young Choi, Deputy Asst. Attorney General, U.S. Department of Justice
  • Kevin Kurland, Deputy Asst. Secretary for Export Enforcement, Department of Commerce
  • James Mancuso, Asst. Director, Global Trade and Investigations Division, Department of Homeland Security

Opening Statements

Subcommittee Chair Maggie Hassan (D-NH)

In her opening statement, Hassan said she looked forward to discussing actions that Congress can take to prevent advanced technologies from flowing to bad actors, while still working to maintain the United States’ innovation edge and our place at the center of the world’s economy. She warned America’s adversaries could grow their military and cyber capabilities by violating American export control laws and acquiring sensitive U.S. technologies. Hassan emphasized that this possibility presents a considerable threat to national security, which explains the recent push to improve US export controls.

Hassan discussed the efforts of countries like China to acquire sensitive dual use technologies and praised the Biden Administration’s roll out of updated guidance and export controls for emerging technologies. She emphasized there is more work to do and concluded that it’s incumbent on Congress to ensure the effectiveness of actions taken by the executive branch, especially relating to inter agency coordination.

Testimony

Eun Young Choi, Deputy Asst. Attorney General, U.S. Department of Justice

In her testimony, Choi explained that the work of the DOJ’s National Security Division (NSD) is increasingly focused on responding to the evolving and dynamic threats posed by sophisticated nation state actors such as China, Russia, Iran and North Korea. She noted these countries have sought to acquire sensitive technologies including not only military hardware, but also emerging technologies such as advanced computing and autonomous vehicle capabilities, as well as the components upon which these technologies are built. Choi emphasized that enforcing export controls and sanctions laws is critically important to countering threats to our national security and requires interagency, international, and private sector cooperation.

Choi discussed the StrikeForce interagency partnership, which is designed to pursue enforcement actions against those who engage in the illicit transfer of emerging technologies. She explained that curtailing the flow of sensitive technology to our adversaries is a global problem, which demands a global response. Choi concluded by reiterating how private sector partnership is critical to the NSD’s work, explaining that since companies are on the frontlines when it comes to export controls and sanctions, their decisions as to how, where, and with whom to do business can be just as important as criminal enforcement actions.

Kevin Kurland, Deputy Asst. Secretary for Export Enforcement, Department of Commerce

In his testimony, Kurland noted that export control has never been more central to our national security than right now. He discussed the most recent annual threat assessment published by the intelligence community, which reaffirmed that nation state actors, especially China, Russia, Iran and North Korea, are the most pressing threats. Kurland said export enforcement’s mission is laser focused on preventing sensitive U.S. technologies from being used for malign purposes by adversarial nation state actors. He concluded by discussing Commerce’s partnerships with industry and academia, other agencies including the intelligence community, and like-minded countries to prevent diversion.                                                                                                                           

James Mancuso, Asst. Director, Global Trade and Investigations Division, Department of Homeland Security

In his testimony, Mancuso described combating the illegal export and proliferation of sensitive technology, equipment, and weapons as an operational priority. He discussed the work of the Homeland Security Investigations unit of the Department of Homeland Security, the primary agency charged with investigating violations of U.S. export laws as it relates to military items and controlled dual-use goods. Mancuso concluded that export enforcement is critical to achieving national security and foreign policy goals.

Question & Answer

Outbound Investment & China

Sen. Rick Scott (R-FL) said the U.S. should not be doing business with China, explaining that the CCP is not an honest trade partner. He said every U.S. dollar spent in China supports the CCP’s military efforts and human rights violations.

Scott noted the approval levels for export licenses to China are at historic highs, and asked if we should be comfortable with this. Kurland said Commerce is aggressively using the entity list to prevent China from getting access to key technologies. He noted that over 800 Chinese companies are on the entity list and discussed Commerce’s collaboration with FinCEN to receive suspicious activity reports from financial institutions.

Scott said the numbers suggest there is a basic presumption of approval, and asked if there should be the presumption of denial when dealing with Chinese applications. Kurland explained that every license application is reviewed by the Departments of Commerce, State, Energy, and Defense, and is reviewed on its own merit.

Scott said the Chinese government is targeting American children through TikTok, and asked if the app should be banned. Choi said the DOJ agreed with the characterization of the national security threats posed by TikTok, and said TikTok and ByteDance present a danger to U.S. national security. She said the DOJ supports the TikTok ban legislation that passed the House.

Sen. James Lankford (R-Okla.) discussed efforts to limit Huawei’s proliferation of U.S. communications systems. He asked Kurland about Commerce’s efforts to identify Chinese companies who are seeking to accomplish similar goals as Huawei in going after American technology. Kurland said they are reviewing information and evaluating trends in China daily. He noted that Commerce has added a number of key Chinese entities to entity lists.

Advanced & Restricted Technologies

Hassan asked the witnesses about the new tactics that adversarial states like China, Russia, and Iran are using to avoid U.S. enforcement efforts and illegally obtain sensitive advanced technologies. Choi emphasized the interconnectivity of our adversaries, explaining that while Russia and Iran are subject to severe U.S. economic countermeasures, they have robust procurement networks in jurisdictions where it’s difficult to hold people criminally accountable, like China and Hong Kong. Kurland warned that China has unlimited resources to pursue the acquisition of advanced technologies. Mancuso said it was important for the government to bring industry into the enforcement conversation, explaining that no one knows their customer base like they do.

Sen. Mitt Romney (R-Utah) asked whether China or Russia has been more successful at evading enforcement efforts and getting access to restricted key technologies. Choi explained that while the efforts of both countries pose concerns, she cited the International Criminal Court’s recent threat assessment, which warned of China’s effort to become a world science and technology superpower. Choi warned that China is laser focused on obtaining technological superiority to use for political, economic, and military gain.

Sen. Jacky Rosen (D-Nev.) asked how data analytics and AI tools could improve export control enforcement. Choi said the DOJ is looking at AI as a tool, especially for litigation, to see if there are ways it can generate leads, but also to do the data analytics for evidence. Kurland said the ability for AI to synthesize information at a terminal and predicate a law enforcement lead would be incredibly powerful, but noted Commerce does not have the resources to do so yet.

Rosen asked Kurland what dual use technologies he views as high risk. Kurland said Commerce is focused on key disruptive technologies, including AI, biotech, and quantum advanced computing.

Hassan noted that BIS announced it would be adding new entities to the agency’s entity list because they were providing AI tech to China. She asked for more information about these entities’ efforts to undermine enforcement controls and if any additional action should be taken. Kurland said they were seeking to acquire AI chips for China’s military modernization program and military intelligence. He emphasized that addressing China’s whole of government approach to advanced technologies is a constant focus for BIS.

Private Sector Collaboration

Lankford asked how Commerce is communicating information about Chinese firms to industry to allow them to evaluate their contracting process. Kurland said as soon as a party is placed on an entity list, Commerce works with CBP and HSI to identify transactions that would violate regulations. He also discussed the consolidated screening list, a list of all prescribed parties that is updated in real time and can be downloaded by companies into their IT systems.

Hassan asked how the DOJ is coordinating with private entities to prevent further violations of export control laws and to stop our adversaries from illegally accessing advanced technologies. Choi said the DOJ believes that companies are at the forefront of efforts to protect national security. She explained the work the StrikeForce is doing through private sector engagements to arm companies with actionable intelligence. Choi warned that the DOJ is also laser focused on their corporate enforcement regime, as some companies are willing participants in the criminal evasion of sanctions and export control laws.

Hassan noted that private entities don’t have access to most US export data, making it more challenging for them to conduct due diligence and avoid working with bad actors who are trying to violate our export controls law. She asked if DHS was considering ways in which it could share more data with US companies, research institutions, and academia to help them protect themselves against accidental violations of export controls. Mancuso said that while DHS pursues aggressive industry outreach and actively speaks to thousands of companies each year, there is always room for improvement. Mancuso also noted that DHS is limited in how much of the law enforcement and sensitive data they can share.

Sen. Richard Blumenthal (D-Conn.) discussed the prevalence of American chips and components in Russia’s weapons. He noted the increased flow of U.S. technology to countries bordering Russia and asked if private companies are reacting positively and promptly enough to remedy this trend. Kurland said the companies need to do more, and said he is in ongoing discussions with major trade associations and companies, asking them to harden their supply chains and track the end users of their components. Blumenthal noted talk is cheap and raised the possibility of economic pressure.

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