Opinion: Shifting Export COntrol Jurisdiction Misses the Point
Christopher Nelson
November 10, 2022
Recently, three members of the House of Representatives introduced bill HR 9241, the Prioritizing National Security in Export Controls Act of 2022 (see here). The main thrust of the bill would transfer licensing authority from the U.S. Department of Commerce (DOC), Bureau of Industry and Security to the Defense Technology Security Administration (DTSA) in the Department of Defense. It proposes moving funds from the DOC to DTSA for implementation and prohibiting any Senior Executive Service personnel from accompanying the transfer.
The bill’s sponsors say that the main reason for this major change to U.S. export licensing policy is that BIS has been “unsuccessful in…tighten[ing] restrictions on emerging and foundational technologies, especially to countries of concern” and they are unable to manage their “conflicting missions of protecting national security and encouraging legitimate trade.” The primary target here is trade with China and the bill cites Chinese entities currently included on the prohibited entity list as part of the slow and weak response.
Fundamentally, the bill proposes an unrelated “solution” to a fundamental problem. Yes, the control of emerging and foundational technologies is a major national security concern. This is, however, an issue solved by adjusting the mission rather than a change in licensing authority. BIS serves an important function to balance national security and commercial interests in making licensing decisions based on the best information available. To perform more efficiently on prohibiting technology transfers to end-users of concern, the U.S. Government needs to focus more on leveraging data analysis, data science, and intelligence gathering.
The prohibited entities lists used by BIS and others do not appear out of nowhere. They are driven by a) catching violators and b) intelligence. It takes work to uncover these illicit procurement networks – and this work cannot be done just at the point of a licensing decision or a post-mortem after a bad actor is caught. The U.S. Government generally, and BIS specifically, have access to an extremely data rich environment through individual transaction records for both licensed and unlicensed shipments. With appropriate resources, this data can be a force multiplier in the U.S. export control system.
There needs to be a mechanism to provide a constant stream of analysis to those in export licensing and enforcement positions. These tools and functions are not necessarily new, but are scattered across the government and not brought to bear in a systematic manner. What is needed is:
a) Proactive research on emerging technology and how it does or does not fit into the existing export control and international trade system;
b) Pressure to bring classifications and controls of this technology and related equipment to international export control regimes and the World Customs Organization Harmonized System. Better classification improves detection;
c) Expanding OSINT and data science techniques to proactively identify connections between purported end-users and bad actors and illicit trade networks;
d) Using machine learning to evaluate historical data and create mature detection models for identifying high-risk trading partners, transactions, and license avoidance; and
e) Significantly revamped outreach efforts that are informed by data. Targeting individual companies with key capabilities based on existing data and reinforcing their primary role in export due diligence and security.
Ultimately, restricting technology transfers to undesirable end-users is not an issue of motivation or jurisdiction – it is uncovering sufficient information to make the case. Blanket denials do not make coherent policy. A better approach is to create a mandate to leverage data analysis and intelligence to support informed licensing decisions and policy. A public effort needs to be made to provide the appropriate level of attention to connection between U.S. security, export controls, economic competitiveness and emerging technologies. Playing musical chairs with licensing bodies does not tackle the problem. Providing data- and intelligence-driven support to licensing authorities is the only way to make progress.