[Senate Hearing 117-740]
[From the U.S. Government Publishing Office]


                                                     S. Hrg. 117-740                                                       
                                                      

              ADVANCING NATIONAL SECURITY AND FOREIGN 
               POLICY THROUGH EXPORT CONTROLS: OVER-
               SIGHT OF THE BUREAU OF INDUSTRY 
               AND SECURITY

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                                   ON

  EXAMINING THE ACTIONS TAKEN BY THE BUREAU OF INDUSTRY AND SECURITY, 
   INCLUDING THOSE TAKEN TO RESPOND TO RUSSIA'S FURTHER INVASION OF 
   UKRAINE, ENGAGE WITH INTERNATIONAL ALLIES AND PARTNERS ON EXPORT 
 CONTROLS, ADDRESS HUMAN RIGHTS VIOLATIONS, AND ENFORCE EXPORT CONTROLS

                               __________

                             JULY 14, 2022

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                                
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                


                Available at: https: //www.govinfo.gov /


                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
53-535 PDF                 WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------   

            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Dan Sullivan, Republican Chief Counsel

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                        Pat Lally, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        THURSDAY, JULY 14, 2022

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    24

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3
        Prepared statement.......................................    25

                                WITNESS

Alan F. Estevez, Under Secretary for Industry and Security, U.S. 
  Department of Commerce.........................................     5
    Prepared statement...........................................    26
    Responses to written questions of:
        Chairman Brown...........................................    32
        Senator Warren...........................................    33
        Senator Tillis...........................................    36

              Additional Material Supplied for the Record

Letter submitted by The Bureau of Industry and Security..........    38

                                 (iii)

 
ADVANCING NATIONAL SECURITY AND FOREIGN POLICY THROUGH EXPORT CONTROLS: 
            OVERSIGHT OF THE BUREAU OF INDUSTRY AND SECURITY

                              ----------                              


                        THURSDAY, JULY 14, 2022

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:01 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Sherrod Brown, Chairman of the 
Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Committee on Banking, Housing, and 
Urban Affairs will come to order. We welcome our witness, Alan 
Estevez, who serves as Under Secretary for Industry and 
Security at the Department of Commerce.
    I thank Ranking Member Toomey and his staff for their help 
in confirming Under Secretary Estevez and the two Assistant 
Secretaries at the Bureau of Industry and Security: Thea 
Kendler for Export Administration and Matt Axelrod for Export 
Enforcement. That is important as other confirmations in the 
Federal Reserve and others have been.
    This is the first time since we passed the Export Control 
Reform Act in 2018 that Congress has fully confirmed the full 
BIS leadership.
    Because of this Committee's work, for the first time since 
2013, close to a decade, we have a full, confirmed Federal 
Reserve Board. It is our job to do these things.
    We have confirmed, as I just spoke with the Under Secretary 
a moment ago, a fourth member of the Ex-Im Board. We have a 
fully functioning Export-Import Bank, also important.
    And for the first time in our history, these nominees are 
beginning to look more like America in terms of gender and race 
and background and diversity generally.
    The world changed on February 24th when Russia invaded 
Ukraine, continuing--I would underscore ``continuing''--its 
barbaric war on the Ukrainian people and their sovereignty.
    Vladimir Putin has been shocked by two things: the strength 
of the Ukrainian resistance; and the skill of this President in 
assembling and uniting a broad coalition, the likes of which we 
have not seen in decades. Think about this: Germany, Finland, 
Sweden, Switzerland.
    We have isolated Russia. We have limited its ability to 
access the tools and technologies it needs to continue its 
grotesque, immoral, inhumane war against Ukraine.
    BIS has been integral in our international response to 
siphon off Russia's access to military material. I thank all of 
you for that. It quickly rolled out a sweeping series of rules 
designed to stall and degrade Russia's military and 
technological capabilities.
    BIS targeted Russia's defense, aerospace, and maritime 
sectors. It applied controls to U.S. exports and to items 
produced abroad that use U.S. software, U.S. technology, or 
U.S. equipment.
    Since February 24th, BIS has issued a dozen new rules, 
ramped up enforcement activity, and continued to build what 
Assistant Secretary Axelrod called ``the broadest expansion of 
multilateral export controls among like-minded partners since 
the creation of CoCom back in cold war days in 1949.''
    The results have been impressive.
    Exports to Russia by countries who have imposed sanctions 
have fallen 60 percent.
    At the same time BIS weakened Russia's military, it 
committed to ensuring that those items that benefit the Russian 
people, like medical supplies, are still available.
    This ability to distinguish bad actors--whether they are 
State or non-State actors--while still allowing innocent 
civilians to benefit from U.S. exports is crucial, threading 
that needle is crucial, as the agency builds on this 
international coalition to address other national security and 
foreign policy challenges.
    To that end, Mr. Under Secretary, I am encouraged by your 
statements calling for strengthening or supplementing our 
existing multilateral regimes.
    Enhancing our multilateral regimes requires patience--by 
BIS and by Congress. We must work with allies to identify the 
items and the technologies that present a risk to our 
collective national security.
    It is important work. I am pleased to hear that it is one 
of Under Secretary Estevez's top priorities.
    Back in 2018, when this Committee worked to enact the 
Export Control Reform Act, we included policy statements, 
guiding BIS in developing export control policy.
    One of these guiding principles is that our national 
security requires that the U.S. maintain our leadership in 
science, technology, engineering, and manufacturing.
    That value should guide our export control policy. It 
should guide our work in Congress.
    We do not want to be at the mercy of our competitors--or 
our adversaries--for technology and other inputs vital to a 
21st century economy. Dependency on countries like China poses 
a huge economic risk and an unacceptable national security 
risk.
    It is why we need investments in research and development 
and investments in our fellow citizens.
    We have an innovation and competition bill in conference 
that would do just that. I appreciate Mr. Estevez's 
enthusiastic support for that bill.
    Ranking Member Toomey and his staff--and I compliment 
them--have worked in good faith with me and my staff to 
negotiate this Committee's conference provisions. I thank them 
for that important work.
    We have reached bipartisan agreements on provisions with 
the House Foreign Affairs Committee and the House Financial 
Services Committee.
    It is time for us to vote on and pass a final bill that 
promotes U.S. science, U.S. technology, and U.S. manufacturing 
so we maintain U.S. economic leadership.
    This bill will create thousands, likely tens of thousands 
of good-paying jobs in Ohio and many more around the country--
jobs in growing industries, jobs where you build careers. In my 
State, those 10,000 jobs, at least 10,000 jobs, are at stake. 
Business leaders and labor leaders are desperate for this 
investment.
    The head of the Ohio Chamber of Commerce and my friend, 
former Congressman Steve Stivers, and the head of the Ohio 
Business Roundtable, former Republican Congressman Pat Tiberi, 
have been particularly vocal about this support.
    We must act now.
    For decades--we know this. For decades, at the behest of 
corporate America, policymakers of both parties have passed bad 
tax policy and bad trade policy that not only allowed but 
really encouraged these companies to move jobs overseas and 
supply chains and technology abroad--always in search of lower 
wages, always in search of weaker worker protections, always in 
support and encouraging low-level environmental enforcement. 
And when the production moves abroad, innovation moves with it. 
And then we act surprised.
    We invented semiconductor chips. Ninety percent of them are 
now made overseas, again, because of a corporate trade policy 
that far too many Members of this Senate and House acquiesced 
in when faced with intense corporate lobbying.
    We have to fix that now. This is our chance.
    Americans have waited long enough. We should pass this bill 
this month.
    If Congress is serious, if we are serious about the threats 
that face us, regardless of the politics, it must be similarly 
serious about supporting American innovation.
    Senator Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman. And, Under 
Secretary Estevez, welcome.
    The Bureau of Industry and Security, or BIS, determines 
which U.S. goods are too sensitive to be shipped abroad. In the 
face of China's drive for dominance in key tech sectors 
especially, BIS' mission today is as important as it has ever 
been. By setting U.S. export control policy on items used for 
both civilian and military purposes, BIS effectively has the 
power to reshape the supply chains of entire industries. That 
means BIS must craft export controls in a prudent, thoughtful, 
and effective manner that advances U.S. national security 
interests without unduly harming American economic interests.
    The issue I would like to focus on today is a legislative 
concept that has received a growing amount of attention in 
recent months. It falls entirely in the jurisdiction of this 
Committee, and it would unquestionably impact BIS' mission and 
work flow if enacted. I am referring to a concept known as 
``outbound CFIUS.''
    The idea of outbound CFIUS is to establish a new agency 
within the Executive branch and to give this agency vast, 
potentially unchecked authority to regulate, intervene in, and 
even block all kinds of potential activities, including 
prohibiting Americans and U.S. firms from investing in, selling 
to, or buying from companies in certain countries, most notably 
China.
    Outbound CFIUS could also provide the President with 
extremely broad authority to determine which industries are 
subject to regulation of this sort. And it is not just 
semiconductor firms that we would be talking about. Any 
industry determined to be in the national security interest of 
the United States could be impacted.
    President Biden's recent invocation of the Defense 
Production Act for baby formula is just the latest reminder of 
how the Executive branch can abuse the term ``national 
security.''
    President Trump also abused the notion of national 
security, having the Commerce Department laughably assert in a 
232 investigation that the import of foreign cars was somehow a 
threat to our national security.
    Now, it appears that Mr. Estevez perhaps agrees with this 
because, during his confirmation hearing before this Committee, 
he said to me, and I quote: ``232 is an important tool. Section 
232 needs to be looked at in a hard national security lens, 
Senator. It should not be used willy-nilly.''
    I share Mr. Estevez's concern about national security 
authorities being abused by any President willy-nilly. It is 
not an overstatement to suggest that hundreds or thousands of 
U.S. companies and tens if not hundreds of billions of dollars 
in commerce could be impacted by outbound CFIUS.
    The rise of China presents the United States with the 
greatest security challenge we have faced since the end of the 
cold war. I am very clear-eyed about the fact that the Chinese 
Communist Party has embarked on a concerted, whole-of-
Government campaign to surpass the technological leadership of 
the United States in the areas that will underpin geopolitical, 
military, and economic power for decades to come, all to 
further their ambition to displace America as the world's 
dominant superpower.
    But how we address this challenge matters. Doing outbound 
CFIUS and getting it wrong could actually impede national 
security, including the work of security agencies such as BIS 
or CFIUS that are already doing important work with respect to 
China. Getting it wrong could also severely harm the United 
States. We cannot prevail in this contest with China by 
emulating China, like the China competition bill before the 
Senate envisions in many ways.
    Instead, we need to out-innovate China and protect our 
intellectual property from theft and illicit transfer. That 
means ensuring that the United States remains the single 
greatest global destination for capital formation, research and 
development projects, and the smartest minds in the world to 
come and work. Getting outbound CFIUS wrong puts all of this 
into jeopardy by disincentivizing the flow of capital, ideas, 
and people to come to the United States.
    There are many important questions about outbound CFIUS 
that remain to be answered. For example, what exactly is the 
problem outbound CFIUS is attempting to solve? How do current 
laws and authorities such as export controls address or fall 
short of addressing these problems? How would outbound CFIUS 
affect the United States as a destination for capital formation 
and technological innovation?
    Now, I am not the only one concerned about the reasoning 
and implications of standing up an outbound CFIUS mechanism. I 
have here, Mr. Chairman, a letter from three former officials 
from the last Administration who directly oversaw CFIUS and 
export controls. The letter raises concerns about the scope and 
justification for outbound CFIUS and calls for any such 
mechanism to be grounded in a clear, statutory law brought 
about through regular order. Mr. Estevez's predecessors clearly 
are concerned about the way in which outbound CFIUS is laying 
out. I think he should be concerned, too.
    In addition, 11 trade associations representing hundreds of 
companies and thousands and thousands of workers sent a letter 
to Congress expressing opposition to the inclusion of outbound 
CFIUS in the China competition bills that are under 
consideration. I ask that these two letters be entered into the 
record.
    Chairman Brown. Without objection, so ordered.
    Senator Toomey. So given these concerns, I think Congress 
really has to take the time to properly evaluate the outbound 
CFIUS concept rather than rushing to enact legislation that is 
not properly vetted.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    I appreciate the Ranking Member's comments about the 
outbound investment provisions. I meant what I said in my 
opening statement. I want to pass a final competition bill this 
month. Time is up. We need to act. I will work with my 
colleagues on this issue, but we should do so in another 
vehicle. So, Pat, thank you.
    It is my pleasure to welcome Under Secretary of Commerce 
Alan Estevez. He was sworn in in early April. Thank you for 
joining us. You are recognized for your testimony.

STATEMENT OF ALAN F. ESTEVEZ, UNDER SECRETARY FOR INDUSTRY AND 
             SECURITY, U.S. DEPARTMENT OF COMMERCE

    Mr. Estevez. Thank you, Chairman Brown, thank you, Ranking 
Member Toomey, and thank you, Members of this Committee, for 
inviting me to testify before you today on the work of the 
Commerce Department's Bureau of Industry and Security, or BIS.
    As the Under Secretary of Commerce for Industry and 
Security, I view my role as the Chief Technology Protection 
Officer of the United States. Our primary goal is to prevent 
malign actors from obtaining or diverting technologies that can 
be used against the United States or its allies in order to 
protect our national security and advance our foreign policy 
objectives.
    Export controls are a unique and powerful tool for 
responding in the modern environment. This is particularly true 
when we work together with our allies and partners.
    Today I will briefly discuss BIS' role in administering and 
enforcing export controls in response to Russia's further 
invasion of Ukraine; the pacing threat of China; the 
identification of emerging and foundational technologies 
essential to national security; and building a durable, 
multilateral technology security framework for export controls.
    Since February 24th, we have imposed sweeping export 
controls on Russia for its unjustified, unprovoked, and 
premeditated invasion of Ukraine and on Belarus for its 
substantial enabling of that invasion. I want to thank the 
Members of this Committee for their support for additional 
funding for BIS in the first Ukraine supplemental spending bill 
that passed in March.
    We are choking off exports of technologies and other items 
that support Russia's defense, aerospace, and maritime sectors 
and are degrading Russia's military capabilities and ability to 
project power. For example, overall U.S. exports to Russia have 
decreased approximately 88 percent by value since last year, 
and other countries implementing similar controls have seen 
export decreases around 60 percent.
    Importantly, since our controls have fully taken effect, 
worldwide shipments of semiconductors to Russia have dropped 74 
percent by value compared with the same period in 2021. Also, 
reports indicate Russia will have to ground half to two-thirds 
of its commercial aircraft fleet by 2025 in order to 
cannibalize them for parts due to the controls we have 
implemented. This is one of the most aggressive and robust uses 
of export controls against another country, and the effects 
would not be possible without the coalition of 37 other 
countries so far that have adopted substantially similar 
controls on Russia and Belarus.
    As we continue our robust response to Russia's invasion of 
Ukraine, we remain focused on aggressively and appropriately 
using our tools to contend with the long-term strategic 
competition with China. My North Star at BIS is to ensure we 
are doing everything within our power to prevent sensitive 
technologies with military applications from getting into the 
hands of China's military, intelligence, and security services.
    BIS maintains comprehensive controls against China, 
including for the most sensitive items under our jurisdiction, 
as well as for predominantly commercial items when intended for 
military end uses or end users in China.
    As part of our controls, we have nearly 600 Chinese 
entities on our entity list, 107 of those added during the 
Biden administration. China remains a complex challenge in the 
competition between democracies and autocracies. We are closely 
reviewing our approach to China, seeking to maximize the 
effectiveness of our controls.
    Another part of our mission at BIS is to identify and 
impose appropriate controls on emerging and foundational 
technologies essential to national security. Since enactment of 
this statutory requirement, BIS has established 38 new controls 
on emerging technologies, including controls related to 
semiconductors, biotechnology, and quantum computing. I 
continue to prioritize this issue.
    As part of this important mission, I have asked the 
Department of Defense Under Secretaries for Acquisition and 
Sustainment and for Research and Engineering to work with me to 
establish a critical technologies review board. This board will 
help BIS to understand the technologies DOD is investing in for 
military use and help us impose appropriate controls for those 
technologies.
    For the United States to maintain effective export controls 
and technology leadership, we need to coordinate with others. 
Our work with 37 other countries to implement the Russia 
controls helps provide a blueprint for further progress. We 
need to work with our allies to develop a 21st century export 
control framework for the digital age, which includes working 
with like-minded suppliers of sensitive technologies as well as 
addressing the use of commercial technologies to commit human 
rights abuses.
    Finally, enforcement is critical to ensuring effective 
export controls, and we are working with partners across the 
globe to enhance export control enforcement. I value the 
collaboration and partnership with this Committee as we tackle 
national security challenges together.
    Thank you again for inviting me here today to testify, and 
I look forward to your questions.
    Chairman Brown. Thank you, Mr. Under Secretary.
    The questioning will begin with the Senator from Nevada, 
Senator Cortez Masto, for 5 minutes.
    Senator Cortez Masto. Thank you, Mr. Chairman.
    Chairman Brown. Of course.
    Senator Cortez Masto. I appreciate the consideration.
    Under Secretary, in May, the Bureau of Industry and 
Security announced its decision, as we have been talking about, 
to cease which technologies subject to new export control under 
the Export Control Reform Act are either emerging or are 
foundational and instead identify all such technologies 
together as Section 1758 technologies. So can you elaborate on 
how the Bureau expects this change to speed up efforts to 
identify technologies significant to U.S. national security?
    Mr. Estevez. Thank you for that question, Senator. We found 
going through the process, while we were looking at emerging 
and foundational technologies, an interagency debate over what 
is the difference between emerging and foundational. For 
example, is a 5 nanometer semiconductor emerging technology or 
is it foundational, a next generation of an existing 
technology? Is a Tesla a new emerging vehicle, or is it just a 
car?
    So instead of dancing around that, to get technology 
protections out, we wanted to just identify them within the 
statute, number 1758. That does not mean we will not go back 
and identify them as emerging or foundational and put 
appropriate controls. My guiding light is to put appropriate 
controls on technologies that may threaten the United States if 
used by the wrong people. But to get through the interagency 
process, we are going to blur that distinction.
    Senator Cortez Masto. So could this lead to a rise in 
designations of such technologies and an increase in mandatory 
filings with CFIUS? Would this add more bureaucracy and slow 
this process down somehow, impeding our national security in 
being able to identify these technologies?
    Mr. Estevez. I do not believe so, Senator. I am a former 
DOD rep to CFIUS for 6 years. CFIUS needs to look at 
technologies for investment, including passive investment, 
under the rules of FIRMA. They can do that using broad 
categories of technologies--AI, quantum computing. To do an 
export control, I need a more definitive identification of that 
technology. What is the algorithm? Which CFIUS does not need. 
CFIUS needs to look at a broader scope.
    So, for me, this is an easier way to get the proper 
controls around technologies that could be used against us 
while still allowing the processes to work.
    Senator Cortez Masto. Thank you. And we talked about this. 
China is the greatest long-term threat to the United States and 
democracies around the world with their economy and at so many 
other levels, and it has a clear plan to use all forms of their 
Government, their economy, their military, the industry, to 
really gain that competitive advantage over the United States.
    My question to you, Under Secretary, is: What additional 
authorities--tell us as you are here today--or resources do you 
need in order to address this threat that is posed by the 
Chinese Government?
    Mr. Estevez. I think I have the proper authorities under 
ECRA, so I do not believe I am missing any authorities. I would 
be remiss since you asked the question about resources--look, 
you know, BIS is a fairly small organization. I could always 
use more technologists, more enforcement officers, you know, 
and a larger budget to use some tools that can give us access 
to supply chain mapping, for example. You know, so I would 
always look to Congress to help me in that regard.
    Senator Cortez Masto. So let us talk about that workforce, 
though. Does that workforce exist? Do we have the skill set for 
what you need to be able to hire?
    Mr. Estevez. I have some fantastic technologists on my 
staff. I think the talent is out there. Obviously, Government 
has to compete for that talent with the private sector. But, 
you know, there are people like me who came back from the 
private sector who want to do the right thing to protect our 
national security, and I think we can access that talent.
    Senator Cortez Masto. Thank you. And then, finally, how is 
BIS working to protect the U.S. IP and innovation with the 
interagency to ensure that critical and emerging technologies 
do not land in the hands of our adversaries such as Iran and 
North Korea?
    Mr. Estevez. So just like our protections against China and 
China's theft of IP, you know, we would have the same kind of 
controls. Theft of IP is a violation of export control, because 
we also control the technical data around specific 
technologies. So if we found that someone that we could 
pinpoint that was stealing IP, that person/entity would 
probably land on the entity list, and we would take appropriate 
actions with our interagency partners.
    Senator Cortez Masto. Thank you. Thank you, Mr. Under 
Secretary, for joining us today.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Toomey is recognized.
    Senator Toomey. Thank you, Mr. Chairman.
    Mr. Estevez, I just wanted to sort of try to establish some 
baselines here. First of all, I trust you would agree that any 
technology transfer, even as part of an outbound investment by 
an American firm into China, is currently subject to existing 
export controls.
    Mr. Estevez. Yes, I would, Senator.
    Senator Toomey. OK. So BIS, as I think you just said, has 
the authority to block the transfer of really any kind of 
technology, intellectual property, blueprint, procedural know-
how, software, and that does not end because a U.S. company has 
entered into, say, a joint venture with a Chinese company.
    Mr. Estevez. That is correct. They would need a license if 
it was a protected technology.
    Senator Toomey. Right. So let me just drill down on this 
and make it very clear. If an American venture capital firm, 
for instance, is investing in a Chinese artificial intelligence 
company that has ties to the Chinese military, a technology 
transfer that is associated with that deal that included some 
kind of intellectual property or sensitive blueprints or 
services or procedural know-how, none of that escapes the 
jurisdiction of these export controls because it is part of an 
investment deal.
    Mr. Estevez. If there was a technology transfer as part of 
that investment, that is correct, Senator.
    Senator Toomey. Right. So, likewise, if an American 
semiconductor firm, software firm, has a joint venture with a 
Chinese company, the Chinese company cannot just get, again, 
the sensitive technology, intellectual property, or any of 
that; they do not come out from under the export control.
    Mr. Estevez. That is correct. It is a slippery slope once 
you start working with companies.
    Senator Toomey. So I guess the question becomes: Is it your 
view that the BIS has sufficient authority to control the 
transfers of sensitive American technology to China?
    Mr. Estevez. Yes, Senator, BIS has the appropriate controls 
to protect transfer of technology.
    Senator Toomey. OK. So you have got that authority. But I 
think you have said that you think we still, nevertheless, need 
to have some kind of outbound investment review mechanism, even 
though you have just said we already have the authorities to 
prevent any kind of technology transfer. So I think given the 
limitations on time, I am going to not ask you to explain fully 
how and why we need to have that limitation on investment when 
you have said we already have the full authority to prevent the 
technology transfer.
    I guess what I would like to ask you is this: I think we 
all know that when Congress passed ECRA, we did not intend for 
that law to contemplate a regime to regulate and block 
investment. So if we are going to stand up a regime that 
empowers that, don't you think that that ought to happen as a 
result of specific new statutory action by Congress?
    Mr. Estevez. I agree there should be statutory action.
    Senator Toomey. OK. So we should pass a law. And that comes 
completely under the jurisdiction of the Banking Committee, so 
the sensible way forward would be to have hearings on this to 
understand the need for this. I would like to have you back for 
an occasion where you could explain why you think we need this 
given that you have already said we have full capability to 
block technology transfer. I assume you would support and work 
with this
    Committee on that.
    Mr. Estevez. As you know, Senator, I would always come 
before this Committee if asked.
    Senator Toomey. Let me ask you this: If a foreign company 
violates our export controls, is that sufficient grounds for 
putting that company on the entity list?
    Mr. Estevez. If a foreign company violates our export 
controls, that is a likely--they would be a likely candidate 
for an entity list listing.
    Senator Toomey. Likely candidate, so----
    Mr. Estevez. Yes, I would put them on the entity list.
    Senator Toomey. OK. All right. OK. Now, last year, China 
conducted two hypersonic missile tests which the Chairman of 
the Joint Chiefs, General Mark Milley, described as being very 
close to a Sputnik moment for the United States. There is also 
growing speculation that China will soon unveil its H-20 
nuclear-capable stealth bomber.
    Several months ago, my staff and the staff of the Chairman 
requested a briefing on the hypersonic test to hear from BIS an 
assessment of whether or not and to what extent any U.S. 
technology that was used in the development of that system, but 
we have not yet received that briefing. So I would like now to 
expand that briefing to include an analysis of whether U.S. 
technology of any sort has been involved in the development of 
the H-20 bomber. Can you commit today to give us that briefing 
within the next month?
    Mr. Estevez. I will commit to give the Committee what 
Commerce can give. The reality is that is a much more complex 
problem that involves other agencies, including----
    Senator Toomey. But we have not had the BIS briefing.
    Mr. Estevez. I am happy, Senator, to give what BIS has.
    Senator Toomey. And we can do that within a month?
    Mr. Estevez. Yes, sir.
    Senator Toomey. All right. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Senator Tester from Montana is recognized from his office.
    Senator Tester. Thanks for being here, Mr. Estevez. I serve 
as Chair of the Defense Appropriations Subcommittee, and there 
has been a lot of talk about national security, and rightfully 
so, as it applies to your agency. Just on a side note, if we 
really want--if we are really concerned about national 
security, we as a Senate need to put politics in the back 
pocket for once in our lives and make sure we get USICA passed 
and make sure that we get our appropriations bills done by the 
end of this fiscal year, which is our job. And if we do not do 
that, then we are putting everything at risk that we stand for 
as a Nation. And I think now is not a time to play games or 
extend to a CR for even 30 days. The fact is that if we are 
going to have, in my case, a Defense Department that works, if 
we are going to have domestic programs that work for this 
Nation, these budgets need to be out by the end of September 
and no more screwing around. We need to do it. And I would hope 
that everybody on this Committee pressure their leadership and 
the Chairman and Ranking Member of the Appropriations Committee 
to do exactly that.
    I want to talk to you, Mr. Estevez, about exports to 
Ukraine to fight back against the Russian invasion. Do you have 
a system in place to expedite the consideration of those 
exports?
    Mr. Estevez. We do, Senator.
    Senator Tester. Could you walk me through what that process 
looks like, what that approval process looks like?
    Mr. Estevez. So like all----
    Senator Tester. As briefly as you can.
    Mr. Estevez. Like all licenses that may require--or items 
that are exported that may require a license, it goes through 
the interagency process. But we would move them up to the top 
of the list in order to make sure that we are providing the 
Ukrainian military the capability they need to defeat the 
Russians.
    Senator Tester. And so what kind of timeframe do you look 
at for those approvals?
    Mr. Estevez. They are going within weeks, Senator, or 
shorter.
    Senator Tester. So there has been much said about China, 
and rightfully so, because there is a lot to be said about what 
China is doing. The technology that we are giving the 
Ukrainians, I do not want to get into what that is at all. But 
the truth is that anything we give Ukraine, you have got to 
assume China can get. How do you accommodate that?
    Mr. Estevez. So our export controls that I control are over 
dual-use items, not the military equipment that the Department 
of Defense is providing to China--excuse me, providing to 
Ukraine. And, you know, none of the items that we are talking 
about are like the type of high-end tech that we are looking at 
protections around China.
    Senator Tester. OK. You prefaced that by saying not the 
military stuff. What about the military stuff? You have 
oversight over that also.
    Mr. Estevez. I do not have oversight over the provision of 
military equipment. That is under the jurisdiction of the State 
Department.
    Senator Tester. What about the technology that goes with 
that military equipment? Still part of the State Department?
    Mr. Estevez. If it is embedded inside like a HIMARS Unit, 
for example, or an M777, which is an artillery piece, that is 
under the jurisdiction of State.
    Senator Tester. Do you have any concern about State's 
ability to be able to keep valuable information out of the 
hands of Russians and the Chinese?
    Mr. Estevez. It is a matter of what is captured on the 
battlefield, I guess is what you would be concerned about.
    Senator Tester. That is correct.
    Mr. Estevez. Nothing that I am aware of--and I am not, you 
know, playing in the Department of Defense's role of providing 
equipment. But I am familiar with the equipment that they have 
provided. None of that equipment is what I would call our crown 
jewels.
    Senator Tester. OK.
    Mr. Estevez. Because the Ukrainians are not capable of 
using that equipment, quite frankly.
    Senator Tester. I have got you. The last time we had one of 
these hearings in 2019, there was no one from the 
Administration to testify. I was frustrated by that then, so I 
just want to thank you for being here, because export controls 
are really very important to our national security, and 
Congress has a responsibility to provide the oversight of how 
that is working, and a great way to do that is to have folks 
like you in front of this Committee. So balancing our national 
security with export competitiveness is also really, really, 
really important.
    In your role, how do you ensure that that is happening at 
BIS?
    Mr. Estevez. Through our interagency licensing process. It 
is not just me that looks at stuff. It is the Department of 
State, Department of Defense, Department of Energy for all 
licenses. So that process in and of itself has a good 
divergence of views, you know, that usually come together in a 
coordinated fashion, and I think we--I personally believe that 
we need to balance those authorities.
    With that said, I also believe we do need to prevent the 
most sensitive technologies from going to people who have 
identified that they would like to use it against us.
    Senator Tester. Thank you. Thank you, Mr. Chairman, and 
thank you, Mr. Estevez.
    Mr. Estevez. Thank you, Senator.
    Chairman Brown. Thank you, Senator Tester.
    Senator Daines of Montana is recognized.
    Senator Daines. Mr. Chairman, thank you, and thank you for 
coming to the Committee today. The United States is facing 
serious shortages of semiconductors, used in virtually every 
aspect of our economy. I believe this is truly becoming a 
national security concern. Whether it is health care, whether 
it is the military, semiconductors form the core of our modern 
economy. I believe it is critical that we dramatically increase 
domestic manufacturing as well as the fabrication of 
semiconductors and ramp up our enforcement of intellectual 
property violations by China. And I believe the Senate version 
of USICA does just that, and they do through the important 
CHIPS funding and also with the addition of my bipartisan 
Protecting IP Act. I believe it is critical that our colleagues 
across the aisle abandon their partisan tax-and-spend proposals 
and that Congress focuses on this very real national security 
threat by passing the bipartisan Senate USICA bill.
    However, BIS can be doing more right now, I believe, with 
their existing authorities. It is clear that China is seeking 
to leapfrog semiconductor technology by stealing American IP, 
and companies that are supposed to be on your entity list are 
still finding a way to access American intellectual property.
    So here is my question: What is BIS doing to ensure that 
high-tech and national security IP is not ending up in the 
hands of the Chinese Government?
    Mr. Estevez. Thank you for that question. That is frankly 
what I spend my sleeping and waking hours thinking about, 
Senator. Now, we do have some cutoff points at the most 
sensitive highest tech semiconductors and the tooling that 
would make those semiconductors being allowed to be exported to 
China, so there is a cutoff point. I am conducting a complete 
review over those policies within BIS right now, and then there 
is also an interagency process looking at this. So there is a 
red line on what we would allow the Chinese to access.
    With regard to listing folks on the entity list, you know, 
I cannot talk about any existing investigations that we may 
have, but we are always looking at all sources of data, open 
source, input from, you know, articles from think tanks, and 
certainly classified information on what Chinese firms may be 
doing. You know, we do have a legal process that is interagency 
to do that, and I always want to make sure that I have the 
legal standing to get someone on the entity list that, if they 
happen to sue us, we win.
    Senator Daines. Mr. Estevez, how much time have you spent 
in China before you served in this capacity?
    Mr. Estevez. Zero.
    Senator Daines. Never been there?
    Mr. Estevez. Never been there, partly because, you know, my 
whole career has been with the Department of Defense.
    Senator Daines. Whereabouts in the region have you traveled 
outside of China?
    Mr. Estevez. I have been to Japan, Korea.
    Senator Daines. I lived in China for 6 years, worked for 
Proctor & Gamble, had two kids born in Hong Kong, and one of 
the things I have--one of my missions serving the U.S. Senate 
is to take U.S. Senators--this is pre-COVID--into China and to 
see it. And the supply chain issues are very, very critical, 
but equally critical and perhaps even a greater threat is the 
innovation ecosystem that China is building, STEM graduation 
rates, you know, ten times greater than the United States of 
America. They are building not only in terms of the scale of 
the innovation ecosystem, but now the quality of the IP that 
they can generate. So it is about stealing IP, but it is now 
shifting increasingly to generating IP. And I think this is one 
of the greatest threats we face as a Nation over the course of 
the next several decades.
    Mr. Estevez. Senator, I agree that they have an incredible 
ecosystem. I would put our ecosystem of a free and independent 
thought process up against a directed ecosystem against that. 
But with that said----
    Senator Daines. As long as we can keep our freedom, the 
rule of law, abundant supplies of energy, tax code to 
incentivized American innovation, I agree with you. The 
threats, I believe, to our long-term competitiveness are not 
outside the city but they are right here in this city.
    Mr. Estevez. Let us pass BIA. Let us get CHIPS funding out 
there.
    Senator Daines. We agree on that. Well, thank you, and I do 
not want to--we should not be underestimating the threat that 
China presents long term. I am not betting against the U.S. at 
all. As long as we stay free, have the rule of law, and have 
policies that incentivize innovation, we are going to win. But 
it is a very real threat.
    Mr. Estevez. I agree with you, Senator.
    Senator Daines. Thank you.
    Chairman Brown. Senator Warner of Virginia is recognized 
from his office.
    Senator Warner. Thank you, Mr. Chairman, and I appreciate 
you holding this hearing.
    Mr. Estevez, my friend Senator Daines just raised this 
issue, and I know others have as well. I think it is critically 
important from a competitiveness standpoint, national security 
standpoint, that we go ahead and pass the CHIPS legislation. I 
think almost all of our colleagues understand that we need to 
have those fabrication facilities built here in America, that, 
candidly, we are not producing any of the leading edge chips. 
And as we get below 10 nanometers into even smaller and 
smaller, to be dependent upon Taiwan is not smart.
    I think sometimes we have forgotten, though, that what 
started this whole debate--and I say this as a former telecom 
guy--was when we were a little bit asleep at the switch, and 
China crept up in the 5G domain and managed to set the 
standards, the rules, the protocols, come forward with a 
company like Huawei that was extraordinarily important. And I 
just want to remind my colleagues and I hope you realize, Mr. 
Estevez, that, you know, in addition to the $52 billion around 
CHIPS, there is a billion and a half dollars for investment in 
the USA Telecom Act that was also included in this legislation 
that makes sure that we make the investments in not only 5G but 
the next generation beyond 5G and wireless communications, open 
radio access network.
    Can you talk about what you guys are doing on the BIS tools 
to make sure that we are looking at beyond 5G technology to 
make sure that we reclaim some of that leadership we need?
    Mr. Estevez. Thank you for that, Senator. You know, this 
morning I was listening to NPR, and they used a Wayne Gretzky 
quote about skating where the puck is going rather than where 
the puck is. And we need to be doing that, and we are. So it is 
not just what technologies are there today that need 
protection. We need to look out and see what is coming down the 
pike and what should we be thinking about the protections on 
that. And when I have been talking to companies, that is 
exactly what I am talking to them about, and it is also what I 
am talking to my Defense colleagues about.
    Senator Warner. Well, I do think, again, any big or slim 
CHIPS-related bill, I know everybody has agreed with the USA 
Telecom piece, that 5G and O-RAN needs to be a part of that, 
but I appreciate that.
    I want to go back again to the CHIPS piece and some of the 
Huawei entity designation list. I am really concerned, and a 
number of our--kind of in the memory space, a lot of our 
domestic manufacturers have complained to me about the Chinese 
memory manufacturer YMTC. The Financial Times just did a major 
expos? on this that YMTC was providing components, parts to 
Huawei. You may not be able to talk about all of the specifics 
of this case, but I have urged the Commerce Department to look 
very carefully at YMTC's activities. I think they are typical 
of a lot of the new Chinese memory and chip-related firms.
    How do you make sure we are--whatever you can say about 
YMTC specifically would be great, but if you can also just 
generally talk about, you know, how you are investigating 
potential violations of the Huawei entity list, and how do we 
make sure we maintain the integrity of our enforcement actions 
to make sure that these tools have got real teeth?
    Mr. Estevez. Thank you for that. Again, I cannot talk about 
YMTC in particular or any entity which may or may not be under 
investigation. However, what we would do, regardless of where 
the allegation or the information came from, but certainly we 
would like a multi-sources, including information provided by 
the intelligence community. We would do a supply chain 
assessment to see how they are flowing and who they are flowing 
with, what companies they are doing business with and how that 
occurred. We would work, again, with not just the BIS 
enforcement arm but with other agencies. And when we find 
sufficient data, we would move to put them on the list.
    Again, it is all-source data that we need to work on. If we 
find violations, we will put companies on the list.
    Senator Warner. Well, there are a number of members, I 
think American companies that raised this concern. I think YMTC 
deserves that investigation and I believe at the end of the day 
designation. But I appreciate your answers, sir, and I 
appreciate the time, Mr. Chairman.
    Mr. Estevez. Thank you.
    Chairman Brown. Thank you, Senator Warner.
    Senator Tillis from North Carolina is recognized.
    Senator Tillis. Thank you, Mr. Chairman. Secretary Estevez, 
thank you for being here. I was happy to support your 
confirmation.
    When I come to this hearing, anytime I talk about export 
controls, first off, thank you for what you have done for 
Russia. I think it is having an impact, and the dozens of other 
nations who have followed suit. But when I look at our greatest 
threat, it is China. And I look at through three lenses: in the 
Banking Committee, the venue that we are here today; in my 
position on Senate Armed Services, where we have received some 
of the briefings that Senator Toomey has rightfully requested 
and should receive; and also through the Judiciary Committee.
    In the Judiciary Committee in particular, I am Ranking 
Member on the Intellectual Property Subcommittee, and we have 
had numerous hearings on China's theft of intellectual 
property. In fact, down in Charlotte, there is a company called 
Charlotte Pipe. It has been in the family for almost 100 years. 
It looks like an old-fashioned foundry. It is high-tech, but 
its look looks like it was back maybe 75 years ago. You can go 
to a province in China, and there is a Charlotte Pipe, a 
complete rip-off of intellectual property. It looks like a 
Hollywood set of this business in North Carolina, inferior 
products being shipped and imported into the United States. We 
have caught them a couple of times, but they just shamelessly 
do it. And I assume that is with the full approval and 
agreement with the CCP and Xi Jinping.
    If you take a look at their J-20 fifth generation fighter, 
it looks--in fact, if it were flying out of Cherry Point, I 
would mistake it as an F-35. Maybe it was just coincidental, or 
perhaps they stole our intellectual property, and they damn 
sure did not steal it on the battlefield. They are 
consistently, as a Government, turning a blind eye toward 
intellectual property theft. Yeah, they are innovators and they 
have gotten better, and I agree with Steve Daines, they are an 
innovator. They have got a middle class that is almost twice 
the size of our U.S. population. I understand the need for 
businesses to invest in China. But I also think that we have to 
match China strategically.
    In August, I am going to be on a trip that will take me to 
South America and Africa, and most of my focus is going to be 
on Chinese investment in this hemisphere and in Africa that 
have dual-purpose uses. Virtually every dollar that China 
invests in outside of their country has a dual purpose, an 
economic and military purpose, and we have virtually no answer 
to that.
    So in my opinion, we have got to get smart. We have to play 
the same game that they are playing. And if we do not, then Xi 
Jinping will achieve his objective of being the economic and 
military superpower by 2050. And we no longer have to think 
about the threat of the invasion of Taiwan as hypothetical. We 
have seen what Putin has done in the Ukraine. It is a real 
threat. And we only have to look to Hong Kong to see that China 
would be prepared to do it if they thought they could get away 
with it.
    Think about what would happen if China took Taiwan and how 
disruptive that would be to the global economy, and 
particularly the United States economy with the technology that 
we rely on out of that part of the world.
    So I have got a debate club in my office, Senator Toomey. 
Half of them, if the light shines on them right, it looks just 
like you in terms of being very careful about controlling 
outbound investment. The other half, who happens to be the 
people who sit on the Judiciary Committee, my Judiciary staff, 
and my Senate Armed Services staff say, ``We have got to do 
something differently here. We have to recognize them 
differently.'' We do have to have free trade with China, but it 
has got to be fair. And there has to be a consequence when they 
are not playing by the rules. And they are absolutely not 
playing by the rules.
    And, by the way, on CFIUS, I have had personal experience 
with CFIUS where I think we have got work to do there. We get 
some transactions swept up in CFIUS that should not. I think 
there are some reviews that need to go more quickly. We ended 
up getting one done that affected a North Carolina-based 
business. But I do think it is time for us to sit at the table 
and figure out if we are going to play the same game China is 
playing or if we are going to let them unilaterally use every 
device that they have--and we do not. So the only question I 
have for you in the 30 seconds remaining, when you are taking a 
look at outbound--or any sort of export controls right now in 
your lanes--and I know you talk about where the DOD comes in--
is the intelligence community and the DOD involved in your 
decisionmaking process?
    Mr. Estevez. The intelligence community provides 
information. The DOD is part of the decisionmaking process.
    Senator Tillis. How active are they in the final 
decisionmaking process? Do they provide inputs, or are they at 
the table?
    Mr. Estevez. They are at the table.
    Senator Tillis. Good. Last thing here, I ask this of people 
all the time. What is the best thing in this Congress that 
could come out that could provide you tools that you think are 
necessary to match up against the China threat?
    Mr. Estevez. You know, I talked about some resources, you 
know, certainly some----
    Senator Tillis. So you think you have the authorities, you 
just need more people?
    Mr. Estevez. There is one authority that is a provision in 
one of the China bills that would give me authority to do some 
things on people working with the Chinese intelligence.
    Senator Tillis. Are there any proposals in Congress right 
now that would not be particularly helpful?
    Mr. Estevez. No--I should not say that, no.
    Senator Tillis. What are they?
    Mr. Estevez. We believe that our interagency process works 
very well, and that, you know, it needs to remain that way.
    Senator Tillis. OK, so what specific proposals are you 
concerned with?
    Mr. Estevez. There are proposals around making the first 
discussion over a licensing decision a public record, so how 
did the DOD vote? How did DOE vote? How did State vote? And how 
did Commerce vote? And there is a process that that works, and 
only 0.14 percent actually gets escalated after discussion, 
because what we do is we provide information we pull from your 
question, the intelligence community, and we look at all 
sources to get the right answers.
    Senator Tillis. Got it. Thank you.
    Thank you, Mr. Chair.
    Chairman Brown. Thank you. And, Mr. Under Secretary, follow 
up a little more on extending authorities that Senator Tillis 
just raised, what more you need precisely so we understand 
better.
    Mr. Estevez. Yeah, in ECRA, or maybe it was passed after 
ECRA, there is a control that supports--stops U.S. persons from 
supporting Chinese military, and we need it to be a little 
broader, to Chinese military and the Chinese intelligence 
community, you know, the surveillance community that are doing 
things. So it would expand the export control, which I think 
was the original intent of the legislation. It just came out 
narrower than it was intended.
    Chairman Brown. OK. Thank you. And, Senator Tillis, thank 
you for raising that and allowing you to explore a little 
better.
    Your agency, BIS, has done impressive work to build an 
international coalition that has imposed sweeping export 
controls in response to Russia's unprovoked war in Ukraine. I 
spoke in my opening statement about the President's impressive 
assembling of the coalition in terms of pushing back on Russia 
and from Sweden, to Switzerland, to Finland, to Germany and 
beyond. And your export controls have been really important.
    How do you evaluate the effectiveness of these controls? 
How will it inform future actions?
    Mr. Estevez. So we work with, again, our interagency 
partners and with those countries and certainly with the 
intelligence community to assess what is going on. And we 
listen to Russia's own statements. You know, Putin himself made 
a statement about concerns about the semiconductor--loss of 
semiconductors coming into Russia. I know from my personal 
experience, you know, in the Department of Defense you need 
semiconductors to make a precision guided weapon.
    Now, the Russians do not seem to care about precision 
guided, you know, because they are indiscriminately hitting 
civilian populations. But the reality is they are going to run 
out of capability and are going to be incapable of sustaining 
their force over time.
    Chairman Brown. Thank you. President Biden took office with 
the campaign promise that ``Human rights will be the center of 
our foreign policy.'' That, as you know, as the world knows, 
was a dramatic reversal of his predecessor's foreign policy. 
What actions has BIS taken to follow through on that promise? 
And answer also what other actions do you plan to take?
    Mr. Estevez. So human rights are part of the regular 
license review process, so any license that comes before us, 
you know, we look to assess whether there is a human rights 
issue around that. You know, certainly surveillance technology 
is a great example of that.
    We have a number of Chinese firms--I do not have the exact 
number off the top of my head--that we have put on the entity 
list related to their use of surveillance technology and also 
to the suppression of the Uyghur minority in Xinjiang. And, of 
course, we are working with the interagency on the Human Rights 
Initiative and what export controls would be appropriate in 
that vein.
    Chairman Brown. OK. As the President of the Richmond 
Federal Reserve told me once, ``Watch what I do, and let me 
know that you are watching what I do.'' And we will be watching 
you. I understand your good intentions, but we will be watching 
on human rights, so thank you for that, Mr. Under Secretary.
    Last question. You said recently BIS should take the 
partnerships you build, in responding to Russia, and build a 
new, your words, ``digital export control regime for the 21st 
century.'' I am a strong proponent, as a number of people in 
both parties in this Committee are, of international 
cooperation and updated efforts that would address civil and 
military fusion policies, human rights violations, strategic 
supply chains, and other shared national security and foreign 
policy concerns.
    Describe, if you would, in more detail your work on that 
effort and discuss, if you would, the conversations with allies 
on what national security and foreign policy such a regime 
would address and how you would go about identifying the tools 
and technology that warrant control.
    Mr. Estevez. Certainly, and when I talk about this, 
Senator, you know, I am not talking about replacing the 
existing Missile Control Regime or the Wassenaar Agreement. You 
know, this is a supplemental. The reality is time has changed 
since those regimes were put in place. It used to be the U.S., 
for example, the Department of Defense was the generator of 
innovative technology. That is not the case. Today it comes 
from the commercial sector. We have this great group that we 
have put together to address the Russia controls, and, again, 
semiconductors is a great area of that. We have a threat 
arising from China and from other nations, and we are working 
with them talking about what would be the appropriate control 
regime that we should be working together on that. And we are 
certainly talking to our partners in the EU, the specific 
nations of the EU, our Five Eyes partners, and our partners in 
Asia about those issues.
    Chairman Brown. Thank you, Mr. Under Secretary. Let me ask 
one more question. Senators Menendez and Warren are on the way. 
One other question. BIS has added a number of parties to the 
entity list and military end-user list. Describe the end-user 
tools that BIS uses to address entities of concern. What 
considerations guide the use of end-user controls?
    Mr. Estevez. So we look at who the exporter says it is 
going to, and, again, we draw on the full capabilities of the 
interagency, including the intelligence community, to see who 
that end user is, who that end user is related to, so we can 
see if there is diversion potential. And that is how we would 
make a decision on a licensing agreement or whether someone 
should go on the entity list.
    Chairman Brown. Thank you. Senator Menendez from New Jersey 
is recognized.
    Senator Menendez. Thank you, Mr. Chairman.
    Under Secretary Estevez, we are facing an epidemic of gun 
violence in our country, and we continue to see armed conflict 
and even human rights abuses abroad committed with American-
made weapons. We are told that export control of semiautomatic 
weapons are safer at Commerce than at the State Department 
because BIS has dedicated agents to do end-use monitoring on 
these firearms after they are exported; whereas, State 
supposedly does not.
    However, isn't it true that such agents are checking to see 
if such exports are diverted to unapproved persons but not 
checking for whether or not such firearms are being used for 
human rights abuses?
    Mr. Estevez. As I just answered Senator Brown before you 
came in, human rights are part of the licensing review, and 
certainly for firearms they are at the top of the list for 
licensing review, and we do that with the Department of State, 
Department of Defense, and Department of Energy. And when we do 
our enforcement actions, we would do likewise.
    Senator Menendez. But the end-use efforts, isn't it really 
that they are diverted to--making sure they are not diverted to 
unapproved persons? You are not really doing human rights 
monitoring on end use, are you?
    Mr. Estevez. We are doing human rights monitoring in the 
initial export decision, and should someone use an export 
inappropriately, we would look at, you know, our other tools, 
for example, entity list or blocking further licensing.
    Senator Menendez. At least at State the Congress was able 
to review and disapprove such sales above $1 million on human 
rights grounds if it so chose. What congressional check has 
there been since the transfer of jurisdiction on those proposed 
exports?
    Mr. Estevez. As I believe you are aware, Senator, we have a 
rule that is going to go into effect on the 18th, on Monday, 
that will provide congressional notification regarding weapons 
over a certain amount, and it precludes our providing to our 
allies.
    Senator Menendez. Yes, I appreciate that, and I was happy 
to discuss that with Secretary Raimondo. However, even after 
the rule becomes effective, Congress will not be able to 
disapprove any such sales. Isn't that correct?
    Mr. Estevez. But you will see them in advance, and you can 
certainly provide----
    Senator Menendez. Let me reiterate my question. Congress 
will not be able to disapprove such sales. Isn't that correct?
    Mr. Estevez. That is correct.
    Senator Menendez. OK. Now, President Biden, when he was a 
candidate, promised that he would reverse President Trump's 
transfer of export control of semiautomatic weapons to Commerce 
and return control to the State Department, which he can do 
simply by regulation, and in so doing make them subject again 
to the Arms Export Control Act and, therefore, congressional 
oversight. Do you know of any progress within the 
Administration in fulfilling the promise made by the President?
    Mr. Estevez. I do not, Senator.
    Senator Menendez. OK. Let me ask you a different question. 
A New Jersey medical device manufacturer and its union 
employees received medical grade stainless steel tubing from a 
longstanding supplier in Korea. The company has applied for and 
received limited exclusions from the Section 232 quota for this 
tubing, but managing inventory timing remains a huge and costly 
challenge even with those exclusions in place. The company has 
had to estimate its needs far into the future and stockpile 
tubing for up to a year at a time, costing them about a quarter 
million dollars annually.
    In December 2020, BIS released a list of general approved 
exclusions for the Section 232 Korea steel quota, and anything 
classified under the HTS codes on that list are no longer 
subject to the quota cap. In my constituent company's 
interaction with BIS, career staff indicated additions to the 
list would be made over time, but to date, it is my 
understanding that no new exclusions have been granted under 
this process.
    Can you explain the process and timeline for placing 
additional HTS codes on the list and what other criteria that 
are necessary to see additions made to the list?
    Mr. Estevez. On February 22nd, before I was confirmed into 
the position, BIS put out for public comment asking for 
comments on additional exclusions to the list. We have received 
98 comments to date, and we expect to have a rule out by the 
end of the year.
    Senator Menendez. I hope that BIS can continue to review 
new applications for general approved exclusions and make new 
additions where necessary.
    One last question. Much of your job involves making sure 
critical technologies do not fall into the hands of foreign 
adversaries, human rights abusers, or other rogue actors. Can 
you explain why maintaining America's technological leadership 
is so critical to our national security and the mission of BIS?
    Mr. Estevez. Thank you for that, Senator. Having American 
technology being used to develop military capabilities that are 
on par with ours certainly threatens our national security. You 
know, when I was in the Department of Defense, my job was to 
arm U.S. forces, to provide the weapons and capabilities that 
they use, because we never want to put a U.S. soldier, sailor, 
airman, or marine into a fair fight. And my job right here is 
to protect American technology from being used by an adversary 
to do that. That is my North Star, Senator.
    Senator Menendez. So, therefore, we want to be in an unfair 
fight where we are on the side of the unfairness.
    Mr. Estevez. We want to be on--if an adversary is 
threatening us, we want to win.
    Senator Menendez. Right. Thank you very much.
    Chairman Brown. Thank you, Senator Menendez.
    Senator Warren from Massachusetts is recognized.
    Senator Warren. Thank you, Mr. Chairman.
    I want to ask specifically about military assault weapons 
like the one that was used on the 4th of July to kill seven 
people in Highland Park.
    Now, Congress should reinstate the assault weapons ban to 
keep these guns off our streets, but we should not be shipping 
them to just anyone overseas either. In fact, companies need 
license from the Federal Government to sell assault weapons 
overseas. These are called ``export licenses.'' But in 2020, 
the Trump administration made it easier to get that permission 
by putting the Commerce Department in charge instead of the 
State Department where those permissions had always resided.
    This shift is important. The State Department has deep 
expertise in foreign instability, human rights abuses, and 
terrorism. The Commerce Department specializes in promoting 
U.S. industry overseas, even the gun industry. In the 2020 
campaign, President Biden promised to reverse the Trump 
decision and put export control back with the State Department, 
but as of today that has not happened.
    So, Under Secretary Estevez, how many billions of dollars 
in assault weapons sales has Commerce approved since it took 
over export control in March 2020?
    Mr. Estevez. I will have to get back to you on the exact 
amount, Senator, so I will get you that----
    Senator Warren. Do you want to do an estimate? I think your 
records show----
    Mr. Estevez. I think the website shows $15 billion.
    Senator Warren. $15.7 billion.
    Mr. Estevez. Across all types of weapons, not just assault 
weapons.
    Senator Warren. So Commerce approved $15.7 billion in 
weapons sales in its first 16 months on the job, and by 
comparison, when the State Department was making these 
decisions, it approved $12 billion on average in the same time 
period, including some weapons that never got transferred to 
Commerce. So if you do the math, that is about a 30-percent 
increase.
    Now, that is a huge boon to the gun industry. The $15.7 
billion in Commerce-approved exports is nearly as large as the 
current size of the entire $19 billion U.S. gun manufacturing 
industry.
    Export control law gives Commerce a lot of authority to 
disapprove license requests, including if such weapons sales 
threaten our national security or undermine our foreign policy.
    So, Under Secretary Estevez, how often since March 2020 has 
the Commerce Department actually denied the gun industry's 
request to export these assault weapons?
    Mr. Estevez. Senator, a couple of things, and it is a small 
percentage, and, again, I do not have the percentage off the 
top of my head.
    Senator Warren. Well----
    Mr. Estevez. But can I answer a couple other points? The 
State Department is part of my review process. The State 
Department can stop a sale.
    Senator Warren. I am asking, now that you have the approval 
process, what have you done? How many have you disapproved in 
that time period? Do you know the number?
    Mr. Estevez. I do not know the number, Senator.
    Senator Warren. It is four-tenths of 1 percent. That is, 
less than one-half of 1 percent of the applications are 
disapproved, which sounds a lot like the Commerce Department is 
rubber-stamping these license applications, including to places 
like Mexico, where corruption puts these weapons in the hands 
of criminals, or the Philippines, where there are multiple 
reports of security forces shooting civilians.
    Now, President Biden has stated clearly that he supports 
cracking down on assault weapons both at home and overseas, so 
let me ask, Under Secretary Estevez: Can you explain how 
increasing assault weapons export licenses by 30 percent and 
turning down less than one-half of 1 percent of applications is 
consistent with the President's stated objectives? Is the 
Commerce Department working for the President or working for 
the gun industry here?
    Mr. Estevez. Senator, that also includes sales to people 
like Ukraine that are using those weapons against the Russians 
right now.
    Senator Warren. I have no doubt.
    Mr. Estevez. So this is an interagency process now that it 
has moved to Commerce. There is the power of the Department of 
State that brings State's jurisdiction to that discussion, the 
Department of Defense, and the Department of Energy. So it is--
--
    Senator Warren. So wait a minute----
    Mr. Estevez. --an interagency process that approves gun 
licenses.
    Senator Warren. Excuse me, Under Secretary----
    Mr. Estevez. It is not just the Commerce Department.
    Senator Warren. Excuse me. What happened is authority was 
transferred to the Commerce Department, and what has happened 
is that it has a minuscule disapproval rate and the weapons 
sales have gone up dramatically.
    Look, the Commerce Department is helping put more assault 
weapons in more hands, and this needs to stop. It is time to 
put overseas gun sales back in the hands of the State 
Department where someone can exercise better judgment over it.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warren.
    Senator Moran is on his way back. Senator Toomey has one 
more question.
    Mr. Estevez. Certainly.
    Senator Toomey. Mr. Estevez, we spoke briefly earlier about 
how to determine whether or not U.S. technology is involved in 
the development of China's stealth bomber and hypersonic 
missile, and we talked about a briefing, and you agreed that 
you would do the briefing. But subsequent dialog suggested that 
it might be useful to involve the DNI in that briefing. Will 
you work with us to make sure that we get a comprehensive 
insight into this and the input of the DNI?
    Mr. Estevez. I absolutely will work with you on that, 
Senator.
    Senator Toomey. Thank you very much.
    Chairman Brown. Thank you, Mr. Under Secretary. It looks 
like Senators Moran and Van Hollen we thought were on the way 
but they may not be. Thank you for the work that BIS is doing 
on many fronts to impose economic consequences against Russia 
in the wake of their invasion of Ukraine. Your work is so 
important. Thanks for the use of tools at your disposal to 
defend our national security.
    For Senators who wish to submit questions for the hearing 
record, those questions are due 1 week from today, Thursday, 
July 21st--my wife's birthday, I might add. Under Secretary 
Estevez, please submit your responses to questions for the 
record within 45 days from the date you receive them.
    The Committee on Banking, Housing, and Urban Affairs is 
adjourned.
    [Whereupon, at 11:10 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    Today we welcome our witness, Alan Estevez, who serves as Under 
Secretary for Industry and Security at the Department of Commerce.
    I thank Ranking Member Toomey and his staff for their help in 
confirming Under Secretary Estevez and the two Assistant Secretaries at 
the Bureau of Industry and Security--Thea Kendler for Export 
Administration and Matt Axelrod for Export Enforcement.
    This is the first time since we passed the Export Control Reform 
Act in 2018 that Congress has fully confirmed BIS leadership.
    Because of this Committee's work, for the first time since 2013 we 
have a full, confirmed Federal Reserve Board.
    Yesterday we confirmed a fourth member of the Ex-Im board. We 
finally have a fully functioning Export-Import bank.
    And for the first time in our history, these nominees are beginning 
to look more like America.
    The world changed this year on February 24, when Russia invaded 
Ukraine, continuing its barbaric war on the Ukrainian people and their 
sovereignty.
    Putin has been shocked by two things:
    The strength of the Ukrainian resistance and the skill of this 
President in assembling and uniting a broad coalition, the likes of 
which we haven't seen in decades--Germany, Finland, Switzerland.
    We've isolated Russia and limited its ability to access the tools 
and technologies it needs to continue its grotesque war against 
Ukraine.
    And BIS has been integral in our international response to siphon 
off Russia's access to military material. It quickly rolled out a 
sweeping series of rules designed to stall and degrade Russia's 
military and technological capabilities.
    BIS targeted Russia's defense, aerospace, and maritime sectors, and 
it applied controls to U.S. exports and to items produced abroad that 
use U.S. software, technology, or equipment.
    Since February 24, BIS issued 12 new rules, ramped up enforcement 
activity, and continued to build what Assistant Secretary Axelrod 
called ``the broadest expansion of multilateral export controls among 
like-minded partners since the creation of CoCom back in 1949.
    The results have been impressive.
    Exports to Russia by countries who have imposed sanctions have 
fallen by 60 percent.
    At the same time BIS weakened Russia's military, it committed to 
ensuring that those items that benefit the Russian people, like medical 
supplies, are still available.
    This ability to distinguish bad actors--whether they're State or 
non-State actors--while still allowing innocent civilians to benefit 
from U.S. exports is crucial, as the agency builds on this new 
international coalition to address other national security and foreign 
policy challenges.
    To that end, Under Secretary Estevez, I am encouraged by your 
statements calling for strengthening or supplementing our existing 
multilateral regimes.
    Enhancing our multilateral regimes requires patience--by BIS and 
Congress. And we must work with allies to identify the items and 
technologies that present a risk to our collective national security.
    This is important work, and I am pleased to hear that it is one of 
Under Secretary Estevez's top priorities.
    Back in 2018, when this Committee worked to enact the Export 
Control Reform Act, we included policy statements, guiding BIS in 
developing export control policy.
    One of those guiding principles is that our national security 
requires that the United States maintain our leadership in science, 
technology, engineering, and manufacturing.
    That value should guide our export control policy. And it should 
also guide our work in Congress.
    We do not want to be at the mercy of our competitors--or our 
adversaries--for technology and other inputs vital to a 21st century 
economy. Dependency on countries like China poses a huge economic risk 
and an unacceptable national security risk.
    It's why we need investments in research and development, and in 
our fellow citizens.
    We have an innovation and competition bill in conference that would 
do just that.
    Ranking Member Toomey and his staff have worked in good faith with 
me and my staff to negotiate this Committee's conference provisions. I 
thank them for that important work.
    We have reached bipartisan agreements on provisions with the House 
Foreign Affairs Committee and the House Financial Services Committee.
    It is time for us to vote on and pass a final bill that promotes 
U.S. science, technology, and manufacturing, so that we can maintain 
U.S. economic leadership.
    This bill will create thousands of good-paying jobs in Ohio and 
around the country--jobs in growing industries, jobs where you can 
build careers. In my State, more than 10,000 jobs are at stake. 
Business leaders and labor leaders are both desperate for this 
investment.
    The head of the Ohio Chamber of Commerce--former Republican 
Congressman Steve Stivers--and the head of the Ohio Business 
Roundtable--former Republican Congressman Pat Tiberi--have been 
particularly vocal about this support.
    We must act now.
    For decades, at the behest of corporate America, policymakers of 
both parties have passed bad tax policy and bad trade policy that 
allowed these companies to move American jobs and supply chains and 
technology abroad--always in search of lower and lower wages.
    And when the production moves abroad, the innovation moves with it.
    We invented semiconductor chips. Now 90 percent of chips are made 
overseas.
    We have to fix that. Now.
    Americans have waited long enough. We should pass this bill this 
month.
    If Congress is serious about the threats that face us, it must be 
similarly serious about supporting American innovation.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman. Under Secretary Estevez, welcome.
    The Bureau of Industry and Security, or BIS, determines which U.S. 
goods are too sensitive to be shipped abroad. In the face of China's 
drive for dominance in key tech sectors, BIS's mission today is as 
important as ever.
    By setting U.S. export control policy on items used for both 
civilian and military purposes, BIS effectively has the power to 
reshape the supply chains of entire industries. That means BIS must 
craft export controls in a prudent, thoughtful, and effective manner 
that advances U.S. national security interests without unduly harming 
America's economic interests.
    The issue I would like to focus on today is a legislative concept 
that has received a growing amount of attention in recent months, falls 
squarely in the jurisdiction of this Committee, and would 
unquestionably impact BIS's mission and workflow, if enacted. I am 
referring to a concept known as ``outbound CFIUS.''
    The idea is to establish a new agency within the Executive branch, 
and give this agency vast, potentially unchecked authority to regulate, 
intervene in, and block all kinds of potential activities, including 
prohibiting Americans and U.S. firms from investing in, selling to, or 
buying from companies in certain countries, most notably China.
    Outbound CFIUS could also provide the President with extremely 
broad authority to determine which industries to subject to regulation. 
It is not just semiconductor firms that would be affected. Any industry 
determined to be in the national security interest of the United States 
could be impacted.
    President Biden's recent invocation of the Defense Production Act 
for baby formula is just the latest reminder of how the Executive 
branch can abuse the term ``national security.'' President Trump also 
abused the notion of ``national security,'' having the Commerce 
Department laughably assert in a 232 investigation that the import of 
foreign cars was a threat to our national security.
    In fact, it appears that Mr. Estevez agrees with this, because 
during his confirmation hearing before this Committee he said to me, 
``232 is an important tool . . . Section 232 needs to be looked at in a 
hard national security lens, Senator. It shouldn't be used willy-
nilly.'' I share Mr. Estevez's concern about national security 
authorities being abused by a President ``willy-nilly.''
    It is not an overstatement to suggest that hundreds of thousands of 
U.S. companies and tens, if not hundreds, of billions of dollars in 
commerce could be impacted by outbound CFIUS.
    The rise of China presents the United States with the greatest 
security challenge we've faced since the end of the Cold War. I am 
clear eyed about the fact that the Chinese Communist Party has embarked 
on a concerted, whole-of-Government campaign to surpass the 
technological leadership of the United States in areas that will 
underpin geopolitical military and economic power for decades to come. 
But how we address this challenge matters.
    Doing outbound CFIUS, and getting it wrong, could impede the 
national security agencies--such as BIS or CFIUS--that are already 
doing important work on China. Getting it wrong could also severely 
harm the United States.
    We cannot prevail in this contest with China by emulating China, 
like the China competition bills before the Senate envision. Instead, 
we must out innovate China and protect our intellectual property from 
theft and illicit transfer.
    That means ensuring that the United States remains the single 
greatest global destination for capital formation, research and 
development projects, and the smartest minds in the world to come and 
work. Getting outbound CFIUS wrong puts all this into jeopardy by 
disincentivizing the flow of capital, ideas, and people to come to the 
United States.
    There are many important questions about outbound CFIUS that remain 
unanswered. For example, what is the problem outbound CFIUS is 
attempting to solve? How do current laws and authorities, such as 
export controls, address or fall short of addressing this problem? How 
would outbound CFIUS affect the United States as a destination for 
capital formation and technological innovation?
    I am not the only one concerned about the reasoning and 
implications of standing up an outbound CFIUS mechanism. I have here a 
letter from three former officials from the last Administration who 
directly oversaw CFIUS and export controls.
    It raises concerns about the scope and justification for outbound 
CFIUS, and it calls for any such mechanism to be grounded in a clear 
statutory law brought about through regular order. If Mr. Estevez's 
predecessors are concerned about the way in which outbound CFIUS is 
playing out, I think he should be too.
    In addition, 11 trade associations representing hundreds of 
thousands of companies and workers sent a letter to Congress expressing 
opposition to the inclusion of outbound CFIUS in the China competition 
bills under consideration. I ask that these two letters be entered into 
the record of this hearing.
    Given these concerns, Congress must take the time to properly 
evaluate the outbound CFIUS concept rather than rushing to enact it.
                                 ______
                                 
                 PREPARED STATEMENT OF ALAN F. ESTEVEZ
 Under Secretary for Industry and Security, U.S. Department of Commerce
                             July 14, 2022
    Chairman Brown, Ranking Member Toomey, Members of the Committee, 
thank you for inviting me to testify today on the work of the Commerce 
Department's Bureau of Industry and Security, or BIS.
    BIS's mission is to advance U.S. national security, foreign policy, 
and economic objectives by ensuring an effective export control and 
treaty compliance system and promoting continued U.S. strategic 
technology leadership.
    We execute this mission by imposing appropriate controls on exports 
and reexports of lower capability military items, dual-use items (i.e., 
those items having both commercial and military or proliferation 
applications), and predominantly commercial items. We have the 
authority to seek criminal and administrative sanctions when 
appropriate for violations of our export controls. We also play an 
important role in Commerce's analysis and support of our industrial 
base, and the Department's participation on the Committee on Foreign 
Investment in the United States (CFIUS).
    Put another way, our primary goal is to prevent malign actors from 
obtaining or diverting items, including technologies, for unauthorized 
purposes, in order to protect our national security and advance our 
foreign policy objectives while supporting the competitiveness of our 
key industries.
    BIS's mission has never been more relevant. We face ongoing 
national security threats from Nation States--China, Russia, Iran, 
North Korea--as well as from terrorists and other non-State actors. 
However, on top of the traditional threats posed by those actors, we 
also must contend with an evolving threat landscape and the use of 
commercially available technologies to further activities of concern, 
including human rights abuses.
    As Under Secretary of Commerce for Industry and Security, I view my 
role as the ``Chief Technology Protection Officer'' of the United 
States. BIS operates at the nexus of national security and technology, 
and export controls are a unique and powerful tool for responding to 
the modern threat environment that we face. This is particularly true 
when we work together with our allies and partners.
    We are in an important moment for our national security, and today 
I will focus on BIS's role administering and enforcing export controls 
to address four critical challenges: first, our response to Russia's 
further invasion of Ukraine; second, the pacing threat that China 
represents; third, the identification of emerging and foundational 
technologies essential to national security; and finally, the need to 
build a durable, multilateral technology security framework for the 
future use of export controls.
Responding to Russia's Further Invasion of Ukraine
    BIS has robust authorities under the Export Control Reform Act of 
2018, or ECRA. Using those authorities, BIS has imposed sweeping export 
controls on Russia for its unjustified, unprovoked, and premeditated 
further invasion of Ukraine, and on Belarus for its substantial 
enabling of that invasion. And thanks to the additional resources 
Congress provided to BIS in the Ukraine Fiscal Year (FY) 2022 
supplemental spending bill, we are prepared to sustain and expand those 
actions against Russia and Belarus.
    Our goal is to choke off exports of technologies and other items 
that support Russia's defense industrial base, including defense, 
aerospace, and maritime sectors, and to degrade Russia's military 
capabilities and ability to project power. While the impact of our 
export controls will only increase over time as Russia is unable to 
repair, replace, and replenish its military hardware, we are seeing 
substantial impacts of our actions in the data available to date:

    Since the start of the invasion on February 24 through July 
        1, 2022, U.S. exports to Russia in categories of items subject 
        to new U.S. export license requirements decreased by 95.9 
        percent by value as compared to the same period in 2021.

    Overall U.S. exports to Russia have decreased by 
        approximately 88 percent by value over the same period in 2021 
        (February 24-July 1, 2021).

    Analysis of trade data conducted by the Peterson Institute 
        for International Economics (PIIE) shows that, of the 54 
        countries that make up approximately 90 percent of Russia's 
        imports, those with similar export controls against Russia in 
        place have seen total exports to Russia decline by a cumulative 
        60 percent since the invasion. Exports to Russia from countries 
        that have not imposed similar controls are also down 40 
        percent.

    PIIE goes on to point out that ``the inaccessibility of 
        foreign tech and components is hitting Russia's maintenance; 
        supply; and future development of chips, guided missiles, 
        tanks, cars, planes, and much more. Russia's own economy 
        ministry is projecting a GDP contraction of up to 12.4 percent 
        in 2022.''

    There are numerous open-source reports on the need for Western 
semiconductors as key inputs to Russian weapons systems. Since our 
controls have fully taken effect, there has been a 74 percent reduction 
by value of global exports of semiconductors to Russia compared to the 
same period in 2021 (March-May). This has prompted Putin himself to 
issue public concerns about where Russia will source these critical 
inputs.
    We have also taken multiple actions that have impacted Russia's 
aerospace sector, which is reliant on U.S. and European manufactured 
planes, parts, and service necessary to maintain them. There have been 
reports that Russia will have to ground between half and two-thirds of 
its commercial fleet by 2025 in order to cannibalize them for parts due 
to the export controls and enforcement actions we have implemented. And 
as our recent Entity List actions demonstrate, where we identify 
companies that attempt to backfill our restrictions, we will take swift 
action.
    These are just some examples of the impact our controls are having 
to date. This is one of the most aggressive and robust uses of export 
controls against another country, and these impacts would not be 
possible without the unprecedented level of coordination with our 
allies and partners around the world.
    While there is an appropriate role for unilateral export controls, 
as Congress noted in ECRA, ``[e]xport controls that are multilateral 
are most effective[.]'' If other countries supply the same types of 
items that the United States restricts, the U.S. controls will be 
ineffective for two reasons. First, the countries or parties of concern 
will still acquire the items at issue. Second, U.S. technology 
leadership will be threatened if foreign competitors can undercut U.S. 
companies and earn revenue to invest in research and development. Thus, 
coordinating with allies and partners also helps keep a level playing 
field for U.S. companies and helps maintain U.S. technology leadership 
and competitiveness, all of which contribute to national security, as 
described in ECRA.
    Thanks to the hard work done by the Biden administration--from the 
President on down--we have built a coalition of 37 other countries so 
far who have agreed to adopt substantially similar controls on Russia 
and on Belarus.
    Our message to countries that have not joined our restrictions on 
exports to Russia is that if they share our horror at Russia's 
aggression against Ukraine and our respect for the rule of law, they 
should join the United States and our partner countries around the 
Indo-Pacific and Europe in imposing stringent restrictions on exports 
to Russia.
    To maximize the effectiveness of our controls, we have conducted 
extensive outreach to the public to educate them on the changes. BIS 
conducts regular outreach to the exporting community to inform and 
share best practices, and utilizes international partnerships to 
educate foreign companies about U.S. export controls. Since February 
24, we have conducted outreach on the new controls to over 3,000 
entities and individuals.
    In addition, we are aggressively enforcing the new controls. We 
deploy a variety of resources and tools to ensure effective 
enforcement, including leveraging relationships with other law 
enforcement agencies, the Intelligence Community, and international 
partners. BIS conducts physical inspections (e.g., end-use checks and 
port inspections/detentions) to detect illicit procurements, and we 
investigate potential violations of U.S. export controls and, if 
appropriate, vigorously pursue criminal and civil penalties. Since 
Russia's further invasion of Ukraine on February 24, we have detained 
or seized 218 shipments valued at $90 million.
    Related to my earlier statements about Russia's deteriorating 
commercial aviation industry, we have tracked and publicly released a 
list of over 150 aircraft that we believe operated in violation of our 
Russia and Belarus controls, in order to provide notice to the world 
that servicing these aircraft is itself violative of our rules. We also 
recently issued our first public charging letter against Russian 
oligarch Roman Abramovich related to his improper export of two private 
planes, alongside a seizure warrant for the planes obtained by the 
Department of Justice. We have issued nine temporary denial orders, or 
TDOs, against various Russian airlines, which effectively cut off not 
only their right to export items subject to our regulations from the 
United States, but also their right to receive or otherwise participate 
in exports from the U.S. of such items.
The Pacing Challenge: China
    As we continue our robust response to Russia's further invasion of 
Ukraine, we remain focused on aggressively and appropriately using our 
tools to contend with the long-term strategic competition with the 
People's Republic of China (PRC).
    The PRC threat to our national security and foreign policy 
interests is real. My north star at BIS as it relates to China is to 
ensure we are appropriately doing everything within our power to 
prevent sensitive technologies with military applications from getting 
into the hands of China's military, intelligence, and security 
services.
    Export controls are at the forefront of the many tools that the 
Biden administration is using to coordinate and respond to China's 
destabilizing activities. We are using our controls to address China's 
military-civil fusion strategy that seeks to divert dual-use 
technologies to military uses, military modernization, WMD program 
development, human rights abuses, and efforts to destabilize the Indo-
Pacific region. Confronting these actions protects our national 
security and advances our values and interests, as well as those of our 
allies and partners. This is a dynamic threat environment, and we are 
constantly evaluating our existing authorities and thinking about how 
we can employ our tools to maximum effect.
    We continue to maintain comprehensive controls related to the PRC, 
including requiring a license for: all military and spacecraft items 
under our jurisdiction; all multilaterally controlled dual-use items; a 
large number of dual-use items with extensive commercial applications 
if the item is intended, entirely or in part, for a military end use or 
military end user in the PRC; and all items under our jurisdiction, if 
the item is exported knowing it will be used in certain WMD programs or 
if it is intended, entirely or in part, for military-intelligence end 
uses or end users in China. In addition, the Export Administration 
Regulations (EAR) prohibit certain U.S. person activities that would 
support WMD-related activities or military-intelligence end use or end 
users in China absent authorization. Thus, the EAR's licensing 
requirements for China seek to prevent activities that threaten U.S. 
national security and foreign policy interests while allowing 
commercial activities that do not raise such issues.
    We also use our Entity List to identify parties of concern, many of 
whom are subject to license requirements for all items under our 
jurisdiction, regardless of the sensitivity of the item. Currently, we 
have nearly 600 Chinese parties on our Entity List--107 of those added 
during the Biden administration. These parties have been added for a 
variety of reasons ranging from supporting China's military 
modernization and WMD programs, to supporting Iran's WMD and military 
programs, to facilitating human rights abuses in Xinjiang. These 
parties include those involved in artificial intelligence, 
surveillance, biotechnology, and quantum computing.
    We are continually assessing available open-source, proprietary, 
and classified information, in coordination with our interagency 
partners, for the addition of other parties to the Entity List and 
other restricted party lists maintained by BIS in connection with the 
enabling of China's military-civil fusion strategy and other malign 
activities.
    Addition to the Entity List means that anyone seeking to export or 
transfer items under Commerce jurisdiction to a listed party must first 
seek a license to do so from Commerce. As with all license 
applications, those applications are generally reviewed by the 
Departments of Commerce, State, Defense, and Energy. As a general 
matter, such license applications for parties on the Entity List are 
reviewed under a presumption of denial. For those entities not subject 
to a comprehensive presumption of denial, the Entity List provides 
clear policies on the types of items and transactions that may be 
approved on a case-by-case basis. Thus, companies are likely to only 
submit license applications for proposed transactions that may be 
approved by the interagency process.
    In the select instances where there is disagreement among the 
agencies on whether to approve the license, there is an established 
process for any agency to initiate further escalation and review. 
During FY 2021, only 0.14 percent of all applications submitted were 
appealed to the Assistant Secretary level. While the agencies may have 
different perspectives on individual cases, we all bring helpful 
expertise to the process and can reach accommodation on almost all 
applications. And when we cannot, the interagency review and escalation 
process forces us to bring our best arguments to the table to help 
shape U.S. export control policy.
    In addition to the Entity List, we also maintain the Unverified 
List, which includes parties for which we cannot verify their bona 
fides (i.e., legitimacy and reliability relating to the end use and end 
user of items subject to the EAR). Earlier this year, we added 33 
Chinese parties to the Unverified List as BIS was unable to verify 
their bona fides because an end-use check could not be completed 
satisfactorily for reasons outside the U.S. Government's control. 
Because of this designation, no license exceptions can be used to 
export to these parties, and BIS is imposing a pre-license check for 
any license application involving these parties.
    We know that the PRC is determined to advance its military 
capabilities by illicitly acquiring U.S. technology. Our enforcement 
team at BIS is dedicated to preventing this from happening by utilizing 
all of our criminal and administrative investigative tools, as well as 
regulatory actions like the Entity List and Unverified List, to 
aggressively enforce our export control rules. For example, 21 percent 
of the Office of Export Enforcement's current investigations involve 
China as the ultimate destination. And in FY 2021, 66 percent of 
criminal penalties and 40 percent of administrative penalties levied 
related to export violations involving China, totaling almost $6 
million, as well as resulting in 226 months of incarceration. In 
addition to monetary penalties, we also have a powerful administrative 
tool to deny export privileges. For example, in June, we imposed a 
temporary denial order on three interrelated companies--Quicksilver 
Manufacturing Inc., Rapid Cut LLC, and U.S. Prototype Inc.--that 
contracted with U.S. defense and aerospace customers to 3-D print items 
based off sensitive prototype space and defense technologies. The three 
companies illegally sent the blueprints and technical drawings to China 
to create 3-D prints, which were then shipped back to the United 
States. BIS's action prevents these three companies from participating 
in, or benefiting from, any export transaction while our investigation 
continues.
    China remains a complex challenge in the competition between 
democracies and autocracies. We continue to assess the effectiveness of 
our controls to address our national security and foreign policy 
concerns related to the PRC and analyze whether the current threat 
landscape requires new action. We are closely reviewing our approach to 
China, seeking to maximize the effectiveness of our controls.
Identifying Emerging and Foundational Technologies Essential to 
        National Security
    One such assessment is our continuous review to identify emerging 
and foundational technologies essential to the national security of the 
United States, as required under Section 1758 of ECRA. As many of you 
know, this topic has attracted considerable attention, and for very 
good reason. BIS works closely with our interagency colleagues to stay 
informed on new technologies with national security implications and 
determine whether we need to recalibrate controls on new or existing 
technologies subject to our jurisdiction. Since enactment of ECRA, BIS 
has established 38 new controls on emerging technologies, including 
controls related to semiconductor production, biotechnology, and 
quantum computing. All but one of these controls are multilateral, with 
the one unilateral control pending multilateral agreement.
    As part of interagency groups led by the National Security Council, 
we have finished reviewing seven technology groups, which has 
contributed to proposing and finalizing new controls. In many cases, 
these reviews have also found that our current controls were sufficient 
to capture emerging technology roadmaps. Where updates were needed, we 
have prioritized updating and adding new controls. In addition, BIS has 
identified technologies that were also identified through CFIUS filings 
to propose potential controls on emerging and foundational 
technologies.
    We're also continuing to do more to involve parts of the Government 
that are closer to the development and funding of new technologies. I 
am working with the Department of Defense Under Secretaries for 
Acquisition and Sustainment and for Research and Engineering to 
establish a critical technologies review board. This board will help 
BIS to understand the technologies DoD is investing in for military 
use, and help us provide the appropriate controls for those 
technologies.
    We are also working to propose or implement new controls faster and 
more efficiently. As part of a May 23, 2022, rule, we informed the 
public that we would no longer characterize new controls as 
corresponding to ``emerging'' technology or corresponding to 
``foundational'' technology, instead referring to the technologies at 
issue as ``Section 1758 technologies.'' As we noted in that rule, this 
approach reflects the difficulties in drawing meaningful and functional 
distinctions between technologies for purposes of fulfilling our 
statutory obligations under Section 1758 of ECRA. Attempting to do so, 
without statutory definitions for those terms, resulted in delays in 
proposing and implementing new controls on such items because there is 
no clear, consistent agreement within the Government and in the public 
on how to apply the terms ``emerging'' and ``foundational'' to specific 
technologies.
    Attempting to characterize a technology as either ``emerging'' or 
``foundational'' reduces our flexibility to respond to real-time 
developments in rapidly changing technological landscapes. For example, 
the marine toxins identified in our most recent proposed rule defy 
common attempts to define ``emerging'' and ``foundational'' as these 
toxins are naturally occurring items that are not new and have never 
been on the Commerce Control List. Calling such items ``Section 1758 
Technologies'' maximizes our flexibility and effectiveness. As Under 
Secretary for Industry and Security, my fundamental principle is that 
if there is a technology that could potentially harm our national 
security (and is essential to our national security), we want to assess 
it and if appropriate, impose controls on it--regardless of whether it 
can be labeled ``emerging'' or ``foundational.''
    While we will use the term ``Section 1758 Technologies'' going 
forward, we will continue to review whether additional controls are 
warranted for technologies that may be viewed as ``foundational,'' or 
``emerging.'' We are statutorily required to do this. We are also 
statutorily required to consider three criteria when identifying 
emerging or foundational technologies: (i) the development of emerging 
and foundational technologies in foreign countries; (ii) the effect 
export controls may have on the development of such technologies in the 
United States; and (iii) the effectiveness of export controls on 
limiting the proliferation of emerging and foundational technologies to 
foreign countries. Thus, imposing new, unilateral controls on a 
technology that foreign suppliers can backfill or that a target country 
already has would be ineffective and primarily undermine U.S. 
development of such technologies. That is the key challenge with more 
mature technologies and raises the importance of obtaining multilateral 
or plurilateral controls for such items.
Multilateral Cooperation Essential to Our Security
    That brings me to the final topic I want to discuss today: 
furthering multilateral cooperation to more timely address national 
security and foreign policy concerns.
    Given the great work we have done with our partners with regards to 
Russia, and given the threats posed by China--and other malicious 
actors in the world--I believe we have been presented with a great 
opportunity to further coordinate with our allies.
    In all the export control policy areas I have described, it is 
clear that cooperation with allies and partner countries is essential 
to the effectiveness of these controls. To that end, we are involved in 
working with various groups, including the European Union in the Trade 
and Technology Council's Export Control Working Group and Japan in the 
Japan-United States Commercial and Industrial Partnership. We are also 
leading an export control effort in the Indo-Pacific Economic Framework 
for Prosperity.
    Additionally, we are working with colleagues across the interagency 
to lead the multilateral Export Controls and Human Rights Initiative, 
which we announced during the Summit for Democracy. Through this 
effort, we are working with foreign Government partners to establish a 
voluntary, written code of conduct around which like-minded States 
could pledge to use export control tools to prevent the proliferation 
of software and other technologies used to enable serious human rights 
abuses.
    We continue to monitor the effectiveness of the current 
multilateral regimes and, when necessary, identify areas of 
plurilateral cooperation in certain technologies with other supplier 
countries. All four multilateral regimes maintain key controls in 
restricting the proliferation of conventional arms, dual-use items, and 
items related to WMD activities. In addition, to mitigate today's 
threats, we must also work with like-minded Governments of supplier 
countries of certain technologies of concern, including to identify 
ways to use export controls to limit the use of technologies to commit 
human rights abuses.
    Finally, enforcement is critical to ensuring effective export 
controls and we are working with partners across the globe on this 
effort as well. We recently announced an enhanced export enforcement 
partnership with Canada, and we are working with the European 
Commission and its Member States on a similar coordination effort. Our 
Export Control Officers around the globe are also working with 
enforcement partners in countries stretching from Europe to East Asia, 
including Singapore and the United Arab Emirates, to enhance export 
control enforcement and prevent the diversion of U.S.-origin items.
    Ultimately, for the United States to maintain effective export 
controls and technology leadership, which itself is a part of our 
national security, we need to work in cooperation with others. Our work 
with the 37 other countries to implement the Russia controls helps 
provide a blueprint for advancing further. We have momentum on export 
controls that I will be working to carry forward as we build a new 
technology security architecture.
    We have a lot of work ahead of us on all of these fronts, and there 
are many more areas where BIS is doing important work that I have not 
discussed. I am proud to be serving in this critical moment, and I 
value the partnership and collaboration with you and your staffs as we 
tackle these challenges together.
    Thank you again for the honor of inviting me here to testify today, 
and I look forward to your questions.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                      FROM ALAN F. ESTEVEZ

Q.1. During the hearing on July 14, and at the House Foreign 
Affairs Committee's hearing on July 19, members asked questions 
regarding the recent transfer of certain munitions from the 
U.S. Munitions List to the Commerce Control List. Though this 
transfer of items occurred prior to your service at BIS, please 
describe any changes to existing controls, licensing policies, 
or enforcement authorities that resulted from the transfer. 
Please also describe the process for reviewing license 
applications related to these items, including consideration 
given to potential end uses and end users, and any trends 
related to license applications for these items.

A.1. Under prior Administrations, defense articles on the U.S. 
Munitions List (USML) in the International Traffic in Arms 
Regulations (ITAR) were transferred from the export control 
jurisdiction of the Department of State to the Department of 
Commerce if such items did not provide the United States with a 
critical military or intelligence advantage or, in the case of 
weapons, have an inherently military function, for export 
control purposes. Within this process, the Department of State 
and Department of Commerce published final rules on January 23, 
2020, effective March 9, 2020, that revised USML Categories I 
(firearms, close assault weapons and combat shotguns), II (guns 
and armament), and III (ammunition/ordnance) and transferred 
items that no longer warranted export control on the USML in 
the ITAR to the Commerce Control List (CCL).
    Following these changes, the Department of Commerce's 
Bureau of Industry and Security (BIS) regulates exports of non-
fully automatic firearms up to .50 caliber (12.7mm) inclusive, 
which includes semi-automatic, bolt-action, lever-action, pump-
action, single-shot and double rifles, pistols, and revolver 
type firearms, ammunition, and related items, which are subject 
to a worldwide license requirement by BIS for export from the 
United States. BIS imposed additional restrictions on these 
items when they transferred to Commerce jurisdiction, such as 
restricting the use of license exceptions and imposing 
restrictive license review policies on certain end users, such 
as narcotics traffickers. Also, for those licenses approved, 
the amount that may be exported is also limited by the 
applicable import license/certificate restrictions of the 
importing country. Since the transfer of jurisdiction, BIS has 
further tightened restrictions, such as to address the concerns 
over technology or software for 3D printing of firearms.
    License applications for firearms exports under Commerce 
jurisdiction are reviewed by Commerce, Defense and State to 
address, among other things, human rights, and impacts to 
regional stability with the potential exports. Assessments by 
BIS Licensing Officers, as well as the other agencies that 
review these license applications, are updated on a continuous 
basis to respond to changes in specific countries, as well as 
additional information that is received on the bona fides of 
the parties identified in license applications, including , 
from the Watch List administered by the Department of State's 
Directorate of Defense Trade Controls, diplomatic and other 
reporting. Thus, the same agencies that reviewed license 
applications for these items when they were on the USML 
continue to do so today.
    In addition to these front-end restrictions, BIS has Export 
Enforcement agents--Federal law enforcement officers--whose 
mission is to ensure that firearms exports are not diverted to 
activities that violate U.S. law or would otherwise be contrary 
to our national security or foreign policy interests. And BIS 
makes arrests and works with our Justice Department partners to 
seek indictments when appropriate. The addition of BIS 
enforcement resources builds upon those previously available 
when these items were on the USML in the ITAR.
    Importantly, there are many approvals for licenses of 
firearms exports to Government entities of allies and partners, 
such as Ukraine in its defense of its sovereignty and 
territorial integrity against Russian aggression, and it is in 
our national security and foreign policy interests to support 
the Ukrainian people. The largest by dollar value for firearms 
exports under the Export Administration Regulations (EAR) is 
Canada. For example, for calendar year 2021, BIS approved 278 
firearms licenses valued at $347.6 million and 130 ammunition 
licenses valued at $595.7 million. The amount of firearms 
approved is based on a 4-year projection in many instances, so 
the total number of actual firearms exported is lower. BIS 
continually assesses its licensing policies, but always reviews 
export license applications consistent with U.S. national 
security and foreign policy interests.

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                      FROM ALAN F. ESTEVEZ

Q.1. President Biden supports the reinstitution of a domestic 
assault weapons ban, which would prohibit the manufacture, 
sale, transfer, and importation of assault weapons and high-
capacity ammunition in the United States. If such a ban were 
enacted, which of the 17 Export Control Classification Numbers 
(ECCNs) that were created to control items moved from the 
United States Munitions List (USML) Categories I-III to the 
Commerce Control List (CCL) would be considered assault weapons 
and high-capacity ammunition and therefore subject to the ban?

A.1. BIS interprets this question to refer to firearms 
described in H.R. 1808, ``Assault Weapons Ban of 2022'', and 
BIS believes this would apply to a subset of firearms described 
in ECCN 0A501. Such firearms are currently subject to a 
worldwide license requirement by BIS for export from the United 
States. BIS also imposed additional restrictions on these items 
when they transferred to Commerce jurisdiction, such as 
restricting the use of license exceptions and imposing 
restrictive license review policies on certain end users, such 
as narcotics traffickers, and also has worked to address the 
concerns over technology or software for 3D printing of 
firearms.
    License applications for firearms exports under Commerce 
jurisdiction are reviewed by Commerce, Defense and State to 
address, among other things, human rights, and impacts to 
regional stability with the potential exports. Assessments by 
BIS Licensing Officers, as well as the other agencies that 
review these license applications, are updated on a continuous 
basis to respond to changes in specific countries, as well as 
additional information that is received on the bona fides of 
the parties identified in license applications, including from 
the Watch List administered by the Department of State's 
Directorate of Defense Trade Controls, diplomatic and other 
reporting Thus, the same agencies that reviewed license 
applications for these items when they were on the USML 
continue to do so today.
    In addition to these front-end restrictions, BIS has Export 
Enforcement agents--federal law enforcement officers--whose 
mission is to ensure that firearms exports are not diverted to 
activities that violate U.S. law or would otherwise be contrary 
to our national security or foreign policy interests. And BIS 
makes arrests and works with our Justice Department partners to 
seek indictments when appropriate. The addition of BIS 
enforcement resources builds upon those previously available 
when these items were on the USML.

Q.2. When you appeared before the Committee on July 14, we 
discussed aggregate data on the Commerce Department's approval 
of export licenses for assault weapons and some other items, 
and you committed to providing me with the exact dollar value 
of approved export licenses for semiautomatic, or assault, 
weapons since the
    Commerce Department gained jurisdiction over these exports 
in March 2020. Since March 2020, how many licenses for the 
export of assault weapons and high-capacity ammunition (as 
defined under Question 1) has the Commerce Department approved? 
What is the dollar value of the export licenses for assault 
weapons and high-capacity ammunition that Commerce has approved 
since March 2020? What is Commerce's approval rate on export 
license applications for assault weapons and high-capacity 
ammunition since March 2020?

A.2. On January 23, 2020, the Department of Commerce, Bureau of 
Industry and Security (BIS) published a final rule, effective 
March 9, 2020, in conjunction with a Department of State final 
rule to revise Categories I (firearms, close assault weapons, 
and combat shotguns), II (guns and armaments), and III 
(ammunition/ordnance) of the United States Munitions List 
(USML) and transfer items that no longer warrant export control 
on the USML in the International Traffic in Arms Regulations 
(ITAR) to the Commerce Control List (CCL) (85 FR 4136, Jan. 23, 
2020). Since this transfer of jurisdiction, through August 1, 
2022, BIS has approved 13,867 applications valued at $10.06 
billion dollars' worth of firearms, parts, and components 
described in ECCN 0A501. The approval rate is over 98 percent, 
the value of firearms and components denied was over 38 million 
dollars. Note that ECCN 0A501 includes far more than just 
semiautomatic firearms of which ``assault weapons'' as defined 
in the referenced act would be a subset of these. Note also 
that these applications are valid for 4 years and in many 
instances involve projected sales which may be lower than what 
is ever physically exported.
    License applications for firearms exports under Commerce 
jurisdiction are reviewed by Commerce, Defense and State to 
address, among other things, human rights, and impacts to 
regional stability with the potential exports. Assessments by 
BIS Licensing Officers, as well as the other agencies that 
review these license applications, are updated on a continuous 
basis to respond to changes in specific countries, as well as 
additional information that is received on the bona fides of 
the parties identified in license applications, including from 
the Watch List administered by the Department of State's 
Directorate of Defense Trade Controls, diplomatic and other 
reporting Thus, the same agencies that reviewed license 
applications for these items when they were on the USML 
continue to do so today.

Q.3. We also discussed concerns about the export of American-
made assault weapons to countries like Mexico, where corruption 
puts these weapons in the hands of criminals, and the 
Philippines, where reports have emerged of security forces 
carrying out extrajudicial killings against civilians. To which 
countries, and in what quantities (dollar value and license 
number), has Commerce approved exports of assault weapons (as 
defined under Question 1) since March 2020? To which countries, 
and in what quantities (dollar value and license number), have 
these weapons actually been exported since March 2020?

A.3. On January 23, 2020, the Department of Commerce, Bureau of 
Industry and Security (BIS) published a final rule, effective 
March 9, 2020, in conjunction with a Department of State final 
rule to revise Categories I (firearms, close assault weapons, 
and combat shotguns), II (guns and armaments), and III 
(ammunition/ordnance) of the United States Munitions List 
(USML) and transfer items that no longer warrant export control 
on the USML in the International Traffic in Arms Regulations 
(ITAR) to the Commerce Control List (CCL) (85 FR 4136, Jan. 23, 
2020). BIS applications in general would not differentiate 
between those types of firearms considered ``assault weapons'' 
in this legislation and other types of firearms in the same 
caliber range because multiple types of firearms are all 
included within ECCN 0A501. In calendar year 2021 for Mexico 
there were 1,744 firearms shipped to Mexico, of these 790 were 
pistols and revolvers and 954 were rifles of all types and 
calibers of which ``assault rifles'' could possibly be a subset 
of the 954. For the Philippines, in calendar year 2021 there 
were 15,797 firearms shipped to the Philippines of these 15,130 
were revolvers and pistols and 667 were rifles of all types and 
calibers of which ``assault rifles'' could possibly be a subset 
of the 667.
    With respect to exports to Mexico, BIS also notes its 
administration of the United States' commitment to the 
Organization of American States (OAS) Model Regulations for the 
Control of the International Movement of Firearms, their Parts 
and Components and Munitions (OAS Model Regulations), which 
were developed to assist OAS member countries to implement the 
Inter-American Convention Against the Illicit Manufacturing of 
and Trafficking in Firearms, Ammunition, Explosives, and Other 
Related Materials (Firearms Convention). Pursuant to this, BIS 
requires licenses for the export of specified firearms to OAS 
members countries and requires the submission of an import 
certificate from the recipient countries' Government prior to 
the issuance of any such license.

Q.4. For each country listed in the answer to Question 4, what 
percentage of exports went to Government agencies? What 
percentage of exports went to nongovernment entities and 
individuals?

A.4. For Mexico, all license applications for these items are 
for export to the Government of Mexico, which then supplies the 
items to specific parties. With respect to the Philippines, BIS 
would have to do a manual review of all approved licenses to 
determine the percentage that went to nongovernment entities 
and individuals. All parties in license applications are 
reviewed by Commerce, State, and Defense, including to review 
for human rights concerns, regional stability concerns, or 
potential risk of diversion to other parties of national 
security or foreign policy concern.

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                      FROM ALAN F. ESTEVEZ

Q.1. As you know, State-subsidized drone companies based in 
China control over 90 percent of the U.S. and global markets 
and have put many U.S. companies out of business. The largest 
of those, DJI, is on the Entity list and Chinese Military 
Industrial Complex Company (CMIC) list for supporting human 
rights abuses and genocide in China. The Department of Defense 
and some civilian agencies have also banned the use of DJI, and 
other drones made by PRC companies, due to well-known national 
security and cybersecurity concerns. And many in Congress are 
working to ban their use governmentwide.
    Do you agree with your predecessor's decisions to place DJI 
on the Entity and CMIC List, and that they are a threat to 
national security?

A.1. It is a matter of public record that DJI was added to the 
Entity List in December 2020 by the Commerce Department, Bureau 
of Industry and Security (BIS), after the usual interagency 
review by the End-User Review Committee (ERC) made up of 
representatives of the Departments of Commerce, State, Energy, 
and Defense, and, where appropriate, the Treasury, because the 
company ``enabled wide-scale human rights abuses within the 
People's Republic of China through abusive genetic collection 
and analysis or high-technology surveillance, and/or 
facilitated the export of items by the PRC that aid repressive 
regimes around the world, contrary to U.S. foreign policy 
interests,'' as BIS stated in its December 18, 2020, rule. The 
effect of DJI's addition to the Entity List is that the export, 
reexport, or in-country transfer of any item subject to the 
Export Administration Regulations (EAR) to DJI requires a 
license from the Commerce Department. DJI remains on the Entity 
List. DJI remains on the Entity List, and I have no reason to 
second guess its placement on the Entity List.

Q.2. Will you commit to this Committee that you will advocate 
that DJI stays on the Entity List?

A.2. BIS commits to continually monitoring parties on the 
Entity List for activities that are contrary to the national 
security and foreign policy interests of the United States. 
Under the Export Administration Regulations (EAR), parties on 
the Entity List may request Commerce to be removed. Removal 
from the Entity List requires unanimous agreement of the End-
User Review Committee (ERC), made up of representatives of the 
Commerce Department (Chair), Departments of Commerce, State, 
Energy, and Defense, and, where appropriate, the Treasury. DJI 
remains on the Entity List, and I have no reason to second 
guess its placement on the Entity List. Consistent with 
Executive Order (EO) 13918, it is the policy of the United 
States to prevent to use of taxpayer dollars to procure UAS 
that prevent unacceptable risks and are manufactured by, or 
contain software or critical components from, foreign 
adversaries and to encourage the use of domestically produced 
unmanned aerial systems (UAS).

Q.3. What other authorities available to BIS can you consider 
to protect the homeland from the threats posed by DJI and other 
drones made by PRC companies?

A.3. BIS is continually assessing technologies, end uses, and 
end users in developing appropriate export controls to protect 
U.S. national security and foreign policy interests. BIS 
possesses a variety of tools beyond the Entity List, such as 
further restricting the licensing policy applicable to exports 
under the Export Administration Regulations (EAR) to countries 
or parties and transmitting ``Is Informed'' letters (i.e., 
letters to individual companies informing them of additional 
license requirements related to specific parties and/or items). 
When appropriate, these additional license requirements can be 
imposed because of end-use or end-user concerns.
              Additional Material Supplied for the Record
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