[Senate Hearing 118-273]
[From the U.S. Government Publishing Office]
S. Hrg. 118-273
IMPROVING EXPORT CONTROLS ENFORCEMENT
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HEARING
BEFORE THE
SUBCOMMITTEE ON
EMERGING THREATS AND SPENDING
OVERSIGHT
OF THE
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
APRIL 10, 2024
__________
Available via the World Wide Web: http://www.govinfo.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
55-522 PDF WASHINGTON : 2025
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
GARY C. PETERS, Michigan, Chairman
THOMAS R. CARPER, Delaware RAND PAUL, Kentucky
MAGGIE HASSAN, New Hampshire RON JOHNSON, Wisconsin
KYRSTEN SINEMA, Arizona JAMES LANKFORD, Oklahoma
JACKY ROSEN, Nevada MITT ROMNEY, Utah
JON OSSOFF, Georgia RICK SCOTT, Florida
RICHARD BLUMENTHAL, Connecticut JOSH HAWLEY, Missouri
LAPHONZA BUTLER, California ROGER MARSHALL, Kansas
David M. Weinberg, Majority Staff Director
William E. Henderson III, Minority Staff Director
Laura W. Kilbride, Chief Clerk
Ashley A. Gonzalez, Hearing Clerk
SUBCOMMITTEE ON EMERGING THREATS AND SPENDING OVERSIGHT
MAGGIE HASSAN, New Hampshire, Chairman
KYRSTEN SINEMA, Arizona MITT ROMNEY, Utah
JACKY ROSEN, Nevada JAMES LANKFORD, Oklahoma
JON OSSOFF, Georgia RICK SCOTT, Florida
Jason M. Yanussi, Majority Staff Director
Nicholas F. Caron, Policy Advisor
Scott Maclean Richardson, Minority Staff Director
Maggie Frankel, Minority Professional Staff Member
Paul H.J. Hurton III, Subcommittee Clerk
C O N T E N T S
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Opening statements:
Page
Senator Hassan............................................... 1
Senator Scott................................................ 10
Senator Romney............................................... 13
Senator Lankford............................................. 15
Senator Blumenthal........................................... 17
Senator Rosen................................................ 20
Prepared statements:
Senator Hassan............................................... 31
WITNESS
WEDNESDAY, APRIL 10, 2024
Eun Young Choi, Deputy Assistant Attorney General, U.S.
Department of Justice.......................................... 2
Kevin J. Kurland, Deputy Assistant Secretary for Export
Enforcement, Department of Commerce............................ 4
James R. Mancuso, Assistant Director, Global Trade and
Investigations Division, Homeland Security Investigations,
Department of Homeland Security................................ 6
Alphabetical List of Witnesses
Choi, Eun Young:
Testimony.................................................... 2
Prepared statement........................................... 33
Kurland, Kevin J.:
Testimony.................................................... 4
Prepared statement........................................... 42
Mancuso, James R.:
Testimony.................................................... 6
Prepared statement........................................... 50
APPENDIX
Response to post-hearing questions submitted for the Record
Mr. Kurland.................................................. 55
IMPROVING EXPORT CONTROLS ENFORCEMENT
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WEDNESDAY, APRIL 10, 2024
U.S. Senate,
Subcommittee on Emerging Threats and
Spending Oversight,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 3:05 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Margaret
Hassan, presiding.
Present: Senators Hassan [presiding], Rosen, Blumenthal,
Ossoff, Romney, Lankford, and Scott.
OPENING STATEMENT OF SENATOR HASSAN\1\
Senator Hassan. Good afternoon. This hearing will come to
order. I want to welcome our very distinguished panel of
witnesses, and thank you for appearing today to discuss what
your agencies are doing to enforce export controls, and how
Congress can enhance enforcement efforts to prevent our
adversaries from illegally acquiring advanced technology.
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\1\ The prepared statement of Senator Hassan appears in the
Appendix on page 31.
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I also want to thank Ranking Member Romney and his staff,
and the ranking member will be here shortly. We are in the
middle of votes, but I want to thank them for working with us
on this hearing and the months of staff oversight that have led
up to today. I appreciate our continued partnership to address
emerging threats to our Nation.
To our witnesses, I look forward to hearing from each of
you about trends in export control violations, your agency's
unique role in enforcement, and how better agency coordination
can help prevent our adversaries from accessing sensitive
technologies. We look forward to hearing more about actions
that Congress can take to prevent advanced technologies from
flowing to bad actors while still working to maintain the
United States' innovation edge and our place at the center of
the world's economy.
By breaking our expert control laws and acquiring sensitive
U.S. technologies, our adversaries can grow their military and
cyber capabilities. This represents a considerable threat to
the United States' national security. This is why over the past
few years, there have been significant efforts to improve U.S.
export controls as authorities work to constrain efforts by
countries like China to acquire sensitive dual-use
technologies.
This focus is important, and I have been glad to see the
administration consistently roll out updated guidance in export
controls for emerging technologies. However, there is always
more work to do. It is incumbent on Congress to ensure the
effectiveness of actions taken by the Executive Branch,
especially as it relates to inter-agency coordination.
I look forward to hearing from all of our witnesses about
their efforts to enforce expert controls and how Congress and
the Federal Government can work together to keep the American
people safe, secure, and free.
I will recognize Senator Romney in when he returns from
voting for his opening statement. But what I thought I would do
is get us started on testimony, and then when he comes, we can
break for his opening statement. It is the practice of the
Homeland Security and Governmental Affairs Committee (HSGAC) to
swear in witnesses. If you will all please stand and raise your
right hand.
Do you swear that the testimony you give before this
Subcommittee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Ms. Choi. I do.
Mr. Kurland. I do.
Mr. Mancuso. I do.
Senator Hassan. Thank you very much, and please be seated.
Our first witness today is Eun Young Choi. Ms. Choi is the
Deputy Assistant Attorney General (DAAG) in the National
Security Division (NSD) at the Department of Justice (DOJ).
Before overseeing export controls at the National Security
Division, Ms. Choi was the inaugural director of the National
Cryptocurrency Enforcement Team. In this role, she set
strategic priorities to address crimes involving
cryptocurrencies and digital assets.
Welcome, Ms. Choi, you are recognized for your opening
statement.
TESTIMONY OF EUN YOUNG CHOI,\1\ DEPUTY ASSISTANT ATTORNEY
GENERAL, U.S. DEPARTMENT OF JUSTICE
Ms. Choi. Good afternoon, Chair Hassan, and distinguished
staff of the Subcommittee. I appreciate the opportunity to
testify here today. I joined the National Security Division
this past July after spending over a decade at the Department
of Justice, eight years of which I spent as an Assistant United
States Attorney (AUSA) for the Southern District of New York,
focusing primarily on cyber investigations, including those
implicating national security. Just before joining NSD, as you
mentioned, I was the inaugural director of the National
Cryptocurrency Enforcement Team, which focuses on the criminal
use of digital assets.
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\1\ The prepared statement of Ms. Choi appears in the Appendix on
page 33.
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The work of NSD is increasingly focused on responding to
the evolving and dynamic threats posed by sophisticated nation-
state actors such as China, Russia, Iran, and North Korea.
These countries have sought to acquire sensitive technologies,
including not only military hardware, but also emerging
technologies such as advanced computing and autonomous vehicle
capabilities, as well as the components upon which these
technologies are built, for instance, semiconductors and
microelectronics.
Such technology in the hands of our adversaries, risk
undermining us and allied military capabilities. It can also be
exploited by repressive regimes to conduct surveillance of
civilian populations suppressed descent, and enable human
rights abuses.
Enforcing our export controls and sanctions laws is
critically important to countering these threats to our natural
security and requires interagency, international, and private
sector cooperation. The Justice Department plays a central role
in those efforts, investigating and prosecuting criminal
violations of those laws alongside our law enforcement and
interagency partners.
This interagency partnership is at the heart of the
Disruptive Technology Strike Force (DTSF), which was
established in February 2023, under the leadership of NSD in
the Commerce Department's Bureau of Industry and Security
(BIS), and is designed to pursue enforcement actions against
those who engage in the illicit transfer of emerging
technologies. The Strike force consists of 15 cells located
across the country, made up of local Federal prosecutors and
agents from four agencies, including the two represented here
today, the Federal Bureau of Investigation (FBI) and the
Defense Criminal Investigative Service (DCIS).
In close partnership with NSD's Counterintelligence and
Export Control Section (CES), these local cells investigate and
prosecute companies and individuals who violate U.S. laws
governing the transfer of technology. Their work is supported
by an inter-agency team of analysts who coordinate case leads
and identify opportunities to generate new leads.
Since May 2023, the Strike Force has investigated and
charged 16 cases across seven cells, and has secured guilty
pleas from four defendants on exports, smuggling, and money
laundering charges.
These cases include the arrest of a defendant who allegedly
was engaged in a year's long scheme to illegally send sensitive
technology, including semiconductors to a Russian entity with
ties to the Russian military and the Federal Security Service
(FSB), using a network of transshipment points in Hong Kong and
other countries to try to evade tighter export controls put
into place Following Russia's unlawful invasion of Ukraine.
The Strike Force also announced charges against four
Chinese nationals who allegedly smuggled U.S.-origin items that
could be used in the production of unmanned aerial vehicles
(UAVs), ballistic missile systems, and other military-end uses
through the use of front companies in China and Hong Kong for
the benefit of the Iranian armed forces.
We recently marked the one-year anniversary of the Strike
Force by bringing together the local cells to Phoenix, and
holding a summit focused on case studies, best investigative
practices, briefings on cutting edge technologies, and one-year
reports of their efforts.
The work of the Strike Force builds upon the success of the
Task Force KleptoCapture to capture, an inter-agency task force
dedicated to enforcing sanctions, export and trade
restrictions, that the United States has levied in response to
the Russian invasion.
The task force's successes to date include seizing,
restraining, or obtaining forfeiture judgments against almost
$700 million worth of assets belonging to Russian oligarchs and
others who unlawfully supported the Russian regime and invaded
U.S. economic countermeasures, and charging more than 70
individuals and five corporate entities accused of sanctions
evasion, export control violations, money laundering, and other
crimes, many of whom have been arrested in more than a half
dozen countries.
To that end, we have been leveraging our international
partnerships to follow leads, track down perpetrators, and make
arrests around the globe. Curtailing the flow of sensitive
technology to our adversaries is a global problem and it
demands a global response.
Finally, private sector partnership is critical to our
work. Companies are on the front lines when it comes to export
controls and sanctions. Their decisions as to how, where, and
with whom to do business can be just as important as our
criminal enforcement actions.
I appreciate the opportunity to discuss these issues with
you and would be happy to answer any questions.
Senator Hassan. Thank you very much for your testimony.
Senator Romney, we just started testimony. We can go through
with it or you can make your opening statement.
Senator Romney. Oh, please continue.
Senator Hassan. OK. Thank you. Our next witness is Kevin
Kurland. Mr. Kurland is the Deputy Assistant Secretary for
Export Enforcement at the Bureau of Industry and Security at
the Department of Commerce.
He previously served as the Deputy Chief of Staff for the
Undersecretary for the Bureau of Industry and Security. Before
joining the Bureau of Industry and Security, he worked as an
international trade analyst at a U.S.-based law firm.
Welcome, Mr. Kurland. You are recognized for your opening
statement.
TESTIMONY KEVIN J. KURLAND,\1\ DEPUTY ASSISTANT SECRETARY FOR
EXPORT ENFORCEMENT, DEPARTMENT OF COMMERCE
Mr. Kurland. Chair Hassan, Ranking Member Romney and
distinguished Members of the Subcommittee. Thank you for
inviting me to testify in the Commerce Department's ongoing
efforts to enforce U.S. export controls.
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\1\ The prepared statement of Mr. Kurland appears in the Appendix
on page 42.
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I currently serve as the Deputy Assistant Secretary for
Export Enforcement at the Commerce Department's Bureau of
Industry and Security. When Congress passed the Export Control
Reform Act of 2018 (ECRA), it provided BIS with robust
regulatory as well as administrative and criminal enforcement
authorities that export enforcement leverages every day to
protect U.S. national security.
At Export Enforcement, our talented law enforcement agents
and analysts are focused on a singular mission to keep our
country's most sensitive technologies out of the world's most
dangerous hands. Thanks to the authorities granted under ECRA,
we have powerful tools to identify, disrupt, and investigate
any violations of our controls. No Federal agency, and quite
frankly, no other country has so expansive a toolkit to enforce
export control rules.
At no point in history has export controls been more
central to our national security than right now. The most
recent annual threat assessment published by the intelligence
community (IC) reaffirms that nation-state actors, especially
China, Russia, Iran, and North Korea, are the most pressing
threats. It also identifies transnational threats that can
result from the misuse of disruptive technologies like
artificial intelligence (AI).
Accordingly, Export Enforcement's mission is laser focused
on preventing sensitive U.S. technologies from being used for
malign purposes by these nation-state actors. We do this in
three primary ways: prioritization of our enforcement efforts
on the most pressing threats, expansion of our partnerships at
home and abroad, and aggressive enforcement of our controls.
My full testimony provides additional details on each of
these lines of effort, but I would like to highlight a few key
initiatives and actions that illustrate our effectiveness.
First, we have prioritized our analytical and investigative
work to match the evolving threat environment. We have updated
our procedures for initiating enforcement leads and opening
investigations to focus on the technologies, end users, and end
uses of most concern.
We have been responsible for the addition of significant
numbers of Chinese, Russian, and Iranian procurement-related
parties to the Entity List, including ones announced just this
morning. We conducted over 1,500 end use checks last year in
over 60 countries, the highest number ever with the
overwhelming majority targeting Chinese, Russian, and Iranian
procurements, and transshipments of concern.
Second, to expand the effectiveness of our robust
enforcement authorities, we have partnered with industry and
academia, other agencies, including the intelligence community,
and like-minded countries to prevent diversion. We work closely
with companies and universities to ensure they understand our
rules and to warn them of illicit procurement efforts.
We launched the Disruptive Technology Strike Force, which
BIS and DOJ co-lead in partnership with Homeland Security
Investigations (HSI), FBI, and DCIS to prevent nation-state
actors from illicitly acquiring our most sensitive technologies
to advance their authoritarian regimes and facilitate human
rights abuses.
We established export enforcement coordination mechanisms
with Canada, the European Union (EU), Five Eyes, and G7
counterparts, and we organized a Disruptive Technology
Protection Network with Japan and South Korea to replicate the
Disruptive Technology Strike Force model abroad.
Third, we have aggressively enforced our controls in a way
that imposes real costs on those who seek to violate export
controls and undermine U.S. national security. Our criminal
enforcement efforts with DOJ last fiscal year (FY) resulted in
the highest number of criminal convictions and number of months
in prison on record.
On the administrative side, we resolved or imposed the
highest number of administrative cases, denial orders, and
temporary denial orders, including the largest stand-alone
administrative penalty in BIS history; a $300 million penalty
against Seagate for continuing to ship millions of hard disc
drives to Huawei, a party on our Entity List, without BIS
authorization.
My testimony provides additional examples of high-profile
cases dismantling illicit procurement networks involving China,
Russia, and Iran, as well as of firearms traffickers.
Let me close by reaffirming that the work of our talented
staff of 200 agents and analysts in partnership with industry,
other agencies, and international counterparts has never been
more important, and is achieving significant results that
directly protect U.S. national security through aggressive
enforcement of U.S. export controls.
I thank the Subcommittee for its support and look forward
to your questions.
Senator Hassan. Thank you very much, Mr. Kurland. Our third
witness is James Mancuso. Mr. Mancuso is the Assistant Director
of the Homeland Security Investigations, Global Trade and
Investigations Division, and Director of the National
Intellectual Property Rights Coordination Center. Before his
current role, Mr. Mancuso served as special agent in charge for
HSI Baltimore. He also has served as the HSI attache to the
United Kingdom and Ireland.
Welcome, Mr. Mancuso. You are recognized for your opening
statement.
TESTIMONY OF JAMES R. MANCUSO,\1\ ASSISTANT DIRECTOR, GLOBAL
TRADE AND INVESTIGATIONS DIVISION, HOMELAND SECURITY
INVESTIGATIONS, DEPARTMENT OF HOMELAND SECURITY
Mr. Mancuso. Chair Hassan, Ranking Member Romney, and
distinguished Members of the Subcommittee, thank you for the
opportunity to appear before you today to discuss export
enforcement, and the vital role Homeland Security Investigation
plays as it stands at the forefront of U.S.
counterproliferation investigations (CPI), and the enforcement
of our nation's export statutes.
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\1\ The prepared statement of Mr. Mancuso appears in the Appendix
on page 50.
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The enforcement of export control laws has been a critical
element of U.S. national security dating back to 1789 when the
first U.S. Congress and President George Washington created the
United States Custom Service to interdict contraband under the
United States, collect duties, and enforce our fledgling
nation's trade laws. HSI formed under the Homeland Security Act
of 2002 remains steadfast in its 234-year-old mission of
enforcing our nation's export control laws.
HSI is a principal investigative component of the U.S.
Department of Homeland Security (DHS), enforcing more than 400
Federal criminal statutes. The mission of HSI is to
investigate, disrupt and dismantle transnational criminal
organizations (TCOs) and national security threats seeking to
exploit the customs and immigration laws of the United States.
HSI consists of more than 6,800 special agents assigned to
235 domestic field offices, 93 international offices in 56
countries. HSI is designated as the primary law enforcement
agency charged with investigating violations of U.S. export
laws related to military items, controlled dual-use goods, and
sanctioned or embargoed countries.
I currently serve as the Assistant Director of the HSI
Global Trade Division and the Director of the National
Intellectual Property Rights Coordination (IPR) Center. The
Global Trade Division provides oversight support for
investigations of U.S. import and export laws to ensure
national security, protect the public's health and safety, stop
predatory and illegal trade practices, and prevent sensitive
U.S. technologies and weapons from reaching transnational
criminal organizations and foreign adversaries.
Global trade components include the Counterproliferation
Investigations Unit, the Counterproliferation Mission Center,
located in Huntsville, Alabama, and two whole-of-government
centers; the IPR Center, and the Export Enforcement
Coordination Center (E2C2).
HSI through its CPI program, brings to bear significant
resources against sophisticated illicit procurement networks,
which operate globally on behalf of transnational criminal
organizations and other malign nation-states attempting to
acquire U.S. military items and control dual-use goods. HSI's
broad authorities combined with the extensive global footprint,
has allowed its special agents to forge partnerships with
domestic and international law enforcement communities. This is
proving critical when illicit procurement networks exploit
vulnerabilities in the global supply chain to circumvent laws
for the purpose of illegally obtaining controlled goods and
technologies.
Combating the illegal export and proliferation of sensitive
technology equipment and weapons is an operational priority.
Last year, the CPI program initiated over 1,500 investigations,
made nearly 700 criminal arrests, worked with the Department of
Justice to secure 371 indictments and 292 convictions, clearly
demonstrating HSI unwavering commitment to national security.
The Export Enforcement Coordination Center was created in
2010 by Executive Order (EO) and serves as the primary forum
within the Federal Government for executive departments and
agencies to coordinate and enhance their export enforcement
activities. HSI serves as the executive agency designated for
the administration of E2C2, and is responsible to house, lead,
manage, and fund the initiative.
The E2C2 two provides a whole-of-government approach to
enforcement by ensuring inter-agency coordination, promoting
multi-agency collaboration, and minimizing duplicative efforts
and strengthening the critical link between law enforcement,
the U.S. intelligence community, and export licensing entities.
As a result of these partnerships, approximately 15,000
deconfliction requests have been processed by the E2C2 since
becoming operational in 2012.
Export enforcement is critical to achieving our national
security and foreign policy goals. HSI through its CPI program
is uniquely positioned to effectively work with its partners in
a unified effort to enforce our nation's export control laws.
I appreciate your interest in this important topic and look
forward to your questions. Thank you.
Senator Hassan. Thank you all three for your excellent
testimony.
We are going to proceed to questions now, and I will start
with a set of questions, and then turn it over to Senator
Romney while I go vote.
To all three of our witnesses in your testimony, you each
highlight the important and unique role that your agencies play
in enforcing us export controls. Your agencies are working hard
to protect our national security, but unfortunately, our
adversaries are nimble, and they are constantly finding new
ways to circumvent U.S. export controls.
Just this week, we saw concerning new reports that show how
Iran is utilizing U.S. technology in weapons that it uses and
exports to extremist groups and other hostile actors around the
globe. I would like to hear about the new tactics that
adversarial States like China, Russia, or Iran are using to
avoid U.S. enforcement efforts and illegally obtain sensitive
advanced technologies. Ms. Choi, we can start with you.
Ms. Choi. I think it is important to recognize, and I
appreciate that question, the interconnected nature of many of
these adversaries. One way to think about it is for countries
such as Russia and Iran, where U.S. economic countermeasures
are quite comprehensive, they have incredibly robust
procurement networks that involve shipment points in the use of
front companies across the world, including in jurisdictions
where it's sometimes difficult to hold people criminally
accountable, such as, for instance, in our view China and Hong
Kong, along with some of in the recent months since or in the
recent years now, since the start of the unlawful invasion of
Ukraine the countries that surround Russia, right?
I think one of the trends we are seeing is just how robust
these procurement networks are, and we are doing the best that
we can to try to find from the DOJ's perspective instances
where we can identify willful participants in these procurement
networks and holding them accountable to ensure that we can
disrupt their ongoing flow of goods.
Senator Hassan. Thank you. Mr. Kurland.
Mr. Kurland. Madam Chair, what I would say is, we are
focused on the activities of nation-state actors like China,
Russia, Iran, and particularly their acquisition of advanced
technologies, disruptive technologies, like AI, biotech,
advanced computing, and quantum.
I think what is important to understand is these countries
have both the intent and the resources to seek to acquire these
items through any means necessary. That is what we are seeing
on a day-to-day basis, whether it is licit acquisition, or
illicit acquisition through cyber exfiltration, through theft,
through the use of shell companies, through transshipments that
is through shell companies.
This is a whole-of government-effort where they have
resources, and maybe in the case of China, almost unlimited
resources, to seek to acquire these goods. What we are doing as
an interagency is, we are fighting back by basically leveraging
the authorities and resources that we have across the
interagency through this Disruptive Technology Strike Force
model.
The idea is how do we get together Commerce, and HSI and
FBI analysts, to identify how our adversaries are seeking to
illicitly acquire those items, and then get prosecutors and
investigators in cells all across the country to prioritize
enforcement actions against those activities.
We have had a significant amount of success just in the
first 15 months that the Strike Force has been in effect.
Sixteen criminal cases have been brought. Just last month we
had one involving a Google employee who was stealing AI
software and technology to take it back to China. Their whole-
of-government response requires us to be as similarly nimble
and active to share our limited resources and our comprehensive
authorities to go after those threats.
Senator Hassan. Thank you for that. Mr. Mancuso.
Mr. Mancuso. Much like my colleagues here at the table
expressed, it is a whole-of-government approach, and that is
one of the things at the E2C2 where we really rely on each
other's unique authorities and, and different investigative
methodologies and strategies to attack this problem set. I will
go to a different direction and talk a little bit about
partnership engagement with private industry. At the E2C2, we
are regularly----
Senator Hassan. I want to just stop you for a minute
because what I was trying to get at was how China, Russia, and
Iran are trying to avoid our enforcement effort. Then I want to
move into the topic about kind of how we are responding to
that.
Mr. Mancuso. Sure. When we are talking about the relentless
efforts of our adversaries, they are constantly attempting to
acquire these components, this innovation, this creation, this
technology, and it's important for the government to have that
conversation with industry. No one knows their customer base
like private industry.
When they are receiving a one-off request, when they are
receiving something outside their normal supply chain and their
red flags kind of go up, that is when we need to have an honest
conversation with them. We have the ability, a two-way
conversation, not just a one-way conversation with the
government.
We start there, and then when we receive intelligence or
referrals from our private industry partners that this may be a
request from a bad actor, that is when law enforcement is
involved. That is when we work with our industry partners and
all the agencies, and then we do what we do best. We
investigate that allegation.
Senator Hassan. OK. Thank you. Mr. Mancuso. Another
question for you, and then I will turn it over to Senator
Romney. As you know, many of our foreign partners rely on their
customs agencies to enforce export controls. Frequently, those
customs agencies are not law enforcement agencies, and they may
not have the authority to take direct action against criminals.
As a result, there may be delays in turning intelligence into
enforcement actions.
How does this situation impact Homeland Security
Investigations' operations? How could Congress better enable
HSI to act against international criminal organizations that
break our export control laws?
Mr. Mancuso. Thank you for that question. The subject of
international overseas customs officers is very dear to me. I
had the opportunity, the privilege, to serve as the attache to
the United Kingdom (UK) at the embassy in London for five
years.
HSI has invested a tremendous amount of resources and
efforts into a very healthy overseas footprint. And what it's
allowed us to do is strategically align ourselves in different
regions with our international partners to combat this.
Now, as legacy customs officers, I understand the
challenges of working with our customs partners. One of the
things I would say is we as HSI have looked at threats and we
have been able to realign our resources to address today's
threats. For example, we now have four HSI personnel in HSI
Taipei. That was a strategic decision we made as an agency to
counter the threat from China.
Conversely, in HSI Bucharest, we now have a presence there
before the Russian invasion of Ukraine. They were working,
spending an incredible amount of time, hand in hand with their
Ukrainian customs counterparts recovering weapon systems from
the battlefield, exploiting those weapon systems to see are
there U.S. components in those, and if so, how do they get
there? It is an incredible challenge.
Thank you for your interest in this. How could you help? I
think one of the ways you could help would be ensuring that HSI
in our FY 2025 budget, HSI is fully funded, therefore giving us
the strategic ability to adjust resources internationally. The
ability to turn on a dime and pivot, not just today's threats,
but the threats tomorrow and five years down the road.
Thank you for just that topic.
Senator Hassan. Thank you. I will return to this in another
round of questioning with our other witnesses. Senator Romney.
Senator Romney. I am going to yield to my colleague,
Senator Scott, who has a hard stop on the other end.
OPENING STATEMENT OF SENATOR SCOTT
Senator Scott. I want to thank the Chair and Ranking
Member, for hosting this hearing. Thanks each of you for being
here. Thank you for what you do.
Mr. Kurland, I personally do not believe that the United
States should be doing any business with Communist China Party
(CCP). The CCP is not an honest trade partner. Just recently,
we learned more details about American business executives
being trapped in China with an exit ban just for civil
litigation business disputes for as little as $7,000.
They steal our intellectual property, use non-market
economic practices to destroy our businesses, harness our
technology and innovation for their military to defeat us, or
to make the world dependent on Chinese-run technology. They cut
corners at every turn, from the labor they use, to poisons they
put in their foods that they normally export to America. Every
U.S. dollar spent there supports the CCP's military and its
horrific human rights violations based on the BIS count country
report for China.
In 2022, only seven percent of export licenses for tangible
items, technology, and software were denied. A whopping 3,249
were approved, and another 980 were returned without action.
Approvals for licenses to export to China to remain at
historically high levels. Do you think this is an approval
rating that we should be comfortable with?
Mr. Kurland. Senator Scott, first of all, let me say that I
share your concerns about China's illicit procurement of U.S.
technology, particularly to support its destabilizing military
modernization programs and mass surveillance programs.
I am on the export enforcement side of the house not the
export administration side of the house that does the
licensing. What I can tell you is, on our side, our team is
focused on preventing and detering China from illicitly
acquiring technology to support these destabilizing programs.
It is why we have stood up the Disruptive Technology Strike
Force.
We have been using the administrative enforcement authority
that we have under the Export Control Reform Act in an
aggressive manner. We have imposed the highest stand-alone
civil penalty in our history just this past year against a
party that was selling hard disk drives to a party on our
Entity List called Huawei a $300 million penalty. We have
imposed the most temporary denial orders in our history in just
the past year.
In addition, we continue to aggressively use our Entity
List to prevent China from getting access to key technologies.
There are now over 800 companies, Chinese companies, that are
already on the Entity List in addition to six that we are
adding tomorrow. They were announced this morning, four of
which are involved with providing AI chips to China's military
modernization programs. They are going on the list tomorrow in
addition to two additional Chinese parties along with United
Arab Emirates (UAE) counterparts that were providing components
to the Russian and Iranian UAV programs.
Last, I will say we have been working with our interagency
colleagues and in particular Financial Crimes Enforcement
Network (FinCEN) to receive from financial institutions
suspicious activity reports that we can also action into
enforcement leads with regard to China's evasion of our
controls. We are systematically focused on preventing China
from getting access to those technologies using all of the
authorities that we have been authorized.
Senator Scott. If you look at the numbers, it seems like
there is a basic presumption of approval rather than a denial.
The denials is, it seems, like it is an anomaly. Do you believe
that there should be reforms to the BIS review process so there
is going to be better parameters in place to effective
presumption of denial as opposed to the assembly baked in
presumption of approval?
Look, and we also know the hardware's only as good as what
it is running on it, but it seems BIS list is porous and clunky
to deal with the panoply of threats that should be addressed
for export limitations.
So No. 1 is, do you think we ought to have presumption of
denial with anything with regard to China? No. 2 is, how do you
consider software for inclusions on the list?
Mr. Kurland. Senator every license application that goes
through the Commerce system gets reviewed by the Department of
Commerce, the Department of State, the Department of Energy
(DOE), and the Department of Defense (DOD), and also gets
intelligence information added to it. There is a fully informed
decision that is being made by an interagency body on each one
of those activities.
Each one of those licenses are reviewed de novo, if you
will, on their own merits based on review or a refresh of
information that the Department of Commerce and our interagency
colleagues have in terms of determining whether or not this is
a reliable recipient of U.S. items. That is the basis on which
those licenses are reviewed. In terms of software and----
Senator Scott. Still a pretty big number, right?
Mr. Kurland. Certainly, Senator. There is a lot of trade
between the United States and China, and so there is a lot of
licenses that are received in the system, but it also shows
that there is a lot of licenses that are subject to our control
that are undergoing that four-agency scrutiny to determine
whether or not there is a reliable recipient on the other end.
Senator Scott. What about software?
Mr. Kurland. Certainly software in terms of its control is
something that we control in addition to commodities and
technology itself. It is intangible, but it also goes through
that same licensing process. It does not matter whether it is
internet protocol (IP), or software, or a widget that you can
hold, all of those transactions go through our system through
all four agencies in order to make a determination on whether
to approve.
Senator Scott. Let us talk about TikTok. I saw a report
this morning that that when you look at TikTok and compare it
to Instagram, and you look at the messaging on Instagram versus
TikTok, it is no if and buts about it, the Chinese government
is targeting us. They are targeting our kids. They are
targeting every citizen gets on there for the news. It is not a
little bit biased. It is complete.
There is nothing on TikTok about Tiananmen Square. There is
nothing on about Tibet, and it all supports pro Hamas, attacks
Israel. I mean, it is complete. It is not a little bit, it is
complete.
Knowing all that, do you believe that TikTok ought to be
banned?
Mr. Kurland. Senator, I am going to defer to my colleague
from the Department of Justice on the topic of TikTok.
Senator Scott. OK.
Ms. Choi. Senator, I think that the Department of Justice
and its leadership would agree with your characterization of
the national security threats that are posed by TikTok. It is
our view that TikTok and its parent company ByteDance are
presenting a clear and present danger to our national security.
We are in support of the Foreign Adversary Controlled
Application Bill because it covers both TikTok and any
attendant or subsequent applications that may have similar
concerns with regard to foreign adversary control over our
data.
There are three different ways in which we think it's a
concern for national security. First, in particular, TikTok, as
you mentioned, collects fast amounts of personal data from more
than 170 million Americans who actively use the platform. It
also relies on a proprietary algorithm that was developed and
maintained in China to determine what content to show, and what
content not to show or to suppress to its users. Third, TikTok
continues to rely on PRC-based source code and employees to
support its U.S. operations.
We think that the national security front in this regard is
even more urgent because of the Chinese government's growing
use and focus on its AI capabilities.
Senator Scott. All right. Thank you.
OPENING STATEMENT OF SENATOR ROMNEY
Senator Romney [presiding.] Thank you, Senator Scott. I am
going to ask some questions now, and then when the Chair
returns, she will, I think, provide Senator Lankford the
opportunity to speak, and then we will finally get to Senator
Blumenthal.
A couple of questions. There is a great deal being written
about the degree of leakage, if you will, of things that are
not supposed to be exported from our country or from our
friends that are somehow getting in the hands of adversaries of
one kind or another. How great a part do you think that is? Is
this a tiny share of those things that are most sensitive, or
is this a pretty significant problem that that we need to
address?
Any one of you can respond to that? Maybe I will go over to
Mr. Mancuso, and I realize we have a lot of things in the list,
and so some things they are not terribly interested in, but I
am thinking particularly about large scale chips that go into
or other key defense technologies. How much of that is getting
through? Are we a sieve? Are we not really a sieve, but drip,
drip, drip. What's the characterization of what's getting
around our export controls?
Mr. Mancuso. Thank you for that question. I can say this is
the Assistant Director for Global Trade, I think the sheer
volume of legitimate trade far outweighs the illicit trade that
is going on. However, that small slice is of concern.
What you have is you have folks at this table, all the 20
partners at the E2C2, the intelligence community. All of us are
completely laser-focused on retaining America's innovation, our
creativity, our intellectual property, right? We developed the
most advanced weapon systems of the world because of our
ability to create this. We are the envy of the entire world.
That also means our adversaries will stop at nothing to obtain
this technology in these weapon systems.
With that being said, we are focused on this issue. We are
an investigative agency looking at these agencies attempting to
disrupt and dismantle the flow of this technology. It concerns
all of us. Like I said, we are focused. I am also concerned the
day that they do not want our technology, the day that we are
not the world leader because that means that they have
surpassed us and they have become superior. All of us at this
table are laser-focused, making sure that date never happens.
Senator Romney. Yes. I think there's a recognition that
with regards to AI, in particular. It is very difficult to
control the software. Some software on AI has already been put
on open source and represents, in my view, a huge breach of
poor judgment or breach of good judgment. It is poor judgment.
There are some who believe that the only way we are going
to try and keep AI from being used in a most negative way is if
we limit the supply of the chips necessary to operate AI. Are
we able to do that successfully, or is it like, no, we really
cannot.
Mr. Kurland, do you have a sense of that?
Mr. Kurland. At BIS, Senator, we have been imposing
controls not only on entities that are involved in these types
of diversionary attempts, but we have over the past year and a
half rolled out a series of significant countrywide controls on
China in addition to parties in not only that are resident
there, but their actors that are sitting in third countries as
well.
It is a complex problem set, and certainly with regards to
the semiconductor ecosystem where the vast majority of chips
are produced offshore, trying to identify potential violators
is something that we all here are working hard to do using all
source intelligence, putting together analytical cells that are
trying to identify those activities, working hand in hand with
industry to both prevent on the front side and then, if there
are violations, imposing penalties that are high enough to
deter others is critical. We have been doing that as an
interagency. We have issued over a dozen multi-sealed documents
just in the past year and a half that are trying to get at this
problem set: how do we get industry to harden their supply
chains and their distribution Networks.
Then, we are working globally, internationally. Chair
Hassan mentioned some of the complications of our international
partners in most of these jurisdictions. The licensing folks
are actually disconnected from the enforcement folks, right,
and that creates a bit of a gap because the enforcement folks
do not know what's coming into the system that's being
licensed, and the licensing folks do not actually know what's
going out, which is the biggest vulnerability, the things that
should be coming into the system that are not.
We have been working very closely. We have attaches similar
to HSI that are stationed now in 10 countries around the globe,
trying to get our international partners to increase their
capacity to identify and then take enforcement action in
coordination with us.
It's a challenge, but we are using all the tools at our
disposal--industry, interagency, international--to try to get
at making sure that these key technologies are not getting into
those hands. Where we're identified it, we are either using
criminal enforcement, administrative enforcement, or as I
mentioned, just this morning, we added four companies to our
Entity List in China that were explicitly diverting AI chips to
the Chinese military weapons program so that we can alert
industry and have them harden their supply chains when they are
doing their due diligence of transactions.
Senator Romney. What will the penalties be for those
corporations that have been, if you will, shipping those chips
into China?
Mr. Kurland. Sure. They would be subject to criminal and/or
administrative enforcement authority. Up to 20 years in jail,
or $1 million per fine. Then on the administrative side, we
have a statutory maximum of $365,000 or twice the value of each
violation. And as in the case of Seagate that resulted in a
$300 million penalty to set a deterrence level to say we expect
companies to put in place internal compliance programs when
they are screening their transactions.
Then when they find a problem, they come to us voluntarily
through what we call a voluntary self-disclosure to tell us
because if they do not do it, and there's a willful action
where there's knowledge, then we are going to take aggressive
action to try to deter others from violating and also putting
those that are investing in in compliance programs at a
competitive disadvantage. We want to level that playing field
at the same time.
Senator Romney. Ms. Choi, who's been the most successful in
being able to get the key technologies that are vital and we
have endeavored to restrict? Is it China or is it Russia? We
read stories about Russia being able to get technologies that
they are using in Ukraine. At the same time, we read about
China.
Just today, we have read more stories about China getting
advantage of our technologies. Are they equally effective or is
one more effective than the other?
Ms. Choi. Senator Romney, I would say that--I would refer
you to the annual threat assessment which focuses on China's
efforts in particular. I would say both of those countries pose
concerns, but with regard to China, that threat assessment
notes that China seeks to become a world science and technology
(S&T) superpower, and to use this technological superiority for
economic, political, and military gain.
Among its various methods to do that, it includes means to
acquire or steal IP, its cyber operations, and its illicit
procurement. I would say China is laser-focused on trying to
advance its science and technology program, and it's a focus
for us at the Department of Justice.
Senator Romney. Thank you. Senator Lankford.
OPENING STATEMENT OF SENATOR LANKFORD
Senator Lankford. Senator Romney, thank you. Thanks all
your work. This is a lot of behind the scenes, very technical,
very legal work that makes an enormous difference for the
country. I really do appreciate the ongoing work on this.
I have a question about Huawei. We have talked about for
years in trying to be able to limit the proliferation of Huawei
around the world and communication systems. Now in their
partnerships for chips development and such, Huawei's become a
hundred-billion-dollar company.
The question is, are we being effective in limiting them?
Can we show real progress in future limitations for Huawei
getting into our ally systems and into American systems? How do
we actually show that as a metric for how we are protecting us,
our technology, and our allies? Anyone can step in on that.
Mr. Kurland. Senator, as you know, Huawei is a significant
national security concern for us. They have been on our Entity
List since 2019.
Senator Lankford. But they are still getting bigger.
Mr. Kurland. Our Entity List is not necessarily aimed at
preventing their growth, it's aimed at preventing them from
misusing U.S. technology for their malign activities. I think
we have a level of confidence that our entity listing, in
addition to the use of the foreign direct product rule, has had
a significant impact on their ability to leverage U.S.
technology to conduct their activities.
Where we have had an opportunity to enforce our controls
against Huawei, we have done it. I have mentioned the Seagate
case twice, but it's, I think, an example of how aggressively
we are identifying violations. As it relates to Huawei, we have
another case as well that we resolved back in 2021, I believe,
involving Huawei. We are focused on preventing them from
getting our tech.
Senator Lankford. OK, I get it. Again, and I do not want to
be flippant to say your focus is to be able to stop them from
growing. I understand they are a Chinese company. They are
going to continue to grow. Our focus is trying to keep them out
of the systems of our allies, and to keep them from stealing
our tech and our technology as well in the process.
The concern all along has been the next Huawei, the other
company that's coming up. Obviously, we have a lot of focus on
Huawei at this point. Do we know at this point the next company
that the Chinese are using to be able to basically do the exact
same thing and to be able to go after technology? When you are
doing the entities list, it is whack-a-mole all the time on it.
How is that going as far as identifying those next companies?s
Mr. Kurland. What I can say, Senator, on that question is
we are lashed up with the IC on a daily basis. We are reviewing
information. We are evaluating trends that are happening in
China, and we are amending our controls, when necessary, both
in terms of countrywide and entity wide, or entity-specific, I
should say, to address those concerns.
We have done that with regard to advanced computing,
semiconductor manufacturing, a number of their key parties in
terms of both equipment manufacturing and semiconductors
themselves have been put on our Entity List. These actions do
retard and delay their capabilities, but should we identify the
next champion, certainly it is somebody we will actively review
to determine whether or not they are involved in violation of
our controls but also whether or not we need to take some other
regulatory action against them to prevent their access to U.S.
tech.
Senator Lankford. This is just a process question that is
getting the information out to different companies to let them
know, hey, this entity is now on our Entity List, because
that's changing all the time. Have you been able to evaluate
how quickly companies are able to get the information
processed? Is there an expectation to say within the next 15
days, 30 days, or 90 days, that the changes are made in this?
Because some of them may be in the middle of contracting in the
process when they actually discover that. Walk me through the
process of how that's actually distributed out to companies and
how quickly that can turn around.
Mr. Kurland. Sure. Senator, I will answer it two ways. One
is from the government perspective, and then one is from the
industry perspective. When we put parties on the Entity List,
we are working hand in glove with U.S. Customs and Border
Protection (CBP) and HSI to identify transactions the next day
that would violate our regulations. Then we both have authority
to detain those shipments, or if they are moving to have them
redelivered. We have the ability to immediately take
enforcement action against shipments that are moving in
violations of our regulations.
In terms of industry, obviously, they are published in the
Federal Register. But one of the things that we have made
available is something called the Consolidated Screening List,
which is a list of all the proscribed parties that is updated
in real time from Treasury, State, and Commerce that companies
can simply just download into their IT systems.
There are commercial systems as well, but it's a free
service that we offer where companies can just download that
immediately upon--and they get notification. They can sign up
through our website for notifications of updates. They can
download it so that their screening system immediately picks up
those changes.
Those are some of the ways that we are working--it's also a
way for us to make sure that, in particular, small and medium
sized enterprises, which may not have the resources to expend
and buy commercial software for these entities, can simply just
import that information for free into their IT system and have
an automated way to screen their transactions
Senator Lankford. For enforcement itself, and you talked
about that there are criminal penalties, obviously, for selling
to those on the entities list. How quickly do you start
enforcing those penalties? Because you may put on the entities
list today, there's a contract that they actually do 3 weeks
from now. Is that a criminal penalty that comes?
Again, not being flippant about it, trying to be able to
find out how quickly we are able to actually move from, it's
there to, we need to do enforcement to be able to stop and how
quickly it moves to major fines versus this is a contact to you
to say, stop, you may or may not have known.
Ms. Choi. Senator Lankford, that's actually a very
important part point. I would note that criminal enforcement is
a very important part of the enforcement rubric. But with
regard to penalties in particular, that does not happen until
after we have adjudicated the criminal prosecution, right? We
have to bring charges, there needs either to be a guilty plea
or a trial, and then there has to be sentencing.
The penalties are oftentimes, somewhat distant from the
original sort of understanding of the problem. But there are
many non-criminal sort of circumstance or examples in which
that information could be helpful. For instance, as Mr. Kurland
was explaining, if there was new information that was available
to a company that may prohibit them from entering into that
transaction, that's still disrupting a potential opportunity
for there to be an export violation because we are looking for
opportunities short of criminal prosecution to stop and disrupt
that threat.
Senator Lankford. Sure. Grateful to do that. Thank you.
Thanks for the questioning time. I may follow up with you on
some questions on university students that are foreign students
here in the United States. That's a growing population. We are
not going to try to cutoff all foreign students here, but there
are challenges that are there when they are involved in
research, and there may be the possible transfer of technology
or information as well. I will try to follow up with some
questions for that. Thank you.
Senator Hassan [presiding.] Senator Blumenthal.
OPENING STATEMENT OF SENATOR BLUMENTHAL
Senator Blumenthal. Thank you, Senator Hassan, and Senator
Romney, for your leadership on this Subcommittee. As you may
know, I am Chair of the Permanent Subcommittee on
Investigations (PSI). We are conducting an investigation into
the flow of parts and components, semiconductors, chips, to
Russia.
I recently visited Russia, as a matter of fact, with
Senator Blumenthal. In the course of a meeting with President
Zelinski, he handed me a folder with documents, photographs,
charts, showing me how prevalent American chips and other
components are in Russian weapons that they have recovered on
the battlefield. Our own military and intelligence community
confirms that the flow is prevalent and pervasive.
This issue is at one level, very complex and challenging.
At the other level, it's very simple. This system is not
working. This system is not working, and I want to know why.
That's the purpose of the investigation we are conducting.
Our Subcommittee's inquiry shows added--reflecting
significant jumps in the export of products from four of the
largest United States manufacturing companies, Intel, Texas
Instruments, AMD, and Analog Devices to five countries
neighboring Russia, Kazakhstan, Armenia, Georgia, Finland,
Turkey. In recent years, exports to these countries increased
by huge orders of magnitude between 2021 and 2022. For example,
we found exports to Kazakhstan rose by more than 1,000 percent,
and they are continuing to rise.
Mr. Kurland, I am assuming that you are aware of these
trends, the increased flow of United States technology to these
countries, eventually becoming parts of Russian weapons used to
kill Ukrainians. Correct?
Mr. Kurland. That is correct, Senator.
Senator Blumenthal. Have you asked the State Department or
one of our agencies of government whether it's Treasury or some
other country to bring increased pressure on these countries?
Mr. Kurland. There is a whole-of-government effort,
Senator, to bring pressure on these countries, particularly
that are outside the coalition. We have a coalition of 39
countries that have agreed to impose substantially similar
controls on Russia. The vast majority of these shipments that
you are referencing are coming from countries that are outside
of the coalition; countries like China, UAE.
Senator Blumenthal. I mentioned five countries that do not
include China or UAE. I mentioned countries like Finland and
Turkey. Finland is part of North Atlantic Treaty Organization
(NATO). Turkey is part of NATO. Other countries depend on us. I
am assuming that more can be done. You mentioned in your
testimony, Mr. Kurland that we have been providing ``guidance''
on spotting red flags and implementing best practices to
prevent diversion to private industry.
What are those red flags and why aren't they working?
Mr. Kurland. Sure. We have been working diligently with
industry to provide them with as much information as we have
about the evasion tactics of Russia. Some of those tactics are
companies that did not exist prior to the invasion now exist
and are receiving items that require some enhanced due
diligence where they were receiving items unrelated from that.
Senator Blumenthal. Let me just come right to the point.
Mr. Kurland. Sure.
Senator Blumenthal. Don't you agree that these American
manufacturers have to know, looking at these trends, that
something is awry here?
Mr. Kurland. I think, Senator, that this is a complex
supply chain, but industry needs to do more, and we are trying
to do more. We are using our Entity List as aggressively as
possible. I, personally, over the past few months, have signed
out over 40 letters to the major distributors, manufacturers,
and express carriers identifying----
Senator Blumenthal. I have no question that you are doing
your job, and you are doing it as well as you can, and you are
doing it expertly and with consummate dedication. My question
is, are the private companies reacting positively and promptly
enough?
Mr. Kurland. I think there is a general recognition that
they need to do more. I share your concern that they need to do
more----
Senator Blumenthal. By general recognition, do you mean on
their part or our part?
Mr. Kurland. On their part. I have been personally talking
with the major trade associations, with major companies. I know
even our undersecretary has been reaching out. There's a
recognition that these components are ending up in places that
they shouldn't be.
We need industry to do a better job of hardening their
supply chains, and we are making specific asks of them to try
to do that. Taking a look at these lists of companies and
stopping voluntarily to sell to them. Putting together more
effective distributor relationships so that they can track who
the actual end user of these components are. There's a lot that
they can do that we are encouraging them to do.
Senator Blumenthal. I apologize for interrupting, but as
you know, my time is limited. When you say you are encouraging
them, as the saying goes, talk is cheap. There's the blunt
instrument of criminal prosecution, which is very difficult to
do. People can say, oh, well, we ought to prosecute them. But
obviously, there's mens rea and intent, and all the
difficulties of doing an effective prosecution.
I was a prosecutor for quite a few years, not minimizing
the difficulties, but there are not more effective instruments
other than jawboning that can be brought to bear here on
private industry or on the countries that are complicit because
they are not completely immune to economic pressure and other
kinds of pressure that has real world consequences in dollars,
and cents, or otherwise?
Mr. Kurland. We have increasingly been ratcheting up our
controls. That is on the other side of the bureau, Senator. I
am on the enforcement side of the house. I can speak
specifically to how we are addressing the evasion of our
controls as they relate to those that are in place, and that's
why we are out talking with industry.
We are giving them as much guidance as possible. We are
providing them with lists. But as our controls change we will
effectively enforce those controls as well.
Senator Blumenthal. My time has expired, but I would
appreciate an opportunity to follow up with you on these
issues. Again, I appreciate the work that you are doing on this
very difficult topic. Thank you. Thanks, Madam Chair.
Senator Hassan. Thank you, Senator. Senator Rosen.
OPENING STATEMENT OF SENATOR ROSEN
Senator Rosen. Thank you, Chair Hassan, and of course,
Ranking Member Romney for your hard work on this really
important Committee. Thank you to the witnesses for being here
and testifying today.
I want to focus my questions on artificial intelligence,
and of course, its potential role in aiding in our enforcement
in this area, and so many others. Because one of the issues
this Committee in particular has been focusing on is how
government use of AI has the potential to dramatically improve
how effective and efficient government is. Whether it's cutting
waiting times for Americans seeking support from Federal
agencies, Federal workers using data to root out fraud and
focus their efforts on going after bad actors.
To all of the witnesses. How can data analytics and AI
tools improve export control enforcement, and where are your
agencies in the development and the adoption of these type of
tools for this purpose?
We can start with you, Ms. Choi.
Ms. Choi. Thank you for that question. The Department of
Justice recognizes, as you do, Senator Rosen, that there's
tremendous potential in the use of AI to improve the way in
which we are defending our national security or protecting the
American people. With regard to export controls in particular,
I am sure that my colleagues at the table will be able to
discuss more specifically the ways in which AI could be
harnessed in the export control investigations portion of our
type of our criminal prosecutions.
From the Department of Justice perspective, we are making
sure that we are looking at AI as a tool, especially when it
comes to litigation, to see if there are ways in which we can
use it to generate leads, but also to do the data analytics
that we need to when it comes to evidence, when it comes to
documents, including in the export control realm, because of
the tremendous amount of documents, for instance, that are in
other languages. Unfortunately, I can only speak a few.
We want to make sure that prosecutors can understand and
digest that evidence. I would note that you know, we are
looking at also from the Emerging Technology Board and within
the Department of Justice to ensure that we have safeguards so
that we are using AI in this manner at the Department of
Justice. That we can protect the rule of law and make sure that
people's rights are not violated as a result.
Senator Rosen. Thank you.
Mr. Kurland. Senator, having access to AI is a critical
function for us to do our job more efficiently and more
effectively given the amount of data that we have available to
us, whether it's classified, open-source.
Government data is vast. The ability for AI to be able to
synthesize that information for an analyst at a terminal and to
be able to use that to predicate a law enforcement lead that
would result in an identification of a violation would be
incredibly powerful.
I can say at the Department of Commerce, we do not have the
resources at this point to be running AI in that manner.
Currently we are running a pilot. But the money even that we
are using for that pilot for AI is not in our base.
We have asked in our Fiscal Year 2025 budget for a $3
million down payment to keep this pilot running. But, I think
we are in agreement with the study from Centers for Strategic
and International Studies (CSIS) that talked about the
infrastructure backbone for BIS to have an infusion of
resources that could upgrade our IT capabilities, particularly
Senator Rosen. IT modernization?
Mr. Kurland. Yes.
Senator Rosen. Thank you. I have a few other questions I
want to ask. Please, Mr. Mancuso.
Mr. Mancuso. That's a great question. In terms of what we
are doing with HSI and looking at our threats overseas, folks
that are trying to go ahead and steal our technology and our
creativity, we go through as HSI, some of our customs
counterparts are international partners, a tremendous amount of
trade data. Looking for those anomalies in the trade data.
Criminal networks are constantly shifting and adjusting
their tactics to stay one step ahead. AI would potentially give
us the ability to go through mass volumes of data and identify
these one-off anomalies which could be an indication that
there's a transshipment or an end user is going to repackage
that and set it onto an adversary.
It's interesting. It's a topic that's top of mind. In the
President's latest Executive Order, we were named, the IPR
Center, our part for helping out industry on the electoral
property side. What we did is we commissioned a study with
Michigan State universities in anti-counterfeiting and product
protection.
We are going to reach out to U.S. businesses and say two
things. How can you harness the power of AI to protect your
intellectual property, and what are the top threats to your
organization from AI? These are things we are working on, I am
excited to release.
Senator Rosen. We will look forward to seeing that. But I
want to talk in the time I have left about the dual-use
technology investigations, because American firms, honestly, we
are really at the forefront of the AI technology revolution.
For the last few years, I led a Senate delegation to the
Consumer Electronics Show in Las Vegas. Multiple companies
unveiled to us their new semiconductor chips.
Last year, the Biden administration announced restrictions
on the export of AI chips and manufacturing equipment to China
in order to limit China's access to advanced semiconductors
related to AI.
Mr. Mancuso, I will go to you. Given the rapid advancement
in AI technology, the importance of the semiconductor chips in
supporting the more powerful AI, these large language models,
all this amount of data, what resources do you need to keep up
with the expansion?
Mr. Mancuso. Thank you for that question. There is no doubt
that AI is evolving at a pace that's hard to keep up with. What
we are doing at the E2C2 in this space is working with our
partners here at the table and the 20 other partners, and in
terms of resources and commitment. Thank you very much for
that.
Again, I would go back to the Fiscal Year 2025 budget and
ensuring that HSI is funded to go ahead and give us the
resources, and the flexibility to think strategically and to
prepare for this, and to put resources in place to meet that
challenge. Again, thank you for that, your leadership and
interest in this topic.
Senator Rosen. I am going to ask Mr. Kurland more broadly.
What other dual-use technologies do you see as high risk? How
should we help you as a Federal Government prioritize these
technologies, because there are a lot out there? What do you
need? How can we help?
Mr. Kurland. Senator, thank you. We are really focused on
the key disruptive technologies that have been identified by
the intelligence community: AI, biotech, quantum, advanced
compute.
From our perspective, we believe that if we have more
resources--as we have been able to demonstrate under the
Ukraine Supplemental--when we have more analysts, we are able
to identify more violations of our controls. When we have more
attaches overseas, we are able to conduct more end use checks
that identify diversionary activities, and those predicate our
law enforcement leads.
Senator Rosen. We have to partner AI with the common sense
of humans.
Mr. Kurland. Yes, exactly.
Senator Rosen. Yes, thank you.
Senator Hassan. Thank you, Senator Rosen. I do have some
more questions, so I appreciate the witness's patience this
afternoon. I appreciate the questions that my colleagues have
asked as well.
I want to go back to the question I left off on which was
really about international cooperation. To Mr. Kurland and Mr.
Mancuso, recent reporting noted that Russian manufacturers have
been importing machine tools that are made in Taiwan, and then
using those tools to produce weapons.
Taiwan is a strategic U.S. partner and should be working
with U.S. authorities to counter Russia. How can we get Taiwan
and other international partners to be more proactive in
countering Russia. Mr. Kurland, we will start with you.
Mr. Kurland. Madam Chair, I think it's important to start
with that Taiwan is a member of the Global Export Control
Coalition, which means it has committed to imposing
complementary controls as 38 other countries have done. It is a
critical player in the global semiconductor supply chain and
other key technologies like machine tools.
Anybody that is a member of this coalition allows us to A,
influence them because there is a need to harmonize controls,
but also bring together our enforcement elements for
cooperation and build their capacity. That's what we have been
doing.
I actually came back last month from Taiwan speaking with
officials: how can we help them build their capacity for
enforcement and implementation. We have an export control
officer that is stationed there funded on a 1-year Ukraine
Supplemental. We have asked the Congress in FY 2025 to actually
make that position permanent. But we have a person that's
working every day with the Taiwanese authorities to get them to
increase their capacity, and they actually have done that. In
February, they amended their controls. They now have controls
on 77 pieces of machine tools.
But that's the model that we are using with other close
partners and allies. Which is, when you are part of the
coalition, there's an expectation that you are going to keep
pace with our changes in controls and that you are going to
effectively enforce. We are working through our attaches
overseas to help build that capacity.
Senator Hassan. Thank you. Mr. Mancuso, anything to add to
that question?
Mr. Mancuso. I believe, it's a great question. Thank you. I
believe earlier I discussed how HSI made a commitment to have
HSI for HSI personnel stationed in Taipei. The mission there is
to work alongside with their law enforcement, but it's also
capacity building. It's also the greater partnership effort.
It's sharing of best practices, and it's really being a good
partner. That's what we are doing, HSI officers, agents
overseas are doing. We are working hand in hand with our
international partners. If it's important to them, it's
important to us and vice versa.
It is establishing these critical relationships on a global
basis so we can all rely on the global community to combat this
threat. We cannot do this alone. The United States clearly, and
our partnership at the table, we cannot accomplish this alone.
You have to rely on your committed global partners and then
demonstrating by investing with our agents there, we are
demonstrating our commitment to them and this in time will
breed success.
Senator Hassan. Thank you. Now I want to turn to kind of a
follow-up on what Senator Blumenthal was asking you about. Ms.
Choi, so we know how important it is that the private sector
research institutions in academia share information with law
enforcement about our adversary's various attempts to break
export control laws and illegally gain access to critical U.S.
technology.
We understand how important it is that they share
information with law enforcement and that private entities that
engage in cutting edge research and development uphold the law,
protect intellectual property. What is DOJ doing to coordinate
with private entities to prevent violations of export control
laws and stop adversaries from illegally accessing advanced
technologies?
Ms. Choi. Senator, I appreciate the question. The
Department of Justice also believes that, companies are in the
forefront of our efforts to protect national security in the
ways that you have described. In a variety of different lines
of effort, we have been engaging with companies in order to
ensure that they are incentivized to come forward, be it
through our voluntary self-disclosure policies, to notify the
government when they see things that are happening within the
confines of their business that would be of concern or
potential criminal activity.
We also think it's very important to provide them with the
actionable intelligence that they can use to strengthen their
own compliance systems because I think prevention is always
going to be a better solution, be it in the export control
realm or in cyber, when it comes to trying to protect your
intellectual property.
I know with regard to the export control, the Disruptive
Technology Strike Force has been having a series of private
sector engagements, including having fora in various large
cities to try to bring industry that are in that area of
jurisdiction to explain trends that are happening within that
area and that industry.
But in addition, we are ensuring that we have compliance
notes, which we had discussed earlier. Again, actionable
intelligence that companies can use to arm themselves. The flip
side of that is when companies are willing participants in
criminal evasion of our sanctions and export control laws and
other criminal violations. We are focused on increasing and
making more robust our corporate enforcement regime as well.
Senator Hassan. Thank you. I have a few more questions, but
I wanted to turn to Senator Romney, if you have more questions.
Senator Romney. Yes. I am going to ask an open-ended
question which is what you would recommend that we do, if
anything, to reduce the flow of technology from the United
States, particularly that which has been limited by export
controls, that nonetheless is finding its hands in Russia,
China, and other places, in part, because it's so critical now
with AI.
It has always been important, but now with AI, it's the
national security implications of us not being able to manage
the super semiconductors that are necessary for AI. It's really
extraordinary. I wonder if I could offer suggestions. One is
more coordination among different agencies in the United States
whether we need to do a better job and establish some type of
entity that does more coordination.
Another alternative, which is putting more burden on the
shoulders of the of companies. Chip manufacturers, I mean
Intel, AMD, and so forth, Analog Devices. Given the fact that
we just heard from Senator Blumenthal that there was 1,000
percent increase in shipments to a neighbor of Russia of
technology, which is ultimately clearly going to Russia.
There could be a requirement that on particularly highly
sensitive items, not all the items that we put export controls
on, but in certain highly sensitive items that a corporation
must track where it's gone and where it is, and be able to
provide that information to somebody to say, all right, yes,
this is where it is. If they do not do that, that we fine them
heavily or provide the sanctions.
I hate just finding more requirements for you guys and
trying to say, well, we have to get more money to you, because
we all know that dollars are hard to come by at the Federal
Government level. How about, say, to corporations, if you are
going to see a shipment something of high sensitivity to some
nation that's not part of the coalition, then you have to track
where it is and be able to report to us how much you have sent,
to which company, and where those items have gone.
That means putting people in that country, tracking it,
determining through an audit, whether I am looking for what are
the solutions to this, because it is not working now. There's a
great effort on our part, but they are finding ways around it.
So why don't we just go down the order that you each
testified with any suggestions you have, as you know, very
briefly, if you know. If you were a king for a day, what should
we be doing differently than we are doing, legislatively, or
other ways?
Ms. Choi. Senator, with regard to your specific thought
regarding the burden or the changing standards as it applies to
corporations. I will defer to Mr. Kurland on that. I know you
said that you understand that resources are scarce. If I could
just illustrate one example of the resources that are required
to do these sophisticated cases.
In one sanctions case alone, I am thinking of there are
multiple petabytes of data, which we had to analyze for one
criminal case. We simply are at our wit's end when it comes to
resourcing and doing the big data analytics, and we know our
adversaries are doing with our data. We need to be able to do
that and be armed to do that.
I would have that in mind when you are thinking about
resourcing in the Fiscal Year 2025. One other thing that's
maybe not so obvious, but is very important to us, is the
reauthorization of Section 702. It's absolutely vital to all
the national security work that we do, but in particular, I
think it's important to highlight that in certain instances, we
have been able to glean insights into the illicit transfer of
technology and goods to hostile foreign state actors for the
use of that particular tool.
We would be happy to give you more details in a classified
setting, but that is incredibly vital to every single thing
that we do day in, day out. Thank you.
Mr. Kurland. Senator, I cannot respond to policy
prescriptions. I am on the enforcement side. What I can commit
to you is that if new actions are taken, we will commit to
aggressively enforce those from our perspective that requires
more analysts, more attache overseas, more agents that are
working with DOJ to bring criminal cases.
It gets back to that IT issue as well; better IT systems so
that we can create efficiencies to identify these violators and
then more quickly be able to bring those cases, whether it's a
criminal case, whether it's an administrative case, whether
it's an entity listing. We have the authorities. We have never
worked better together as an interagency in terms of E2C2,
Disruptive Technology Strike Force. We are working in a
complementary manner and sharing those resources. But the more
resources that we have, the more effective we can be.
Senator Romney. Thank you.
Mr. Mancuso. The important first step was, today, we are
having a hearing highlighting the importance of this. No. 2,
HIS, we are not a policy agency. We are not a regulatory
agency. We are an investigative agency. As I have mentioned
earlier, just ensuring that we have the resources to do what we
do. We are, like I said, we have a very healthy global
footprint, and we are working every day. The men and women of
HSI are working with our international partners, and to
continue that, I believe that again, is a recipe for success.
Thank you.
Senator Romney. Thank you. Madam Chair.
Senator Hassan. Thank you very much, Senator Romney. I want
to keep going at another aspect of this issue of how we work
with private entities. As we have heard during this whole
hearing, the Export Enforcement Coordination Center does really
important work coordinating interagency enforcement efforts and
ensuring that information is shared among Federal agencies.
However, private entities don't have access to most US
export data, making it more challenging for them to conduct due
diligence and avoid working with bad actors who are trying to
violate our export controls law. Is DHS considering ways in
which it could share more data with U.S. companies with
research institutions in academia to help them protect
themselves against accidental violations of export controls.
Mr. Mancuso. Thank you for that question. I think the
answer is we are always evaluating what we are doing well
against what we could be doing better. That's a question we ask
ourselves every day, and we can never become complacent.
We do have an aggressive industry outreach. We do have
Project Shield America where we are actively speaking to
thousands of companies every year. We are going to research
universities; we are talking to them. That is one thing we are
doing. Could we do it better? I am sure we always could.
Senator Hassan. Yes. Again, this is not a question about
better. I share all of my colleagues' respect and real
gratitude for the work that all of you and the people you work
with do. What I am trying to get at is, do we have a way of
sharing actual data that these entities could use, or is DHS
exploring it?
Mr. Mancuso. Sure. In certain circumstances, but we are
limited. Some of the law enforcement sensitive data that we sit
on, and there are limitations, what we can legally share with
our partners too. We share with private to the greatest extent
possible. That is part of a two-way conversation, but there are
limitations on what we can share and how we can share it. We do
to the greatest extent possible, but there are limitations.
Senator Hassan. OK. Ms. Choi, the Disruptive Technology
Strike Force, which was created last year, works across Federal
agencies to coordinate with global partners and enforce export
controls. As the Strike Force continues into its second year,
how should it expand its collaboration with more of our partner
nations?
Ms. Choi. Chair Hassan, that's an excellent question. We
are trying to increase our international cooperation in a
variety of ways. As was previously mentioned, there's an effort
underway pursuant to the Camp David meeting between the
President and leaders from Japan and South Korea to ensure that
we are well equipped to help strengthen those other countries'
export control regimes as well. Because export control regimes,
at least from a criminal perspective, it's very important for
our authorities to be aligned and for the violations to be of
the same kind in order for us to have a maximum impact for
disruption.
We also have, as a matter of course, every criminal
investigation that we have, we leverage the global footprint of
both the Department of Justice and the international law
enforcement agencies that we work with and their presence
abroad in export control.
Senator Hassan. OK. We heard earlier that just today,
Commerce listed two UAE firms for supporting Russia and Iran's
drone program. Is DOJ considering embedding personnel in
hotspots for export control evasion, like the UAE, and if so,
does the Strike Force need additional resources or authorities
to do that?
Ms. Choi. Senator Hassan, I do not know about the specifics
of the UAE information that you just outlined. I would say I am
not aware of a particular effort from DOJ to enhance its UAE
presence on export controls. I will say I am aware of many
different engagements with UAE on a variety of different
issues, including export controls.
Again, we can always do more with more. The extent that we
would have further resources to allow for that travel and to
build those partnerships, the muscle memory with our
international partners, we would look forward to receiving
that.
Senator Hassan. OK, thank you. Mr. Kurland, earlier you
mentioned that BIS would be adding six new entities to your
agency list because they were providing AI tech to China. Can
you tell the Subcommittee more about their efforts to undermine
export controls? How egregious were the violations? What
additional action should we be taking against those entities or
individuals who are working for them?
Mr. Kurland. Senator, there are four entities that will be
listed tomorrow for seeking to acquire AI chips for China's
military modernization program and military intelligence end
users. Addressing China's whole-of-government approach to
acquiring these advanced technologies is something that we are
all focused on a day-to-day basis.
It requires significant resources and analyst overseas. You
were just mentioning attaches that are overseas. We currently
are located in 10 countries, including UAE and key
transshipment countries like Hong Kong and Taiwan, to prevent
those types of diversions, and then to help us identify
enforcement outcomes when those are identified.
Senator Hassan. OK. I want to follow up with you. Maybe we
will learn more tomorrow, but what we are really trying to get
at is a sense of what these entities are doing, because that
helps obviously inform us about what the next steps are and how
we can be helpful. I am, again, out of time. Do you have any
more questions? All right.
I have one or two more, and I thank you guys again for your
patience. Mr. Kurland, an end use check is when the Commerce
Department physically inspects an export-controlled item in a
foreign country to ensure that the item will not be used for
illegal purposes after a request from the Commerce Department.
Foreign governments have 60 days to allow U.S. inspectors
to conduct end use checks in their jurisdictions. If a foreign
government does not allow end-use checks within that timeframe,
the Commerce Department can take away export licenses. How does
the Office of Export Enforcement (OEE) share data with law
enforcement regarding countries that delay end-use checks? How
does interagency data sharing help inform sector-specific
enforcement and private industry engagement?
Mr. Kurland. Sure. Thank you. You explained the program
perfectly, Madam Chair, in terms of our law enforcement
investigators doing these end-use checks.
First, let me say that the majority of our partners around
the globe ask for a list of who we are going to do checks at,
and many of them also participate on those checks. We currently
have no issues with regard to conducting checks anywhere around
the globe.
We had an issue back in October 2022 that resulted in a
change of our regulations, which you were referencing, as well
as a policy that Assistant Secretary Axelrod issued that said
that if a host government, in that case it was China, did not
schedule a check within 60 days because we had a backlog, we
would put them on our unverified list.
Then our regulation change allowed us to move them to the
Entity List, which basically imposes a license requirement on
any item subject to our regulations if those delays continued.
I am happy to report that based on that regulation change and
the policy initiative, that it has spurred the government of
China to eliminate the backlog and to continue to cooperate
with us.
At this point you know, we are not having any issue
globally with conducting checks, and we have tools in place to
spur foreign governments that might attempt to delay completion
of those checks.
Senator Hassan. That's good to hear. We have had a very
comprehensive discussion, and I am very grateful for the three
of you for spending so much time and sharing your expertise
with us. I want to thank you for joining us today, but I also
always like to give witnesses a chance to highlight any aspect
of your work, in this case, on export control enforcement that
we did not cover.
If you feel like we have been comprehensive, you can say,
``we are all set,'' but I just did not want to leave today
without giving you each a brief chance just to touch on
anything we have not gotten to today. I will start with you,
Ms. Choi, and work right down the line.
Ms. Choi. Thank you for that opportunity. I would just say
that we remain very focused on export controls. I think we have
covered a lot of topics today, and so I will probably cede the
rest of my time. But certainly, I would just like to
reemphasize that we appreciate your leadership, and yours
Senator Romney and your focus on this particular issue.
Senator Hassan. Thank you. Mr. Kurland.
Mr. Kurland. Madam Chair, I would say that at Commerce, we
continue to be singularly focused on protecting U.S. technology
from being misappropriated by our adversaries.
To the extent that we have an ability to do more if the
Congress is able to provide us with additional resources from
our FY 2025 budget request, in addition to requests that have
been identified by non-governmental organizations (NGO's), in
terms of the Kiev School of Economics (KSE), AEI, CSIS. They
all have identified you know, the fact that if we have more
analysts, we have more export control officers overseas, we
have more agents, we have better IT systems, we can be more
even more effective as we are laser-focused on this problem
set.
Senator Hassan. Thank you. Mr. Mancuso.
Mr. Mancuso. I just want to say on behalf of the men and
women of HSI, especially the folks in the CPI realm, all of our
men and women at the E2C2, and in Huntsville, Alabama, thank
you for the opportunity to appear before you today. You asked
some great questions and we appreciate your time. Thank you.
Senator Hassan. Thank you very much not only for your
testimony today, but for everything you and the teams you work
with the men and women in your agencies do to help secure our
Nation. I look forward to continuing this conversation with my
colleagues and constituents. I know you have given all of us a
lot of ideas and identified some new problems for us to solve.
We appreciate that.
The hearing record will remain open for 15 days until 5
p.m. on April 25th for submissions of statements and questions
for the record. This hearing is adjourned.
[Whereupon, at 4:33 p.m., the hearing was adjourned.]
A P P E N D I X
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