U.S. GOVERNMENT PUBLISHING OFFICE

57–163 PDF WASHINGTON : 2024

S. HRG. 118–448 

COUNTERING CHINA: ADVANCING U.S. NATIONAL 

SECURITY, ECONOMIC SECURITY, AND FOREIGN 

POLICY 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED EIGHTEENTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING U.S. NATIONAL SECURITY, ECONOMIC SECURITY, AND 

FOREIGN POLICY 

MAY 31, 2023 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: https://www.govinfo.gov/ 
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

SHERROD BROWN, Ohio, Chair 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

TINA SMITH, Minnesota 

KYRSTEN SINEMA, Arizona 

RAPHAEL G. WARNOCK, Georgia 

JOHN FETTERMAN, Pennsylvania 

TIM SCOTT, South Carolina 

MIKE CRAPO, Idaho 

MIKE ROUNDS, South Dakota 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

BILL HAGERTY, Tennessee 

CYNTHIA M. LUMMIS, Wyoming 

J.D. VANCE, Ohio 

KATIE BOYD BRITT, Alabama 

KEVIN CRAMER, North Dakota 

STEVE DAINES, Montana 

LAURA SWANSON, Staff Director 

LILA NIEVES-LEE, Republican Staff Director 

ELISHA TUKU, Chief Counsel 

AMBER BECK, Republican Chief Counsel 

CAMERON RICKER, Chief Clerk 

SHELVIN SIMMONS, IT Director 

PAT LALLY, Assistant Clerk 

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C O N T E N T S 

WEDNESDAY, MAY 31, 2023 

Page 

Opening statement of Chair Brown ....................................................................... 1 

Prepared statement ................................................................................... 43 

Opening statements, comments, or prepared statements of: 

Senator Scott ..................................................................................................... 2 

Prepared statement ................................................................................... 44 

WITNESSES 

Elizabeth Rosenberg, Department of the Treasury .............................................. 5 

Prepared statement .......................................................................................... 45 

Responses to written questions of: 

Senator Scott ............................................................................................. 59 

Senator Fetterman .................................................................................... 64 

Paul M. Rosen, Department of the Treasury ........................................................ 6 

Prepared statement .......................................................................................... 47 

Responses to written questions of: 

Chair Brown .............................................................................................. 65 

Senator Scott ............................................................................................. 67 

Senator Fetterman .................................................................................... 69 

Senator Tillis ............................................................................................. 69 

Thea D. Rozman Kendler, Department of Commerce .......................................... 8 

Prepared statement .......................................................................................... 49 

Responses to written questions of: 

Chair Brown .............................................................................................. 70 

Senator Scott ............................................................................................. 83 

Senator Fetterman .................................................................................... 89 

Matthew Axelrod, Department of Commerce ........................................................ 10 

Prepared statement .......................................................................................... 54 

Responses to written questions of: 

Chair Brown .............................................................................................. 90 

Senator Scott ............................................................................................. 93 

Senator Warnock ....................................................................................... 97 

Senator Fetterman .................................................................................... 100 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter submitted by American Securities Association .......................................... 103 

Letter submitted by Senator Bill Hagerty ............................................................. 111 

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COUNTERING CHINA: ADVANCING U.S. NATIONAL SECURITY, ECONOMIC SECURITY, 

AND FOREIGN POLICY 

WEDNESDAY, MAY 31, 2023 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10 a.m., in room 538, Dirksen Senate Office Building, Hon. Sherrod Brown, Chair of the Committee, presiding. 

OPENING STATEMENT OF CHAIR SHERROD BROWN 

Chair BROWN. This hearing will come to order. 

For far too long, our policy around China catered to multinational corporations, and failed working families. It destroyed 

local communities, and it eroded our manufacturing base and our 

national competitiveness. 

This should not be news to anyone. It is why 23 years ago, then 

Congressman Lindsey Graham and I opposed permanent normal 

trade relations with China. We knew that corporations—we knew 

that corporations—would shut down production in Ohio and South 

Carolina and across the country and move production to China in 

search of lower and lower wages. 

That is exactly what happened. Since NAFTA’s enactment in 

1994 and China’s entry into the World Trade Organization, Ohio 

has lost at least 276,000 manufacturing jobs. That is over a quarter-of-a-million Ohioans who once had a good-paying job—usually 

with top-notch benefits that comes with a union card—suddenly 

finding themselves out of a job. It often takes a decade or more for 

families and communities to recover from that kind of loss. 

It devastated industrial communities in Ohio and around the 

country, and it helped buildup the Chinese military. 

Today, after years of misguided China policy, we are finally 

starting to do something about it. We passed landmark legislation 

to rebuild our infrastructure and invests in critical technologies— 

like semiconductors and advanced energy—that will build more secure supply chains. 

Ohio will be at the center of that kind of investment. Finally, we 

have buried the term ‘‘rust belt.’’ Now, we are finally making more 

in America. 

We need to safeguard critical technologies from the PRC’s military and security apparatus, using national security measures. It 

is why we are holding this hearing. 
2 

For years, this Committee has worked on a bipartisan basis to 

establish legal authorities to protect our national security from 

risks posed by the Chinese Communist Party. Five years ago, I 

worked with then-Chairman Mike Crapo to pass the Export Control Reform Act and the Foreign Investment Risk Review and Modernization Act. We strengthened our export control system and inbound investment screening authorities. 

Last month we did it again. Ranking Member Scott and I worked 

with a majority of this Committee to introduce the FEND Off 

Fentanyl Act. We have nearly all of the Committee Members, and 

almost half the Senate, as cosponsors. 

In 2021, fentanyl was involved in 80 percent of Ohio’s unintentional drug overdose deaths. Over and over I hear from Ohioans 

that we need new, more powerful tools to prevent the flow of 

fentanyl into our communities. 

Our bill declares that international fentanyl trafficking is a national emergency, an emergency that is destroying lives and families across our country and that poses an extraordinary threat to 

the national security, foreign policy, and the economy of our country. 

Therefore, the bill uses our economic arsenal to target every step 

of the foreign supply chain, from Chinese chemical suppliers, to 

Mexican cartels, to money launderers profiting off the illicit drug 

trade. 

National security threats evolve, whether from regimes in 

Tehran, Pyongyang, Moscow, Beijing, or non-State actors or human 

rights abuses, IP theft, or illicit fentanyl trade. We must ensure 

that these tools evolve along with them. 

To that end, I look forward to hearing perspectives from the witnesses on a range of bipartisan legislative proposals and ideas. For 

example, Senators Casey and Cornyn are working on legislation 

that would address a gap in our existing national security authorities—risks posed by certain outbound U.S. investments. 

Senators Tester and Rounds, on this Committee, have legislation 

to address concerns related to Chinese ownership of U.S. farmland 

and agricultural businesses. 

Senators Wyden and Lummis, on this Committee, have a proposal that would impose export controls on personal data. 

And Senators Warner, on this Committee, and Senator Thune 

have legislation to address concerns related to information and 

communications technology transactions. 

The Committee will examine a range of other proposals to address challenges posed by China, related to Taiwan, technology development, digital assets, export controls, and other issues. 

We all agree that China is a real and growing threat. Our Committee must play a leadership role in countering that threat. Today’s hearing is another important step, as we work together to 

safeguard our national security. 

Ranking Member Scott. 

OPENING STATEMENT OF SENATOR TIM SCOTT 

Senator SCOTT. Thank you, Mr. Chairman. Thank you to the witnesses for being here with us today. 
3 

Every day there is a news story after news story about foreign 

adversaries searching for a foothold to expand their global reach. 

Whether it is China brokering so-called ‘‘peace deals’’ to Russia’s 

continued invasion of Ukraine, or Chinese precursors sent to Mexico to fuel cartels’ deadly fentanyl trade, America needs to have 

strong leadership. 

Today, we will be hearing from Biden administration witnesses 

from Treasury and Commerce, to better understand their thinking, 

and frankly, learn why the White House is choosing to follow instead of leading. 

Advancing U.S. national security, economic security, and foreign 

policy are all vital to our domestic security here at home. As I have 

said before, you cannot secure your house with the doors wide 

open. 

In our ever-connected and ever-evolving world, the United States 

and our vibrant economy are continuously impacted by other countries. We spend a great deal of our time on this Committee discussing our Government’s response to our own economic issues, but 

it is vital to consider the decisions being made oceans away by Governments and countries with very different ideals and values than 

those we hold near and dear here at home in America. 

China is at the top of that list. For years, China has grown in 

force and strength, persistently engaging in coercive economic policies to further its interests and undermine those of the United 

States and our allies. 

To try and gain a leg up on America and our allies, China has 

resorted to intellectual property theft, unfair trade practices, and 

other harmful actions that ultimately challenge free markets and 

U.S. innovation. And innovation is the crown jewel of America’s 

success. It is about the birth of ideas and the fertile ground for 

them to grow and to prosper. 

As the internet creates a web of connectivity worldwide, protecting American data from would-be bad actors, like China, becomes even more important. That is why I recently introduced the 

Know Your App Act to increase transparency and protect Americans by requiring app stores to label apps controlled by foreign adversaries. It is about empowering our parents with information to 

make informed decisions. 

Further, China exploited America’s openness to do business on 

the global stage. But we cut our own selves off, with rules and regulations, dictating everything from climate requirements to burdensome building regulations taken to an extreme, making it more and 

more difficult to build here at home and perversely encouraging 

companies to search for more open environments around the globe. 

There should never be a world—there should never be a world— 

where a company finds China easier to do business, a better business environment. Our country was built on freedom, hard work, 

and innovation. We should encourage policies that foster these 

ideals in the marketplace, and that means lessening burdensome 

regulations. 

Furthermore, American companies should not be on an uneven 

playing field simply because they must abide by progressive regulations far stricter than the ones in China. We must work simultaneously to provide businesses with room for growth and oppor-
4 

tunity here at home while also robustly responding to China’s unfair practices globally. 

The United States possesses tools to curb China’s economic aggression, including sanctions, export controls, and investment 

screening, but we must use these tools strategically and effectively. 

Policymakers must think beyond the Washington bubble and ensure that when the Government uses its economic security tools, it 

evaluates the economic impact on communities and small businesses across our country. 

From securing our farmland to protecting our U.S. technological 

innovators, this is the lifeblood of our economy and our communities. I know that firsthand from my home State of South Carolina, where advanced manufacturing is our engine. We have some 

of the largest global brands making their home in South Carolina. 

The foreign direct investment in my State is tremendous, from 

BMW to Volvo, an important component of the success that we 

offer the Nation from South Carolina. After all, efforts to advance 

national security will never succeed if the Government undermines 

the economic security and economic opportunities, of everyday 

Americans. 

Regrettably, under President Biden, America’s economic strength 

has waned, and the Administration has led this country down a 

path of reckless spending that has led to a 40-year high of inflation, which every single American knows all too well. 

The more this Administration spends on progressive policies, the 

more their attention is diverted from issues that our communities 

actually need the Federal Government to focus on, like preventing 

the deadly fentanyl deaths that Chairman Brown alluded to. 

The Chinese Communist Party is facilitating the flow of the 

deadly fentanyl into our Nation through the Mexican cartels, leading to 70,000 American deaths. Fentanyl is the leading cause of 

death for young Americans—the leading cause of death—Americans who will never marry, have children, grow old, or make an investment into our economy simply because they took fentanyl. That 

is why I, along with Chairman Brown, introduced the FEND Off 

Fentanyl Act, which will target the illicit fentanyl supply chain, 

using sanctions to choke off the income of cartels and the Chinese 

laboratories that make precursors of this deadly drug. We must hit 

them, of course, where it hurts the most, which means in their wallets. 

We must boost economic growth and competitiveness through a 

renewed commitment to free enterprise, free trade, rule of law, and 

international U.S. leadership. And we must maintain our technological edge, promote capital formation, and ensure supply chain 

resilience. 

Let me close with this. Concerns about China’s rising strength 

and aggression are certainly understandable. However, America 

can always outcompete China. Our economic system and our values 

have lifted countless people out of poverty by providing economic 

freedom for everyday people to work hard, apply their talents, and 

pursue their dreams. There is no better system in the world today. 

There is no better system in the world today. 

It is time we renew our commitment to the principles that made 

us the greatest Nation on God’s green earth. 
5 

Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Scott. 

I will introduce today’s witnesses. All four of you were confirmed 

through this Committee and on to the Senate floor. Elizabeth 

Rosenberg has been back at least once since then. She is Assistant 

Secretary for Terrorism Financing and Financial Crimes at Treasury. Paul Rosen is Assistant Secretary for Investment Security at 

Treasury. Welcome to both of you. 

Thea Kendler is Assistant Secretary for Export Administration at 

Commerce. Welcome. 

Max Axelrod is Assistant Secretary for Export Enforcement at 

Treasury. 

I welcome all of you back. Assistant Secretary Rosenberg, you 

start. Thank you. 

STATEMENT OF ELIZABETH ROSENBERG, DEPARTMENT OF 

THE TREASURY 

Ms. ROSENBERG. Good morning, Chairman Brown, Ranking 

Member Scott, and distinguished Members of this Committee. 

Thank you for the opportunity to testify today on ‘‘Countering 

China: Advancing U.S. National Security, Economic Security, and 

Foreign Policy’’. 

The United States and the PRC are the two largest economies in 

the world. Despite the current tension in our relationship, cooperation between the two countries is absolutely critical in addressing 

important global challenges like the climate and managing international debt distress. As Secretary Yellen has recently noted, the 

United States does not seek conflict but rather a constructive and 

fair economic relationship with China, one where we can work together, when possible, for the benefit of our countries and the 

world. 

Our economic approach to China is guided by three objectives: securing the national security interests of the United States and our 

allies and partners and promoting respect for human rights; seeking an economic relationship with China that fosters growth and 

innovation in both countries through healthy competition; and cooperating on the urgent global challenges of our day. 

As I have responsibility for coordinating Treasury policies to address, expose, and target national security threats, I will briefly address security challenges related to the PRC and the tools at Treasury’s disposal to address them. I have provided more details on 

these challenges in my written statement. 

The first of our national security concerns related to the PRC is 

its challenge to global norms, norms that have maintained peace 

and had a part in enabling the PRC’s economic growth. This includes acts of economic coercion, economic espionage, transnational 

crime, and human rights abuse. 

Furthermore, we are concerned with China’s role in the illicit 

narcotics trade. That is why just yesterday Treasury sanctioned 

and exposed a drug trafficking network that included Chinese individuals and entities responsible for shipping pill press machinery 

for counterfeit pill manufacturing, including those involved with 

fentanyl-laced pill production. 
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Another concern is the PRC’s role in geopolitical conflict around 

the world, including related to Russia, North Korea, and China’s 

militarization of international spaces. PRC’s support for those 

countries I noted and increased tension along its borders, including 

in international waterways and airspace, further destabilizes precarious situations, increasing the risk from misunderstandings and 

miscalculation. 

On Russia, for example, we have sanctioned Chinese entities exporting items to Russia in support of its brutal, illegal invasion of 

Ukraine’s sovereign territory. Chinese continued support for Russia 

will only prolong that conflict. 

I want to focus now on the suite of Treasury tools and how we 

deploy them in service of our national security concerns. 

First, Treasury publicly exposes threatening activity, including 

through financial sanctions. Public exposure and targeting individuals and entities through a sanctions designation gives financial institutions and other organizations a fuller picture of the illicit activity and greater ability to distance themselves from the threat. 

This is often the case for our drug trafficking sanctions, where we 

map and expose the networks moving narcotics and the funds. 

In addition, Treasury regularly engages the private sector, providing typologies and red flag indicators as well as partner and ally 

Nations who share similar concerns and can take complementary 

enforcement actions. 

Another way we protect our national security interests is by 

strengthening international anti-financial crime standards and by 

building partner consensus around them. Leadership in the Financial Action Task Force, or FATF, the international standards-setting body for anti-money laundering and countering the financing 

of terrorism is a major way we accomplish this. By leveraging this 

international forum and building agreement around models laws 

and best practices, we increase the cost for actors to reject these 

norms. 

To conclude, the United States can effectively manage our relationship with China by clearly conveying our interests and intentions, including about our specific national security concerns. Indeed, the health of the global economy rests on how we, both the 

United States and China, can manage our relationship and address 

pressing shared challenges. 

Thank you very much, and I would be happy to take your questions. 

Chair BROWN. Thank you. 

Assistant Secretary Rosen, you are recognized. 

STATEMENT OF PAUL M. ROSEN, DEPARTMENT OF THE 

TREASURY 

Mr. ROSEN. Thank you. Good morning, Chairman Brown, Ranking Member Scott, and distinguished Members of the Committee. 

Thank you for allowing me to be here today to testify on this important national security topic. 

At the Department of the Treasury, we understand the significant challenge that China poses to the economic and national security interest of the United States. I manage the Government’s re-
7 

view of foreign investment coming into the United States for national security risks through the 

Committee on Foreign Investment in the United States. In this 

work we are focused on stopping the access and exploitation of sensitive technologies, infrastructure, data, and other assets by those 

who have the intent and capability to harm our national security. 

Recently, Secretary Yellen addressed the U.S.-China economic relationship. In her remarks, she conveyed that China and the 

United States can and need to find a way to live together and 

share in global prosperity. She also stressed the importance of our 

countries working together, when possible, for the benefit of the 

world. 

At the same time, Secretary Yellen was crystal clear when it 

comes to national security: the United States will secure our national security interests and those of our allies and partners. We 

remain firm in our conviction to defend our values. We will not 

hesitate to defend our vital interests, and we will not compromise 

on national security concerns, even when they force tradeoffs with 

our economic interests. We will fully and zealously exercise our economic tools to protect the national security of the United States. 

CFIUS is one important tool to address national security that 

pursues these objectives. The committee—comprised of the heads of 

several Executive branch agencies, which I help lead in support of 

the Secretary of the Treasury’s role as Chair—carefully reviews foreign investments in the United States for national security risks. 

When necessary, the committee takes action to address any such 

risks while seeking to maintain an open investment environment 

and the status of the United States as one of the top destinations 

for foreign direct investment in the world. 

Over the years, as the national security threat environment has 

evolved, so has CFIUS. First established, as you know, by Executive order in 1975, the committee has benefited from congressional 

action to codify and enhance its authorities. As was pointed out by 

the Chairman, most recently, Congress did so with the bipartisan 

Foreign Investment Risk Review Modernization Act of 2018. 

Among other things, FIRRMA provided the committee with important authorities over certain investment structures that had previously fallen outside of its jurisdiction and modernized our processes and procedures to better and more timely and more effectively review covered transactions. It also, importantly, provided 

the committee with much needed jurisdiction over certain transactions involving real estate in close proximity to sensitive facilities. 

Since I was confirmed to my role as Assistant Secretary for Investment Security, I have been focused on making sure CFIUS operates effectively and efficiently, bringing to bear all of our available resources and tools to support our important national security 

mission. This effort includes the issuance of the first Executive 

order since the committee was established to provide formal Presidential direction on additional risks that we are to consider when 

reviewing a covered transaction. It also includes the issuance of our 

first-ever enforcement and penalty guidelines to ensure that transaction parties are held accountable for failing to comply with our 
8 

laws and for not upholding their obligations to mitigate national 

security risk. 

While Congress rightly put in place strict confidentiality requirements for information filed with CFIUS, we have and will continue 

to take enforcement actions on particular matters to protect our national security. We are also enhancing our tactics and techniques 

to ensure we are gathering more detailed information about foreign 

acquirers, more detailed information about deal structures, and 

thoroughly assess the national security risks arising in connection 

with any transaction. 

We also continue to enhance our ability to identify non-notified 

transactions, that is transactions that are not voluntarily brought 

to CFIUS, and we are also engaging with our international partners and allies. 

Finally, as we protect national security in the context of inbound 

investments, we continue to contribute to the interagency discussions regarding policies to restrict certain U.S. outbound investment flows in specific sensitive technologies with significant national security implications. Our desire is to avoid situations in 

which U.S. investments and business know-how support and advance technologies that enhance military or intelligence capabilities 

in countries of concern that could undermine our national security 

and put Americans at risk. 

While we are proud of the Committee’s work, our work remains 

unfinished, and there is always more we can do. We remain focused on being as effective as we can in our national security mission. And you have my commitment, Senators, that we will use all 

authorities available to protect the national security of the United 

States, including, in particular, against national security threats 

posed by the PRC. 

Thank you for the opportunity to appear before you, and I look 

forward to your questions. 

Chair BROWN. Thank you. 

Assistant Secretary Kendler. 

STATEMENT OF THEA D. ROZMAN KENDLER, DEPARTMENT OF 

COMMERCE 

Ms. KENDLER. Thank you Chairman Brown, Ranking Member 

Scott, and distinguished Members of the Committee. Thank you for 

inviting me to testify today about the Commerce Department’s Bureau of Industry and Security’s ongoing efforts to counter China’s 

military modernization and human right abuses. 

In the past year, BIS and our dual-use export control tools have 

stepped into the spotlight. In February 2022, we cutoff Russian access to technology it needs to wage its brutal war against Ukraine. 

We barred the export of thousands of weapons components and 

other items needed by Russia’s military, including classic dual-use 

items like radio frequency converters. Working with 38 allies and 

partners, we are also barring certain exports to countries helping 

Russia, including Iran and its drone programs. 

With the advanced computing rule we released in October of last 

year, BIS has hammered China’s ability to use artificial intelligence and supercomputing power to develop its military. We are 

restricting exports of leading-edge semiconductors and also of semi-
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conductor manufacturing equipment and related activities by U.S. 

persons. Even foreign-made chips produced with certain U.S. technology or tooling are restricted. 

China has tried to characterize our actions as meant to restrain 

its economic growth. Let me be clear. Advanced semiconductors are 

key to developing advanced weapons. They also support surveillance systems for human rights abuses. We focus solely on national 

security and human rights considerations when imposing these 

measures. 

It bears noting that when we impose controls involving products 

made overseas we work closely with other manufacturing countries. 

BIS embraces the significant responsibility of working with international partners to explain the rationale for our export control 

policies and, where possible, including them in our efforts. 

In addition to technology-specific controls, BIS has restricted exports to organizations acting against U.S. national security and foreign policy interests by adding them to our Entity List. Of the 

nearly 700 PRC parties on the BIS Entity List, over 200 have been 

added during this Administration. 

Since implementing these restrictions, we have seen the increasing impact of our controls, including through desperate efforts by 

Russia and China to obtain the items we have cutoff. This shows 

that our controls are working. And even as we hone current controls in our ever-evolving technological landscape, BIS is focused on 

our next moves—reviewing the cutting-edge technology areas of autonomous systems, quantum information sciences, biotechnology, 

and advanced materials and manufacturing. 

Export controls are not being used to pursue economic decoupling 

with China. Our approach to China is calibrated and targeted. China’s military civil-fusion strategy, under the Chinese Communist 

Party’s Government system, necessitates stronger export controls 

targeting advanced commercial items that can be used in military 

applications. 

We seek to counter China’s military modernization by restricting 

key sensitive technologies without undercutting U.S. technological 

leadership or unduly interfering with commercial trade that does 

not undermine national security. This is all part of the review of 

our approach to China that Under Secretary Alan Estevez has 

identified to this Committee. 

Moreover, BIS never acts alone. I am deeply grateful for our 

partnership with the Defense, Energy, and State Departments, as 

well as the intelligence community and law enforcement agencies. 

Following collectively agreed-upon policies and considering all 

sources of information—open source, business proprietary, and 

classified—we work together to closely scrutinize license applications involving transactions with China. 

Last calendar year, license applications involving China were 

about 13 percent of all the license applications we received, 5,064. 

We denied or returned without action about 26 percent of China 

applications. And on average, we spent a lot more time scrutinizing 

these applications, 90 days last year, a little over double the 43 

days we took to process non-China applications. We prioritize comprehensive review, and we are taking the time to ensure that 

China license applications are carefully reviewed. 
10 

BIS is laser focused on aggressively and appropriately contending with the strategic technology threat posed by China. We 

will continue to use all our tools to counter China’s efforts to outpace the United States and our allies to the benefit of its military. 

Thank you, and I welcome your questions this morning. 

Chair BROWN. Thank you. 

Assistant Secretary Axelrod, you are recognized for 5 minutes. 

STATEMENT OF MATTHEW AXELROD, DEPARTMENT OF 

COMMERCE 

Mr. AXELROD. Thank you, Chairman Brown, Ranking Member 

Scott, distinguished Members of the Committee. Thank you for inviting me to testify today on our ongoing efforts to deny the People’s Republic of China access to restricted U.S. technologies. 

As the Assistant Secretary for Export Enforcement at the Department of Commerce, I oversee a team of law enforcement agents 

and analysts who carry out a critical national security mission: 

keeping our country’s most sensitive technologies out of the world’s 

most dangerous hands. 

At no point in history has this mission been more important, especially when it comes to the PRC. As our intelligence community’s 

most recent annual threat assessment notes, ‘‘China has the capability to directly attempt to alter the rules-based global order in 

every realm and across multiple regions as a near-peer competitor 

that is increasingly pushing to change global norms and potentially 

threatening its neighbors.’’ 

Here is what my team has been doing to meet this unprecedented moment. First, we have enhanced our enforcement policies; 

second, we have expanded our partnerships at home and abroad; 

and third, we have taken aggressive enforcement actions to impose 

real costs on those who seek to violate our rules and undermine 

U.S. national security, both in China and elsewhere. 

On enforcement policies, we have updated them to ensure that 

our finite resources are best positioned to have maximum national 

security impact. Last June, for example, we announced that we are 

raising penalties for more serious violations, prioritizing the most 

serious cases, and eliminating no-admit, no-deny settlements. We 

also made our administrative charging letters public when filed, so 

now as soon as we allege someone has violated our rules, everybody 

knows it. 

In October, we issued a policy announcing that when a foreign 

Government fails to schedule our end-use checks in a timely way, 

we generally seek to move the unchecked parties onto our 

Unverified List, and then, from the Unverified List to the Entity 

List. Prior to this policy, the Chinese Government had not scheduled a single end-use check for us in over 2 years. In the 7 months 

since the policy was issued, we have completed over 90. 

Next, partnerships. Given the scope of the threat we face in protecting U.S. technology from misappropriation by the PRC Government and others, we know we must amplify our efforts through robust partnerships. It is why we joined with the Department of Justice, the FBI, and Homeland Security Investigations to form the 

Disruptive Technology Strike Force, which works to protect ad-
11 

vanced U.S. technologies from being illicitly acquired by NationState actors such as China, Russia, and Iran. 

We also have developed close partnerships with industry, academia, through our Academic Outreach Initiative, the intelligence 

community and Treasury components like OFAC and FinCEN. In 

the past year we have put out multiple joint alerts and advisories 

with these partnerships designed to educate industry and academic 

on how best to comply with our rules and detect violations of them. 

We also partner closely with our international counterparts, bilaterally, multilaterally, and through our end-use check program. 

We are working with the G7, the EU, and our Five Eyes allies to 

create an enforcement coordination mechanism that will help us 

work more closely together to combat export control evasion. 

And finally, our enforcement actions. Just 2 weeks ago, alongside 

DOJ, FBI, and HSI, we announced the first wave of Strike Force 

actions, including charges in five different cases across the country, 

three of which touched the PRC. In two California cases, the defendants are charged with stealing sensitive American technology 

and shipping it to restricted Chinese entities. In a third case, from 

Manhattan, the defendant is alleged to have used a sanctioned Chinese entity as a front company to aid Iranian ballistic missile procurement. 

And last month we announced a $300 million penalty against 

Seagate Technology for selling missions of hard disk drives to 

Huawei, even after Seagate’s only two competitors have stopped 

selling due to our Foreign Direct Product Rule. It is the largest 

standalone administrative penalty in our history, and it sends a 

clear message about the need for companies to comply with our 

rules and about the power of our administrative enforcement tools 

when they do not. 

In conclusion, as Beijing seeks to spread its technology-driven 

authoritarianism the world over, our export enforcement team remains hyper-focused on preventing the PRC from illegally obtaining sensitive U.S. items. 

Thank you again for the opportunity to testify today about our 

work, and I look forward to your questions. 

Chair BROWN. Thank you. 

Secretary Rosen, can you describe the gap in existing authorities 

and the national security risks that an outbound investment mechanism would address? 

Mr. ROSEN. Thank you, Chairman Brown, for that question. I appreciate the Senate’s and Senator Cornyn’s and Casey’s leadership 

and other members on this important topic. What the Administration is looking to do here, and actively assessing, is establishing a 

program that gets at U.S. investment money and the know-how 

and expertise that goes with that money into sectors of concern in 

countries of concern, in a narrow and targeted way that gets at the 

investments that would develop the technologies that would be 

used from a military or intelligence way against the United States. 

We currently assess that looking at our existing tools, including 

those at the table, including export controls which include items, 

for example, and covered and critical technologies, or my colleague 

here talking about sanctions and targeting individuals or entities. 

And, of course, CFIUS, which monitors inbound investment. We 
12 

current assess we do not have an effective tool to target the money 

and sophistication with know-how that goes into these sensitive 

and most critical technologies into countries of concern. 

Chair BROWN. What happens if we do not address this? 

Mr. ROSEN. I think we risk leaving a gap in terms of some of our 

national security concerns and addressing some of the issues that 

I laid out, Senator. 

Chair BROWN. Secretary Rosenberg, last month Ranking Member 

Scott and I introduced, as he said and as I said in our opening 

statements, the Fentanyl Act. At an Oversight hearing in the 

House, Brian Nelson, the Under Secretary for Terrorism and Financial Intelligence, spoke about his trip to the Mexican border 

and Treasury efforts at addressing the fentanyl crisis by targeting 

Chinese suppliers, Mexican cartels, and money launderers profiting 

from the illicit drug trade. 

Senator Rosenberg, yes or no. Do you agree with the Under Secretary about the nature of the threat and the targets to address the 

fentanyl crisis? 

Ms. ROSENBERG. Mr. Chair, thank you for the question. I certainly agree about the nature of the threat and those particular 

targets. This is a challenging issue on which we have the opportunity to work using our existing authorities. And regarding the 

legislation that you had noted previously, cosponsored by yourself 

and a number of others, it is another opportunity for us to work 

closely with you under additional authorities to get after this problem. 

Chair BROWN. I assume that means you will commit to helping 

us work to make this become law. 

Ms. ROSENBERG. Certainly, Senator. I would be very happy to 

work with you and your colleagues on bringing this to fruition and 

to using its authorities. 

Chair BROWN. Thank you. Secretaries Kendler and Axelrod, last 

year a significant increase in funding through Ukraine supplemental bills enabled BIS to take aggressive action to respond to 

Russia’s war against Ukraine and to expand our engagement with 

U.S. allies on export controls. As important as export controls are 

to countering Russia’s aggression, they are increasingly viewed as 

a critical element in China-U.S. policy, specifically ensuing that 

American innovation does not wind up in the wrong hands. 

Would you, starting with you, Senator Kendler, describe how BIS 

used the funding it received through supplemental appropriations 

and what additional investments are necessary for BIS to address 

risks posed by China? 

Ms. KENDLER. Thank you, Senator. We used the Ukraine supplemental funding, which was very valuable to us, to ramp up license 

review involving Russia, to review technologies that Russia was 

trying to obtain that it needed for its military machine, to step up 

data analysis of trends and procurement and trans-shipment, and 

for international cooperation and education on the Russia threat 

and Russia’s procurement practices, and how we could address 

those through the 38-plus members now of the Global Export Control Coalition, designed to restrict Russia’s military capability. 

I do support the President’s fiscal year 2024 budget proposal. We 

can always do more with more, and the Ukrainian supplemental 
13 

funding model would certainly be an example for how we could do 

more with respect to the China military modernization and human 

rights threat. 

Chair BROWN. Secretary Axelrod, same question. 

Mr. AXELROD. Yes. Thank you, Senator. We used the Ukraine 

supplemental money in an impactful way. We were able to bring 

on 16 special agents and 6 intelligence analysts, and in addition we 

were able to hire 2 export control officers, one for Finland and one 

for Taiwan. By adding agents and analysts it means that we are 

able to do more investigations, which down the road will lead to 

more penalties. We can do more compliance checks. We can do 

more outreach to industry. We can do more nomination packages 

for the Entity List. It has been a very effective resource for us, Senator. 

Chair BROWN. Thank you. 

Secretary Rosenberg, really quickly. My time has run out. Discuss the challenges building multilateral conditions and how Congress can support your multilateral efforts on export controls and 

sanctions. 

Ms. ROSENBERG. The multilateralism of the use of our tools is essential for their utility. We have learned that over the past year 

and a quarter that we have been seeking to respond to Russia’s 

brutal war. We engage directly at a high level in order to build 

those coalitions. 

As Assistant Secretary Kendler mentioned, there are formal bodies, groupings of bodies to develop and find commonality in the approaches that we take. We use our attache program. We offer and 

receive technical guidance to align our various authorities. And, of 

course, we issue designations wherever possible, sanctions designations, in coordination with our foreign partners. 

Chair BROWN. Thank you. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. 

Secretary Rosenberg, I have noted with some interest the Executive branch’s surge to its economic statecraft tools to hold Russia 

accountable for its unjust war in Ukraine. In the last few months 

we have sanctioned hundreds, if not thousands, of Russian entities 

responsible for perpetuating the war in Ukraine. Not only were we 

able to identify these obscure targets but we were also able to coordinate these actions, as you just talked about, a multilateral approach with our international partners in Europe. This, to me, 

seems like a testament to U.S. Government and in the dominance 

we can provide to the marketplace when we focus our attention on 

set targets. 

The NIH reported that in 2021, we saw more than 70,000 Americans lose their lives to fentanyl. So my question is, as we think 

about the weight—I did an interview this morning and talked 

about the individual loss of life. But we think so often about the 

70,000 people who have lost their lives to fentanyl, and sometimes 

the number itself is so overwhelming that we forget to personalize 

it. And I think about my friend in Charleston, South Carolina, Dr. 

Alan Shao, whose son, Alan Shao II, 27 years old, lost his life to 

fentanyl just 2 months ago. 

And I think about the tools that we may have at our disposal 

that could disrupt some of the cartels, and I think about perhaps 
14 

it is easier to go to the front line, the top of the food chain. But 

the middle-level folks seem to need to be targeted as well. 

From your vantage point overseeing TFFS, what is possible for 

us to do to use more of the tools to disrupt the financials of not 

only the top of these cartels but the midlevel as well? Is there more 

that we can do in that area? And if so, how do we get there? 

Ms. ROSENBERG. Thank you, Senator, for the question. I very 

much appreciate the approach that you have just noted, not just of 

identifying the individuals who are the leaders of particular cartels 

or networks to move drugs and to move money, but also all of the 

individuals who work as the front line, if you will, for bundling 

money, for packaging materials and equipment, and of course, the 

illicit drugs themselves. 

We have found that it is essential to be able to identify and expose, and of course, designate with sanctions the front companies, 

the exchange houses or money services businesses, the other kinds 

of businesses that function as fronts in order to launder this money 

and move the goods and services. Furthermore, being able to explain through the use of typologies or those red flag indicators to 

other financial institutions or businesses that might come in contact with them the challenges and the risks involved so that they 

can avoid them is essential to this work of exposing and disrupting. 

Senator SCOTT. So just to put a fine point on it, I heard what you 

said but I did not fully hear an answer to my question, however. 

What else can we do, from your perspective, to use the tools that 

we have at our disposal to disrupt the flow of cash to these cartels? 

Is there more that we can do, from your perspective? Certainly I 

think we have started targeting some of the heads, and certainly 

think about the fact that we have 45 cosponsors to my legislation 

on fentanyl, to get Democrats and Republicans, 22, 22 on each side, 

to do something together is like Peter walking on the water these 

days, right? It is almost a miracle. 

So the question is, is more legislation like that helpful? Harmful? 

Do you need more tools? 

Ms. ROSENBERG. I appreciate the question. In addition to what 

I noted there is something else I want to mention here as far as 

what we can do additionally, and that is two things. One is to expand our relationships with foreign partners, specifically Mexico, 

which is something that was featured in the sanctions designation 

yesterday. It called out our partnership with Mexican law enforcement officials, which is a way that we can do an even better and 

more thorough job of getting at money movement and drug movements that traverse several different countries, which is so often 

the case when we have Chinese precursor chemicals moving 

through Mexico into the United States. 

One thing that is very significant, and that I warmly welcome 

from the legislation for which you are a cosponsor, is the expansion 

of the statute of limitations on enforcement against IEEPA to 8 

years from 5. Respectfully, I would request that this be expanded 

even further to 10 years, which would allow us additional significant benefit in compliance and deterrence. 

Senator SCOTT. Great. The legislation that I am sponsoring, that 

is good to hear. And if I get another round—I am out of time—— 

Chair BROWN. You can ask one more question. 
15 

Senator SCOTT. Thank you. I will get to a quick question for you, 

Secretary Rosen. One of the things I have spent some time on is 

trying to figure out how to disconnect TikTok from having surveillance opportunities of our kids. And one of the ways that we try 

to do that is in legislation that we have worked on called Know 

Your App Act, which is a forward-looking solution to ensure Americans are empowered to decide for themselves how to best protect 

their data and their security. 

From your viewpoint as Assistant Secretary for Investment Security, do you think providing users with the country of origin of 

their application is a useful consumer protection measure? 

Mr. ROSEN. Thank you for that question, Senator, and I certainly 

share the concern emanating from the legislation. More information on these topics for parents and also just general transparency 

is very important, particularly when you are talking about countries of concern, and particularly when you are talking about countries of concern with laws on the book that see no line between 

being able to access and manipulate that data. 

So I am certainly willing to work with you on that and understand those issues. 

Senator SCOTT. And my last point, not a question, but I will have 

a question for the record on CFIUS and how we can look back and 

track the progress that has been made over the last couple of years 

and/or the impediments to progress from your perspective as it relates to using that very important tool to perhaps put that target 

on the backs of folks that we think we need to. Thank you. 

Chair BROWN. Thank you, Senator Scott. 

Senator Reed, of Rhode Island, is recognized. 

Senator REED. Thank you very much, Mr. Chairman, and I thank 

the panel for excellent testimony. Private markets are notoriously 

opaque. Unlike other financial institutions, private equity funds 

and hedge funds are exempt from requirements to maintain antimoney laundering programs, verify the identities of their customers, and report suspicious transactions to the Government, 

which I think is a huge oversight. 

Secretary Rosenberg and Senator Rosen, has Treasury observed 

individuals and companies with ties to the Chinese Communist 

Party investing in U.S.-managed hedge funds and private equity 

funds? 

Ms. ROSENBERG. Thank you, Senator, for the question. I will be 

happy to begin. This is a concern for us. It is a national security 

concern. When we are thinking about, if you will, vulnerabilities in 

our AML system that may result from inadequate regulatory treatment for certain areas. What you have just noted here, with respect to regulatory treatment for areas of investment advisors, for 

example, private money, that is an area that we have been looking 

at quite carefully. We have seen Russian oligarchs, unfortunately, 

exploiting this as well as other fund managers launder millions of 

dollars through our system in this way. 

I am also quite concerned about it when it comes to Chinese 

money moving into the United States, including that may influence 

our investment security that my colleague has responsibility for. 
16 

We would be very happy to work with you. We appreciate the 

leadership of Congress on this issue, where I know that there is 

significant concern. 

Senator REED. Secretary Rosen. 

Mr. ROSEN. Thank you, Senator, for that question. From a 

CFIUS perspective, it is a critical issue and goes to sort of issues 

of ultimate beneficial ownership and participation in these funds. 

One of the things that we are redoubling our efforts on is to look 

behind the investors, really digging in. Not just looking at general 

partners but who are the limited partners? What is the information 

about the limited partners? How much information do they get? 

And so when it comes to these kinds of investment funds, really 

doing the diligence to not just look at the deal structure but who 

is behind it, and not being satisfied with just a shell company, understanding who is actually doing the investment. 

Senator REED. But they have no legal obligation to tell you. 

Mr. ROSEN. They cannot get through CFIUS if they do not tell 

us. So while we do not have the regulatory framework that requires these specificities, if they want to get through the CFIUS review process they are generally highly motivated to give us that information. 

Senator REED. Let me put this in perspective. From 2020, 2021, and 2022, over $2 trillion of Chinese investments were placed in 

private funds. That is a lot of money, and it is going to a lot of 

places. Secretary Rosenberg, are you aware of any investment in 

national defense companies, our major clients of the Department of 

Defense? 

Ms. ROSENBERG. Thank you, Senator, for the question. I would 

defer the specific answer to that to my colleague from CFIUS as 

well as, of course, the Department of Defense. But I would note 

from my perspective, thinking about the regulatory treatment 

broadly for investments, foreign and domestic in this sector or 

management of investment funds, that is an area of vulnerability 

for the United States, where we must approach it from several different perspectives, not just the regulatory treatment but, of 

course, also any national security implications resulting from foreign funds flowing in as well. 

Senator REED. Well, I think there are profound national security 

implications. I do national security work on the Armed Services 

Committee. 

Let me ask you a question. In 2015, the Treasury proposed a rule 

to impose AML requirements on private equity funds and hedge 

funds, and I have called for the Department to finalize the rule, including a letter I sent in March of 2022, more than a year ago. So 

why have you not finalized this rule since this poses a, I think, potential and maybe actual serious threat to the national security of 

the United States? 

Ms. ROSENBERG. Thank you, Senator. I want to agree with and 

affirm your national security concern that you have identified just 

now and in that letter to begin with. This is an area that I am 

quite concerned about and that I have asked my team to look at 

broadly, gathering further up-to-date information, which we have 

done in the form of the money laundering threat assessment for 

the United States, and where we are seeking to direct resources 
17 

now in order to find appropriate regulatory treatment at this time, 

bearing in mind that since 2015, much has changed in this sector 

as well since that time. 

Senator REED. Well, knowing where they are getting their money 

from, knowing where it is going has a profound effect given that 

$2 trillion in 3 years that is flowing in from China on our national 

security. I am concerned from a national security standpoint. You 

know the old saying, we are shooting ourselves in the foot. In fact, 

both feet. 

Thank you. 

Chair BROWN. Thank you, Senator Reed. 

Senator Kennedy, from Louisiana, is recognized. 

Senator KENNEDY. Thank you, Mr. Chairman. 

Secretary Rozman Kendler, Madam Secretary, we are talking 

about restricting the American private sector from making investments in foreign countries in the interest of national security. Are 

we not? 

Ms. KENDLER. Senator, I think you are asking about outbound 

investment restrictions. Is that right? 

Senator KENNEDY. Yes. 

Ms. KENDLER. Yes, that is the nature of—— 

Senator KENNEDY. And sometimes that may be necessary. Am I 

correct? 

Ms. KENDLER. I think that is correct, yes. 

Senator KENNEDY. OK. My question is, is the Biden administration doing the same thing for the foreign aid that it gives to foreign 

countries? For example, the Biden administration is giving over $1 

billion in foreign aid to South Africa, is it not? 

Ms. KENDLER. Senator, I am sorry. I would have to defer that to 

a different department. 

Senator KENNEDY. Well, are we reviewing that as to whether it 

is in the interest of national security? 

Ms. KENDLER. I am sorry, Senator. We look at technology transfers, and we are reviewing those carefully to determine—— 

Senator KENNEDY. Yeah, but if we give them the money, they 

could use it to buy technology. Correct? 

Ms. KENDLER. If it is restricted under our regulations I would 

say no, sir, respectfully. Our export controls are in place to restrict 

technology transfers, whether it is goods, software, or technical 

data. 

Senator KENNEDY. I understand that. But the Biden administration is still giving a lot of foreign aid. And what I am asking is, 

is it reviewing that foreign aid with the same national security 

standards that you are proposing to restrict the private sector? 

Ms. KENDLER. I am sorry, Senator. I am simply not in a position 

to answer that, but I would be happy to take it back and continue 

working with you on that. 

Senator KENNEDY. The Biden administration is still giving 

money to the Wuhan lab, is it not? 

Ms. KENDLER. I am sorry, Senator. I focus on technology transfers. I am not familiar with that. 

Senator KENNEDY. Do you know if we are reviewing that money 

in the interest of national security? 

Ms. KENDLER. I do not. I am sorry. 
18 

Senator KENNEDY. OK. Could you get me an answer for that one? 

Ms. KENDLER. Yes. We will find the right people to get to you. 

Senator KENNEDY. OK. Secretary Rosenberg, in your opening 

comments you said it is important that we maintain a relationship 

with China so we can work together on, I believe you said, climate 

change and debt relief. I thought you might have also said to contain the threat of nuclear warfare, but that is just me. 

I want to ask you about the debt relief. Many foreign countries 

owe debt that they cannot pay back, do they not? 

Ms. ROSENBERG. Yes, Senator, that is true. And if I may, with 

respect to nuclear proliferation—— 

Senator KENNEDY. Yes, ma’am, but I do not want to get off on 

nuclear proliferation because I am going to run out of time. 

And some of those countries that owe money that they cannot 

pay back, owe that money to the American people, either individually or as businesses. Is that correct? 

Ms. ROSENBERG. I do not have particular responsibility over foreign debt matters, although I do—— 

Senator KENNEDY. Well, you mentioned it. Am I correct? 

Ms. ROSENBERG. I did mention it, and I do believe you are correct, while I do not have specifics at my disposal. 

Senator KENNEDY. I understand. And the Biden administration 

is leaning on these Americans to whom these foreign countries owe 

money to forgive that money, is it not? 

Ms. ROSENBERG. Senator, I would be happy to follow up with you 

further on that. If I may, with respect to Chinese debt dependency—— 

Senator KENNEDY. Yeah. If you could just answer my question 

first. The Biden administration is leaning on American individuals 

and businesses to forgive debt to foreign countries, is it not? 

Ms. ROSENBERG. I would have to follow up with you with further 

information. 

Senator KENNEDY. Is it not? 

Ms. ROSENBERG. I unfortunately do not have an answer to that 

question. 

Senator KENNEDY. Oh, you know the answer. You mentioned it 

in your opening remarks. It is. 

Ms. ROSENBERG. Unfortunately, Senator, I do not have an answer to that question. 

Senator KENNEDY. Do you know what the Paris Club is? 

Ms. ROSENBERG. Senator, this is not my area of responsibility. 

Senator KENNEDY. Do you know what the Paris Club is? 

Ms. ROSENBERG. Yes, Senator. 

Senator KENNEDY. Well, the Biden administration is leaning on 

American businesses and individuals to forgive debt that foreign 

countries owe them, but China is refusing, is it not? 

Ms. ROSENBERG. Senator, I would be very happy to follow up 

with you. 

Senator KENNEDY. You do not want to talk about that? 

Ms. ROSENBERG. Unfortunately, this is not my area of specific expertise. 

Senator KENNEDY. Yes, ma’am, but you are a smart person and 

you mentioned it. I have a feeling you know about it. 
19 

Ms. ROSENBERG. Unfortunately, I am not in a position to offer 

specific information at this time. 

Senator KENNEDY. You will not or you cannot? 

Ms. ROSENBERG. I do not have at my disposal details that you 

are looking for right now, though I would be very happy to follow 

up—— 

Senator KENNEDY. But am I right that the Biden administration 

is leaning on the American people to forgive debt that foreign countries owe them while allowing China to skate? 

Ms. ROSENBERG. Senator, I believe I understand your question 

and the significance of it. Nevertheless, I am not in a position to 

answer it with specificity at this time. 

Senator KENNEDY. You will not or you cannot? 

Ms. ROSENBERG. I am not able to answer with specifics on this 

question, but I would be more than happy to follow up with you 

with my colleagues. 

Senator KENNEDY. In private? 

Ms. ROSENBERG. Certainly. I am sure—— 

Senator KENNEDY. Do you not think the public needs to know 

this as well? 

Ms. ROSENBERG. I appreciate the point, and I would not dispute 

that either. Unfortunately, I am not able to offer you an answer to 

those questions. 

Chair BROWN. Senator Kennedy—— 

Senator KENNEDY. Would you check on the Wuhan lab? 

Ms. ROSENBERG. I will—— 

Chair BROWN. Senator Kennedy, you can make her answer as 

public as you would like, once she answers you, or someone at 

Treasury answers you. 

Senator Menendez, from New Jersey, is recognized. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

At a time of increasing challenges from adversaries seeking to 

threaten the international order, from perch as Chairman of the 

Senate Foreign Relations Committee I am increasingly of the view 

that the United States has to lead the creation of an economic alliance among like-minded countries that can provide a framework 

for cooperative action in response to military aggression, violations 

of sovereignty, economic coercion, and retaliation by adversaries. 

So while I welcome the G7 leader statement calling for the creation of a new coordination platform on economic coercion to promote cooperation within and beyond the G7, I think we have to go 

further. I am currently drafting legislation that would direct the 

Administration to create a common economic defense mechanism 

that would counter economic coercion, build supply chain resilience, 

promote stronger export controls, and protect critical technologies. 

So I would like to have each of your offices’ assistance in creating 

this bill. 

My first question is will each of you commit to working with my 

office on creating input and drafting this legislation? 

Ms. ROSENBERG. Yes, Senator. Certainly. 

Mr. ROSEN. Yes, Senator. 

Ms. KENDLER. Yes, Senator. 

Mr. AXELROD. Yes, Senator. 
20 

Senator MENENDEZ. Thank you all very much. I look forward to 

working with you. 

Out lack of outbound investment oversight in sensitive industries 

has the potential to harm our national security and hamper the 

competitiveness of U.S. industry because of our technical prowess, 

capital, and the unique know-how that access to the U.S. capital 

markets provides. The President’s budget requested funding to support the establishment of such an outbound investment review 

mechanism by Executive action. 

So Assistant Secretary Rosen, how will you scope a screening tool 

such that it is broad enough to prevent U.S. capital and expertise 

from financing investments in critical sectors that undermine U.S. 

national security but narrow enough to actually be implementable? 

Mr. ROSEN. Senator, thank you for the question, and I think you 

sort of hit the nail on the head, which is we are working to craft 

a narrow and focused program on national security that achieves 

these core objectives. And what we are thinking, currently working 

toward is a program that restricts the flow of U.S. investment dollars that comes with know-how and expertise into certain and specific sectors and subsectors of concern, such as advanced semiconductors, artificial intelligence, and quantum computing, that 

can be used by countries of concern—in this case particularly the 

PRC—for the benefit of their military, intelligence capabilities, and 

mass surveillance. 

And so we are focused on being narrow and tailored, but we are 

also focused on a program that is understandable by the public and 

the business community and administrable. 

Senator MENENDEZ. What steps are you taking to bring other 

major capital markets on board so that our allies and partners are 

prepared to take similar steps? 

Mr. ROSEN. Another excellent point. We have been engaged in a 

robust dialogue with our allies and partners. You have seen some 

of the outputs of this from the G7 statement, by the President of 

the European Commission as well. And under Secretary Yellen’s 

leadership we have been engaged in a robust dialogue, not just to 

sort of share what we are thinking but also to help share what our 

national security concerns are so that other countries can assess 

whether something similar is in their best interest, because we believe when you go multilaterally it is always more effective. 

Senator MENENDEZ. All right. I appreciate that and I look forward to seeing the work. 

I commend the Administration for the unprecedented range of 

sanctions it has imposed on Russian actors in response to the invasion of Ukraine. And while I believe we need to focus on enforcement, we need to address the fact that China continues to enable 

Putin’s war machine. 

Assistant Secretary Rosenberg, what steps are you taking to target enablers of Putin’s inner circle and war-making capabilities, including such enablers in the People’s Republic of China? 

Ms. ROSENBERG. Thank you, Senator, for the question. We are 

strongly committed to ensuring that Russia is not able to gain access to money and materiel to fund its war and to enforcing our 

sanctions, as you have noted. We have made clear to any individual 

or entities that might go forward and evade those sanctions that 
21 

we will not tolerate this, including specifically with respect to 

China at the level of president-to-president. 

In order to make good on that commitment that there should be 

consequences for enablers of sanctions evasion, we have designated 

a number of Chinese entities and individuals that have participated in the evasion of sanctions. With respect to Russia, starting 

just this year, in January we designated a firm known as Spacety 

that was providing satellite imagery of the battlefields in Ukraine 

to the Wagner Group in fighting the war. We have also designated, 

in April and this month as well, a number of entities that were involved in providing financial front services as well as participating 

in procurement networks. 

Senator MENENDEZ. But not many individuals. Entities, but not 

many individuals. 

Ms. ROSENBERG. We have designated many Chinese individuals 

in the past and would not hesitate to do so if there was an opportunity—— 

Senator MENENDEZ. Could you forward to my office the public 

list of the individuals and entities that have been sanctioned in 

this regard? 

Ms. ROSENBERG. Certainly, Senator. 

Senator MENENDEZ. Thank you. Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Menendez. 

Senator Hagerty is recognized, from Tennessee. 

Senator HAGERTY. Thank you, Chairman. 

At the recent G7 meeting in Japan, President Biden described 

the China spy balloon incident in which a Chinese high-altitude 

surveillance ship violated American sovereignty as, quote, ‘‘silly.’’ 

To be frank, I do not find the Chinese spy balloon incident to be 

silly, and neither did the American people. 

That is why, in my capacity as Ranking Member of the Banking 

subcommittee that oversees export controls I sent a letter to Secretary Raimondo yesterday. In this letter I requested export licensing data from Commerce Department’s Bureau of Industry and Security to see what American technologies were approved for export 

to China’s aerospace sector, including to those in China who manufacture these types of spy balloons and their payloads. 

Mr. Chair, I would like to submit this letter for the record. 

Chair BROWN. Without objection, so ordered. 

Senator HAGERTY. Thank you. 

Assistant Secretaries Kendler and Axelrod, do you agree to fully 

comply with my request for export licensing data which Section 

1761 of the Export Control Reform Act of 2018, or ECRA, requires 

the Commerce Department, if asked, to share with my subcommittee? 

Ms. KENDLER. Senator, we will certainly comply with the terms 

of ECRA in responding to your letter. 

Senator HAGERTY. Mr. Axelrod. 

Mr. AXELROD. Same answer, Senator. 

Senator HAGERTY. Thank you. I am very concerned about news 

reports that the Biden administration continues to conceal attempts for more transparency on China’s spy balloon incident, including a taxpayer-funded FBI report on this incident. That is why 

I am using my authority under ECRA to ensure transparency on 
22 

the extent to which U.S. technology exports have contributed to 

threats like China’s spy balloon program. 

On April 26th, Secretary Raimondo told Congress that the Department has put over 200 companies on the Entity List for export 

controls during her tenure. This statistic appears like an accomplishment at face value, but it falls drastically short of the previous 

Administration’s standard. Frankly, in 2020, the Commerce Department added 147 companies to the Entity List, and in 2021, 

that number decreased to 85, and in 2022, that number further decreased down to 68, to Chinese companies that have been added to 

the Entity List. 

Assistant Secretary Kendler, what is the explanation for this 

drastic decrease in the Commerce Department’s Entity List listings? 

Ms. KENDLER. Senator, I would like to make sure that you have 

the right information. I believe it is 205 entities that have been 

added under the Biden administration in China. 

Senator HAGERTY. Are you disputing the level that I am talking 

about? These numbers add up to that number over the course of 

21⁄2 years. Just in the last year of the previous Administration, 147 

companies were added to the Entity List, and what we see is a decrease year over year to get to the total that you just named. Why 

are we decreasing? Why are you decreasing the activity, in light of 

the fact that we have seen more and more of Chinese—the CCP, 

I should say—predatory behavior? 

Ms. KENDLER. Senator, I just want to make sure that we are 

being clear that these are Chinese entities, not overall entities. It 

is correct that 205 entities in China have been added to the Entity 

List. 

Senator HAGERTY. Why has there been a decrease year over 

year? That is my question. 

Ms. KENDLER. Can I get back to you on that? I want to make 

sure that we are operating with the same data, please. 

Senator HAGERTY. The data shows that there has been a decrease, and I want to understand the trend and what is underlying 

the trend. 

Ms. KENDLER. We are deeply focused, as one of the two pillars 

of export controls, on entities that pose national security and foreign policy threats to the United States, particularly in China. 

Senator HAGERTY. I am very concerned about this decrease. I am 

also concerned about the fact that the Commerce Department still 

permits exports of U.S. technology to China’s most worrisome 

State-owned defense enterprises, including—and I want to be specific here—Aviation Industry Corporation of China; China Aerospace, Science, and Industry Corporation; and China Aerospace, 

China, and Technology Corporation. 

Let’s turn to another issue that very much concerns me, and that 

is Huawei. When I served as U.S. Ambassador to Japan I worked 

very closely with a kitchen cabinet of Japanese Government leaders, Japanese business leaders, to understand the threat of Huawei 

and what they could do in the 5G arena. I took my analysis back 

to Washington. I met with the President. We put a lot of pressure 

on the situation and persuaded this Government to take action 
23 

against Huawei and 5G. I did the same with the Government of 

Japan, to get Huawei out of 5G. 

I want to talk to you now about this issue, which clearly is of 

deep importance to me. I was very upset and disturbed to see an 

article in Reuters on May 11th that cited internal emails indicating 

that State Department delayed significant U.S. measures against 

China after the spy balloon incident, including far-reaching export 

controls on Huawei. This is in May of this year. 

So Assistant Secretaries Kendler and Rosen, has the Commerce 

Department’s Bureau of Industry and Security prepared a draft 

rule to revoke export control licenses related to Huawei? 

Ms. KENDLER. Senator, we do not have a draft rule in place at 

this time. However, we are looking very closely—— 

Senator HAGERTY. Tell me, have you received any guidance from 

within the Commerce Department or from anywhere in the interagency to back off and not do this? 

Ms. KENDLER. Senator, we are working closely, and we are under 

deep analysis of this issue. Huawei—— 

Senator HAGERTY. I am very concerned to see this Administration basically back off and kowtow, just so they can obtain highlevel meetings with officials in China. This makes no sense. We 

should be speaking from a position of strength, not weakness, and 

this backing off is absolutely unacceptable. 

Ms. KENDLER. Senator, we have not backed off this issue. 

Senator HAGERTY. Mr. Chairman, I am—— 

Chair BROWN. Thank you. 

Senator Tester, of Montana, is recognized. 

Senator TESTER. Well, I want to thank you, Mr. Chairman and 

the Ranking Member for having this hearing, and I want to thank 

all of you for testifying today. I appreciate your testimony. 

I will start with you, Mr. Rosen, and thank you for what you are 

saying, and thank you for what you do. Would you classify food security and national security as being equivalent, food security and 

national security? 

Mr. ROSEN. Yes, Senator. Issues of food security, particularly 

when it comes to supply chain, are core national security issues. 

Senator TESTER. Thanks for that. In my real life I am a farmer, 

and interestingly enough, a couple of years ago I started getting 

phone calls from folks about folks who were buying up land in 

north-central Montana. And then I did some farm bill listening sessions earlier this year, and there was an issue that came up in 

every one of the forums that I had. That resulted in myself 

teaming up with a number of Members of this Committee, Senator 

Rounds, to deal with American farmland, or should I say potential 

American farmland that would be bought up by China, Russia, 

Iran, or North Korea. 

So the first question I have for you is, right now a covered transaction does not include farmland unless it is next to a designated 

military base. Is that correct? 

Mr. ROSEN. So there are two prongs to this analysis, Senator. 

You are correct that one of the prongs, from a purely real estate 

purchase perspective—— 

Senator TESTER. Yep. Yep. 
24 

Mr. ROSEN. ——is proximity, as Congress articulated. The other 

note is we have control jurisdiction, too, if the purchase involves 

the acquisition of a U.S. business. 

Senator TESTER. OK. But what I want to focus on—we will get 

to agribusiness in a second—but I just want to talk about the farmland situation for a second. So right now if a piece of farmland is 

bought by an out-of-country individual or corporation, what are the 

triggers that would make you look and see who bought that land? 

Are there any triggers? 

Mr. ROSEN. So if it fell within our jurisdiction, under one of those 

prongs, we would look very closely at it. 

Senator TESTER. So if we were to pass this legislation—I think 

there are 30 bills out there to do this and this is just one of many— 

to regulate who is buying land and potentially even prevent a company or an individual from those four countries—and I am not 

talking about a U.S. citizen. I am talking about people from those 

four countries—do you have the capacity to be able to enforce it? 

Mr. ROSEN. Well, I think your legislation that you have with 

Senator Rounds and Senator Cramer and others raises this very 

important issue, and I want to work with you to figure out how we 

can address it. From a resource perspective, you raise an excellent 

question. Depending on the scope of what you are considering, we 

would have to assess what that would bring in and whether that 

is targeting national security. 

Senator TESTER. Yeah. So I have no idea how much land is being 

bought in this country by folks from outside this country, OK. We 

are just talking about four countries in this particular case. It is 

really a focus on China—let’s be honest—but the others are important too. But this bill does not work unless CFIUS can do the enforcement. You have to have an enforcement tool. You cannot just 

say we are not going to do this, and you are the enforcement tool. 

So the real question I have is I do not want to write something 

that sounds good, you put good press releases out on it, but really 

it does not do anything because we do not have the enforcement 

agency to do it. And since you are the enforcement agency, do you 

have capacity to do it, and how much more capacity—what would 

you need to be able to have capacity, to be able to enforce a bill 

that would stop China, or all four of the countries—China, Russia, 

North Korea, Iran—from buying farmland in this country? 

Mr. ROSEN. Senator, I appreciate the question, particularly as it 

relates to administrability and resources. And what I would say is 

it would depend on the scope. If we brought in every single investment, that would be a different consideration than targeting the investments that you have a particular national security concern 

with. But what I can commit to you is I am willing to go at this 

issue with you and figure it out and work toward a solution. 

Senator TESTER. So Senator Reed asked some questions on investment funds, and we talked about how important it was for 

laundering money. We talked about how important it was for, from 

his perspective and mine too, by the way, of potentially investing 

in military production firms. 

I am going to tell you that I do not know how much land is being 

bought right now in this country, and we have not even gotten into 

agribusiness, by the way, which is just as big a concern. But we 
25 

have got to figure this out before it gets to be a crisis. And I would 

hope that Treasury, Ms. Rosenberg, Mr. Rosen, we can work with 

you. Because I just think this is a huge problem. Whether it is for 

laundering money or whether it is for national security or whether 

it is food security, it is all the same thing. And if we could get your 

help we might be able to get a piece of legislation that actually 

functionally works. 

Mr. ROSEN. You have my commitment to work with you, Senator. 

Senator TESTER. Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Tester. 

Senator Vance, of Ohio, is recognized. 

Senator VANCE. Thank you, Mr. Chair. I appreciate you for 

hosting this Committee. And I want to focus a little bit on perhaps 

the unintended consequences of some of our Russia and Ukraine 

policy over the last year. Let me direct my question to you, Ms. 

Rosenberg, and thank you all for being here. 

I have been on this Committee before. Sanctions policy in Russia 

has been a complete and total failure. We thought that we would 

shrink the Russian economy by 10, 20, 30, even 50 percent, yet we 

have shrunk the Russian economy by very little. If you compare it 

to the performance of other regional economics, let’s say in terms 

of the performance of its currency, it is actually doing pretty well, 

relative to other world currencies. 

So the foreign policy establishment claim that one of the strongest sanctions measures was the disconnection of Russian banks 

from SWIFT. Scholars claimed that this would kneecap the Russian economy, but while the Washington foreign policy establishment was preoccupied with crafting a sanctions regime, they failed 

to consider that Russia had been developing their own alternative 

to SWIFT, which is, of course, the SPFS. 

Ms. Rosenberg, I want to ask first, has the SPFS grown in response to being cutoff from SWIFT, and by how much has it 

grown? 

Ms. ROSENBERG. Thank you, Senator, for the question. We are 

aware of and looking at the Russian payments rail system, if you 

will, the SPFS, which grew significantly earlier on, in the prior 

stage of Russia sanctions in 2014, when it saw some of the writing 

on the wall about its inability to access certain international financial institutions or partners, and it began developing at that time. 

Senator VANCE. Yeah. So my understanding, at least the Russian 

claims are that they have integrated about 50 foreign banks just 

in the last couple of years onto the SPFS system, and to your point 

it sounds like they integrated a lot more before, from maybe 2014 

to 2020, perhaps 2021. 

The other really concerning thing, of course, is that India and 

Iran seem to be getting closer and closer to the Russian financial 

system, even as they are getting further and further away from the 

American financial system. And in particular India, which we 

should all recognize as the most important geopolitical counterweight to China in the region, it is a very bad thing for them to 

be getting closer to Russia and China and the Russian financial 

system. 

Just for my edification and anybody else who is listening, could 

you speak a little bit to the national security importance? What do 
26 

we get out of cooperative organizations like SWIFT as the dominant global bank power, and what kind of access does our law enforcement have that they would not have if you had major foreign 

powers shifting off of SWIFT? 

Ms. ROSENBERG. Thank you for the question. I have also noted, 

with great concern, some of the developments and expanding efforts by Russia with several specific partners to have direct and bilateral financial flows. You mentioned India and Iran. Those are 

not the only ones. There are other countries where this is a great 

concern. And as you pointed out, this is designed to be an effort 

to relieve and mitigate its dependency on international financial 

system. 

So the reason why Russia, as we see it, is seeking to do this is 

because it has less and less connectivity with international financial architecture. It is not just SWIFT. It also the correspondent 

banking relationships that have been cutoff so significantly by the 

European and U.S. and British sanctions that have sanctioned a 

designated number of banks and severed those relationships. 

But the concern that I hear you expressing is a concern that we 

also have. We cannot rest knowing that we have designated over 

80 percent of Russia’s financial system and restricted their access 

to SWIFT system. That is insufficient if they are still able to move 

around them and gain access to international financial channels. 

Senator VANCE. Yeah, I appreciate that, and certainly agree with 

the emphasis there. My concern, I guess, is that our Ukraine policy 

has had this massive unintended consequence. And if we had gone 

into this 18 months ago knowing that we would maybe be pushing 

India closer to the Chinese, to say nothing of Russia, we are pushing Russia and India closer to the Chinese, or encouraging the creation of an entirely alternative financial system, it is really important that our law enforcement has access to some of these financial 

transactions. It is one of the ways we catch international crime. It 

is one of the ways that we prevent international terrorism. 

If the consequence of our Ukraine policy is weakening that financial system and strengthening an alternative financial system, I 

think it is one of the many consequences for our country that our 

policymakers have not fully incorporate, and frankly, that the 

American people are not fully aware of. Because you do not see the 

effect of this stuff right away. We may be dealing with consequences for years or even decades to come. 

But I appreciate your work on this and I appreciate your answer 

to the questions. Thank you, Ms. Rosenberg, and thanks to everybody else. 

I yield. 

Chair BROWN. Thank you, Senator Vance. 

Senator Warren, of Massachusetts, is recognized. 

Senator WARREN. Thank you, Mr. Chairman. 

Fentanyl is fueling the most severe drug crisis our country has 

ever seen. In 2022, synthetic opioids like fentanyl were responsible 

for 75,000 deaths, more than two-thirds of all drug overdose deaths 

last year. Fentanyl is now the leading cause of death among Americans 18 to 45. 

China is the leading supplier of the chemical ingredients called 

precursors, that drug cartels us to produce fentanyl and other syn-
27 

thetic opioids. China also plays a major role in laundering money 

for the cartels. 

Assistant Secretary Rosenberg, you are responsible for leading 

and coordinating anti-money laundering policy. Now Treasury has 

caught a number of Chinese companies that were providing 

fentanyl precursors. Were any of these Chinese companies using 

cryptocurrency in their illegal drug transactions? 

Ms. ROSENBERG. Thank you, Senator, for the question. Unfortunately, that is a mode that some of these precursor manufacturers 

and illicit drug organizations have used. The receipt of bitcoin payments in cryptocurrency wallets. 

Senator WARREN. OK. So we are talking about these Chinese 

companies that are supplying precursors to fentanyl, and they are 

getting paid in cryptocurrency. And you have to ask why this would 

happen, because crypto is supposedly banned in China. But new research from the blockchain analytics firm, Elliptic, shows that more 

than 90 companies based in China are raking in tens of millions 

of dollars’ worth of crypto selling these fentanyl precursors. The 

number of crypto transactions associated with Chinese fentanyl 

brokers increased by 450 percent just last year alone. 

So Assistant Secretary Rosenberg, why are drug suppliers and 

cartels increasingly turning to crypto for large-scale drug sales and 

money laundering? 

Ms. ROSENBERG. Thank you, Senator, for the question. The reason why they would find this appealing is the same reason that 

other financial criminals would find it appealing, which is to say 

there is an element pseudonymity they seek in using this kind of 

payment mechanism. Also, you are able to, unfortunately for these 

purposes, process a large value, financial value—— 

Senator WARREN. Lots of dollars’ worth of transactions. 

Ms. ROSENBERG. Yes, of bitcoin in this instance, a large amount, 

a high value of such currency across a national border. And if you 

can achieve a person-to-person transaction or a decentralized transaction, then you are avoiding the kind of scrutiny, know your customer, financial disclosure that you would get if you used a more 

traditional financial institution. 

So those anonymity-enhancing features are generally what financial criminals that you are noting here find attractive. 

Senator WARREN. OK. So they are using crypto. This is their payment of choice for these fentanyl dealers. This is looking good for 

them. 

Ms. ROSENBERG. It is one, but unfortunately there are others, 

but it is certainly one. 

Senator WARREN. But this is one that they are focused on here. 

So Elliptic’s research found that these 90 Chinese suppliers sold 

enough—let’s talk about the volume—this group sold enough precursor drugs in exchange for crypto to produce $54 billion worth of 

fentanyl pills. That is enough fentanyl to kill nearly 9 billion people, all paid for by crypto. When one of the companies was asked 

whether their Mexico-based customers paid in crypto, they replied 

that the cartels, and I am going to quote, ‘‘always use Tether or 

Bitcoin to pay. It is no problem.’’ 

Now the Office of National Drug Control Policy has identified 

crypto as, quote, ‘‘central to the rise of drug sales in the United 
28 

States.’’ Senator Marshall and I believe that Congress has talked 

about fentanyl long enough. We propose to do something to fight 

back. And that is why we are reintroducing our Digital Asset AntiMoney Laundering Act, which closes loopholes in our anti-money 

laundering rules and cuts off drug suppliers and cartels from using 

crypto to fuel their illegal business. 

Assistant Secretary Rosenberg, will closing the holes in our antimoney laundering rules give regulators stronger tools to address 

crypto’s use in the fentanyl trade and at least help cutoff payments 

from drug cartels to Chinese drug suppliers? 

Ms. ROSENBERG. Yes. I am certain that will help, and I hope that 

we will be able to encourage some of our foreign counterparts, 

other jurisdictions, to do the same, which would go a long way in 

helping, as well. 

Senator WARREN. Thank you. Crypto is helping to fund the 

fentanyl trade, and we have the power to shut that down. It is 

time. Thank you. 

Chair BROWN. Thank you, Senator Warren. 

Senator Britt, from Alabama, is recognized. 

Senator BRITT. Thank you, Mr. Chairman. Thank you to all of 

our witnesses for being here today. 

I am greatly concerned about the growing relationship between 

Iran and China. These two countries have long worked together, 

China purchasing Iranian oil and Iran buying Chinese goods. We 

have seen Chinese firms repeatedly caught in aiding Iran’s missile 

production and different defenses, and we have also seen, as we 

have discussed here today, China laying the foundation, both for 

technology and infrastructure with Huawei, in order for Iran to be 

able to surveil and censor their own people. 

I saw and heard in Mr. Axelrod’s testimony that we must have 

robust partnerships, which I could not agree more with. I think 

China understands that as well, which is why I am so concerned 

with regard to China’s role in bringing Iran and Saudi Arabia together not too long ago. 

Assistant Secretary Rosenberg, despite intensified sanctions, Iran 

has continued to increase its oil exports, and China seems to be the 

largest beneficiary of that. What is the Administration doing to 

stop Chinese purchase of Iranian oil and petroleum products? 

Ms. ROSENBERG. Thank you, Senator, for the question. I share 

this concern you are articulating about Iran being able to continue 

to sell petroleum and petrochemical, or petroleum products. Indeed, 

China is a purchaser of great concern, and not just as a purchaser 

but also facilitating trading activities, providing storage, that 

broader supply chain. 

What we have been doing in response to this concerns is getting 

out there to designate and clarify what is occurring that is of such 

great concern. So for example, in a series of designations, different 

designation packages this year and last year, we went after dozens 

of Chinese recipients, also the providers of storage and of trading 

and brokering, not just Chinese individuals, by the way, but also 

elsewhere in the region, including where that is part of the supply 

chain to China, in order to get after and expose purchases of petroleum and petroleum products. 
29 

Senator BRITT. So let me ask you this. If ports or refineries are 

knowingly accepting shipments of oil from Iran, are they violating 

U.S. sanctions? 

Ms. ROSENBERG. Yes. Our authorities say where there is a knowing significant purchase—— 

Senator BRITT. So that is a yes. So if so, have any Chinese ports 

or refineries actually been sanctioned? 

Ms. ROSENBERG. With regard to the specificity here, what we are 

doing is getting after nodes in that chain where we can have the 

biggest disruption effect. So it may not be the end recipient, and 

it is also not a refinery. 

Senator BRITT. Do the sanctions allow if a port knowingly accepts 

it? So should we not be actually pursuing this with these ports, 

these Chinese ports, that are accepting this petroleum and oil products from Iran? 

Ms. ROSENBERG. Yeah. So wherever there is an entity that is engaging in one such transactions, yes. 

Senator BRITT. OK. But you are saying to date we have not sanctioned any Chinese port or refinery. 

Ms. ROSENBERG. I did not say that, actually, and I would be 

happy to follow up with you on the specific entities. But it is our 

goal to find those where the disruptive—— 

Senator BRITT. So we have sanctioned some. 

Ms. ROSENBERG. We have sanctioned many entities in China related to this trade. 

Senator BRITT. The port, though. 

Ms. ROSENBERG. I would be happy to follow up with you on specific entities in order to answer your question with detail. 

Senator BRITT. OK. I would hope if they are knowingly accepting 

it, as you said, and it is within the realm, that we are actually 

doing what we say we are going to do and following through with 

these sanctions. 

So my question to you is, if we have these sanctions in place and 

yet Iranian oil exports hit new heights at the end of last year, and 

obviously we know that China’s purchase of Iranian oil has risen 

to record levels, either we do not have the right sanctions in place 

or we are not enforcing them. Would you agree? 

Ms. ROSENBERG. I think the authorities we have are strong and 

efficacious. I, too, have noted, along with our colleagues in the intelligence community and throughout this Government, that this is 

a growing concern. I never think that sanctions are the only tool 

that can advance our purposes here, but we must—— 

Senator BRITT. So what else should we do then? Because we 

should not have these sanctions in place. Either we do not have the 

right sanctions in place, or we are not enforcing them, or to your 

point, there is another tool that we are not using. So what is that? 

Ms. ROSENBERG. There are a variety of things that we must do, 

a number of which we are doing, in order to get at the supply 

chain. So for example, where there are jurisdictions that are involved in the trans-shipment, those are further opportunities, including in the Gulf and in Southeast Asia, to engage with the leaders of those countries and businesses there in order to clarify for 

them the consequences of violating our sanctions. So that is a dip-
30 

lomatic and technical engagement, as well as sanctions designation. For example, Malaysia. 

Senator BRITT. Well, and I would like for us to just drill down 

into this. I know that I am out of time. But when we are seeing 

Iran offer discounted oil to compete with Russia and the Chinese 

marketplace and circumvent our sanctions regime in coordination 

with China, it is incredibly concerning. So it is my position that we 

either are not using the right sanctions, or we are not enforcing 

them to the level that we can, and either one is unacceptable. 

Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Britt. 

Senator Cortez Masto, of Nevada, is recognized. 

Senator CORTEZ MASTO. Thank you, Mr. Chairman. 

Let me jump back to what I heard Assistant Secretary Rosenberg 

talk about, the need to get some of our allies and other countries 

supportive of what we are trying to do here with respect to the illicit activities that are happening. So let me start with this, because I know, just in general, the malign neglect on the PRC’s part 

has allowed money laundering to flourish, and it is really underwriting some of the drug trafficking in North America and fueling 

the probability of that drug trade. The PRC has made commitments, however, to crack down on illicit finance, yet it fails to investigate its own money laundering schemes and blocks other Nations from doing so. 

So can I ask, what actions has Treasury taken, if any, or is it 

even possible, to secure the Chinese Communist Party’s cooperation with international investigations of illicit financial activity? 

Ms. ROSENBERG. Thank you, Senator, for the question. This is a 

concern, just as you have noted, and it has been a frustration, I 

think, to many in the U.S. Government that when Chinese entities 

have gone after the predicate crimes associated with illicit drug activity, to the extent they have done so, they are often not also going 

after the associated financial transactions to those, which is something that we have sought to engage Chinese counterparts about 

in our concerns so that we can pursue those activities. They can 

pursue then and we can pursue them together. 

When I noted in my opening statement the value of engaging 

China to deal with areas of mutual concern, I noted a few. Another 

one of that list is cooperation on counternarcotics efforts. So that 

is an excellent reason, in my mind, that we should have constructive and clear communication between our two countries, to get at 

this problem, where we clearly have a link between their supply 

and the recipients in our country, unfortunately. 

Senator CORTEZ MASTO. And that is right. Anybody who has ever 

worked just on the Federal law enforcement side knows—you follow the money. You follow the money. That is the key to taking out 

a lot of the illicit activity, whether it is around drug trafficking or 

human trafficking, what we see. And so Treasury plays an important role. 

And for that reason let me talk about it, because as a Nevadan 

I am deeply concerned about the easy access to fentanyl in our 

communities, and that is why I cosponsored the bipartisan FEND 

Off Fentanyl Act, a crackdown in transnational drug trafficking 

networks. 
31 

Assistant Secretary Rosenberg, you said earlier, in response to 

Senator Scott’s question of what more can you do, you talked a little bit about the need to extend the statute of limitations, and in 

the bill it extends it to 8 years, but you are seeking to extend it 

to 10 years. Can you explain why that is important for Treasury? 

Ms. ROSENBERG. Thank you for that question. I would be happy 

to. And just to note, that would extend it in line with similar authorities given to the SEC for pursuit of enforcement activities. 

There are three key reasons why it would be useful to expand 

out to 10 years, the first of which is that—and for anyone who has 

looked carefully at a complex web of this nature, where we are seeing these procurement networks and associated financial activity 

and money laundering activity—they are difficult, complicated to 

investigate. They involve multiple different fronts, beneficial owners in a variety of different jurisdictions, opaque corporate structure. So having the time to be able to put that together, specifically 

including when they go across border, and we are trying to work 

with, for example, our Mexican counterparts on the law enforcement side, unfortunately, it just takes time, a lot of time, to do a 

complex investigation. That is one. 

The second one is having to do with compliance. So having a 

longer statute of limitations here clearly signals to those covered 

institutions, covered entities that have an obligation here and 

watching IEEPA restrictions, that they must comply with, that 

they must comply for a longer period of time. That is to say there 

is a longer period that they need to be looking at. 

And then the last one here, deterrence, related to the same 

thing, which is to say if there is a longer period here that they 

must be aware of when they are thinking about violations, IEEPA 

violations, it will deter them from skating up to the edge or taking 

certain risks if they know that they may be investigated and prosecuted for that 10-year period. 

Senator CORTEZ MASTO. Thank you. And I know my time is almost up, but I am curious, and I will submit this for the record. 

But as we talk about fentanyl and we track it precursors from 

China into Mexico into the United States, to me that is similar to 

the methamphetamine issue we had decades ago, where the precursors were coming from China into Mexico into the United States. 

And so at some point in time I am curious, what have we learned 

or not learned? What tools do we need, and we should have a better understanding of how to track and stop fentanyl if we were 

doing so with methamphetamine decades ago. 

It is a question for a later time for us to have a discussion, but 

I am always curious, what more tools do we need to give you, or 

is it more of just a coordination of Federal agencies and State and 

local agencies with some of our allies and partners? 

But I know my time is up. Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Cortez Masto. 

Senator Daines, of Montana, is recognized. 

Senator DAINES. Chairman, thank you. 

Montana is not exempt from the crisis we are seeing with 

fentanyl, and as well as Senator Cortez Masto said, meth. In the 

last 10 years the United States has seen exponential increases in 

trafficking, interdiction, overdoses related to fentanyl. As we say, 
32 

though, you do not necessarily die of an overdose of fentanyl, you 

die of exposure to fentanyl. Think about a little Sweet’N Low packet. If that were fentanyl it is enough to kill 500 people. 

As you know, the trafficking and the sale of drugs like these are 

made possible through advanced illicit finance schemes such as 

trade-based money laundering or obscured beneficial ownership. 

We talk about the supply chain, China, Mexico, and then into the 

United States. I spent 6 years living in China with Procter & Gamble, launching brands there. We had two kids born in Hong Kong. 

We were there to compete against the Chinese brands. By the way, 

we beat them, handily, these great American, high-quality products 

competing then against Chinese brands. 

But the cost of crimes can not only be measured by Chinese subversion of U.S. interests around the globe but also in terms of 

American lives. While the Office of Terrorism and Financial Intelligence, with the help of the Corporate Transparency Act, have 

done excellent work to curb these behaviors, the simple fact is this: 

there is still a major concern for the U.S., international partners, 

and financial institutions around the world. More needs to be done 

to combat these illicit financial flows that impact everything from 

fentanyl to the acquisition of military end-use technology. 

Assistant Secretary Rosenberg, fentanyl overdose deaths in Montana in the last 2 years are up 1,700 percent. We are a northern 

border State with a southern border crisis. The trafficking of 

fentanyl and its precursors is largely conducted or facilitated by 

Chinese actors. These Chinese networks can operate outside designated local jurisdictions through the establishment of shell companies, which often serve as front for illicit activities. Beneficial 

ownership information is a critical part of uncovering these shell 

companies and combatting drug trafficking. I have concerns about 

the direction the beneficial ownership rulemaking is taking. 

Ms. Rosenberg, how do you envision success when combatting 

drug trafficking, particularly fentanyl trafficking, given the limited 

to access to BOI? 

Ms. ROSENBERG. Thank you very much, Senator. You have raised 

very significant challenges with which I would agree are frustrating for us as we are thinking about how to see into the networks that are involved in both moving the drugs and in laundering the money associated with those drugs, to all parts of the 

United States. 

I do believe that with these kinds of crimes, as with a whole host 

of other criminal financial activity, the ability to see into and understand the ultimate beneficial owner of shell companies in the 

United States will help. It will not be the only thing that will help 

us because when we are dealing with structures where even that 

information is not clear to us, we will still be struggling to put together the pieces. So, unfortunately, I do not think that will be that 

silver bullet for us, but it will be helpful. 

Senator DAINES. To expand on that, most financial institutions 

prefer to self-regulate and avoid sanctions violations and any civil 

penalties associated with conducting businesses with bad actors. 

That is just good business practices. Would you agree that an active relationship with the private sector would be a multiplier for 

identifying and tracing illicit financial flows? 
33 

Ms. ROSENBERG. I do not disagree. I think it is essential. It is 

absolutely essential for understanding. They are the ones that report to us suspicious activity reports, and they help us map together the indicators, the typologies that we can then generalize 

and reflect back publicly so that they can do their jobs even better. 

Senator DAINES. One more question for you, Assistant Secretary 

Rosenberg. As you know, many times the best way to trace the 

source of international crime and terrorism is to follow the financial footprint, whether we are talking about illicit activity in South 

American free trade zones or shell corporations in Macau. How is 

the Corporate Transparency Act and the greater Anti-Money Laundering Act of 2020, failing to provide the necessary tools to attack 

illicit financial flows? 

Ms. ROSENBERG. Senator, I think there are a variety of different 

pieces that we will need in order to understand the risks associated 

with criminal financial activity and address them effectively. So the 

authorities that were required per AMLA, and the CTA, in particular, for beneficial ownership, that will go a long way toward one 

of our greatest vulnerabilities and deficiencies in this system, 

which is the anonymous companies’ problem. 

There are a variety of other challenges we see that we need to 

address. We had the opportunity to speak earlier in this hearing 

about investment advisors or the private wealth industry, where 

there are also vulnerabilities in our approach and in our regulatory 

system. That is another area where we need to devote attention in 

order to be able to get at this broader challenge in front of us. 

Senator DAINES. Thank you, Mr. Chairman. 

Chair BROWN. Thank you, Senator Daines. 

Senator Van Hollen, from Maryland, is recognized. 

Senator VAN HOLLEN. Thank you. Thank you, Mr. Chairman. I 

thank all of you for your testimony and for your service. 

In early January, President Biden signed into law a bill I authored along with former Senator Sass called the Protecting American Intellectual Property Act, and I want to thank the Chairman 

for his help in getting that passed. The idea was pretty straightforward, that garden-variety litigation is often not a sufficient defense when you have got sophisticated foreign actors backed up by 

foreign Governments trying to steal very important U.S. technologies, Exhibit A, of course, being the PRC. 

The President, as I understand it, has not yet designated the implementing agency. I recognize this falls among agencies. Can anybody provide an update today, and I will start with Assistant Secretary Rosenberg, as to the status of the President’s decision? The 

reason I want to emphasis this is the bill requires a report to be 

due by later this month that identifies and designates foreign entities that are engaged in the serial theft of U.S. technology and to 

apply sanctions. So I would welcome any update on where all that 

may stand. 

Ms. ROSENBERG. Thank you, Senator. I, too, understand that this 

legislation has yet to be delegated by the President to a Cabinet 

agency. That said, as you, I am sure, appreciate, IP theft is something that many of our agencies are focused on and interested in 

and where we already have some activity that we would be able to 

advance further when this authority is delegated. 
34 

Senator VAN HOLLEN. No, I appreciate that, and the idea was to 

give U.S. Government a little more firepower in helping U.S. companies that are subject to this kind of serial theft of technology. 

Again, this is not intended to interfere with garden-variety litigation in the courts, but there are, as you know, many examples over 

time where especially Chinese entities backed by the PRC have engaged in theft of U.S. technology. The idea here is to catch that 

early and preempt it. So I appreciate it. The report, as I said, is 

due later in June, so I appreciate you looking into that. 

I do want to take this moment to commend all of you for your 

efforts to identify critical technologies to put on our export control 

list, especially those technologies like advanced semiconductors, the 

equipment to manufacture advanced semiconductors—congratulations on the agreement we reached with the Netherlands and 

Japan when it came to that advanced manufacturing equipment— 

because I think that is essential. Obviously it requires very good 

coordination with our allies and others around the world, and I 

know that has been a theme of this, and I think all of you are very 

well aware of that fact. And I just want to urge you to continue 

to move in that direction. 

I think Secretary Yellen gave an important speech at SAIS. Secretary Raimondo has spoken about this. National Security Advisor 

Jake Sullivan gave remarks at Brookings, the EU president. So I 

think this idea of, as I think I have heard described as small gardens and high walls, in other words, really protects those technologies that are vital to our national security, and not cover a lot 

of things but have very high walls. 

I do want to, in my closing time here, though, ask about the 

issue of outbound CFIUS or outbound investment. You know, I am 

reading the statement here from the G7 which reads, ‘‘We recognize that appropriate measures designed to address risks from outbound investment could be important to complement existing controls of targeted controls on exports and inbound investments, 

which together protect our sensitive technologies from being used 

in ways that threaten international peace and security.’’ So that is 

the G7. 

I understand it is a broad statement, Assistant Secretary Rosenberg, could you just identify what principles we are going to be applying as we decide how to implement outbound investment controls? As you know, there is a lot of discussion and concern. The 

devil is in the details. And so I am interested in your thoughts on 

that, and any other witnesses. 

Ms. ROSENBERG. Thank you, Senator. I would be happy to defer 

to my colleague, Assistant Secretary Rosen, to take that question. 

Mr. ROSEN. Sure. Thank you. Thank you, Senator, for the question and highlighting the G7 statement. In fact, international engagement has been a key component of our efforts. Taking the time 

to get this right has been one of our core principles as well as engaging with our stakeholders and Congress as well. 

We are focused, when it comes to principles, on national security. 

We are focused on a tailored, narrow, administrable, understandable approach that gets at these core equities that would clearly 

and directly impact U.S. national security in a way that is understandable to the community that is going to have to comply with 
35 

them, and in a way that directly enhances and protects our national security. So those are some of the fundamental principles 

that we are focused on. 

Senator VAN HOLLEN. I appreciate that. Thank you. 

Chair BROWN. Senator Cramer, from North Dakota, is recognized. 

Senator CRAMER. Thank you, Mr. Chairman, and thank you to 

all of our witnesses. It will not surprise you, Assistant Secretary 

Rosen, that I want to talk to you about the same topic that you visited with Senator Tester about. Obviously, his emphasis on making 

sure you can enforce was not unimportant. I think I want to give 

you the tools to do that first. But I do hope considering what you 

said to him about food security being a critical supply chain that 

we would prioritize that for sure. But we can get into that at another time. 

Specifically, though, in relation to the legislation that you were 

talking about, the PASS Act that he and I and Senator Rounds and 

others are on, it is another legislation related specifically to the 

food supply chain. Do you believe that the role of the Secretary of 

Agriculture as a standing member would be helpful? 

Because one of the frustrations I saw, from our vantage point 

during that last awful year of nightmare in Grand Forks, North 

Dakota, where Fufeng had purchased 370 acres near Grand Forks, 

some 12 miles from the Grand Forks Air Force Base—and you also 

mentioned sensitive facilities in your opening statement as one of 

the criteria—that we were very frustrated that after CFIUS took 

the first 60-plus and another 15 or so days to conclude that they 

did not have jurisdiction, it was very frustrating to watch that play 

out. 

Would it have helped to expand CFIUS with the Secretary of Agriculture as a standing member so that food supply chain is, in 

fact, a higher priority? 

Mr. ROSEN. Thank you, Senator, for the question, for our continued dialogue on what is a very important issue. And I will repeat 

what I said to Senator Tester. Food security, particularly in the 

supply chain, is a critical national security issue. 

As you know, I cannot talk about any particular case or comment 

on any particular case. That said, I want to address your comment 

a bit more generally about USDA if I may. 

Senator CRAMER. Thank you. 

Mr. ROSEN. So USDA is a critical ally and partner in CFIUS, and 

given the importance around these food security issues that we 

have talked about, we have set up a process where USDA has full 

visibility into the case filings, they have visibility into the materials, they are regularly involved in our regular CFIUS meetings, 

and they have an opportunity to not just participate but lead, just 

like a permanent member would, cases that present specific food 

security or agricultural issues. And when they do that they are 

participating, by and large, just like a full member. 

So the process that we have set up ensures, from my perspective, 

that we do not leave any food security or agricultural issues as 

they relate to national security unresolved. And so that is how we 

are working with them presently. 
36 

Senator CRAMER. And I appreciate that, and I appreciate the obvious secrecy with specific case. But if the Secretary and the Department can have access, in the meantime if we could pass legislation that would codify that, I think that would probably strengthen 

your hand a little bit. 

Just sort of building on that, and you used the term, again, ‘‘sensitive facilities,’’ and I am quite certain I am not saying anything 

that is classified. But as you know it was quite public last month 

in the Administration the Department of Defense added eight military bases to receive broader jurisdiction, provide broader jurisdiction for CFIUS, given the sensitivity of the bases. 

I suspect this is basically a call by the Department of Defense, 

but would you have suggestions on whether we should just more 

broadly add all military bases to this jurisdiction? Because it seems 

to me that if we start designating certain bases as more sensitive 

than other bases we might, in essence, be signaling to the enemy 

where are priorities are. I mean, would it not make sense to just 

apply that more broadly to all of our military and defense installations? 

Mr. ROSEN. Senator, thank you for that question and for your 

support in that expansion. At my insistence and working with the 

DoD we did start the regulatory process for adding those eight 

bases. We added 300,000 square miles of additional real estate coverage. The way that Congress set up our authorizing statute, and 

FIRRMA, was very intentional not to blanket the United States 

real estate jurisdiction. And we give great deference to our partners 

at the Department of Defense and elsewhere to designate for us 

what is sort of a proximity risk. 

But these are certainly important questions. They are hard questions that I am happy to continue working with you on. 

Senator CRAMER. I am going to just wrap up with this question, 

and you can either answer it or not. But when it comes to land 

itself, whether it is agricultural or otherwise, it is not like we are 

going to grow more. I do not think we are going to take over Alberta or anything. But it just seems like it is such a precious commodity that maybe we should just consider more blanketed restrictions. But just my thought, my comment. I am not even overly committed to it. It is just something to think about. Thank you and 

thank you for your help. 

Chair BROWN. Thank you, Senator Cramer. 

Senator Smith, of Minnesota, is recognized. 

Senator SMITH. Thank you, Chair Brown, and thanks to all of 

our panelists. I am going to ask a question first of Senator Rosenberg. This is around illicit finance risks with crypto. I know several 

of my colleagues have touched on this a little bit before. 

China banned cryptocurrency trading about 2 years ago, but it 

appears that some of these restrictions are not really working. 

Bank filings of the failed crypto exchange FTX show that 8 percent 

of its 9 million users were from China. And there have also been 

reports alleging how employees of the exchange Binance and 

trained volunteers were teaching Chinese users how to evade the 

ban, including by passing its own know-your-customer and residency verification systems. 
37 

So Assistant Secretary Rosenberg, to what extent do you think 

that these bad actors in China are exploiting these weaknesses to 

engage in money laundering or other illicit activities, and how are 

we able to monitor or understand that risk? 

Ms. ROSENBERG. Thank you, Senator, for the question. I appreciate that point that you have made. We are also quite concerned 

about jurisdictions, not just China but other ones where even if 

there is ostensibly a policy that bans certain kinds of activity for 

their nationals they are, nevertheless, still involved in such activity. As I noted, there are other jurisdictions where this is a problem. 

For us in the United States, one of our greatest vulnerabilities 

with respect to virtual assets is when other jurisdictions insufficiently put in place requirements, laws, rules, regulations, disclosure, and insufficiently enforce them. Because where that creates 

an opportunity for a lot of activity in the dark or outside of awareness from their regulators, including specifically where countries 

say it shall not be allowed, but nevertheless it is clearly happening, 

because that does not give them an opportunity to work with us on 

enforcing against activity that may cross borders and violate our 

laws. 

Senator SMITH. And do you have thoughts—what are your 

thoughts about how regulators or Congress can address this apparent ease with which crypto users can work around these trading restrictions, and what should we be doing more of or differently? 

Ms. ROSENBERG. To the point that I was just making where that 

greatest vulnerability of ours is when other jurisdictions have inadequate rules and enforce against them, I think that the American 

people would be very well served if we, together, with one voice, 

made it quite clear to other jurisdictions that have inadequate regulatory structures and did not adequately enforce, that they must 

step up to the plate because their weakness leaves us all vulnerable. 

Senator SMITH. Thank you. Let me turn to Ms. Kendler. Assistant Secretary Kendler, we are aware of how the People’s Republic 

China military-civil fusion strategy creates unique obstacles when 

we are trying to restrict export of technologies that have dual use. 

You know, it is hard to identify what those technologies and users 

are and uses are. So robust enforcement of these export controls is 

important for our national security, but it is complicated. 

So could you talk a bit about what trends you are seeing and attempts to evade dual-use technology export controls, how should we 

be partnering and working with agencies to mitigate that risk for 

dual-use technologies that might be diverted to China’s military capacities. 

Ms. KENDLER. Thank you, Senator. We share your concerns 

about PRC procurement strategies that are directed at its military 

modernization and human rights abuses. From the licensing perspective—and I will defer to my colleague, Assistant Secretary 

Axelrod when it comes to the enforcement and evasion issues— 

from a licensing perspective, we have pursued two pillars. One is 

based on technology identification, restricting cutting-edge technologies in a calibrated way for the PRC, and then also looking at 

entities that are of specific military modernization concern, na-
38 

tional security and foreign policy concern. And that is the basis for 

our structure. 

Senator SMITH. That is great. Thank you. And Mr. Axelrod, 

please. 

Mr. AXELROD. Yeah, thank you, Senator. There is no higher priority for us than combatting that threat. It is one of the reasons 

why we stood up the Disruptive Technology Strike Force, which I 

co-lead along with my counterpart at the Department of Justice. It 

is 14 operational cells around the country focused on preventing 

sensitive technology from going to places of concern, including 

China. We rolled out the first five actions of that strike force just 

a couple of weeks ago, and three were related to the PRC. 

Senator SMITH. That is great. Thank you, Mr. Chair. 

Chair BROWN. Thank you, Senator Smith. 

Senator Lummis, from Wyoming, is recognized, and Senator 

Smith will chair the Committee for the remainder 15 or 20 minutes. Senator Lummis. 

Senator LUMMIS. Thank you, Mr. Chairman. 

Ms. Rosenberg, I think it is very important that we ensure digital assets are not being used for illicit finance, so the LummisGillibrand Financial Innovation Act will be reintroduced soon, and 

it will include an entirely new title on combatting illicit finance. 

My first question is, do you agree that digital assets today are 

subject to the U.S. comprehensive laws on money laundering and 

sanctions? 

Ms. ROSENBERG. Thank you, Senator, for this question, and I appreciate the legislative focus. We would be happy to work with you 

going forward. It is certainly true that financial institutions that 

offer services in the digital asset are covered by AML/CFT obligations. 

Senator LUMMIS. Thank you. My next question, also for you, is 

from a practical standpoint in combatting money laundering and 

sanctions evasions in digital assets, would you rather have new 

legal authorities or new personnel and funding to equip Treasury 

to fight bad actors in the digital asset space? 

Ms. ROSENBERG. Thank you, Senator. I am very grateful for that 

kind of a question. With respect to the first part of it on legal authorities, I would really welcome opportunity to work with you. It 

would depend on what they are, and I would welcome an opportunity to work with you on what they are. 

When it comes to additional bodies and additional resources to 

get after this problem, that I think you and others on this Committee, certainly in our agency, acknowledge is a challenge and a 

problem, we can do more with more, and would welcome the opportunity to get after this problem with more resources. 

Senator LUMMIS. Well, I will make sure that when Senator Gillibrand and I are working our bill through the system that we stay 

in touch with you. 

Ms. Kendler, I want to turn to you. The Bureau of Industry and 

Security monitors the export of advance technologies, so they do 

not end up in the wrong hands. But you do not currently regulate 

the export of Americans’ personal data to our adversaries like 

China. As a result, there are no rules outlawing the sale of data 
39 

on sensitive topics, including information on military and intelligence personnel to the Chinese Government. 

Do you agree that personal data on Americans, particularly our 

service men and women, can be exploited by foreign adversaries in 

ways that are harmful to national security? 

Ms. KENDLER. Senator, I do share your overall concerns about 

this issue. The approach of export controls has been on goods, software, and technology, not on personally identifiable information. 

But I do share your concerns, yes. 

Senator LUMMIS. Well, thanks for that answer. I, too, am concerned about the national security threat posed by the export of 

Americans’ personal data. So I am co-leading with Ron Wyden an 

important bipartisan bill, the Protecting Americans’ Data from Foreign Surveillance Act, and I am joining Senators Wyden, Hagerty, 

and Rubio. So this is very bipartisan and includes other Members 

of this Committee. And I look forward to working with all my colleagues, on this Committee and off, on strengthening U.S. competitiveness against China in digital assets, distributed ledger technologies, which are beginning to really blossom in terms of the capabilities of using distributed ledger technology and data exports. 

It is a growing area of interest, it is a growing area of concern, and 

it certain is a growing technology that we all need to be aware of. 

So thank you very much. 

Mr. Chairman, I yield back. 

Senator SMITH [presiding]. Senator Warnock. 

Senator WARNOCK. Thank you so very much, Madam Chair. 

In 1919, President Woodrow Wilson described sanctions as an act 

that does not require force and would not, quote, he said, ‘‘cost a 

life, outside of a Nation boycotted.’’ More than 100 years later, we 

know that the truth is more complicated than that. We know that 

this tool, although peaceful, and that it does not rely on the use 

of guns or bombs, still has severe consequences and can have a 

devastating effect on societies. 

In our globalized and connected world, sanctions on one Nation 

usually affect others. Sanctions on a global economy like China, for 

example, would likely affect folks all around the world, and we 

know that these effects can last for generations. 

Ms. Rosenberg, how do you measure the effectiveness of sanctions in targeting decisionmakers and the ruling groups of Nations? 

Ms. ROSENBERG. Thank you, Senator, for that question. In measuring effectiveness, I think it is utterly essential to define the objectives against which you are measuring those particular sanctions. For example, with respect to our Russia sanctions we have 

sought to do two things, in particular, to deprive Russia of the 

money and financial funds and also of the battlefield equipment 

that it needs in order to fight its war. That is different than saying 

a goal would be to collapse an entire economy. We are quite focused. And so when evaluating the efficacy of these sanctions you 

must measure it against what your goals are in the first instance. 

Now, one of the reasons why it is useful to have partnership with 

Members of Congress and the Administration is so that we can discuss together the goals of various sanctions authorities so that we 

can be aligned and working with common purpose, and then evaluating their efficacy against the objectives we have set out together. 
40 

Senator WARNOCK. So a kind of laser focus on the goal so as not 

to create consequences that cascade beyond what you are trying to 

do. At the same time, even with that kind of focus, with the world 

being so connected, there is the concern that this affects poor and 

working-class folks in other countries, particularly with a global 

economy like China. How do you take all of that into account as 

you think about this? 

Ms. ROSENBERG. Just those concerns you mentioned but other 

ones, too, that we must all be concerned with, like competitiveness 

of American businesses and institutions and our ability to innovate 

and promote growth in our country, and, of course, those of our allies. These are exactly the right questions, and I think as sanctions 

policymakers we must constantly be asking ourselves every time 

we implement a new sanction, will this have the desired purpose, 

will it have unintended consequences, and seek to mitigate those 

unintended consequences at every step, before, during, if it occurs 

afterwards, to try and address them. We do that often using licensing or updating the authority. 

Senator WARNOCK. OK. Ms. Kendler, can you speak to how you 

think about this or considerations that you take into account? 

Ms. KENDLER. Yes, Senator, I agree with your focus on these 

issues and share your concerns. When we impose export controls 

we do so in a very calibrated and targeted way. For example, the 

advanced computing rule we put in place last October was focused 

on the most cutting edge of technologies, so as not to disrupt legacy 

technologies that have limited national security purpose. Our focus 

was on the cutting-edge technologies that would most effect national security, because of their use in artificial intelligence and 

supercomputing. 

Senator WARNOCK. Thank you so much. We have to carefully 

consider innocent families and children and those without power 

when we use these tools, very, very powerful tools. 

The Commerce Department recently announced a collaboration 

with the FBI and the Department of Justice, Disruptive Technology 

Strike Force to target illicit acquisition of technology and assets by 

foreign adversaries like the Chinese Government. This seems to follow in the footsteps of the Department of Justice’s, quote, ‘‘China 

Initiative’’ in 2018, to address potential economic espionage. DOJ 

ended that initiative, as you know, in 2021, following criticism from 

civil rights groups that it targeted scientists of Chinese descent and 

produced several prosecutions that actually ended in dismissals or 

acquisitions. 

As DOJ officials acknowledged, the Department heard from 

members of the scientific community that targeting scientists over 

sometimes minor research grant infractions could, quote, ‘‘lead to 

a chilling atmosphere for scientists and scholars that damages scientific enterprise in our country.’’ 

I have been hearing from a lot of folks in my State on this, Georgians of Chinese descent, including scientific researchers at some 

of our universities, about the climate of fear around any engagement with China, even lawful interaction. Mr. Axelrod, as Commerce begins this new initiative to target espionage by the Chinese 

Government, which is a serious threat, which we have to engage, 
41 

what steps have you taken to address civil rights concerns and any 

actual or perceived targeting of scientists of Chinese descent? 

Mr. AXELROD. Thank you for the question, Senator, because you 

have hit on a two critically important things. One is to take action 

against the threat from the PRC, which is why we have established 

the Disruptive Technology Strike Force with the Department of 

Justice. And then a second is to make sure that Chinese Americans 

or people of Chinese descent who are here studying or working in 

the United States are not targeted and do not feel targeted. 

And I believe one thing we have done in that regard, separate 

from the strike force, which is really more focused on things happening in PRC, is our establishment of an Academic Outreach Initiative. Because in academic community, in particular, it is essential that we both safeguard sensitive research but also, at the same 

time, maintain that open, collaborative environment so that we 

have people from foreign countries coming here to help contribute 

to the research and development that is sort of the hallmark of our 

academic setting. 

So we identified 20 universities, in particular, that we thought 

were maybe at higher risk from foreign countries, and we are working with them and partnering with them, with on really a shared 

endeavor, which is to protect their research community and protect 

their research from forces abroad that would seek to obtain it. 

Senator WARNOCK. I have much here, but thank you, Madam 

Chair. 

Senator SMITH. Thank you, Senator Warnock. 

Senator Fetterman. 

Senator FETTERMAN. Thank you, Madam Chair. 

United States businesses have made large investments in hightech companies tied to the CCP. Is that a fair statement? 

Mr. ROSEN. There has been U.S. investment in PRC businesses, 

yes, Senator. 

Senator FETTERMAN. And we need more increased scrutiny on 

these types of investments to protect our supply chains and our national security interests. My friend and my colleague, Senator Bob 

Casey, has spoken on that issue a lot. Are you familiar with any 

of that? Because the officials in the Biden administration have outspoken about potential Executive order to outbound investment 

screening. 

Mr. Rosen, can you speak about how transparent the U.S. companies’ investments in CCP companies can promote a U.S. national 

security and de-risk our economic relationship with China? 

Mr. ROSEN. Yes, Senator Fetterman. Thank you for raising that 

important issue and understand the question. It is certainly the 

Administration’s goal to get at U.S. investment dollars that are 

coupled with particular expertise and know-how to make certain 

development and advancement of certain specific cutting-edge technologies, for instance, in artificial intelligence and semiconductors 

and quantum computing, to help advance the development of those 

in ways that could negatively impact U.S. national security. It is 

something that the Administration has been working on for some 

time because we want to get it right and we want to be careful. 

And we have also been engaged with the Senate and the leadership 
42 

of that legislation, as you have identified, because we want to work 

with Congress as we move forward. 

Senator FETTERMAN. Well, clearing on that, sir, what resources 

does the Administration need on this front? Could you share any 

updates on the timeline on the release of the Executive order on 

this? 

Mr. ROSEN. Thank you, Senator. Well, what I can say is as we 

work to develop it, I am happy to keep you and the rest of this 

body updated in terms of the resources that we would need to be 

effective, and we appreciate the support that has already been expressed by the Senate and by Members for our efforts in that regard. 

With regard to timelines, what I can say is that we are working 

quickly but diligently, and we are working with not just stakeholders in the United States Government but also external stakeholders in private industry, in Congress, our allies, because we 

want to ensure that if and when we do something in this area that 

it is targeted and tailored but also takes into account any potential 

unintended consequences. And so, obviously, the ultimate decision 

is up to the President, but we are working hard on that. 

Senator FETTERMAN. Thank you. And I cede the balance to the 

Chairwoman. 

Senator SMITH. Thank you so much, Senator Fetterman. 

Well, thank you to our witnesses for being here today and for 

providing testimony. 

For Senators who wish to submit questions for the record, those 

questions will be due 1 week from today, on June 7th. To the witnesses, you have 45 days to respond to any questions. 

Thank you again, and with that this hearing is adjourned. 

[Whereupon, at 12:15 p.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 
43 

PREPARED STATEMENT OF CHAIR SHERROD BROWN 

For far too long, our policy around China catered to multinational corporations, 

and failed working families. It devastated local communities and it eroded our manufacturing base and national competitiveness. 

This shouldn’t be news to anyone. It’s why 23 years ago, Lindsey Graham and 

I opposed permanent normal trade relations with China. 

We knew that corporations would shut down production in Ohio and South Carolina and across the country, and move production to China in search of lower and 

lower wages. 

That’s exactly what happened. 

Since NAFTA’s enactment in 1994 and China’s entry into the WTO, Ohio has lost 

over 276,000 manufacturing jobs. 

That’s over a quarter-of-a-million Ohioans who once had a good paying job—often 

with the top-notch benefits that comes with a union card—suddenly finding themselves out of a job. It often takes a decade or more for families and communities 

to recover from that kind of loss. 

It devastated industrial communities in Ohio and around the country. 

And it helped build up the Chinese military. 

Today, after years of misguided China policy, we are finally starting to do something about it. 

We passed landmark legislation that rebuilds our infrastructure and invests in 

critical technologies—like semiconductors and advanced energy—that will build 

more secure supply chains. 

And Ohio will be at the center of that kind of investment. Finally, we have buried 

the term ‘‘rust belt.’’ Now, we’re making more in America. 

We need to safeguard critical technologies from the PRC’s military and security 

apparatus, using national security measures. It’s why we’re holding this hearing. 

For years, this Committee has worked on a bipartisan basis to establish legal authorities to protect our national security from risks posed by the Chinese Communist Party. 

Five years ago, I worked with then-Chairman Mike Crapo to pass the Export Control Reform Act and the Foreign Investment Risk Review and Modernization Act. 

We strengthened our export control system and inbound investment screening authorities. 

Just last month we did it again. Ranking Member Scott and I worked with a majority of this Committee to introduce the FEND Off Fentanyl Act. We have nearly 

all of the Committee Members, and almost half the Senate, as cosponsors. 

In 2021, fentanyl was involved in 80 percent of Ohio’s unintentional drug overdose 

deaths. I hear over and over from Ohioans that we need new, more powerful tools 

to prevent the flow of fentanyl into our communities. 

Our bill declares that international Fentanyl trafficking is a national emergency— 

an emergency that is destroying lives and families across America and that poses 

an extraordinary threat to the national security, foreign policy, and economy of the 

United States. 

Therefore, the bill uses our economic arsenal to target every step of the foreign 

supply chain—from Chinese chemical suppliers, to Mexican cartels, to money 

launderers profiting off the illicit drug trade. 

National security threats evolve—whether from regimes in Tehran, Pyongyang, 

Moscow, Beijing, or non-State actors or human rights abuses, IP theft, or illicit 

fentanyl trade. We must ensure that our tools evolve along with them. 

To that end, I look forward to hearing perspectives from the witnesses on a range 

of bipartisan legislative proposals and ideas. For example: 

Senators Casey and Cornyn are working on legislation that would address a gap 

in our existing national security authorities—risks posed by certain outbound U.S. 

investments. 

Senators Tester and Rounds have legislation to address concerns related to Chinese ownership of U.S. farmland and agricultural businesses. 

Senators Wyden and Lummis have a proposal that would impose export controls 

on personal data. 

And Senators Warner and Thune have legislation to address concerns related to 

information and communications technology transactions. 

The Committee will examine a range of other proposals to address challenges 

posed by China—related to Taiwan, technology development, digital assets, export 

controls, and other issues. 

We all agree that China is a real and growing threat. Our Committee must play 

a leadership role in countering that threat. Today’s hearing is another important 

step, as we work together to safeguard our national security. 
44 

PREPARED STATEMENT OF SENATOR TIM SCOTT 

Every day, there’s news story after news story about our foreign adversaries 

searching for a foothold to expand their global reach. Whether it’s China brokering 

so-called ‘‘peace deals’’ to Russia’s continued invasion of Ukraine, or Chinese precursors sent to Mexico to fuel cartels’ deadly fentanyl trade—America needs to have 

strong leadership. 

Today, we’ll be hearing from Biden administration witnesses from Treasury and 

Commerce, to better understand their thinking and frankly, learn why the White 

House is choosing to follow instead of leading. 

Advancing U.S. national security, economic security, and foreign policy are all 

vital to our domestic security here at home. As I’ve said before, you can’t secure 

your house with the doors wide open. 

In our ever-connected and ever-evolving world, the United States and our vibrant 

economy are continuously impacted by other countries. We spend a great deal of our 

time on this Committee discussing our Government’s response to our own economic 

issues, but it is vital to consider the decisions being made oceans away by Governments and countries with very different ideals and values than those we hold near 

and dear here at home in America. 

China is at the top of that list. For years, China has grown in force and strength, 

persistently engaging in coercive economic policies to further its interests and undermine those of the United States and our allies. 

To try and gain a leg up on America and our allies, China has resorted to intellectual property theft, unfair trade practices, and other harmful actions that ultimately 

challenge free markets and U.S. innovation. And innovation is the crown jewel of 

America’s success. It’s about the birth of ideas and the fertile ground for them to 

grow and to prosper. 

As the internet creates a web of connectivity worldwide, protecting American data 

from would-be bad actors—like China—becomes even more important. That’s why 

I recently introduced the Know Your App Act to increase transparency and protect 

Americans by requiring app stores to label apps controlled by foreign adversaries. 

It’s about empowering our parents with information to make informed decisions. 

Further, China exploited America’s openness to do business on the global stage. 

But we cut our own selves off, with rules and regulations, dictating everything from 

climate requirements to burdensome building regulations taken to an extreme— 

making it more and more difficult to build here at home and perversely encouraging 

companies to search for more open environments around the globe. 

There should never be a world—there should never be a world—where a company 

finds China easier to do business with, a better business environment. Our country 

was built on freedom, hard work, and innovation. We should encourage policies that 

foster these ideals in the marketplace—and that means lessening burdensome regulations. 

Furthermore, American companies should not be on an uneven playing field simply because they must abide by progressive regulations far stricter than the ones 

in China. We must work simultaneously to provide businesses with room for growth 

and opportunity here at home while also robustly responding to China’s unfair practices globally. 

The United States possesses tools to curb China’s economic aggression, including 

sanctions, export controls, and investment screening, but we must use these tools 

strategically and effectively. Policymakers must think beyond the Washington bubble and ensure that when the Government uses its economic security tools, it evaluates the economic impact on communities and small businesses across our country. 

From securing our farmland to protecting our U.S. technological innovators—this 

is the lifeblood of our economy and our communities. I know that firsthand from 

my home State of South Carolina, where advanced manufacturing is our engine, we 

have some of the largest global brands making their home in South Carolina, the 

foreign direct investment in my State is tremendous, from BMW to Volvo, an important component of the success that we offer the Nation from South Carolina. After 

all, efforts to advance national security will never succeed if the Government undermines the economic security, and economic opportunities, of everyday Americans. 

Regrettably, under President Biden, America’s economic strength has waned, and 

the Administration has led this country down a path of reckless spending that has 

led to a 40-year high of inflation—which every single American knows all too well. 

The more this Administration spends on progressive policies, the more their attention is diverted from issues that our communities actually need the Federal Government to focus on—like preventing the deadly fentanyl deaths that Chairman Brown 

alluded to. 
45 

The Chinese Communist Party is facilitating the flow of the deadly fentanyl into 

our Nation through the Mexican cartels, leading to 70,000 American deaths. 

Fentanyl is the leading cause of death for young Americans—the leading cause of 

death. Americans who will never marry, have children, grow old, or make an investment into our economy simply because they took fentanyl. That’s why I, along with 

Chairman Brown, introduced the FEND Off Fentanyl Act, which will target the illicit fentanyl supply chain, using sanctions to choke off the income of cartels and 

the Chinese laboratories that make precursors of this deadly drug. We must hit 

them, of course, where it hurts the most, which means in their wallets. 

We must boost economic growth and competitiveness through a renewed commitment to free enterprise, free trade, rule of law, and international U.S. leadership. 

And we must maintain our technological edge, promote capital formation, and ensure supply chain resilience. 

Let me close with this. Concerns about China’s rising strength and aggression are 

certainly understandable. However, America can always outcompete China. Our economic system and our values have lifted countless people out of poverty by providing economic freedom for everyday people to work hard, apply their talents, and 

pursue their dreams. There’s no better system in the world today. 

It’s time we renew our commitment to the principles that made us the greatest 

Nation on God’s green earth. 

PREPARED STATEMENT OF ELIZABETH ROSENBERG 

DEPARTMENT OF THE TREASURY

MAY 31, 2023 

Chairman Brown, Ranking Member Scott, and distinguished Members of the 

Committee: 

Thank you for the opportunity to testify today on ‘‘Countering China: Advancing 

U.S. National Security, Economic Security, and Foreign Policy’’. I also want to thank 

the Committee for its work on addressing our relationship with the People’s Republic of China (PRC). Your partnership is critical to clearly convey to the leaders of 

the PRC that the United States speaks with one voice in advocating for our national 

interests and protecting our national security. 

The United States and the PRC are the two largest economies in the world. For 

decades, the PRC’s economy grew as it implemented market reforms and opened 

itself up to the global economy. And despite the current tension in our relationship, 

cooperation between our two countries is absolutely critical in addressing important 

global challenges like the climate and managing international debt distress. As Secretary Yellen has recently noted, the United States does not seek conflict, but rather 

a constructive and fair economic relationship with China, one where we can work 

together, when possible, for the benefit of our countries and the world. 

That is why we seek expanded engagement with the PRC to work through the 

difficult issues that we face. While no two countries’ interests will ever perfectly 

align, responsible Nations must ensure that those differences do not threaten each 

other’s safety and security. 

Our economic approach to China is guided by three objectives: securing the national security interests of the United States and our allies and partners and promoting respect for human rights; seeking an economic relationship with China that 

fosters growth and innovation in both countries through healthy competition; and 

cooperating on the urgent global challenges of our day. 

As a steward of the U.S. economic and financial system, the Department of the 

Treasury plays a vital role in protecting U.S. national security. For most of the post9/11 era, Treasury’s targeted national security work involved cutting terrorists and 

WMD proliferators off from the U.S. and international financial system. But now, 

in addition to addressing these threats, Treasury plays a key role in conducting 

broader economic statecraft to advance a host of our national interests. 

As I have responsibility for coordinating Treasury policies to address, expose, and 

target national security threats, I will address security challenges related to the 

PRC, and the tools at Treasury’s disposal to address them. 

Security Challenges Related to the PRC 

As an overarching principle, we deploy economic tools in line with the principles 

that Secretary Yellen has laid out: narrowly scoped and targeted to clear objectives; 

easily understood and enforceable, and readily adaptable when circumstances 

change; and whenever possible, coordinated with our allies and partners. 
46 

The first of our national security concerns related to the PRC is its challenge to 

global norms, norms that have maintained peace and had a part in enabling the 

PRC’s economic growth. 

Just recently at the G7 Hiroshima Summit, leaders discussed economic coercion. 

As the G7 leaders recognized, economic coercion ‘‘not only undermines the functioning of and trust in the multilateral trading system, but also infringes upon the 

international order centered on respect for sovereignty and the rule of law, and ultimately undermines global security and stability.’’ Specifically, we have seen instances when the PRC has not only targeted U.S. persons, but also those located 

in our allies and partners like Australia, Canada, South Korea, the Philippines, and 

Lithuania. Another way we have observed China exploit economic vulnerabilities 

and dependencies is through enabling corruption. Take, for example, Wan Kuok Koi, 

a PRC national and former member of the Communist Party of China’s Chinese 

People’s Political Consultative Conference. Wan, also known as Broken Tooth, and 

his organization, the World Hongmen History and Culture Association, were designated by Treasury in December 2020 for corrupt practices, specifically the use of 

economic and business influence to co-opt elite figures in Malaysia and Cambodia. 

It should come as no surprise to Beijing that the economic, finance, and trade teams 

among the G7 are actively thinking through ways to build resiliency and support 

one another as well as other Nations. 

We also see efforts by PRC-related actors to conduct economic espionage against 

sensitive sectors of the economy. A recent example is the 2022 criminal prosecution 

by the Department of Justice and sentencing of Yanjun Xu, a PRC intelligence officer ultimately convicted of attempting to steal technology and proprietary information from aerospace companies based in the United States and abroad. This opacity 

in the PRC military-industrial complex and its military-civil fusion strategy is a national security concern of the United States and one of the reasons why many PRC 

aerospace companies are currently subject to economic restrictions, including from 

the U.S. Treasury. 

We are also concerned about PRC-based transnational crime, including professional money laundering, cybercriminal networks, and drug trafficking. Last year, 

Treasury submitted to Congress our assessment on money laundering threats emanating from the PRC, which highlighted many of these criminal activities. We continue to pay close attention to this type of criminal activity, and on April 23, Treasury identified and sanctioned Wuhan Shuokang Biological Technology Company and 

its leadership for the sale of fentanyl precursor chemicals. This action complemented 

indictments from the Department of Justice last month that connected these PRC 

companies to drug cartels in Mexico. These actions not only are against the letter 

of U.S. law and contrary to our national security interests—they also have had a 

devastating effect on our communities. 

Nor can we overlook PRC’s human rights abuses. Treasury has acted to promote 

accountability for the ongoing abuses in Xinjiang, Tibet, and Hong Kong. In addition, we have acted to promote accountability for PRC-based entities connected to 

serious human rights abuses, such as the Treasury designations of Dalian Ocean 

Fishing, Pingtan Marine Enterprise, and their affiliates. Over the years, vessels affiliated with Pingtan violated multiple countries’ laws across the Pacific Ocean, including in Ecuador and Indonesia. Dalian Ocean withheld food and pay from their 

crew, refusing to let some of them disembark for over a year. On one vessel where 

crew were abused, five crewmembers died. 

Another growing concern we have is the PRC’s role in geopolitical conflict around 

the world. While the PRC seemed initially apprehensive about its economic relationship with Russia after Russia’s full-scale invasion of Ukraine, we have seen bilateral 

China-Russia trade tick up, including certain transactions that the United States 

has now identified as circumventing U.S. sanctions and export control laws. Take 

King-Pai Technology Hong Kong, for example. This PRC-based supplier, now subject 

to blocking sanctions as well as export restrictions on the Commerce Department’s 

Entity List, supplied the Russian military-industrial complex with components used 

in cruise missile guidance systems. Another example is designated PRC-based firm 

Spacety (Changsha Tianyi Space Science and Technology Research Institute Co. 

LTD), which sold radar satellite imagery that enabled the transnational criminal organization Wagner Group to enhance its combat operations in Ukraine on behalf of 

Russia. In coordination with our interagency partners, we will continue to expose 

and disrupt PRC entities that provide support for the Russian war effort. 

The PRC has also been troublingly consistent in its support for North Korea, 

which allows Pyongyang to conduct numerous weapons tests contrary to international law. In the meantime, North Korea has relentlessly worked to maintain 

and improve its weapons systems, including an ICBM capable of striking the continental United States, and multiple missiles it has flown over inhabited Japanese 
47 

territory. These increasing capabilities, combined with the hostile rhetoric coming 

from North Korea, are direct threats to the national security of the United States 

and its partners and require a U.S. response; and we believe the PRC can and 

should play a more constructive role in stabilizing the region. 

Finally, we are closely watching the PRC’s own rapid militarization of international spaces. This militarization takes many forms. Earlier this year in the 

South China Sea, for example, the PRC Coast Guard directed a military-grade laser 

at Philippine Coast Guard personnel and just last month, the PRC Coast Guard also 

aggressively maneuvered near Philippine patrol boat lawfully operating within the 

Philippines’ Exclusive Economic Zone (EEZ), nearly causing a collision. As Department of Defense officials at multiple levels have attested, the PRC has also increased activity along its border with India, and routinely engages in risky operational behavior in international airspace over the East and South China Seas. 

Each time the PRC conducts risky military activities, there is a chance for a mistake or miscalculation, which again goes directly against our national security interests in preserving freedoms of navigation and overflight and keeping our allies and 

partners secure. This is why the People’s Liberation Army is already subject to 

many financial and economic restrictions—we do not want funds and goods to go 

to the PLA to enable this type of destabilizing behavior. 

Treasury’s National Security Tools 

I want to turn now to our tools at Treasury, and how we deploy them in service 

of our national security concerns. 

First, Treasury publicly exposes threatening activity. This can, for example, take 

the form of targeted financial sanctions, when we designate individuals and entities 

undermining U.S. national security. By publicly outing these individuals and entities through a designation, financial institutions and other organizations are able 

to build a fuller picture of the illicit activity and take action to distance themselves 

from the threats. 

The second way we act to protect U.S. national security interests is through targeted disruption and interdiction efforts. Treasury regularly engages the private sector directly, providing information to help financial institutions, money service businesses, and other actors in the economic and finance space to identify and disrupt 

violations of our sanctions laws and regulations. Treasury also engages partners and 

allies who share similar concerns and are willing to take joint actions and enforcement. 

A third way we protect our national security interest is by raising international 

financial standards and building partner consensus. Leadership in the Financial Action Task Force, the international standard-setting body for anti-money laundering 

and countering the financing of terrorism, is a major way we accomplish this. For 

example, my team helps lead the international virtual assets contact group, working 

to define the rules of the road for international financial systems in regulation of 

digital assets and countering their use in money laundering. By leveraging this 

international forum and building consensus around model laws and best practices, 

we increase the costs for actors to reject these norms. 

To conclude, the United States can effectively manage our relationship with China 

by clearly conveying our interests and intentions, and by talking to each other about 

real examples, as I have done today. Indeed, the health of the global economy rests 

on how we, both the United States and the People’s Republic of China, can manage 

our relationship and address pressing shared challenges. And while it is my job to 

address our national security interests through financial measures, I share Secretary Yellen’s view: the world is big enough for the both of us. Our path is not preordained nor are we destined for open conflict, so long as we both choose to communicate clearly and act responsibly. 

PREPARED STATEMENT OF PAUL M. ROSEN 

DEPARTMENT OF THE TREASURY

MAY 31, 2023 

Good morning, Chairman Brown, Ranking Member Scott, and Members of the 

Committee. Thank you for the opportunity to speak with you today about this important national security issue. 

At the Department of the Treasury, we understand the significant challenge 

China poses to the economic and national security interest of the United States. I 

manage the Government’s review of foreign investment into the United States for 

national security risks through the Committee on Foreign Investment in the United 

States (CFIUS). In this work we are focused on stopping the access and exploitation 
48 

of sensitive technologies, infrastructure, data and other assets by those who have 

the intent and capability to harm our national security. 

Recently, Secretary Yellen addressed the U.S.-China economic relationship. In her 

remarks, she conveyed that China and the United States can and need to find a 

way to live together and share in global prosperity. She also stressed the importance 

of our countries working together, when possible, for the benefit of us and the world. 

At the same time, Secretary Yellen was crystal clear when it comes to national 

security: The United States will secure our national security interests and those of 

our allies and partners. We remain firm in our conviction to defend our values. We 

will not hesitate to defend our vital interests. And we will not compromise on national security concerns—even when they force trade-offs with our economic interests. She also made clear: we do not use our national security tools to gain competitive economic advantage or to stop China from growing. But we will fully and zealously exercise our economic tools to protect the national security of the United 

States, full stop. 

CFIUS is one important tool to address national security that pursues these objectives. The Committee-comprised of the heads of several Executive branch agencies 

and which I help lead in support of the Secretary of the Treasury’s role as Chair— 

carefully reviews foreign investments in the United States for national security 

risks. When necessary, the Committee takes action to address any such risks while 

seeking to maintain an open investment environment and the status of the United 

States as one of the world’s top destinations for foreign direct investment. 

CFIUS protects national security in the context of foreign direct investment from 

any country. By law, the Committee analyzes the facts and circumstances of each 

transaction on a case-by-case basis following a rigorous review process that 

leverages subject-matter expertise across the Executive branch. Our risk analysis is 

focused on three factors: the threat emanating from the foreign investor, the national security vulnerabilities presented by the U.S. business, and the consequence 

of a transaction to national security. When we identify a risk, our mandate is to 

resolve it, whether by mitigating the risk through enforceable restrictions on the 

parties or, as a last resort, by recommending the President block or unwind a transaction. 

Over the years, as national security threat environment has evolved, so has 

CFIUS. First established by Executive order in 1975, the committee has benefited 

from congressional action to codify and enhance its authorities. Most recently, Congress did so with the bipartisan Foreign Investment Risk Review Modernization Act 

of 2018, or FIRRMA. Among other things, FIRRMA provided the Committee with 

important authorities over certain investment structures that had previously fallen 

outside its jurisdiction and modernized our processes to better enable timely and effective reviews of covered transactions. It also provided the Committee with much 

needed jurisdiction over certain transactions involving real estate in close proximity 

to sensitive facilities. 

Treasury has dedicated significant time and resources to the successful implementation of FIRRMA and the efficient processing of what is now an all-time high caseload. Prior to enactment, the Committee processed 237 filings in 2017. Four years 

later, our case load nearly doubled to 436 filings in 2021. We expect the number 

of cases to continue at this heightened level. 

Since I was confirmed to my role as Assistant Secretary for Investment Security, 

I have been focused on making sure CFIUS operates effectively and efficiently, 

bringing to bear all available resources and tools to support our important national 

security mission. This effort includes the issuance of the first Executive order since 

the Committee was established to provide formal Presidential direction on additional risks that we are to consider when reviewing a covered transaction. It also 

includes the issuance of our first ever enforcement and penalty guidelines to ensure 

that transaction parties are held accountable for failing to comply with our laws or 

for not upholding their obligations to mitigate national security risk. While Congress 

rightly put in place strict confidentiality for information filed with CFIUS, we have 

and will continue to take enforcement actions on specific matters to protect national 

security. We are also enhancing our tactics and techniques to ensure we are gathering more detailed information about foreign acquirers and deal structures to thoroughly assess the national security risks arising in any given transaction. 

When CFIUS reviews a transaction that raises national security concerns, the 

Committee can mitigate the risk by requiring that certain measures be undertaken, 

and these measures are formalized in what we call a National Security Agreement, 

or mitigation agreement. When we negotiate a mitigation agreement, our work does 

not stop after the agreement is signed. 

We routinely conduct site visits, collect documents and information, and engage 

with third party monitors and auditors to ensure that the terms of these agreements 
49 

are upheld and parties live up to their compliance obligations. While preventing violations from occurring is our primary focus, the availability of robust remediation 

and enforcement tools in the event of noncompliance is necessary because a breach 

could harm national security. Under the Defense Production Act, the Committee has 

its own enforcement authority—including subpoena authority—and can impose monetary penalties and seek other remedies for violations of its statute, regulations, 

mitigation orders, conditions, or agreements. We will not hesitate to take enforcement action when necessary to protect national security. 

We also continue to enhance our ability to identify non-notified transactions and 

engage with international partners and allies. Indeed, the Committee actively monitors investment activity and follows up on tips from the public and other sources 

to identify these types of transactions that may pose national security risk. Should 

we identify a potentially covered transaction that may raise national security concerns, we request the parties file a notice, and initiate our formal review process. 

We have also established a process to assist partners and allies with foreign investment review—including the sharing of threat information—while contributing to the 

establishment and modernization of over 20 international foreign direct investment 

screening mechanisms. 

Finally, as we protect national security in the context of inbound investments, we 

continue to contribute to interagency discussions regarding policies to restrict certain U.S. outbound investments in specific sensitive technologies with significant 

national security implications. Our desire is to avoid situations in which U.S. investments support and advance technologies that enhance military or intelligence capabilities in countries of concern that could undermine our national security and put 

Americans at risk. 

While we are proud of the Committee’s efforts, our work remains unfinished, and 

there are always ways to improve. We remain focused on being as effective as we 

can be in our national security mission. You have my commitment that we will use 

all authorities available to us to protect the national security of the United States. 

In the end, as we work to counter the national security risks that emanate from 

China, as Secretary Yellen has said, where possible we need to find a way to work 

together for the benefit of the world, but in doing so we never compromise our national security. Thank you again for the opportunity to appear before you today, I 

look forward to answering any questions you may have. 

PREPARED STATEMENT OF THEA D. ROZMAN KENDLER 

DEPARTMENT OF COMMERCE

MAY 31, 2023 

Chairman Brown, Ranking Member Scott, distinguished Members of the Committee, thank you for inviting me to testify on behalf of the Commerce Department’s, Bureau of Industry and Security (BIS) Export Administration’s ongoing efforts to administer U.S. export controls and counter the People’s Republic of China’s 

(PRC’s) military modernization, human rights abuses, and other activities contrary 

to our national security and foreign policy interests. 

BIS is responsible for protecting U.S national security and foreign policy interests 

by ensuring that U.S. technology is not used by adversaries to harm the United 

States and by working to promote American technological leadership. This responsibility stems from our authorizing statute—the Export Control Reform Act of 2018 

(ECRA)—which describes the policy goals for BIS’s administration and enforcement 

of the export control system. While I am responsible for the regulatory side of the 

Bureau, my colleague, Assistant Secretary for Export Enforcement Matthew 

Axelrod, is charged with the enforcement side. 

Through the Export Administration arm of BIS, we identify sensitive U.S. technologies that would give our adversaries an advantage, develop policies and strategies for protecting these technologies, and review license applications submitted by 

exporters to determine whether specific transactions are consistent with U.S. national security and foreign policy interests. We also analyze data, industry information and classified reporting to assess the effectiveness of our controls, the availability of foreign technology (including identifying sensitive technologies developed 

by ally and partner countries), and the foreign end users that require extra scrutiny 

before receiving U.S. technology. 

Ensuring that U.S. and allied technology is not used against us is central to our 

approach with the PRC. In administering our export controls, we endeavor to take 

a multilateral approach. There are certainly times where unilateral export controls 

are necessary, however, as ECRA notes, ‘‘[e]xport controls that are multilateral are 
50 

most effective [ . . . ]’’ Accordingly, foreign cooperation on our controls is a BIS priority. Moreover, as evidenced by our approach to Russia’s further brutal invasion 

of Ukraine, multilateralism has reinvigorated our close and continuing international 

partnerships, particularly with countries in Europe and the Indo-Pacific. 

As the G7 leaders reaffirmed on May 20, 2023, in the G7 Hiroshima Leaders’ 

Communique, 

[E]xport controls are a fundamental policy tool to address the challenges 

posed by the diversion of technology critical to military applications as well 

as for other activities that threaten global, regional, and national security. 

We affirm the importance of cooperation on export controls on critical and 

emerging technologies such as microelectronics and cyber surveillance systems to address the misuse of such technologies by malicious actors and inappropriate transfers of such technologies through research activities. 

National Security Advisor Jake Sullivan, channeling recent comments by European Commission President Ursula von der Leyen, observed in April that we are 

‘‘de-risking and diversifying’’ with respect to the PRC on a narrow slice of technologies. We are not interested in decoupling. There are many areas in which the 

United States and the PRC can and should continue to cooperate. As we continue 

to stand up for our core national security and foreign policy interests, the world’s 

two biggest economies should continue to engage in commercial trade that does not 

impact U.S. national security or foreign policy interests. 

BIS’s Perspective on the PRC National Security and Foreign Policy Threat 

As Secretary Raimondo has stated: ‘‘China today poses a set of growing challenges 

to our national security. It is deploying its military in ways that undermine the security of our allies and partners and the free flow of global trade. . . .’’ The Chinese 

Communist Party (CCP) under President Xi Jinping has set a goal to develop the 

People’s Liberation Army (PLA) into a ‘‘world class military’’ and overtake the 

United States and its allies by dominating certain advanced technology sectors such 

as artificial intelligence (AI), autonomous systems, advanced computing, semiconductors and microelectronics, quantum information sciences, biotechnology, and 

advanced materials and manufacturing. 

To fulfill this vision, the PRC is going to great lengths to obtain key advanced 

technologies with military potential. It uses a military civil-fusion (MCF) strategy 

to deliberately blur lines between commercial sectors and military programs. This 

strategy is even more concerning where the PRC’s Government structure gives leadership the power to demand information and assistance from companies that have 

little choice but to agree. Accordingly, MCF, combined with the PRC’s Government 

system, has necessitated stronger export controls targeting predominantly commercial items that can be used in military applications. 

In the face of this transformative challenge that is decidedly exacerbating threats 

to global peace and security, it is imperative that the United States and our allies 

safeguard our core technologies by continuously and proactively reviewing and updating our export control policies. 

BIS has long restricted the PRC’s access to advanced dual-use items, including 

technologies. Together with our interagency partners in the Defense Department’s 

Defense Technology Security Administration, the Energy Department’s National Nuclear Security Administration, and the State Department’s Bureau of International 

Security and Nonproliferation, we appropriately leverage the tools in our toolbox to 

address this threat. This includes technology controls, identification of entities of 

concern, outreach and education initiatives, and international engagement. 

We partner closely with the Departments of Defense, Energy, and State in a 

range of functions, including proposals to the multilateral export control regimes, 

amendments to the Export Administration Regulations (EAR), review of export license applications, and identifying specific end users of concern, because each of 

these agencies brings different, valuable considerations and understanding to the review of such applications. 

To succeed in using our tools to contend with the strategic challenge posed by the 

PRC, our interagency and international partnerships are more valuable than ever 

before. In today’s testimony, I will discuss the long-standing controls we have in 

place for the PRC, technology controls adopted under the Biden-Harris administration, the targeting of PRC entities of concern, and the measures we are taking to 

educate the public, as well as foreign partners, on the nature of and rationale for 

our controls. 
51 

PRC Dual-Use Export Controls and Licensing 

BIS maintains comprehensive controls on the exports of sophisticated technologies 

to the PRC. BIS also controls low level technologies to preclude exports to untrusted 

end users, PRC military activities, and weapons of mass destruction (WMD) programs. This includes the imposition of license requirements for: 

• All military and spacecraft items under BIS jurisdiction (which are subject to 

a statutory policy of denial); 

• 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; 

• All items under our jurisdiction if the item is exported knowing it will be used 

in certain WMD programs; 

• All items under our jurisdiction if the item is exported knowing it is intended, 

entirely or in part, for military-intelligence end uses or end users in the PRC; 

and 

• All items under our jurisdiction if the item is destined for a party on BIS’s Entity List. 

In addition, BIS prohibits certain U.S. person activities that would support WMDrelated activities or military-intelligence end use or end users in the PRC, even if 

no items subject to our jurisdiction are involved, absent authorization. We are grateful to the Committee and others in Congress for enhancing our authorities in this 

regard as part of the Fiscal Year (FY) 2023 National Defense Authorization Act. We 

are actively working to implement these expanded authorities. 

With our interagency partners, we review all of the license applications for the 

PRC to determine a risk of diversion to military end uses or end users, WMD end 

uses, or abuses of human rights. We evaluate license applications—taking into account open source and intelligence information—based on the technology at issue, 

the country at issue, the entity using the item, other parties involved in the transaction, and how the item will be used. One of the primary factors we consider is 

the risk of diversion of the technology from the transaction details articulated in the 

license application instead to a country, end user, or end use of concern. We deny 

license applications where there is evidence of a substantial risk of diversion. 

License applications submitted by exporters and reexporters to send items to the 

PRC receive close scrutiny by BIS and our interagency partners. In calendar year 

(CY) 2022, license applications for the PRC had an average processing time (APT) 

of approximately 90 days. This APT is significantly longer than the CY 2022 APT 

for non-PRC cases of 43 days. It is also longer than the CY 2021 APT for PRC cases 

of 76 days. As evidenced by this data, BIS with its interagency colleagues is taking 

the time to ensure that PRC licenses are carefully reviewed. We prioritize comprehensive review of relevant open source and intelligence information over speed. 

In CY 2022, licenses reviewed for the PRC comprised approximately 13 percent 

of all applications reviewed by BIS. For items, including commodities, software, and 

technology (including domestic technology transfers, known as deemed exports), BIS 

and our interagency partners reviewed 5,064 export and reexport license applications. Of these, approximately 26 percent were denied or returned without action. 

In general, statistics regarding the interagency licensing process must be considered in light of the inherent restraint exercised by U.S. companies that generally 

do not waste time or resources applying for licenses they know will be denied or 

subject to lengthy interagency review. U.S. exporters should, before filing license applications know the parties in their transactions, including intermediaries and the 

end user, as well as the end user’s intended use of the item. Exporters who do not 

do this risk either a return of rejection or return without action of their license application. After reviewing BIS’s extensive know-your-customer and red flags guidance, many U.S. exporters do not submit license applications for transactions they 

contemplate are likely to be rejected. In fact, applications for exports to the PRC 

dropped by 26.2 percent between CY 2021 and CY 2022 (although volumes are still 

higher than during the height of the pandemic). 

Dual-Use Export Controls To Counter PRC Military Modernization 

BIS’s approach to the PRC is calibrated and targeted. Using a scalpel approach, 

we seek to restrict the PRC’s military modernization efforts by restricting key, sensitive technologies without undercutting U.S. technology leadership and unduly 

interfering with commercial trade that doesn’t undermine our national security and 

foreign policy. 
52 

We remain focused on aggressively and appropriately using our tools to contend 

with the long-term strategic competition with the PRC. Under Secretary Alan 

Estevez previously testified before this Committee, ‘‘We are closely reviewing our 

approach to China, seeking to maximize the effectiveness of our controls.’’ To that 

end, we have prioritized a review of export controls related to quantum, the bioeconomy, and artificial intelligence. 

An example of our approach is the October 2022 advanced computing and semiconductor manufacturing equipment rule, which restricted the PRC’s access to critical artificial intelligence integrated circuits, supercomputing capability, and semiconductor manufacturing technology. The October 2021 controls on software for nucleic acid synthesizers, followed by this April’s proposed rule on potential peptide 

synthesizer controls, further demonstrate this focus. 

Proactively Restricting PRC Plans To Use U.S. Technologies Related to Artificial Intelligence and Advanced Semiconductors for Military or WMD Applications 

The PRC’s efforts to develop and employ advanced artificial intelligence (AI) in 

its military modernization, hoping to surpass the United States and its allies and 

our military capabilities, demanded a clear, strategic export controls response. 

Artificial intelligence was described as ‘‘the quintessential ‘dual-use’ technology’’ 

in the 2021 Final Report of the National Security Commission on AI. The Commission noted that, ‘‘The ability of a machine to perceive, evaluate, and act more quickly and accurately than a human represents a competitive advantage in any fieldcivilian or military.’’ AI capabilities-facilitated by supercomputing, built on advanced 

semiconductors-present U.S. national security concerns because they allow AI to be 

used to improve the speed and accuracy of military decision making, planning, and 

logistics. They can also be used for cognitive electronic warfare, radar, signals intelligence, and jamming. These capabilities can also create concerns when they are 

used to support facial recognition surveillance systems for human rights abuses. Advanced semiconductors are key to developing advanced weapon systems, exascale 

supercomputing capabilities, and AI capabilities. 

Although the PRC has tried to characterize U.S. export control actions on advanced semiconductors, supercomputing, and AI as an economic measure aimed at 

restraining its economic growth, BIS focused solely on these clear national security 

and foreign policy considerations when issuing our rules. 

We made several changes to U.S. dual-use export controls policy to the PRC to 

address our AI concerns: 

• First, BIS implemented targeted restrictions on specific chips, and items containing such chips, that can be used in advanced computing and artificial intelligence applications. Through a new Foreign Direct Product (FDP) Rule, BIS 

further applied these controls to foreign-made chips that are produced with certain U.S. technology or tooling and PRC chip designs meeting the relevant parameters identified by our technical experts. 

• Second, BIS implemented controls for chips and other items that will be used 

in or for supercomputers in the PRC or supercomputers destined for the PRC. 

Through another new FDP Rule, this control also applies to certain foreignmade items when destined for PRC supercomputers, including foreign-made 

semiconductors. 

• Third, BIS expanded the scope of controls on 28 PRC entities previously on the 

Entity List that are involved in supercomputer-related activities or advanced integrated circuit-related activities. These parties are now subject to the Entity 

List FDP Rule that restricts the entities’ ability to obtain foreign-produced chips 

and other items. BIS added additional PRC entities to the Entity List in December 2022, which are also subject to the Entity List FDP Rule. 

• Fourth, BIS implemented new PRC-wide controls on exports of certain manufacturing tools essential for high-end chip production. 

• Fifth, BIS imposed controls on the export of any item to a PRC semiconductor 

fabrication facility that is engaged in the development or production of advanced logic or memory chip production. For these advanced fabrication facilities, we also imposed a license requirement on U.S. persons providing support 

to those entities. 

• Finally, we imposed controls on items that will be used to develop or produce 

indigenous semiconductor manufacturing equipment in the PRC. 

BIS’s actions already are having an impact in the PRC. Since implementation of 

our controls, public reporting shows that the PRC is surging resources into its semiconductor sector. However, the PRC knows that money alone cannot solve its problem. Our cut-off threshold for advanced logic semiconductor manufacturing in the 
53 

PRC is at 14 nanometers (nm). The PRC’s sole semiconductor lithography equipment manufacturer, Shanghai Micro Electronics Equipment Group (SMEE), has not 

made any major advancements since achieving the generations-earlier 90nm equipment, in part due to the difficulties of obtaining components and servicing from 

abroad-difficulties increased by the December 2022 placement of SMEE on the Entity List by BIS. The PRC’s largest semiconductor foundry, Semiconductor Manufacturing International Corp. (SMIC) has removed 14nm fabrication technology from 

the list of services on its website. 

Although our measures have restricted the PRC’s ability to indigenously produce 

advanced semiconductors, we know that the PRC is looking for ways to continue accessing these high-end chips. In this evolving technological landscape, we continue 

to review open source and classified information to address circumvention attempts, 

to track the impact of our controls, and to be proactive and nimble. 

Countering PRC Use of Automated Peptides Synthesis To Develop Toxins 

The Office of the Director of National Intelligence has assessed that advancements in dual-use technology, including synthetic biology and genomic editing, could 

enable the development of novel biological weapons that evade detection, attribution, and treatment. In particular, software for nucleic acid assembly and synthesis 

can be used to design and build functional genetic elements from digital sequence 

data. This data can then be manipulated to create novel pathogens or enhance existing ones. 

For these reasons, in October 2021, based on a BIS proposal, we, along with our 

Australia Group partners—a multilateral regime consisting of 43 participating countries that focuses on the spread of chemical and biological weapons—imposed multilateral controls on software for nucleic acid assembly and synthesis. Additionally, 

in April of this year we sought public comment on the potential control of peptide 

synthesizers. These technologies make it quicker and easier to produce toxins and 

pathogens that can be exploited for biological weapons purposes. By adopting these 

controls, requiring a license to the PRC will help ensure that our biotechnology exports are not used for malign purposes. 

Controlling PRC End Users of National Security and Foreign Policy Concern 

In addition to its technology-based controls, BIS increasingly has used entity-specific restrictions, primarily through the Entity List, to restrict trade to actors of concern in the PRC. Through the interagency End User Review Committee (ERC), BIS 

and our interagency partners review PRC companies, both State-owned and commercial, to determine if they are reliable recipients of U.S. technology. 

Through the Entity List, we impose entity-specific license requirements on PRC 

parties based on specific and articulable facts that indicate that they have been, are, 

or are at significant risk of becoming involved in activities contrary to U.S. national 

security or foreign policy interests. We continually assess available open-source, proprietary, and classified information, in coordination with interagency partners, for 

imposing controls on additional PRC entities. 

Generally, when a PRC party is added to the Entity List, anyone seeking to export, reexport, or transfer items under BIS jurisdiction to such a party must first 

obtain a license. BIS and our interagency partners in the Departments of Defense, 

Energy, and State review license applications for such PRC entities under the entity-specific license review policy published in the EAR, which is frequently a presumption of denial. 

For 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 export transactions qualifying for case-by-case review rather than 

those subject to a presumption of denial. 

Currently, we have nearly 700 PRC parties on our Entity List—over 200 of those 

were added during the Biden-Harris administration. They have been added for reasons including supporting PRC’s military modernization and WMD programs, supporting Iran’s WMD and military programs, facilitating human rights abuses in 

Xinjiang, and providing restricted items to Russia. These parties include those involved in AI, surveillance, biotechnology, microelectronics, and quantum computing. 

For example, in December 2021, we added the PRC Academy of Military Medical 

Sciences and its eleven research institutes under the PLA’s Academy of Military 

Sciences to the Entity List for using biotechnology processes to support PRC military end uses, including purported brain-control weaponry. In December 2022, we 

added Cambricon Technologies, one of the PRC’s most valuable AI chip start-ups, 

and its subsidiaries for supporting PRC military modernization efforts. These enti-
54 

ties are, or have close ties to, Government organizations that support the PRC military and defense industry. Most recently, in March 2023, BGI subsidiaries BGI Research and BGI Tech Solutions were added for their collection and analysis of genetic data which contributes to the monitoring and surveillance of ethnic minorities 

in the PRC. In addition, in the Russia context, we have added companies in the PRC 

that attempted to circumvent regulations by aiding Russia’s unconscionable invasion 

of Ukraine. Sinno Electronics, added June 2022, and others, were added to the Entity List for supporting Radioavtomatika, a Russian procurement firm for the Russian 

defense industry. 

Engaging International Partners 

Export controls can only be effective when other technology producers implement 

comparable controls. Consistent with ECRA, we know that export controls applied 

to items widely available from foreign sources generally are less effective. This is 

particularly true when we consider whether to apply export controls to an item that 

is manufactured both in the United States and the PRC. We also consider this factor when applying controls to technologies that are available in third countries. In 

such situations-to use a phrase that originates with former BIS Under Secretary 

Eric Hirschhorn-unilateral export controls are like damming half the river. BIS embraces the significant responsibility to work with international partners to explain 

the rationale for our export control policies and, where possible, to include them in 

our efforts. 

In light of these realities, we have reinvigorated our international partnerships 

over the last 2 years. In response to Russia’s war on Ukraine, our dual-use export 

controls relationships with the 39 other Governments that make up the Global Export Control Coalition are closer than ever. 

Relatedly, working with the State Department and other partners, from FY 2021 

to FY 2022, BIS more than doubled our capacity-building international engagement 

portfolio, from 23 to 61 engagements. We expanded our Export Control and Related 

Border Security (EXBS) activities from two and three countries in 2019 and 2020, 

respectively, to more than 21 countries in FY 2023. 

Many of the controls we have imposed on the PRC involve a Foreign Direct Product rule. In these instances, we work closely with manufacturing countries to ensure 

that Government and industry understand our controls and their application outside 

the United States. To maximize effectiveness of our controls, we have conducted 

Government and industry outreach in Asia, Africa, Europe, and the Western Hemisphere. In each engagement, we endeavor to explain the clear national security rationale underpinning our controls. 

Conclusion 

Dual-use export controls work has never been more relevant, or more effective. 

We are focused on aggressively and appropriate contending with the strategic technology threat posed by the PRC and will continue to appropriately and aggressively 

use the tools at our disposal to counter PRC efforts to outpace the United States 

and our allies to the benefit of the PLA. 

Thank you. I welcome your questions. 

PREPARED STATEMENT OF MATTHEW AXELROD 

DEPARTMENT OF COMMERCE

MAY 31, 2023 

Chairman Brown, Ranking Member Scott, distinguished Members of the Committee, thank you for inviting me to testify on the Commerce Department’s ongoing 

efforts to enforce U.S. export controls and to help deny the People’s Republic of 

China (PRC) unauthorized access to U.S. technologies. 

I currently serve within the Commerce Department’s Bureau of Industry and Security as the Assistant Secretary for Export Enforcement. By passing the Export 

Control Reform Act of 2018 (ECRA), Congress provided Export Enforcement, the 

side of Bureau of Industry and Security that I oversee, with robust administrative 

and criminal enforcement authorities. My team of law enforcement agents and analysts use those authorities to conduct a mission essential to America’s national security: keeping our country’s most sensitive technologies out of the world’s most dangerous hands. 

At no point in history has this mission been more important, and at no point have 

export controls been more central to our national security, than right now. Our current geopolitical challenges, the increasingly rapid development of technology with 

the potential to provide asymmetric military advantage, and the countless ways in 
55 

which the world is now interconnected, have raised the prominence and impact of 

export controls in unprecedented ways. 

Each year, the Office of the Director of National Intelligence publishes the Intelligence Community’s Annual Threat Assessment, which details the Intelligence 

Community’s (IC’s) view of the gravest national security threats faced by the United 

States. The differences between the first such assessment, issued in 2006, and this 

year’s assessment are striking. In 2006, the DNI stated on the assessment’s very 

first page that ‘‘terrorism is the preeminent threat to our citizens, Homeland, interests, and friends.’’ The 2006 assessment’s first section is on the ‘‘Global Jihadist 

Threat’’, followed by a section on ‘‘Extremism and Challenges to Effective Governance and Legitimacy in Iraq and Afghanistan’’. Analysis of the threat posed by 

China does not appear until page 20. 

Compare that to this year’s assessment and you will see how significantly our national security landscape has changed since 2006. The first four sections of this 

year’s assessment each focus on a different Nation-State actor, with China first, followed by Russia, Iran, and North Korea. As the assessment notes on its first page, 

‘‘[w]hile Russia is challenging the United States and some norms in the international order in its war of territorial aggression, China has the capability to directly attempt to alter the rules-based global order in every realm and across multiple regions, as a near-peer competitor that is increasingly pushing to change global 

norms and potentially threatening its neighbors.’’ 

The assessment later goes on to point out that ‘‘China will continue pursuing its 

goal of building a world-class military that will enable it to try to secure what it 

views as its sovereign territory, attempt to establish its preeminence in regional affairs, and project power globally while offsetting perceived U.S. military superiority,’’ ‘‘is reorienting its nuclear posture for strategic rivalry with the United States 

because its leaders have concluded that their current capabilities are insufficient,’’ 

and that China’s ‘‘space activities are designed to advance its global standing and 

strengthen its attempts to erode U.S. influence across military, technological, economic, and diplomatic spheres.’’ 

Given this threat environment, the job of our Export Enforcement agents and analysts—preventing sensitive U.S. technologies and goods from being used for malign 

purposes by the Chinese Government and other Nation-State actors—is more critical than at any other time in the organization’s history. It’s among the reasons why 

I’m so honored to lead such an expert and dedicated law enforcement team at this 

particular point in time. The team and I work every day to meet this unprecedented 

moment. More specifically, under my leadership, we have: (1) enhanced our enforcement policies; (2) expanded our partnerships at home and abroad; and (3) aggressively enforced our controls in a way that imposes real costs on those who seek to 

violate and undermine U.S. national security—both in China and elsewhere. 

Enforcement Policy Enhancements 

First, we have updated a number of our enforcement policies to ensure that our 

finite resources are best positioned to have maximum national security impact. A 

few highlights: 

• On June 2, 2022, we published a regulatory change making our administrative 

charging letters public when filed (as opposed to the prior practice of making 

them public only after resolution), in order to provide the exporting community 

more timely insight into actions that we believe violate our rules. Just one 

month later, we published a charging letter against Far East Cable Co. Ltd., 

China’s largest wire and cable manufacturer, based on allegations that it served 

as an illicit export channel for Zhongxing Telecommunications Equipment Corporation (ZTE) and delivered U.S.-origin equipment to Iran as part of an effort 

to conceal and obfuscate ZTE’s Iranian business from U.S. investigators. 

• On June 30, 2022, I announced policy changes to strengthen our administrative 

enforcement program. The changes included raising penalties when appropriate 

for more serious violations, prioritizing enforcement focus on the most serious 

violations while using non-monetary resolutions for less serious violations, 

eliminating ‘‘No Admit, No Deny’’ settlements, and dual-track processing of voluntary self-disclosures. As a result of these policy changes, our recent $300 million resolution with Seagate Technology, LLC (Seagate) included an admission 

by Seagate to the factual conduct alleged in our Charging Letter—that Seagate 

continued selling millions of hard disk drives to entitylisted Huawei even after 

its only two competitors had stopped sales because of our Foreign Direct Product Rule (the Huawei FDPR). The Huawei FDPR imposes export controls on foreign items produced overseas from certain U.S. software and technology, including equipment, when destined for Huawei. 
56 

• On October 7, 2022, in conjunction with the promulgation of rules imposing new 

controls on China’s procurement of advanced semiconductor manufacturing 

tools, advanced chips and related items, we issued a rule clarifying that when 

a foreign Government fails to schedule end-use checks (i.e., physical inspections 

of exports to ensure they are in compliance with our regulations) in a timely 

way, that failure can provide a basis for the addition of unchecked parties to 

the Entity List. I also issued a memorandum outlining a two-step policy to address persistent scheduling delays of our end-use checks. Under the policy, if 

BIS requests an end-use check from a foreign Government, that Government 

then has 60 days to enable BIS to conduct the check—otherwise we may place 

the unchecked party on the Unverified List. After that, if 60 more days pass 

without the check being successfully completed, we may place the unchecked 

company on the Entity List. Prior to this policy change, the Chinese Government had not allowed us to conduct a check in over 2 years. The policy led directly to improved cooperation with our pending checks. In the 7 months since 

the policy was announced, we have completed over 90 end-use checks in China. 

• On April 18, 2023, I issued a memorandum clarifying our policy regarding voluntary self-disclosures (VSDs) and disclosures of potential misconduct by others. 

It’s long been understood that when a company finds out about a significant potential violation, and selfreports it, they get concrete VSD credit in the form of 

a reduced penalty. The memorandum makes clear that the converse is also true: 

if a company knows of a significant potential violation and affirmatively decides 

not to divulge it, we will consider that lack of disclosure as an aggravating factor in penalty calculations if we later uncover the violation. Separately, the 

memo clarifies that when a party informs us about another party’s violation and 

that information allows us to take enforcement action, we will consider it ‘‘extraordinary cooperation’’ and treat it as a mitigating factor if the notifying party 

engages in prohibited conduct in the future. This policy clarification is designed 

to lead to an increase in disclosures, which in turn should lead to additional 

enforcement actions involving Chinese (and other) violators. 

Technology Protection Partnerships 

Second, given the scope of the threat that we face in protecting U.S. technology 

from misappropriation by the Chinese Government and other actors, we acutely understand the need to amplify our efforts through robust partnerships. Domestically, 

we have developed such partnerships with industry, academia (through our Academic Outreach Initiative), the IC, Treasury components like the Office of Foreign 

Assets Control and Financial Crimes Enforcement Network, and sister Federal law 

enforcement agencies like the Federal Bureau of Investigation and Homeland Security Investigations. In the past year, we have put out multiple joint alerts and 

advisories with these partners designed to educate industry and financial institutions on how best to comply with our rules and detect violations of them. These 

partnerships allow us in many instances to prevent diversions before they occur, 

and in others to impose costs on violators. 

We also work closely with international counterparts, bilaterally, multilaterally, 

and through our end-use check program. Last year, our Export Control Officers 

(ECOs), augmented by our domestic-based Sentinel teams that deploy to global locations not covered by ECOs, conducted over 1,100 end-use checks in over 50 countries 

to prevent the transshipment and diversion of U.S. items in violation of our regulations. 

And, thanks in part to additional funds from Congress in the first Ukraine supplemental appropriations law last year, we have worked to expand our footprint and 

partnerships abroad, including stationing an analyst in Canada and ECOs in Finland and Taiwan this summer, implementing a data sharing arrangement with the 

European Anti-Fraud Office (OLAF), and establishing export enforcement coordination mechanisms with our Five Eyes (U.S., Australia, Canada, New Zealand, and 

the United Kingdom) and G7 counterparts to prevent illicit reexports to China, as 

well as to Russia, Iran, and elsewhere. 

We have also entered partnerships designed to deliver concrete enforcement actions. On February 16, 2023, we announced the formation of the Disruptive Technology Strike Force in partnership with the National Security Division of the Department of Justice. The Strike Force works to protect U.S. advanced technologies 

from being illicitly acquired and used by Nation-State actors such as China, Russia, 

and Iran to support: (1) their military modernization efforts; and (2) their mass surveillance programs that enable human rights abuses. We have established operational Strike Force cells in fourteen locations across the country, supported by an 

interagency intelligence effort in Washington, DC. Each operational cell consists of 

agents from our Office of Export Enforcement (OEE), FBI, and HSI, as well as an 
57 

Assistant U.S. Attorney. The Strike Force cells use all-source information (open 

source, proprietary, and classified) to pursue investigations and take criminal and/ 

or administrative enforcement action as appropriate. 

Just 2 weeks ago, Assistant Attorney General Matt Olsen and I announced the 

first wave of Strike Force enforcement actions, including arrests, indictments, and 

a temporary denial order in five different cases across the country. Two cases—one 

out of Los Angeles and the other out of San Francisco—involve defendants who allegedly stole sensitive American technology and shipped it to restricted Chinese entities. In a third case, from Manhattan, the defendant allegedly used a sanctioned 

Chinese company as a front company to aid Iranian ballistic missile procurement. 

According to the indictment, the defendant conducted transactions with an Iranian 

company to obtain isostatic graphite, a material used in the production of weapons 

of mass destruction. These actions illustrate how the Strike Force cells are 

prioritizing investigative and prosecutorial resources to target illicit actors, impose 

costs on violators, and harden supply chains to protect our most advanced technologies from being acquired or used by Nation-State actors such as China. 

Enforcement Actions 

Third, I want to highlight some of the recent enforcement actions we have taken 

related to China this calendar year, beyond the work of the Disruptive Technology 

Strike Force described above. 

On April 20, we announced the largest standalone administrative penalty in BIS 

history—a $300 million penalty against Seagate Technology LLC of Fremont, California, and Seagate Singapore International Headquarters Pte. Ltd. of Singapore for 

continuing to ship millions of hard disk drives to Huawei after BIS’s imposition of 

the Huawei FDPR. It is also the first enforcement case and penalty brought under 

the Huawei FDPR since that rule was issued in August 2020. In addition to the 

monetary penalty, Seagate is subject to a suspended 5-year denial order that allows 

BIS to cut off their export privileges if they violate key terms in the agreement. 

As part of the resolution, Seagate admitted to having engaged in the conduct alleged in our Proposed Charging Letter. Back in 2019, BIS placed Huawei and certain of its non-U.S. affiliates were put on the Entity List for posing a risk to U.S. 

national security. In August 2020, due to continued national security and foreign 

policy concerns, BIS imposed the Huawei FDPR to better address the continuing 

threat to U.S. national security and U.S. foreign policy interests posed by Huawei 

and its non-U.S. affiliates. At that time, there were only three major companies producing hard disk drives including Seagate. When the Huawei FDPR went into effect, two out of the three companies promptly, and publicly, stated that they had 

ceased sales to Huawei and that they would not resume such sales unless or until 

they received authorization from BIS. Despite this public declaration from its competitors, the third company, Seagate, continued to sell and became Huawei’s sole 

source provider for hard disk drives. Seagate continued selling hard disk drives to 

Huawei until September 2021, more than a year after their competitors pulled out, 

and more than a year after the Huawei FDPR was published. The $300 million penalty is more than double the amount of profits they made from these sales. 

On February 27, 2023, we imposed a $2.77 million penalty on 3D Systems Corp. 

for exporting controlled aerospace technology (including technical specifications for 

military electronics as well as those used in the development, production, operation, 

or repair of spacecraft) and metal alloy powder to China without the required license and for exporting controlled technology to Germany without the required license. In addition to our penalty, 3D Systems entered into coordinated settlement 

agreements with the Department of State and the Department of Justice. 

On January 17, 2023, Jonathan Yet Wing Soong pleaded guilty to violating export 

control laws in connection with a scheme to secretly funnel sensitive aeronautics 

software to Beihang University, a university in Beijing on the Entity List due to 

the University’s involvement in PRC military rocket systems and unmanned air vehicle systems. Soong, an employee of a NASA contractor, admitted that he willingly 

exported and facilitated the sale and transfer of restricted software knowing that 

Beihang University was on the Entity List. On April 28, 2023, Soong was sentenced 

to 20 months in prison. 

Also on January 17, 2023, we issued a 10-year denial order cutting off the export 

privileges of Ge Song Tao following his conviction for conspiracy to attempt to illegally export maritime combat rubber raiding craft and engines to China. The joint 

case with FBI, ATF, NCIS, and DOJ uncovered that Ge used his company, Shanghai 

Breeze, and contacts with a U.S. Naval Anti-Submarine Warfare Officer to attempt 

to illegally export the items to the People’s Liberation Army (PLA) Navy. The combat rubber raiding craft, which the Chinese military planned to reverse engineer 

and mass produce, was equipped with engines used by U.S. special forces and can 
58 

be launched from a submarine or dropped by an aircraft. The items did not get to 

China. 

On January 11, 2023, Broad Tech Systems, Inc., a California-based electronics 

distribution company, and Tao Jiang, its president and owner pleaded guilty to 

charges of conspiracy and ECRA violations. Jiang participated in a conspiracy to 

conceal information from BIS agents and U.S. Customs and Border Protection officers as part of a scheme to illegally export chemicals used in semiconductor manufacturing to an Entity Listed company in China. The Chinese company develops 

electronics for early warning systems, air defense systems, airborne fire control systems, manned space systems, and other national large-scale projects for the PLA. 

We also use the Entity List to restrict the ability of parties involved in activities 

contrary to U.S. national security or foreign policy interests to obtain U.S. exports. 

While the Entity List is a licensing tool, not an enforcement one, the overwhelming 

majority of Entity List nominations come from the BIS intelligence analysts I oversee and frequently have ties to investigations conducted by our law enforcement 

agents. Currently, there are nearly 700 Chinese parties on the Entity List, of which 

over 200 have been added since the beginning of this Administration. 

As these cases and entity listings demonstrate, we leverage our administrative 

and criminal enforcement, as well as our regulatory authority, to address the diversion of advanced technologies—like semiconductors, marine engines, and satellite 

and rocket prototypes—that support China’s military modernization efforts. 

Conclusion 

Thank you again for the opportunity to testify today on national security risks 

posed by the People’s Republic of China (PRC) and what we on the Export Enforcement side of the Department of Commerce’s Bureau of Industry Security are doing 

to combat them. As CIA Director William Burns has noted, China is the most important geopolitical threat that we face this century. And Export Enforcement’s mission—keeping our country’s most sensitive technologies out of the world’s most dangerous hands—is a critical part of how the U.S. Government addresses the threat 

posed by the PRC. 

As Beijing seeks to spread its technology-driven authoritarianism the world over, 

Export Enforcement remains hyperfocused on preventing the PRC from illegally obtaining sensitive U.S. items. By enhancing our administrative enforcement capabilities, multiplying our impact through work with partners, and aggressively pursuing 

both administrative and criminal enforcement actions to punish violators, we are 

committed to doing everything we can to meet this unprecedented challenge. 

I thank the Committee for its support and look forward to your questions. 
59 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT 

FROM ELIZABETH ROSENBERG 

Q.1. On May 21, the Cyberspace Administration of China (CAC) 

announced that products from a U.S. company, Micron, would be 

banned from key infrastructure projects due to an unjustified national security risk. America must send a clear message to the 

international community that this level of economic coercion is unacceptable and will be met with a swift and stern response. 

What actions is the Treasury Department taking to respond to 

China’s ban on Micron’s products? 

Does the Treasury Department consider China’s Micron ban to 

be retaliation against export controls on the outflow of advanced 

computing and semiconductor manufacturing items to China imposed by the Department of Commerce on October 7, 2022? 

A.1. As the Department of Commerce has stated, we would firmly 

oppose any actions that unfairly target U.S. companies, including 

Micron. This would be inconsistent with the PRC’s assertions that 

it is committed to a transparent regulatory framework. In contrast, 

the United States takes action to defend our national security and 

protect human rights. This is consistent with our targeted policies 

and practices to prevent the transfer of sensitive technologies that 

could be diverted to military end-uses, without undercutting U.S. 

technology leadership or unduly interfering with commercial trade. 

Treasury calls on the PRC to provide a transparent process in relation to its cybersecurity reviews and decisions process grounded in 

facts. 

Q.2. Sanctions can inflict further economic pain on everyday Americans if they are not carefully crafted. The more these tools are implemented, the more likely the U.S. is to face significant retaliation 

from China, which could hurt ordinary Americans who are most exposed to price shocks. 

How do you factor in and account for retaliation before imposing 

sanctions? 

What tools does the U.S. have to preempt or address retaliation? 

A.2. As Secretary Yellen noted in public remarks on the U.S.-China 

economic relationship, Treasury deploys its sanctions authorities in 

order to secure our national security and protect human rights. 

Further, our actions are always intended to be narrowly scoped and 

targeted, with clear objectives, and are calibrated to mitigate 

spillovers into other areas, including harm to Americans. We conduct this analysis on potential spillovers not only with our own 

economists and sanctions experts, but also other departments and 

agencies, including the intelligence community, to conduct a robust 

assessment before we take actions, which includes potential retaliation. We believe that evaluating the financial and economic impacts 

of our sanctions program is important, which is one of the reasons 

why Treasury has created a Sanctions Economic Analysis Division 

that began its operations in April 2023. 

Treasury has always been open to meeting with the victims of 

economic retaliation to discuss their specific circumstances and how 

best to address these important issues. 

Q.3. Current U.S. sanctions on Russia serve as an opportunity to 

evaluate the effectiveness of U.S. sanctions overall. Concerningly, 
60 

the IMF forecasts that the Russian economy will grow in 2023, 

with projected real GDP growth of 0.7 percent. 

How does Russia’s trade surplus influence its ability to remain 

resilient to U.S. sanctions? 

A.3. A country’s trade surplus is not necessarily a good indicator 

of assessing the impact of sanctions. An initial trade surplus was 

not surprising, as it partly reflected higher fossil-fuel export revenues and materially subdued imports, driven by war related uncertainty, sanctions, and private sector de-risking. 

Since the third quarter of last year, however, the total value of 

Russian goods exports has steadily declined, while the general 

trend for goods imports has been rising. This has compressed the 

trade surplus, with Russia’s current account surplus shrinking to 

$22.8 billion in January–May 2023, an 81.6 percent decrease compared with the same period last year. This has put pressure on the 

Russian ruble, which is making imports more expensive. We expect 

the trade surplus and Russian GDP to continue to fluctuate. The 

purpose of the sanctions program is to disrupt Russia’s ability to 

fund and supply its war, and measured against this goal, the sanctions are successful. 

Q.4. If the U.S. imposed sanctions of similar scale and severity on 

China, how does China’s significant role in global trade affect its 

ability to remain resilient to such sanctions? 

A.4. A full separation of our economies would be disastrous for both 

countries and destabilizing for the rest of the world. We have been 

explicit that our national security actions in the economic sphere 

are intended to be narrowly scoped and targeted to clear objectives. 

Across these actions, we are engaging and coordinating with our allies and partners in the design and execution of our policies—we 

are more effective when we work in concert with one another. 

Q.5. How does the U.S. trade deficit with China affect the development of sanctions? 

A.5. The U.S. economic relationship with China, including imports 

and exports, is one of many factors we look at when considering 

how best to use our sanctions authorities. This is a robust process, 

with input from other Departments and Agencies, and one that 

seeks to achieve a specific objective without undermining our own 

interests. 

Q.6. Please explain the Treasury Department’s process for deciding 

when to impose, escalate, or ease sanctions on a country like 

China. 

A.6. Sanctions are part of a broad suite of tools that the United 

States uses to accomplish its foreign policy goals and protect its financial system, consistent with action to defend our national security and human rights. Based on the authorities delegated to the 

U.S. Treasury, the Office of Foreign Assets Control works daily to 

research and evaluate potential sanctions targets in line with both 

our laws and guidance from our policymakers. Likewise, there is a 

deliberate process for lifting of sanctions, consistent with our laws. 

Q.7. What do you consider to be the most effective examples of how 

sanctions have successfully altered Nation-State behavior? What 
61 

metrics or indicators does the Treasury Department use to measure 

the effectiveness of sanctions? 

A.7. There are several instances in which sanctions, when combined with other tools, have positively impacted a foreign Government’s strategic thinking or policies. Some of our drug trafficking 

organization designations, for example, have had a role in fostering 

greater cooperation with the Mexican Government on drug trafficking and money laundering issues. Decision makers in other 

countries, particularly as it relates to counternarcotics and Global 

Magnitsky authorities, are often persuaded to change policies or cooperate with international efforts to counter drug trafficking, corruption, and human rights abuse. Over the last year sanctions 

have successfully undermined Russia’s ability to rearm. 

The objectives of our sanctions programs vary. The objective of 

our Russia sanctions program is different, for example, from the 

objectives of our corruption and human rights programs. However, 

we agree that evaluating the efficacy of our sanctions programs is 

important and is one of the reasons why Treasury has created a 

Sanctions Economic Analysis Division that began its operations in 

April 2023. 

Q.8. Please describe procedures and practices for how Treasury Department and Commerce Department coordinate and exchange information between the Treasury Specially Designated Nationals 

list, the Treasury Chinese Military Industrial Complex List, and 

Commerce’s Entity List. Please provide the nomination process for 

the Treasury lists, and explain why Chinese military firms appear 

on certain lists but not others. 

A.8. Treasury’s decision to identify an individual or company on a 

list is independent of decisions to identify entities on other lists by 

other U.S. Government agencies, and the legal standards and authorizing authorities supporting different lists are separate and 

independent. However, Treasury maintains awareness of and provides input to other agencies’ additions or removals to their restricted party lists. In some cases, other agencies are required by 

law to consult with Treasury. For example, the Commerce Department’s Entity List is a tool to identify foreign parties on which 

Commerce has imposed license requirements based on specific and 

articulable facts that indicate that they have been, are, or are at 

significant risk of becoming involved in activities contrary to U.S. 

national security or foreign policy interests. Entity List decisions 

are made by the interagency End-User Review Committee (ERC), 

comprised of the Departments of Commerce (Chair), Defense, State, 

Energy, and where appropriate, the Treasury. The ERC makes decisions regarding additions to, removals from, or other modifications to the Entity List, and continually assesses available opensource, proprietary, and classified information, for adding new parties to that list. Treasury considers whether information made 

available by other agencies may support a designation under 

Treasury’s own authorities. Treasury is continually working to 

identify entities that meet the criteria for identification or designation pursuant to existing sanctions authorities. 

Q.9. The People’s Bank of China is developing the digital yuan, a 

central bank digital currency. 
62 

Has the Treasury Department assessed the risk that the digital 

yuan will be used as a tool to bypass the U.S. sanctions regime for 

cross-border transactions? If so, please provide the findings from 

these assessments. 

How will the widespread availability of a fully implemented digital yuan influence U.S. national security interests relating to illicit 

finance and financial crimes? 

A.9. Treasury is aware of the digital yuan (RMB) and continues to 

watch its development closely. Treasury continues to assess that 

the United States’ strong economic performance, sound macroeconomic policies and institutions, open, deep, and liquid financial 

markets, institutional transparency, commitment to a free-floating 

currency, and strong and predictable legal system will continue to 

support the dollar in its role as the global reserve currency. 

In contrast, China’s capital controls, the relatively limited depth 

and liquidity of markets for RMB-denominated financial assets, as 

well as China’s weak rule of law and institutions will continue to 

present challenges for widespread internationalization of the RMB. 

They will also hamper a digital yuan from supplanting the U.S. 

dollar. Nonetheless, shifts away from the U.S. dollar and exposure 

to the U.S. financial system more broadly in cross-border transactions could erode the effectiveness of our sanctions and our ability to protect the international financial system from abuse. 

Q.10. When developing and imposing financial sanctions, how does 

the Treasury Department account for the long-term risk that its actions may erode the U.S. dollar’s status as the global reserve currency? 

A.10. We recognize that in the pursuit of strategic autonomy, other 

Nations have expressed interest in reducing their reliance on the 

dollar. 

This is why it is important for us to not only take very specific 

and targeted actions, but to also work closely with our partners to 

take coordinated or complementary actions, and create common understandings and standards, such as those at the Financial Action 

Task Force, to safeguard the international financial system and 

keep it highly useful for global financial transactions and commerce. 

Q.11. Reports indicate that China is flouting U.S. sanctions on 

Russia and Iran by purchasing sanctioned oil from both Nations at 

a steep discount. In the Iran context, an outside NGO estimates 

that since President Biden took office, Iran has exported over 665 

million barrels of oil to China, which is 73 percent of Iran’s total 

exports, worth some $60 billion. To help address this problem the 

bipartisan Solidify Iran Sanctions Act has been introduced to eliminate the sunset on the Iran Sanctions Act of 1996. 

What actions are being taken and considered to address China’s 

purchases of sanctioned oil? 

A.11. We are very concerned by Chinese purchases of Iranian oil 

and petrochemicals. A few specific examples of actions we’ve taken 

to expose and disrupt such Chinese purchases include: 

• In March 2023, OFAC sanctioned 39 entities constituting a significant ‘‘shadow banking’’ network, one of several multi-juris-
63 

dictional illicit finance systems which grant sanctioned Iranian 

entities, such as Persian Gulf Petrochemical Industry Commercial Co. (PGPICC) and Triliance Petrochemical Co. Ltd. 

(Triliance), access to the international financial system and obfuscate their trade with foreign customers. These designations 

included several Hong Kong-based front companies. 

• In February 2023, we designated Iranian petrochemical producer Amir Kabir Petrochemical Company (AKPC), a major 

polyethylene producer whose products were being shipped to 

buyers in China. 

• In December 2022, we designated dozens of actors in multiple 

jurisdictions that facilitated the sale of hundreds of millions of 

dollars’ worth of oil on behalf of Iran’s Islamic Revolutionary 

Guard Corps–Qods Force (IRGC–QF), much of which was sold 

to buyers in China. This action supplemented May 2022 designations targeting elements of the same network, which included three Chinese firms that had purchased millions of barrels of Iranian oil. 

Q.12. Do you support legislation that would eliminate of the sunset 

provision in the Iran Sanctions Act of 1996? 

A.12. The value of a sunset in legislation is that it allows Congress 

to review and renew the intent behind legislation on a periodic 

basis and to send a signal to the regime about its conduct. A sunset 

also necessitates the review of authorities to ensure that legislation 

is attuned to the current methodologies and typologies of a threat 

actor and to ensure that authorities are kept current based on the 

latest threatening activity of sanctions targets in countries such as 

Iran. 

Q.13. The Office of Foreign Assets Control recently reissued its 

longstanding General License, which permits virtually any energyrelated transaction with Russia. 

How long does the Administration intend to allow such transactions with sanctioned entities and persons to proceed? 

Why is the Administration allowing Russia to access these significant U.S. dollar flows? 

A.13. On May 15, OFAC issued Russia-related General License 

(GL) 8G, which extends the authorization for energy-related payments involving certain sanctioned Russian financial institutions, 

for 3 months. This GL helps preserve stability in energy markets 

by mitigating any shocks that would occur in an abrupt transition 

away from Russian energy. It remains consistent with our overarching objectives as we work alongside Coalition partners to reduce Russian Government revenues derived from crude oil and refined products under the price cap while keeping the cost of energy 

manageable for people all over the world. 

This GL has also helped our partners and allies facilitate an orderly reduction of their dependence on Russian energy. We are 

strongly encouraged by their progress and are taking care to preserve their support on key lines of efforts, such as the price cap. 

Of note, GL 8G does not affect the prohibition on importing crude 

oil, petroleum, liquefied natural gas, coal, and similar products of 

Russian Federation origin into the United States under Executive 
64 

Order 14066. Those imports remain prohibited, and GL 8G only authorizes certain energy-related transactions if they involve specific 

sanctioned banks or their subsidiaries but have no other sanctions 

nexus. 

Q.14. What steps is Treasury taking to curb global reliance on the 

Russian Civil Nuclear Industry? 

A.14. Treasury is committed to working with interagency partners 

and with like-minded countries to reduce our collective reliance on 

Russian enriched uranium and fabricated nuclear fuel, including by 

developing alternative supply options and pursuing a broad-based 

renewable energy agenda. Our efforts in this space are closely 

aligned with the two overall goals of our broader Russia sanctions 

policy: degrading Russia’s capacity to prosecute its war in Ukraine, 

including by restricting and reducing Russian State revenue, while 

simultaneously avoiding damaging disruptions to global markets 

and the world economy. Treasury understands the importance of 

working towards an eventual reduction of U.S. and partner country 

reliance on Russia for nuclear fuel and is likewise mindful of the 

ongoing vulnerability of key European partners to a supply disruption. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR FETTERMAN FROM ELIZABETH ROSENBERG 

Q.1. I’ve heard directly from my constituents in Pennsylvania 

about ongoing anti-Asian racism and violence. We must be very 

clear: today’s concerns are about the Chinese Communist Party 

Government—not people of Chinese descent and not Asian-Americans. The bottom line is that we must not enable racism as we consider our national security. 

What is your agency doing to combat anti-Asian racism and 

make sure our response is focused on the Chinese Government? 

A.1. Treasury’s economic actions with respect to the PRC Government are designed to strengthen U.S. national security and protect 

human rights; any differences in approach to national security between our respective Governments are differences with the PRC 

Government, not with the Chinese people. 

During the upsurge across the Nation in anti-Asian rhetoric and 

violence related to the pandemic, Treasury hosted a training event 

open to the entire workforce in collaboration with seven Federal financial regulatory and supervisory agencies (the Federal Reserve 

Board, Federal Deposit Insurance Corporation, Consumer Financial 

Protection Bureau, National Credit Union Administration, Federal 

Housing Finance Agency, Securities and Exchange Commission, 

and Office of the Comptroller of the Currency). The title of the program was ‘‘Unmasking Anti-Asian Violence, Xenophobia, and Bias’’, 

which aligned with the White House Executive Memorandum 

issued in January 2021 condemning such acts. This session was 

conducted by a Vietnamese American neuroscientist and diversity 

and inclusion subject matter expert, Dr. Steve Robbins. This training remains available on-demand to all Treasury employees. 

Additionally, Treasury has had a long-standing robust infrastructure as well as programs, resources, training, and regular assess-
65 

ments dedicated to workforce diversity and equity and workplace 

inclusion. The following are a few examples: 

• A Counselor for Racial Equity position was established within 

the Office of the Deputy Secretary in 2021. The Counselor is 

charged with coordinating Treasury’s efforts to advance racial 

equity including engaging with diverse communities throughout the country and to identify and mitigate barriers to accessing benefits and opportunities with the Department. 

• In 2022, Treasury established the Office of Diversity, Equity, 

Inclusion, and Accessibility (DEIA) that serves as a center of 

excellence to modernize the Department’s overall DEIA strategy and drive cohesive implementation and accountability 

across the departmental offices and bureaus. The new structure allows for greater, more concentrated, and dedicated focus 

on civil rights compliance and mitigation, as well as DEIA accountability, competencies, and transparency. 

• Treasury developed and deployed a data mapping tool that 

measures workforce diversity, equity, and inclusion compared 

to relevant benchmarks. 

• The Office of DEIA developed a three-tiered online training 

program consisting of DEIA 101 fundamentals, Conscious Inclusion Competencies aimed at shaping workplace inclusion, 

and DEIA for Managers that guides the management of a diverse workforce. 

• Regular messages are sent from the Treasury Secretary to the 

entire workforce to reinforce leadership commitment to DEIA 

in conjunction with Federal commemorative months. Ad hoc 

messages have been sent to the workforce from the Treasury 

Chief Diversity & Inclusion Officer following tragic events that 

impact particular people of color, such as the Asian community, to express sentiments of concern and provide resources 

for employee support. 

• Treasury has an Asian Pacific American Employee Resource 

Group, abbreviated as ‘‘TAPA’’. The objective of TAPA is to 

provide a safe environment where Asian Pacific Americans and 

ally employees can actively engage in discussions of shared 

issues or concerns to help promote a diverse and engaged Federal workplace and uncover issues that are specific to the 

needs of the Treasury Asian Pacific American community. 

RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN 

FROM PAUL M. ROSEN 

Q.1. According to your last annual report, CFIUS reviewed around 

450 transactions—roughly triple the number that CFIUS reviewed 

in 2014. The number and complexity of CFIUS’s covered transactions will continue to increase—because technologies are getting 

more complex and our adversaries are seeking new ways to get 

ahead. 

How scalable is the CFIUS model for the future, and how much 

more volume and complexity can CFIUS handle while still functioning with the level of efficiency it has now? 
66 

A.1. CFIUS remains focused on having sufficient resources to process cases in an effective and efficient manner consistent with its 

national security mission. Consistent with Congressional appropriations and bipartisan support, Treasury’s Office of Investment 

Security continues to add resources to address its mission and actively hire new staff to meet the increased volume and complexity 

of transactions. Although the case docket is anticipated to grow 

marginally in the future, the Treasury is currently positioned to 

handle this increase while continuing to meet statutory deadlines 

based upon the Committee’s current jurisdiction. 

However, CFIUS’s case-by-case screening mandate is very resource-intensive. The CFIUS model has been able to scale after 

FIRRMA to handle the increased caseload and complexity; however, if the cases, complexity, or jurisdiction grow, without more resources—both at Treasury and within the interagency—CFIUS will 

not be as effective or efficient in reviewing and resolving transactions that fall within its jurisdiction. In the end, we must ensure 

that CFIUS can continue to conduct timely and in-depth analysis 

of the effect of transactions involving foreign investment on the national security of the United States, so any change to the Committee’s jurisdiction, caseload, or other requirements must be reviewed 

with this shared goal in mind. 

Q.2. Specifically, what are the key limiting factors that Treasury 

and the other CFIUS agencies would need to address in order to 

take on a larger number of covered transactions every year? 

A.2. The key limiting factor in the ability to substantially scale the 

scope of the Committee’s work beyond its current workload is the 

requirement of a thorough case-by-case analysis conducted by the 

interagency. Each case requires substantial staff hours to review, 

potentially investigate, and subsequently obtain, depending on the 

case, a certification by an Assistant Secretary, or Deputy Secretary 

or Cabinet head at each CFIUS member agency that a reviewed 

transaction has no unresolved national security issues. As the 

CFIUS process currently requires the approval of at least nine senior-level officials to resolve each case, in addition to requiring increased resources at Treasury and across the Committee, CFIUS 

might need to change its internal processes and procedures in 

order to take on a materially larger number of covered transactions 

every year. 

Q.3. Can you describe what Congress should consider when evaluating proposals to expand CFIUS jurisdiction to cover greenfield investments or transactions that would result in a foreign company 

or Government being able to moderate content distributed to U.S. 

citizens? 

A.3. Any expansion to CFIUS’s jurisdiction must consider resources, the most appropriate and effective use of CFIUS, and 

whether such changes are consistent with the fact and time-intensive case-by-case review process that Congress enacted. Historically, the Committee’s jurisdiction has been characterized as a ‘‘tool 

of last resort’’ in part to balance the need to protect national security with the importance of maintaining an open investment environment. This is embodied in the Defense Production Act’s requirements that, to act, the President must find, among other things, 
67 

that other provisions of law do not provide adequate and appropriate authority for the President to protect the national security. 

Thus, any proposals to expand CFIUS’s jurisdiction should first 

consider whether an authority separate from CFIUS can or should 

be modified or created that could more precisely or efficiently address the discrete national security concerns identified. Doing so 

will not only lead to a more efficient use of limited resources but 

also avoid subjecting a potentially substantial number of transactions to a complex and resource-intensive regulatory process such 

as CFIUS without a material impact to national security. In the 

end, CFIUS stands ready to continue to execute the national security function that Congress prescribed. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT 

FROM PAUL M. ROSEN 

Q.1. During your testimony before the Banking Committee on May 

31, you stated that a forthcoming Executive order would impact 

outbound investment from the U.S. that ‘‘comes with know-how 

and expertise to certain specific sectors and subsectors such as advanced semiconductors, artificial intelligence, and quantum computing.’’ 

Does the Administration intend to apply its outbound investment 

screening to sectors beyond ‘‘advanced semiconductors, artificial intelligence, and quantum computing?’’ If so, what sectors? 

A.1. The Administration is currently in the process of developing 

a narrowly tailored program to address national security risks presented by certain outbound investments from the United States. 

The specific sectors and subsectors under consideration include advanced technologies—such as semiconductors and microelectronics, 

quantum information technologies, and certain artificial intelligence systems—that enable next-generation military, surveillance, and intelligence capabilities. The final decision and contours 

of any potential program is up to the President, but Treasury will 

continue to work constructively with Congress to protect national 

security in the context of this program and beyond. 

Q.2. If the U.S. restricts outbound investment in certain sectors to 

China, what is the risk that other Nations backfill U.S. capital and 

develop closer ties to China? 

A.2. It is critical that the United States work with allies and partners on this issue. Through concerted efforts by this Administration, Treasury, working with the Departments of Commerce, State, 

and others, have engaged with our allies and partners concerning 

the identified national security concerns. As a result, these issues 

have received increased attention and interest from allies and partners, including through public statements by the United Kingdom, 

European Commission, and others on this subject. The United 

States will continue to work closely with key countries to encourage 

policy developments that address our collective national security 

concerns. 

Q.3. What areas of focus for technology and investment are most 

important to address with respect to geopolitical competition with 

China? How can the public and private sectors cooperate to ensure 
68 

that U.S. and allied critical technology and data does not give 

asymmetrical power advantages to Beijing? 

A.3. Consistent with its authorizing statute, CFIUS’s consideration 

of national security risk is not country specific and is based on a 

holistic assessment of the specific facts of each transaction. The 

Committee often considers risks related to emerging technologies, 

Americans’ sensitive data, and supply chains important to national 

security. In the President’s recent Executive order, ‘‘Ensuring Robust Consideration of Evolving National Security Risks by the 

Committee on Foreign Investment in the United States’’ (E.O. 

14083), several examples of industries fundamental to national security were identified, including microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, 

advanced clean energy, climate adaptation technologies, critical 

materials, and elements of the agriculture industrial base that 

have implications for food security. CFIUS carefully considers risks 

to these and other key industries arising from transactions before 

the Committee. 

The Office of Investment Security engages in extensive outreach 

with public and private stakeholders to educate about the CFIUS 

process and the national security risk factors that the Committee 

considers. As one example, just as financial institutions are subject 

to ‘‘know your customer’’ requirements, we frequently encourage 

U.S. businesses to ‘‘know your investor.’’ Before accepting investment, it is crucial that businesses understand the identity and role 

of even limited partners who may gain access to their business’ 

data or technology. CFIUS regularly requests this information from 

transaction parties, and it is beneficial for U.S. businesses to perform this diligence early in the fundraising process. 

Q.4. Recently, there has been considerable attention on People’s 

Republic of China (PRC)-connected purchases of agricultural land, 

and the potential impact on the security of the U.S. food supply 

chain. 

What is Treasury doing to prevent the weaponization of farmland 

against Americans? 

A.4. CFIUS recognizes the real risk that some foreign purchases of 

agricultural land can pose to national security. Indeed, any foreign 

control of or influence over a critical supply chain such as agriculture is something that the Committee considers carefully. Under 

its authority, the Committee has jurisdiction and does review certain transactions involving agricultural land. To that end, the Department of Agriculture (USDA) plays a key role in the Committee’s discussions involving farmland and food security and serves 

as a co-lead agency on any CFIUS cases involving significant agricultural equities. While we are committed to continued engagement 

with USDA, most cases do not involve food and agriculture. Our 

current system gives us the flexibility to bring in USDA as a fullfledged member for just those cases where the Committee benefits 

from their insight. 
69 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR FETTERMAN FROM PAUL M. ROSEN 

Q.1. I’ve heard directly from my constituents in Pennsylvania 

about ongoing anti-Asian racism and violence. We must be very 

clear: today’s concerns are about the Chinese Communist Party 

Government—not people of Chinese descent and not Asian-Americans. The bottom line is that we must not enable racism as we consider our national security. 

What is your agency doing to combat anti-Asian racism and 

make sure our response is focused on the Chinese Government? 

A.1. I strongly agree that CFIUS’s mandate to address national security is and must be focused on an objective assessment of the 

threat, vulnerability, and consequence to national security that 

may arise in each transaction CFIUS considers. That is one of the 

many reasons why CFIUS takes such care to limit its reviews to 

the specific facts of each transaction and to keep a laser focus on 

our national security mandate. CFIUS’s role is to facilitate foreign 

investment consistent with the protection of national security. 

There is absolutely no place for racial or ethnic discrimination in 

the Committee’s work. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS 

FROM PAUL M. ROSEN 

Q.1. Two of the leading drone manufacturers are the Chinese companies Da Jiang Innovations (DJI) and Autel, both of which 

present a host of cyber and national security threats to the United 

States and our allies. They have used their monopoly power to prevent U.S. or allied drone companies from establishing themselves. 

Further, these Chinese companies are deploying drone platforms 

that would permit the Chinese Communist Party to see and/or collect data associated with Americans’ use of their drones (e.g., images, location data, etc.). This prompted a broad warning from 

DHS’s Cybersecurity and Infrastructure Security Agency on the 

threat posed to public agencies and private entities from the use 

of Chinese drones. DJI was even added to the U.S. Department of 

Commerce’s list in 2020 due to their support of human rights 

abuses. While there is certainly merit in considering whether and 

how to restrict the import of Chinese drones—especially for use by 

Federal, State, and local law enforcement agencies—please explain 

to me your thoughts on the U.S. developing an outbound investment restriction regime to reduce U.S. investment in these firms. 

Specifically, should limits or outright foreclose of U.S. capital to 

Chinese companies that, according to reports, pose serious national 

security risks to the U.S. be considered? 

A.1. The Administration is currently in the process of developing 

a narrowly tailored program to address national security risks presented by certain outbound investments from the United States. 

The specific sectors and subsectors under consideration include advanced technologies—such as semiconductors and microelectronics, 

quantum information technologies, and certain artificial intelligence systems—that enable next-generation military, surveillance, and intelligence capabilities. While I cannot comment on 

whether the investments into a particular company may or may 
70 

not be covered under any such program, the Administration has 

been clear on the overall purpose of restricting outbound investments that advance the technological capabilities of adversaries in 

certain sectors to the detriment of U.S. national security. If an Executive order is issued, the Administration would look forward to 

continuing to work with Congress to fully address identified national security risks under the program. 

RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN 

FROM THEA D. ROZMAN KENDLER 

Q.1. The number of parties on the Entity List increased significantly in recent years to address threats posed by end users seeking to access U.S. items and technology contrary to the national security and foreign policy interests of the United States. 

Please provide the number of parties that have been added to the 

Entity List each year for the past 7 years. Please also provide for 

each year the number of parties added to the Entity List that are 

based in the People’s Republic of China (PRC) or that BIS added 

for PRC-related activity. 

A.1. Entities located in the People’s Republic of China (PRC), (including Hong Kong) account for the second largest number of entries on the Entity List, second only to Russia following its further 

invasion of Ukraine in February 2022. The following table lists the 

number of entities added to the Entity List under the destinations 

of Russia, the PRC and Hong Kong, as well as the worldwide total 

outside of those countries, from the creation of the Entity List in 

1997 through August 2023. 
71 

BIS has also added entities located outside of the PRC to the Entity List based on PRC-related activity. For example, on June 12, 

2023, BIS added 15 entities located in Kenya, Laos, United Arab 

Emirates, South Africa, Malaysia, Singapore, Thailand, and the 

United Kingdom to the Entity List for providing training to People’s Liberation Army (PLA) pilots using Western and NATO 

sources. See 88 FR 38739 (June 14, 2023). BIS does not systematically track all entities located outside the PRC that are added to 

the Entity List for PRC-related activity, and as such, is unable to 

provide a complete list of such entities at this time. 

Q.2. What trends and factors are relevant for Congress to be aware 

of regarding the number of entities added to end user lists, particularly with regard to the countries in which those entities are 

based? 

A.2. BIS adds entities to the Entity List upon a determination that 

that there is reasonable cause to believe, based on specific and 

articulable facts, that an entity has been involved, or poses a significant risk of being or becoming involved in, activities that are 

contrary to the national security or foreign policy interests of the 

United States. In consultation with our interagency partners at the 

Departments of State, Defense, and Energy, we ensure entities 

added to the Entity List meet that standard. 

The Entity List, as well as other prohibited parties’ lists (i.e., the 

Denied Persons List and the Military End User List) currently encompass more than 2,000 entities through approximately 2,500 entries (i.e., affiliates, subsidiaries, etc., sometimes located in multiple countries), in approximately 80 countries. 

Under the Biden administration, the Entity List has been an important tool for protecting U.S. national security and foreign policy 

interests, as evidenced by the fact that more entries were added in 

2022 than in any other year of the Entity List’s existence. While 

a high number of total listings is not necessarily an objective of 

BIS, the Entity List is a potent tool that is both flexible and targeted and can be employed quickly based on circumstances on the 

ground, as evidenced by numerous Russia-related actions. Expanded use of the Entity List also has the benefit of being well understood by industry and foreign partners, and the clear processes 

and standards demonstrate U.S. commitment to the rule of law. 

BIS has undertaken significant Entity List actions against the 

PRC or PRC-related entities for their support of the PRC’s military 

actors and military modernization efforts, support of the PRC’s 

weapons of mass destruction programs, and for enabling or engaging in human rights abuses. The nearly 250 entities added during 

this Administration make up over 30 percent of all PRC entities 

added since the creation of the list and demonstrate the serious 

and sustained focus by the Administration on entities within the 

PRC engaged in activities contrary to U.S. national security and 

foreign policy interests. It is also worth noting that the approach 

taken by this Administration is deliberate, targeted, and focused on 

particular entities of concern and builds on the work done in prior 

Administrations that identified significant large PRC firms of concern, such as Huawei, and added over 150 Huawei affiliates and 

subsidiaries. This illustrates further that focusing solely on the 
72 

number of entities or entries added to the Entity List is not necessarily the most effective metric for determining the national security impact of Entity List actions. 

In addition to addressing the national security and foreign policy 

threats related to the PRC, BIS has been simultaneously imposing 

a series of actions against the Russian Federation for its brutal further invasion of Ukraine. To date, more than 600 entities have 

been added to the Entity List for acquiring or attempting to acquire items subject to the EAR in support of Russia’s military. This 

number includes entities located in third countries, such as the 

PRC. 

BIS continues to add entities for other acts that are contrary to 

U.S. national security and foreign policy interests, such as engaging in cyber exploits that threaten the privacy and security of individuals and organizations worldwide, enhancing the military capabilities of adversaries, or preventing BIS from performing end-use 

checks. 

Q.3. What efforts, if any, is BIS undertaking to prevent Entity List 

evasion through corporate restructuring or other evasion tactics? 

Have such efforts included listing derivative or native language 

business affiliates as AKAs on the Entity List? 

A.3. BIS vigorously uses the Entity List to target parties for which 

there is reasonable cause to believe, based on specific and 

articulable facts, that the entity has been involved, is involved, or 

poses a significant risk of being or becoming involved in activities 

that are contrary to U.S. national security and foreign policy interests. 

With our interagency partners, we have added over 2,000 entities 

to the Entity List under 2,500 entries in over 80 countries. Where 

appropriate, BIS includes entries for affiliates and subsidiaries, including those based in other countries. For example, there are over 

150 entries related to Huawei on the Entity List, which encompass 

Huawei subsidiaries and affiliates in multiple countries across the 

globe. Moreover, where there is evidence of evasion by a derivative 

entity or affiliate of an entity on the Entity List, with our interagency partners, BIS will modify the listing to include aliases/front 

company names. 

In addition, whenever an entity on the Entity List is a party to 

a transaction (not just the recipient of items), BIS imposes a license requirement for the export, reexport, or transfer (in-country) 

of any items included in the License Requirement column of an entity’s entry on the Entity List. This requirement is aimed at reducing risk of diversion. 

Furthermore, through the EAR and published guidance on our 

website, BIS recommends exporters do their own due diligence to 

look for ‘‘red flags’’ when engaging in a transaction. As a first step, 

exporters must screen parties in their transactions against the Entity List. If, for example, a company has the same address as (e.g., 

is co-located with) a listed entity, this is a ‘‘red flag.’’ Here, BIS recommends an exporter undertake sufficient due diligence to verify 

that the company co-located with the listed entity is not, in fact the 

listed entity and does not intend to transfer (in-country) the requested items to the listed entity. Moreover, if the name or address 
73 

of a company involved in a transaction is a near match to a name 

on the entity list, this is also a ‘‘red flag.’’ In this circumstance, BIS 

recommends that detailed due diligence be undertaken and the exporter examine other factors to determine if the company involved 

in the transaction is the same as the listed entity. Such factors 

may include, but are not limited to, the company’s name, address, 

corporate officers, business activities, and contact information. In 

addition to following BIS’s guidance, exporters can also contact BIS 

if there are questions related to a potential transaction. 

As relevant and appropriate, BIS will also exercise its enforcement powers to address violations of export controls. Our intelligence analysts and special agents are the foremost experts on export controls and are dedicated solely to BIS’s enforcement mission 

and are closely monitoring for evasion including through corporate 

restructuring and other evasion tactics. In addition to our extensive 

administrative authorities, BIS is working closely with our sister 

agencies like the Department of the Treasury’s Financial Crimes 

Enforcement Network and Office of Foreign Assets Control, as well 

as the Department of Justice to hold bad actors accountable, wherever they may be located. Where appropriate, BIS is working to coordinate listings based on the unique authorities and criteria that 

each agency oversees. 

Q.4. In recent years, BIS has issued a number of foreign direct 

product rules. What analysis has BIS conducted to determine the 

effectiveness of these rules in achieving their intended effect and 

evaluate the impact of these rules on U.S. exporters? 

A.4. BIS consults with industry, analyzes commercial and Government trade data and classified information, and engages with foreign Governments to determine the effectiveness of our controls. 

This analysis includes monitoring changes in global exports for 

items subject to Foreign Direct Product (FDP) rules to restricted 

countries. For example, through this process BIS identified decreased global exports of items in Supplement No. 7 to Part 746 of 

the EAR following the publication of the Russia/Belarus/Temporarily occupied Crimea region of Ukraine FDP rule in February 

2023. 

Q.5. In a speech last year, you noted that exporters are not using 

the Strategic Trade Authorization license exception as intended, resulting in additional but unnecessary compliance work for exporters that also requires additional license reviews for BIS. Since 

then, have you seen a change in exporters’ use of STA, and if so, 

can you quantify the time and resources BIS must commit to license application reviews for exports to U.S. allies and partners? 

A.5. Between FY 2019 and FY 2022, there was a general upward 

trend of exporters using Strategic Trade Authorization license exception (STA). We have not seen a notable change in the use of 

STA since I delivered my speech. To increase STA-utilization rates, 

BIS continues to educate companies in the United States and 

abroad on the benefits of STA. 

BIS commits considerable resources to license application reviews for exports to U.S. allies and partners. If we define U.S. allies and partners as members of the Global Export Control Coalition (Supp. No. 3 Part 746) and countries in Country Groups A:5 
74 

and A:6 (Supp. No. 1 Part 740), these license applications amount 

to approximately 54 percent (FY 2022) of our overall license application workload. The average processing time (APT) for these license applications has increased from approximately 22 days (FY 

2019) to approximately 25 days (FY 2022). Although this is considerably shorter than the overall APT for all license applications of 

approximately 44 days (FY 2022), the processing of these licenses 

takes considerable time and resources. 

Q.6. At the Committee’s February 28 hearing, former Assistant 

Secretary Kevin Wolf emphasized the need for the U.S. Government to work with allies and partners to establish their own domestic export control mandates, authorities, and resources. International engagement and action are critical elements of an effective 

export control system, and this Administration is doing impressive 

work in this area. 

Do U.S. allies and partners have similar export control authorities and resources as those in the Unites States? 

A.6. U.S. allies and partners have differing legal authorities under 

which export controls are applied and enforced and commit varying 

resources to export control implementation and enforcement. In 

general, allied and partner authorities are more limited than the 

authorities of the United States. Allied export control systems are 

generally limited to controlling the export of (I) items on one of the 

four multilateral regime lists; and (II) activities of their citizens involving unlisted items only if they are specifically for the development or production of weapons of mass destruction. Thus, unlike 

the U.S. export control system, the allied export controls systems 

generally do not have the authority to impose controls on (I) commodities, software, and technologies that are not on a multilateral 

regime list; and (II) exports of unlisted items to specific end users 

of concern. 

Notably, however, in response to Russia’s further invasion of 

Ukraine, some allies and partners enacted new authorities that allowed them to align their controls with those of the United States. 

Thus, for example, the European Commission adopted authorities 

which allowed it to align its list-based controls against Russia with 

that of the United States, allowing the EU members to control 

items that are outside of the four multilateral regime lists. Notwithstanding this alignment, the European Union’s system is not 

fully aligned with the United States. In the EU, if an item is listed 

in its ‘‘Annex I,’’ an export authorization or license is required. If 

the item is not on the list, it is generally not controlled. In the U.S. 

system, BIS lists items on the Commerce Control List (CCL). However, if an item is not on the CCL, it does not mean that it is not 

controlled. It could be classified as EAR99 and may require a license based on to whom or for what purpose the item is being 

shipped. 

The EU and U.S. authorities also differ in how they are administered. In the United States, BIS establishes the regulations, administers the licenses, and implements the regulations. In contrast, the 

EU’s export control authority is more diffuse. The European Union 

establishes dual-use export control regulations for its member 

countries and the member States are responsible for issuing export 
75 

licenses and implementation. Given the decentralized nature of the 

EU’s system, the resources each member State commits to administering licenses and implementation also differ. 

Q.7. If not, please describe what steps BIS is taking to encourage 

and provide technical assistance to allies and partners in establishing such authorities and resources? 

A.7. Since my confirmation, we have worked vigorously to rebuild, 

expand, and strengthen our relationships with partners and allies 

across the world, and export controls is one key area in which we 

have been building robust lines of communication. I engage in regular communication with our allies to share insight and provide 

such assistance. BIS actively participates in fora such as the U.S.- 

EU Trade and Technology Council (TTC); the Indo-Pacific Economic Framework (IPEF); and the nearly 40 Government Global 

Export Controls Coalition built to respond to Russia’s brutal war 

against Ukraine, where we provide technical assistance on our authorities and establishing such authorities. 

BIS works with partner Governments to identify regulatory and 

institutional gaps and to develop resource requirements. Through 

financial support from the State Department’s Export Control and 

Related Border Security Program (EXBS), BIS provides a wide 

range of technical assistance, from Executive exchanges to training 

workshops to the provision of detection equipment and specialized 

training for border control and enforcement agencies in four core 

areas: laws and regulations, licensing, Government-industry cooperation, and interagency and international cooperation and coordination. 

From FY 2021 to FY 2022, BIS more than doubled our capacitybuilding international engagement portfolio, from approximately 23 

to over 60 engagements. We expanded our EXBS activities from 

about two and three countries in 2019 and 2020, respectively, to 

more than 21 countries in FY 2023. The focus of these engagements were the strengthening of countries’ domestic strategic trade 

control implementation and enforcement as well as fostering compliance with the Export Administration Regulations. 

Q.8. Would it strengthen our export control system if Congress, by 

statute, established a new office within BIS to coordinate international export control policy work and provided dedicated resources to carrying out this mandate? 

A.8. Coordination among allies is among the most critical elements 

to any successful export control administration and implementation, and as Under Secretary Estevez has noted numerous times, 

BIS and our interagency partners are constantly working together 

to review and refine our export controls in response to the evolving 

national security context. 

For BIS, this includes evaluating and refining our overall approach, and how our resources are allocated. In order to address 

our substantially growing responsibilities, BIS plans to implement 

a realignment of staff under Export Administration (EA), consistent with the Export Control 

Reform Act of 2018 (ECRA) and in accordance with the Commerce, Justice, Science and Related Agencies Appropriations Act, 
76 

2023 (P.L. 117-328), and which has received partial approval from 

Congress. 

This reorganization plan updated EA’s leadership structure and 

offices to better align existing resources with the important mission 

that Congress has given us. As part of this reorganization, we will 

establish a Principal Deputy Assistant Secretary (PDAS) for Strategic Trade and Technology Security, and two Deputy Assistant 

Secretary (DAS) positions: Strategic Trade and Technology Security. All of these positions would be filled by career Senior Executive Service (SES) personnel. 

A new International Policy Office is being established under the 

PDAS, which will formalize current international policy engagement activities into a consolidated unit. This office will operate in 

a cross-functional manner along with the other program offices as 

well. This office will also work closely with its interagency counterparts, including the Department of State’s Bureau of International 

Security and Nonproliferation, which has responsibility for export 

control diplomacy with foreign Governments and for multilateral 

export control regimes. 

BIS has briefed Committee staff on our full reorganization proposal in detail and stands ready to review and consult on any additional proposals you may wish to consider to further formalize or 

institutionalize this important update to our approach. 

Q.9. In a speech at the Brookings Institution, National Security 

Advisor Jake Sullivan described the approach of protecting 

foundational technologies ‘‘with a small yard and a high fence.’’ He 

previously spoke of ‘‘families of technologies that will be of particular importance of the coming decade’’—including microelectronics, quantum information systems, artificial intelligence, biotechnologies, and clean energy technologies—that are ‘‘new sources 

of economic growth [and . . . ] are driving advanced military modernization efforts.’’ What additional authorities, resources, technical 

expertise and funding, if any, would assist the Office of Export Administration in evaluating these technologies and determining 

whether and when export controls may be appropriate? 

A.9. I agree that it is imperative that the United States and our 

allies safeguard our core technologies by continuously and 

proactively reviewing and updating our export control policies in 

order to protect foundational technologies. 

The President’s FY 2024 budget provides Export Administration 

with the resources necessary to sustain our effective work across 

our areas of responsibility, including the evaluation of the families 

of technologies outlined by the National Security Advisor, as well 

as others. 

BIS is working to implement a reorganization of Export Administration (EA) that will help to address our substantially growing responsibilities and ensure that the national security and economic 

policy priorities identified under Export Control Reform Act of 2018 

(ECRA) are met effectively and expeditiously. This reorganization 

plan has received partial approval from Congress. 

BIS plans to implement this realignment of staff under EA consistent with the ECRA and in accordance with the Commerce, Jus-
77 

tice, Science and Related Agencies Appropriations Act, 2023 (P.L. 

117-328). 

In order to meet BIS’s growing responsibilities and enhance our 

ability to advance the national security and foreign policy objectives of the United States, EA is working to implement a reorganization and realignment of staff. BIS has briefed the Committee 

on this reorganization in detail, but to briefly summarize, we have 

proposed a new leadership structure composed of a Principal Deputy Assistant Secretary (PDAS), and two career Senior Executive 

Service Deputy Assistant Secretaries for Strategic Trade and Technology Security, respectively. Additional notable changes include: 

1. Consolidating EA’s core international coordination work into a 

new International Policy Office reporting to the PDAS. Currently these efforts are spread across EA’s program offices. 

2. Moving the Munitions Control Division (MCD), which reviews 

license applications for 600 series items, that is currently 

housed within the Office of Strategic Industries and Economic 

Security to the renamed Office of National Security Controls 

(ONS). Many of the items reviewed by MCD’s engineers are 

generally designed for military systems, but are related to 

items reviewed by ONS engineers (e.g., aircraft, aircraft engines, electronics, ground vehicles, and telecommunications 

equipment), and the same engineering or technical expertise 

applies regardless of an item’s design or use. This move will 

allow engineers to more readily collaborate. 

3. Restructuring the Office of Technology Evaluation (OTE) so 

that it consists of two new divisions: the Emerging Technology 

Division and the Foreign Technology Analysis Division. The 

first, the Emerging Technology Division, is proposed to consolidate the engineers and policy analysts from various licensing divisions under OTE in order to enable increased focus on 

the critical and high-profile work of addressing ECRA Section 

1758 technologies. The second division, Foreign Technology 

Analysis Division, would similarly consolidate efforts currently spread across EA to increase focus specifically on determining foreign availability of technologies, as well as the impact of export control measures and the approval/denial of licenses. 

4. Transferring the Defense Industrial Base Division (DIB) from 

the Office of Technology Evaluation to the Office of Strategic 

Industries and Economic Security. DIB would also absorb the 

Section 232 Team and focus specifically on defense industrial 

base assessments and Section 232 work. 

The realignment of leadership and other changes will allow EA 

to gain efficiencies, increase performance, and right size divisions 

according to need and focus and to better integrate BIS’s new Information and Communications Technology and Services (ICTS) 

supply chain security program. 

The Ukraine supplemental funding illustrates the ways in which 

additional authorities can help BIS accomplish its missions. Specifically, providing BIS with the flexibility in direct-hiring authority 

would clear administrative hurdles in filling important positions. 

The Ukrainian supplemental funding allowed BIS to hire addi-
78 

tional export analysts with key skills and experience that are supporting our mission. Applying a similar model—to include flexible 

hiring authorities—to expand our capabilities, particularly on a 

permanent basis as the Ukraine supplemental funding is time-limited, would be beneficial. 

BIS has briefed Committee staff on our full reorganization proposal in detail, and stands ready to review and consult on any additional proposals you may wish to consider to further formalize or 

institutionalize this important update to our approach. 

Q.10. The Export Control Reform Act, in 50 U.S.C. 4813(a)(6), requires that BIS ‘‘establish a process for an assessment to determine 

whether a foreign item is comparable in quality to an item controlled under this subchapter, and is available in sufficient quantities to render the United States export control of that item or the 

denial of a license ineffective, including a mechanism to address 

that disparity.’’ Please describe the process that BIS has established for this purpose. 

A.10. BIS utilizes available open-source, proprietary, and classified 

information in coordination with the Intelligence Community as 

well as the U.S. and international law enforcement community to 

assess the foreign availability of an item. The issue of foreign availability is one example of an important consideration in the process 

for identifying and implementing appropriate controls on 

foundational technologies. Because such technologies are already in 

production, there are often developers and producers of such technologies in foreign countries, thereby making new unilateral controls less effective. Additionally, foundational technology can include former multilaterally controlled items that have been decontrolled, many times because of widespread foreign availability outside of regime members. As a result, foreign availability and the 

impact of controls on the development of such technologies in the 

United States should be carefully considered in accordance with 

ECRA. 

As part of Export Administration’s reorganization plan, we will 

be realigning our staff and resources to consolidate and invigorate 

our analytical work in emerging and foundational technologies as 

well as foreign technology analysis by creating two formal divisions 

within the Office of Technology Evaluation: the Emerging Technology Division and the Foreign Technology Analysis Division. 

Q.11. The Export Control Reform Act, in 50 U.S.C. 4812(a)(2)(F), 

provided authority for BIS to control exports to ‘‘foreign military intelligence services.’’ Last year, as part of the National Defense Authorization Act, Congress expanded that authority to control exports to ‘‘foreign militaries, security, or intelligence services.’’ What 

is the timeline for implementing this statutory change? 

A.11. BIS appreciates the Committee’s support for enacting this 

key enhancement to our existing authorities and we are working 

closely with interagency partners to implement this expanded authority in a manner that does not conflict with activities and authorities under the jurisdiction of other agencies. We are working 

with our interagency partners to develop regulations implementing 

this authority. 
79 

Q.12. During the last Congress, Senators Wyden and Lummis introduced the Protecting Americans’ Data from Foreign Surveillance 

Act of 2022. 

Can you describe any concerns or potential unintended consequences of using export controls to address the policy concerns 

related to the foreign adversaries obtaining sensitive personal 

data? Can you estimate, if the bill were to use a definition of ‘‘personal data’’ similar to that of ‘‘sensitive personal data’’ in 31 CFR 

800.241, the number of license applications that such a bill would 

generate? Please also describe any additional resources, expertise, 

and staff BIS would need to implement this legislation. 

A.12. I share the concerns of the bill’s sponsors regarding the 

transmission of American’s personal data to foreign adversaries. 

BIS does not have existing expertise in data privacy and is unable 

to describe potential unintended consequences of using export controls to address the policy concerns related to foreign adversaries 

obtaining sensitive personal data. Currently, BIS’s controls generally apply to a physical good, software, or technology and, in certain limited cases, activities of U.S. persons. Our goal in controlling 

these categories of items is to prevent dual-use items—items that 

have a military and civilian application—as well as certain less 

sensitive military items, from being exported to countries of national security or foreign policy concern. Sensitive personal data 

does not fall within these existing statutory categories. 

As far as estimating the number of license applications based on 

the definition in 31 CFR 800.241, BIS would need to do further 

analysis to determine what data would be controlled under the legislation. For example, it is not clear that the definition of ‘‘sensitive 

personal data’’ in 31 CFR 800.241 meets the standards set forth in 

the legislation. The legislation requires the Secretary to identify 

categories of data of covered individuals that could be exploited by 

a foreign adversary and harm the national security of the United 

States if exported, reexported, or transferred (in-country) in a 

quantity that exceeds certain thresholds. The definition in 31 CFR 

800.241(b)(1) states that ‘‘[d]ata maintained or collected by a U.S. 

business concerning the employees of that U.S. business, unless the 

data pertains to employees of U.S. Government contractors who 

hold U.S. Government personnel security clearances’’ are not included. However, it is likely that such data would present national 

security concerns as outlined in the bill and would likely need to 

be covered under the new licensing regime. Accordingly, further information and expert analysis is needed to respond to this question. 

Q.13. Which agencies, outside of those that participate in the existing interagency licensing process, would be appropriate to include 

in an interagency process for controls and licenses regarding personal data? 

A.13. Commerce bureaus, programs, and offices, including the 

ICTS office, the International Trade Administration, the United 

States Patent and Trademark Office, and our Chief Data Officer, 

are actively engaged in ensuring responsible governance of data at 

home and globally. That said, we believe that imposing controls on 

transactions that raise national security concerns due to the cross- 
80 

border transfer of Americans’ sensitive personal data would also 

need to involve other departments and agencies that play a role in 

assessing and mitigating national security risks that arise in similar contexts. These would likely include relevant members of the 

Committee on Foreign Investment in the United States (CFIUS) 

and the Committee for the Assessment of Foreign Participation in 

the United States Telecommunications Services Sector (colloquially 

referred to as ‘‘Team Telecom’’), such as the Departments of Justice, Defense, Homeland Security, Treasury, State, Commerce, Energy, and the Office of the Director of National Intelligence. 

Q.14. A March 8 article in Financial Times described efforts that 

Chinese artificial intelligence groups undertake to evade U.S. export controls by using cloud providers and rental arrangements 

with third parties to obtain restricted technology. 

Does BIS need any additional authority to impose controls on 

such arrangements? 

A.14. On October 7, 2022, BIS, pursuant to an interagency decision, implemented significant new export controls on certain advanced computing and semiconductor manufacturing items destined to the PRC, as well as restrictions on certain supercomputer 

and semiconductor end uses (87 FR 62186, October 13, 2022). As 

BIS noted in the October 7 rule, the types of advanced computing 

items subject to the new controls can be used to enhance data processing and analysis capabilities, including through artificial intelligence. Among other things, these items are being used by the 

PRC to improve calculations in weapons design and testing including for weapons of mass destruction, such as nuclear weapons, 

hypersonics, and other advanced missile systems. 

BIS is aware of press reporting indicating that PRC-based entities, including those on the Entity List, are seeking to evade these 

controls by using cloud providers and rental arrangements to obtain access to advanced computing capacity enabled by restricted 

items. On October 17, 2023, BIS issued new controls to address 

this concern. Specifically, to address PRC operations inside and 

outside of China and Macau seeking to acquire advanced integrated circuits or access data centers with advanced integrated circuits, the October 17th rule expanded controls to more than 40 additional countries. The rule also added new end use controls to address circumvention of the controls. See 88 FR 73458 (Oct. 25, 

2023). BIS welcomes the opportunity to work with Congress to advance legislative proposals to ensure BIS has the statutory tools 

the agency needs to regulate the ability of foreign persons to remotely access and utilize the functions and capabilities of items 

subject to the EAR. 

Q.15. What considerations should Congress be aware of regarding 

these arrangements and potential controls or legislation related to 

cloud computing services? 

A.15. In addition to the controls put in place in October 2022 and 

October 2023, BIS also maintains controls on other key enabling 

technologies and certain end users that present U.S. national security or foreign policy concerns. In addition to semiconductors and 

related items, BIS maintains controls on encryption technology 

found in Category 5, Part 2, as well as ubiquitous hardware compo-
81 

nents that include: Graphics processing units (GPUs), Neural Network accelerators, central processing units (CPU), application specific integrated circuits (ASIC) units, or cloud computing technology. Restrictions also apply to certain inputs—software and IPlibraries, certain types of data—that are necessary for the production of such items. In other words, AI applications incorporated 

into software, technology, or equipment subject to the EAR may be 

subject to license requirements if the software incorporates 

encryption, or if it is necessary for the development, production, 

use, operation, installation, maintenance, or repair of a licensable 

item. 

Restrictions on items for export to the PRC or specified end users 

in the PRC include items necessary for the development of cloud 

computing systems within the PRC. As a result, PRC entities are 

subject to restrictions when it comes to obtaining certain items necessary for developing their own cloud computing capacity. In addition, BIS maintains a series of tools and restrictions that can be 

employed when particular entities are found to be engaging in activities contrary to U.S. national security or foreign policy interests. 

BIS stands ready to work closely with the Committee to address 

the challenges posed by cloud computing services. 

Q.16. In response to my question about BIS funding and resources, 

you mentioned that, ‘‘we can always do more with more, and the 

Ukrainian supplemental funding model would certainly be an example for how we could do more with respect to the China military 

modernization and human rights threat.’’ If Congress were to provide additional funding, what specific investments would best help 

BIS do more with more? 

A.16. The President’s FY 2024 budget provides Export Administration with the resources necessary to sustain our effective work 

across our areas of responsibility. 

In order to further address BIS’s substantially growing responsibilities, increase our effectiveness in protecting national security 

consistent with ECRA and in accordance with applicable appropriations acts, EA is working to implement a reorganization and realignment of staff, which has received partial approval from Congress. BIS has briefed the Committee on this reorganization in detail, but to briefly summarize, we have proposed a new leadership 

structure composed of a Principal Deputy Assistant Secretary 

(PDAS), and two career Senior Executive Service Deputy Assistant 

Secretaries for Strategic Trade and Technology Security, respectively. Additional notable changes include: 

1. Consolidating EA’s core international coordination work into a 

new International Policy Office reporting to the PDAS. Currently these efforts are spread across EA’s program offices. 

2. Moving the Munitions Control Division, which reviews license 

applications for 600 series items, that is currently housed 

within the Office of Strategic Industries and Economic Security to the renamed Office of National Security Controls. 

Many of the items reviewed by MCD’s engineers are generally 

designed for military systems, but are related to items reviewed by ONS engineers (e.g., aircraft, aircraft engines, electronics, ground vehicles, and telecommunications equipment), 
82 

and the same engineering or technical expertise applies regardless of an item’s design or use. This move will allow engineers to more readily collaborate. 

3. The current Office of Technology Evaluation will consist of 

two new divisions: the Emerging Technology Division and the 

Foreign Technology Analysis Division. The first, the Emerging 

Technology Division, is proposed to consolidate the engineers 

and policy analysts from various licensing divisions under 

OTE in order to enable increased focus on the critical and 

high-profile work of addressing ECRA Section 1758 technologies. The second division, Foreign Technology Analysis Division, would similarly consolidate efforts currently spread 

across EA to increase focus specifically on determining foreign 

availability of technologies, as well as the impact of export 

control measures and the approval/denial of licenses. 

4. Transfer the Defense Industrial Base Division from the Office 

of Technology Evaluation to the Office of Strategic Industries 

and Economic Security. DIB would also absorb the Section 

232 Team and focus specifically on defense industrial base assessments and Section 232 work. 

The realignment of leadership and other changes will allow EA 

to gain efficiencies, increase performance, and right size divisions 

according to need and focus and to better integrate BIS’s new Information and Communications Technology and Services (ICTS) 

supply chain security program. 

The Ukraine supplemental funding is an excellent model in illustrating the ways in which additional authorities can help BIS accomplish its missions. Specifically, providing BIS with the flexibility in direct-hiring authority would clear administrative hurdles 

in filling important positions. The Ukrainian supplemental funding 

allowed BIS to hire additional export analysts with key skills and 

experience that are supporting our mission. 

With respect to the PRC, BIS is focused on holistically considering the strategic environment in which our controls are applied 

to ensure we tailor those controls as narrowly as possible to meet 

our national security objectives. Our strategy relies on several factors, including: identifying the national security or foreign policy 

concern; tailoring a proposed control to achieve a specific defined 

purpose; understanding how a proposed control will affect U.S. 

technological leadership; the impact of any collateral consequences 

including potential retaliation; the willingness of allies and partners to implement similar controls; the consequences of inaction; 

and other factors. Our ability to more quickly, effectively, and deeply conduct this analysis and act on it will be enhanced by the reorganization outlined above, and could be further supported through 

additional funding. Applying a similar model as was provided via 

the Ukraine supplemental—additional funding and flexible hiring 

authorities—to expand our capabilities, particularly on a permanent basis as the Ukraine supplemental funding is time-limited, 

would be beneficial in expanding our international engagement, our 

capabilities for identifying and controlling new technologies, establishing more formal and lasting initiatives directly related to the 

PRC, Russia, and other key adversaries or sectors of concern. I look 
83 

forward to working to review and refine any proposals the Committee put forward. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT 

FROM THEA D. ROZMAN KENDLER 

Q.1. On May 21, the Cyberspace Administration of China (CAC) 

announced that products from a U.S. company, Micron, would be 

banned from key infrastructure projects due to an unjustified national security risk. America must send a clear message to the 

international community that this level of economic coercion is unacceptable and will be met with a swift and stern response. 

What actions is the Department of Commerce taking to respond 

to China’s ban on Micron’s products? 

A.1. The Department has engaged directly with the PRC to detail 

the U.S. position and seek further clarity regarding their action. 

The Department is working closely with our allies and partners to 

deal with distortions of the memory chip market caused by the 

PRC’s actions and to counter the use of coercive economic practices 

broadly. 

BIS also will continue working 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. Should national security 

concerns exist, we will not hesitate to vigorously use our tools to 

address the threat as appropriate. 

Q.2. Do you consider China’s Micron ban to be retaliation against 

export controls on the outflow of advanced computing and semiconductor manufacturing items to China imposed by the Department 

of Commerce on October 7, 2022? 

A.2. The decision to ban operators of key infrastructure from purchasing Micron Technology’s products due to ‘‘serious network security risks’’ has no basis in fact. The PRC’s action is an attempt to 

undermine the strong stance taken by the G7 against economic coercion. In fact, the PRC’s decision was delivered just one day after 

leaders from the G7 issued their first-ever statement on economic 

resilience and security, which expressed serious concern over the 

use of coercive economic practices, and committed to countering 

such efforts. 

Q.3. What are the escalation considerations that the Commerce Department is taking into consideration when considering a response? 

A.3. See response to Question 1. 

Q.4. On October 7, 2022, the Bureau of Industry and Security (BIS) 

implemented new export controls on the outflow of advanced computing and semiconductor manufacturing items to China. In response, People’s Republic of China (PRC) leader Xi is calling for an 

end to China’s reliance on U.S. companies, and curbing the role 

that prominent U.S. firms play in China. 

Will U.S. export controls encourage China to stand up their own 

domestic supply chains without exposure to the U.S.? What will be 

the effect of this? 
84 

A.4. So-called ‘‘design out’’ is a constant concern for export control 

policy and is one of the reasons why the United States must design 

and implement export controls with a scalpel approach, and wherever possible we must work to align our controls with those of 

international allies and partners. BIS takes into consideration a 

number of factors in developing controls that are as targeted as 

possible, while also achieving their intended national security and 

foreign policy objectives. In addition to undergoing robust rulemaking processes in promulgating final rules and engaging closely 

with international partners in coordinating approaches to export 

controls, BIS and our interagency partners regularly utilize available open-source, proprietary, and classified information in coordination with the Intelligence Community. Once rules are put in 

place, BIS coordinates with U.S. and international law enforcement 

community, to ascertain the effectiveness of these rules in achieving their intended effect and evaluating the impact of these rules 

on foreign supply chains of items and on U.S. exporters. 

These concerns also underscore the importance of engaging on a 

multilateral basis with partners and allies to de-risk and diversify 

supply chains, as well as the importance of critical investments in 

U.S. competitiveness like the CHIPs and Science Act, Inflation Reduction Act, and Bipartisan Infrastructure Law. 

Q.5. The mission statement of the Department of Commerce includes creating ‘‘economic growth and opportunity for all communities.’’ How does the Department factor in this objective when developing and implementing export controls? 

A.5. The Department of Commerce is an organization made up of 

13 primary bureaus with distinct missions, authorities, and capabilities across a broad range of areas. 

BIS’s absolute, foremost responsibility is protecting U.S national 

security and foreign policy interests by ensuring that U.S. technology is not used by adversaries to harm the United States and 

by working to promote American technological leadership. This responsibility stems from our authorizing statute, ECRA, which describes the policy goals for BIS’s administration and enforcement of 

the export control system. BIS, in close consultation with national 

security agencies, particularly the Departments of State, Defense, 

and Energy is focused intently on securing sensitive U.S. technologies that would give our adversaries an advantage, developing 

policies and strategies to protect these technologies, and reviewing 

license applications submitted by exporters to determine whether 

specific transactions are consistent with U.S. national security and 

foreign policy interests. 

Q.6. How will reduced access to the PRC market influence the ability of U.S. companies to compete globally? How does (BIS) account 

for U.S. business competitiveness when developing and implementing export controls? 

A.6. The PRC and the United States engage in substantial trade 

across myriad sectors. This trade is made up of tens of thousands 

of specific items, each of which has different characteristics, and 

most of which do not on their own present U.S. national security 

or foreign policy concerns. For example, over 20 percent of U.S. exports to the PRC involve agricultural products, which are not gen-
85 

erally subject to export licensing requirements. For the items that 

do present national security or foreign policy concerns, either based 

on their technical parameters or their intended end use or end 

user, BIS in close consultation with national security agencies, particularly the Departments of State, Defense, and Energy is appropriately using export controls to limit the PRC’s ability to obtain 

such items in order to confront the PRC’s military modernization, 

WMD development, human rights abuses, and destabilization efforts in the Indo-Pacific. Addressing these concerns protects U.S. 

national security and advances our values and interests, as well as 

those of our allies and partners. This is a dynamic threat environment, and BIS is constantly evaluating existing authorities and 

thinking about how we can employ our tools to maximum effect. 

Under ECRA, BIS is required to evaluate United States technological leadership when imposing controls. In order to fulfill our 

statutory mandate, we base our decisions on data and facts from 

open, proprietary, and classified sources. BIS works with exporters 

across the United States to give it a deep understanding of products and the economy, including the work it takes to bring products 

to market, the R&D that goes into new technology, foreign availability, and more. BIS applies a national security lens where it 

matters to the underlying strength and health of our Nation informed by the commercial relationships of the private sector, and 

the innovation environment advanced by U.S. businesses. We work 

to avoid restrictions that hurt the international competitiveness of 

U.S. industry unless there are real national security benefits. 

Q.7. What steps has BIS taken and to ensure that U.S. partners 

such as Japan, Germany, the Netherlands, or South Korea do not 

backfill U.S. export controls? 

How does BIS plan to prevent backfilling of U.S. export controls 

in the future? 

A.7. BIS is in constant communication with international allies and 

partners that share our democratic values, security, and other interests to help them understand our views on the current threat 

environment, explain our approach to export controls, and to enlist 

their assistance in aligning controls. 

With respect to controls on semiconductor manufacturing equipment and related items that BIS implemented tough controls on for 

the PRC in October 2022 and updated those controls in October 

2023. In the interim, both Japan and the Netherlands subsequently 

imposed similar restrictions under their own laws. 

BIS will continue to guard against noncompliance with our export control rules by any company, in the PRC or elsewhere. BIS 

utilizes available open-source, proprietary, and classified information in coordination with the Intelligence Community, as well as 

the U.S. and international law enforcement community, to detect 

violations of export controls and, where appropriate, pursue criminal and administrative penalties and utilize regulatory tools such 

as the Unverified List (UVL) or the Entity List to impose license 

requirements on parties of national security or foreign policy concern. BIS, in close consultation with national security agencies, 

particularly the Departments of State, Defense, and Energy contin-
86 

ually assesses PRC entities’ compliance with our export controls 

and appropriate responses. 

These are matters that we make clear to our allies and partners 

as well so that they and their domestic companies understand the 

importance of compliance with U.S. export controls and the potential costs of noncompliance. 

Q.8. What is the possibility of greater multilateral coordination of 

dual use technologies? 

A.8. The Department of State leads the coordination of international export controls with foreign Governments and multilateral 

regimes. BIS works in close coordination with State and other national security agencies and regularly consults with foreign Governments on various export control matters, including within the four 

multilateral export control regimes and on a bilateral basis. As 

Congress noted in the Export Control Reform Act of 2018 (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 less effective for two reasons. First, the countries or parties of concern may 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. In addition to U.S. ongoing collaboration via the 

four primary existing multilateral export control regimes, the 

Biden administration has worked tirelessly to revitalize and build 

stronger ties to our international allies and partners. The clearest 

example of this is the Global Export Control Coalition of the 

United States and 38 partners that have imposed substantially 

similar controls to the United States in response to Russia’s 

unprovoked and illegal war on Ukraine. 

Other examples include the Department’s establishment of the 

Quad Critical and Emerging Technologies working group with 

Japan, Australia, and India as well as Department’s collaboration 

with State and USTR on the the U.S.-EU Trade and Technology 

Council, or TTC, which are working to align our approaches to secure supply chains, export controls, data governance, and investment screening. 

Q.9. In the last 12 months, how many times has the Foreign Direct 

Product Rule been exercised by BIS to regulate the reexport and 

transfer of foreign-made items? 

A.9. BIS has a number of Foreign Direct Product Rules (FDPR) in 

Part 734.9 of the EAR. In the last 12 months we have published 

rule adding the Iran FDPR to the existing FDPR regulations (88 

FR 12150, February 27, 2023) and have expanded the scope of the 

FDPR in the advanced-computing rule See 88 FR 73458 (Oct. 25, 

2023). 

The FDP Rules are identified Part 734.9 of the EAR, each of 

which identifies the product scope and destination scope for which 

the restrictions would apply, including to certain parties on the En-
87 

tity List or designated as ‘‘Russian/Belarusian Military End Users,’’ 

under sections 734.9 (e) and (g). 

Q.10. How does BIS prevent the Foreign Direct Product Rule from 

creating a compliance regime that is overly burdensome or extremely difficult to abide by? 

A.10. Export Administration and our Export Enforcement colleagues work hard to ensure that U.S. exporters and broader industry understand the rules and their compliance obligations under 

them through seminars, public events, direct engagement with exporters who have questions through our Office of Exporter Services, 

formal Advisory Opinions, and other engagements. We understand 

that effective compliance by industry is the frontline of export controls, and we stand ready and willing to assist with compliance efforts. 

Q.11. How does BIS evaluate the risk of export controls pushing 

companies to incorporate other jurisdictions where they will not be 

subject to our export controls? 

A.11. As a general matter, with respect to export controls, the law 

follows the item and so regardless of where a firm is legally incorporated, if they are engaging in trade with items subject to the 

EAR (particularly if a Foreign Direct Product Rule applies), then 

they must comply with U.S. law. 

Relatedly, BIS takes seriously the risk that companies will ‘‘design-out’’ content subject to the EAR, and this is one reason why 

BIS endeavors whenever possible to impose export controls on a 

multilateral basis with other key supplier Governments. It is also 

why we spend substantial time working to ensure our international 

partners and allies understand our controls, the national security 

reasoning behind them, and the compliance obligations that their 

companies must abide by. 

Q.12. Please describe procedures and practices for how Treasury 

and the Commerce Department coordinate and exchange information between the Treasury Specially Designated Nationals list, the 

Treasury Chinese Military Industrial Complex List, and Commerce’s Entity List. Please provide the nomination process for the 

Treasury lists, and explain why Chinese military firms appear on 

certain lists but not others. 

A.12. Different agencies have different authorities subject to different regulatory standards that can be applied in a variety of circumstances to address particular conduct. BIS engages with other 

agencies as appropriate to coordinate on measures to protect U.S. 

national security and foreign policy interests. As a consequence, 

different lists may have different firms, individuals, or other entities. However, when an entity meets the regulatory standard for 

addition to two or more lists administered by different agencies, we 

strive to harmonize listings to the extent possible. For example, in 

the Russia sanctions context, many entities have been designated 

by Treasury pursuant to Executive Order 14024, Blocking Property 

With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation, and were also added to the BIS 

Entity List. 
88 

Under the Export Administration Regulations (EAR), all additions to the Entity List require a majority vote of the End-User Review Committee (ERC), which is chaired by Commerce, with representation from the Departments of State, Defense, Energy, and 

where appropriate, the Treasury. The ERC determines whether the 

entity has been involved in, is involved in, or poses a significant 

risk of being or becoming involved in activities that are contrary 

to the national security or foreign policy interests of the United 

States, along with those acting on behalf of such persons. 

While Treasury is not formally part of the export control ‘‘interagency’’ as outlined in Executive Order 12981, which governs the 

administration of export controls, under BIS’s current leadership 

we have engaged regularly with our colleagues at Treasury to include discussions on Specially Designated Nationals list and Entity 

List actions, and to coordinate and discuss other matters of shared 

interest and those conversations will continue. 

In addition, in certain instances, the Export Administration Regulations (EAR) apply restrictions on exports and reexports to persons designated pursuant to Executive orders administered by the 

Department of the Treasury as well as pursuant to select sanctions 

statutes. In these instances, when a person is identified and sanctioned pursuant to a particular authority, BIS imposes license requirements. 

Q.13. Could you please describe the steps that BIS is taking to implement machine learning and data analytics into its examination 

of export control licenses and enforcement cases? 

A.13. The President’s FY 2024 budget includes $6 million which 

will allow BIS to comply with several legislative and Executive 

mandates to successfully fulfill its current export control obligations and work with partners. 

In light of global conflict in the past year, BIS has been called 

upon to coordinate more closely with our partners regarding export 

control implementation, and information sharing such as data exchange on license applications, and potential export violators. BIS 

is in the process of planning for and developing new data management strategies to better coordinate with its partners to enforce export law and regulations more effectively. BIS envisions building 

upon its ability to understand the impact of its work on the American and global economy; on its ability to properly secure the highly 

sensitive data in its possession from foreign adversaries; on its reputation as the steward of the Federal Government’s export control 

capabilities; and, most importantly, on its capacity to deliver basic 

services to industry customers. With this funding, BIS will be able 

to establish an Enterprise Data Management and Integration capability, develop a modern Data Science & Impact Analysis capability, publish more data approved for public consumption, and implement Data Loss Prevention and Data Tagging policies. These capabilities serve as the foundation for virtually all other modernization efforts currently being pursued by BIS (e.g., Zero Trust and 

Customer Experience) and will help propel BIS from Y2K-era 

standards and technologies to 21st century systems that will help 

us to more fully realize our mission and deliver quality services. 
89 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR FETTERMAN FROM THEA D. ROZMAN KENDLER 

Q.1. The CCP has poured billions into the acquisition of foreign 

technology to bolster their domestic supply over the past 10 years. 

I’m concerned about the CCP’s access to U.S.-made dual use and 

general-purpose technology—technology used in both commercial 

and defense sectors. CCP coercively acquires this tech both through 

overt means and through covert cyber operations to obtain critical 

intellectual property. 

Ms. Kendler and Mr. Axelrod: how many USD worth of critical 

IP and technology has been obtained by the PRC in 2023 thus far? 

A.1. According to a 2013 study by the Commission on Theft of 

American Intellectual Property (https://www.nbr.org/publication/ 

the-ip-commission-report/IP) Commission, the annual cost to the 

U.S. economy of counterfeit goods, pirated software, and theft of 

trade secrets is $225 to $600 billion. The People’s Republic of China’s (PRC) theft of American IP stifles innovation, harms research, 

threatens jobs, and creates unfair economic and competitive disadvantages for U.S. industries. 

BIS operates at the nexus of technology, economics, and national 

security. We implement appropriate controls on the export of U.S. 

technologies and constantly engage with our interagency partners 

to use tools like the Entity List to target any individual or entity 

engaging in activities that are contrary to U.S. national security 

and foreign policy interests including where appropriate IP theft. 

IP theft by the PRC often results in a violation of the EAR and as 

such is a major concern for BIS and we leave no tool off the table 

in addressing it. 

Q.2. How confident are you that our current strategy against foreign access and theft of American technology is effective? What 

gaps remain? 

A.2. The Commerce Department is committed to appropriately 

using its tools to protect our companies and counter unfair economic practices by the PRC, because no one can outcompete the 

United States if we are playing by the same rules. 

BIS, with its interagency partners, reviews all of the license applications for the PRC to determine a risk of diversion to military 

end uses or end users, WMD end uses, or violation of human 

rights. We evaluate license applications-taking into account open 

source and intelligence information-based on the technology at 

issue, the country at issue, the entity using the item, other parties 

involved in the transaction, and how the item will be used. One of 

the primary factors we consider is the risk of diversion of the technology from the transaction details laid out in the license application instead to a country, end user, or end use of concern. 

BIS continues to evaluate the threat environment, technological 

advancements in a variety of industries and sectors, and other factors and will update controls as appropriate to protect U.S. national security. This is evidenced by the controls announced on October 7, 2022 and updated October 17, 2023, that seek to address 

concerns posed by the PRC’s efforts to develop high performance 

computing capacity to train A.I. and related data and communications technologies that can be employed for military modernization 
90 

and human rights abuses. BIS restrictions related to advanced 

semiconductor manufacturing equipment, high performance chips 

and related items, and other measures outlined in those rules restrict the PRC’s ability to obtain the tools and capabilities they desire for these activities and represent an expansion of our controls 

based on the present threat environment. 

Q.3. I’ve heard directly from my constituents in Pennsylvania 

about ongoing anti-Asian racism and violence. We must be very 

clear: today’s concerns are about the Chinese Communist Party 

Government—not people of Chinese descent and not Asian-Americans. The bottom line is that we must not enable racism as we consider our national security. 

What is your agency doing to combat anti-Asian racism and 

make sure our response is focused on the Chinese Government? 

A.3. I agree wholeheartedly. It must be made clear that anti-Asian 

racism is abhorrent and must be condemned in the strongest terms 

possible. Our actions are directed against the PRC Government 

and not people of Chinese descent and not Asian-Americans. We 

continue to include this in our messaging and emphasize the national security or foreign policy concerns tied to our actions. 

RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN 

FROM MATTHEW AXELROD 

Q.1. Just under one year ago, in a memo to Export Enforcement 

staff, you launched a new Academic Outreach Initiative to help 

academic institutions protect controlled information from unauthorized foreign acquisition. 

What have you learned in the past year through this initiative? 

A.1. The response to the initiative has been quite positive. Our academic partners are eager to engage in this exchange with us and 

we have had many fruitful interactions through the initiative. 

These partners are engaging both quarterly with their Office of Export Enforcement (OEE) designated point of contact as well as with 

other Export Enforcement officials at headquarters. Among other 

things, they have requested, and we have provided, briefings and 

information on topics such as red flags specific to academia and 

how to best conduct open-source research and due diligence on research partners. 

Q.2. What are your future plans for this initiative? 

A.2. We are currently expanding the number of partner universities beyond the initial list of 20—including 9 additional universities we recently invited to join the Initiative—and developing new 

webinars on requested subjects, like fundamental research. Our 

team also continues to reach out to partners engaged in similar 

work across the U.S. Government, like the National Science Foundation under National Security Presidential Memorandum-33 (National Security Strategy for U.S. Government-Supported Research 

and Development), to ensure universities receive a consistent and 

coordinated message from their Government contacts. 
91 

Q.3. In recent years, BIS has issued a number of foreign direct 

product rules. How have the issuance of these rules changed the 

demands on Export Enforcement? 

A.3. Any imposition of additional licensing requirements under the 

Export Administration Regulations (EAR) increases demands on 

enforcement. For example, OEE investigated Seagate for violations 

of the Huawei Foreign Direct Product Rule (FDPR) requiring the 

EAR expertise of Export Enforcement agents, analysts, and supervisors as well as attorneys from the Office of Chief Counsel for Industry and Security. The resulting $300 million penalty was significant and only came about due to the dedication of personnel 

and resources to the investigation. We continue to leverage our relationships with industry and interagency partners to ensure all 

controls are effectively enforced, including the foreign direct product rules. 

Q.4. The Export Control Reform Act includes a statement of policy 

that, ‘‘export controls that are multilateral are most effective.’’ 

What mechanisms does BIS have in place to coordinate with U.S. 

allies and partners on export control enforcement matters? 

A.4. Export Enforcement engages U.S. allies and partners on export control enforcement matters through bilateral and multilateral 

engagement with foreign officials from trade, customs, national police, prosecutorial, and intelligence agencies as well as with industry associations. 

In addition, BIS Export Control Officers (ECOs) are located overseas, in Germany, Turkey, India, United Arab Emirates, Singapore, 

Hong Kong, and mainland China, and have regional responsibility 

for 56 countries. ECOs are responsible for engaging host country 

Government officials, as well as industries, on export controls and 

enforcement. In 2023, the program is expanding to include Finland 

and Taiwan, as well as a new analytical position embedded with 

the Canada Border Services Agency in Ottawa, Canada. 

With the establishment of the 39-member Global Export Control 

Coalition (GECC), BIS Export Enforcement has increased engagement with international partners within the coalition to share best 

practices on targeting for diversion risk to Russia. For example, 

under the G7, BIS participates in a newly established Enforcement 

Coordination Mechanism co-led by Commerce and Treasury. Export 

Enforcement has worked with the European Commission and has 

entered into a data-share administrative agreement with the European Anti-Fraud Office (OLAF). And Export Enforcement also collaborates with Five Eye partners—Canada, the United Kingdom, 

Australia, New Zealand—to develop trend analysis and strategies 

to address diversion risk and increase coordination on export control enforcement. On June 28, 2023, the United States, Canada, 

New Zealand, Australia, and the U.K. agreed to formalize their coordination on export controls. 

BIS also engages countries outside of the 39-member GECC to 

provide overviews of enforcement concerns and elicit cooperation on 

ensuring U.S. and GECC origin items are not illegally re-exported 

from their borders to Russia. In addition to long-standing formal 

bilateral discussions with export control authorities in Singapore, 

BIS has made a concentrated effort to expand enforcement discus-
92 

sions within Association of Southeast Asian Nations (ASEAN) 

members. 

Q.5. What authorities or resources, if any, would enable BIS to expand its current relationships with U.S. allies and partners to further supporting building their export control enforcement capacity? 

A.5. The Export Control Reform Act of 2018 currently provides BIS 

with adequate authority to share information to help build global 

enforcement capacity. Additional personnel would allow BIS to expand capacity building with international partners. Within the 

Russia diversion context, BIS has utilized emergency Ukraine supplemental funding to allow Export Enforcement analysts and 

agents, and myself, to travel to foreign countries and coordinate, 

such as my recent trip to Kazakhstan and Kyrgyzstan. In addition, 

BIS has used this funding to embed analysts, on temporary deployments, with the Canada Border Services Agency and the European 

Anti-Fraud Office to identify evasion targets and coordinate enforcement actions (e.g., detentions, investigations). BIS also is stationing Export Control Officers (ECOs) in Finland and Taiwan 

under this supplemental funding, which is in addition to ECOs stationed in seven other countries and an analyst in Canada. These 

ECOs directly support building export enforcement capacity with 

allies and partners. BIS will be examining whether existing resources can be used to maintain the Finland and Taiwan ECO positions after expiration of this supplemental funding. We are proud 

of what we continue to accomplish with our existing resources, including enforcement actions, end-use checks, and international 

partnerships with allies and partners to ensure that U.S. and multinational companies that invest in an export compliance program 

are not placed at a competitive disadvantage in relation to those 

that do not. 

Q.6. Over the past year, you have announced a series of enforcement policy changes. Among others, at BIS’s Update Conference 

last June, you announced changes to Voluntary Self Disclosures, 

‘‘no admit, no deny’’ settlements, and monetary penalties. In September, you announced four changes to enhance compliance, increase transparency, incentivize deterrence, and compel accountability for those who violate our antiboycott rules. You also 

changed policy on how BIS responds to a host Government that is 

preventing our ability to conduct end-use checks overseas. 

While some of the effects of those changes require additional 

time to understand the full impact, what are the initial effects of 

those changes? 

A.6. Two specific effects have been an increase in efficiency of processing voluntary self-disclosures (VSDs) and the elimination of the 

backlog of end-use checks in China, for the first time in recent 

memory. For example, companies have responded favorably to 

being able to get fast-track responses to VSD submissions for minor 

violations. Moreover, since the implementation of the new end-use 

check policy in October 2022, BIS has conducted over 100 end-use 

checks at approximately 91 parties in mainland China, and no 

pending end-use checks have been pending for more than 60 days. 

In addition, BIS charging letters are now public when filed rather than upon resolution. This change has allowed the exporting 
93 

community to know in closer to real time what type of conduct constitutes a violation. It also has provided an incentive for companies 

to resolve matters with BIS sooner rather than later. 

As part of those changes, we ended the use of ‘‘no admit, no 

deny’’ settlements. Prior to the policy change, it was possible to 

reach resolution by paying a penalty without admitting to the alleged conduct. Now BIS resolutions require admission. That is why, 

for example, when we agreed to a $300 million resolution with 

Seagate Technology LLC and Seagate Singapore International 

Headquarters Pte. Ltd.—the largest standalone penalty ever imposed by BIS—the company admitted that it continued to sell hard 

disk drives to Huawei after we imposed the Foreign Direct Product 

Rule and after its competitors had stopped selling because of it. 

With regard to our antiboycott enforcement changes, in the first 

major administrative action since the announcement of the new 

policy to enhance antiboycott enforcement, BIS imposed a significant civil penalty of $283,500 against Regal Beloit FZE (Dubai) to 

resolve allegations of 84 violations of the antiboycott provisions of 

the EAR. This settlement reflects several of the objectives of the 

enhanced enforcement policy including not only the renewed focus 

on foreign subsidiaries of U.S. companies, but the elimination of 

the ‘‘no admit/no deny’’ settlements and the imposition of monetary 

penalties commensurate with the seriousness of the violations. 

Q.7. Have you noticed any changes in the frequency with which 

parties voluntarily self-disclose export control violations in light of 

this change? 

A.7. No, we have not noticed a significant change in the frequency 

VSDs. In fact, we have received, on average, the same number of 

disclosures after the policy change that we received for the same 

time period in the preceding 2 years. Based on our continuous, robust industry engagement, companies generally recognize that it is 

better to voluntarily disclose potential violations of the Export Administration Regulations (EAR) rather than to be caught engaging 

in, or having been engaged in, in potentially illegal conduct. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT 

FROM MATTHEW AXELROD 

Q.1. Please describe the process of investigating and implementing 

an export control enforcement decision. 

A.1. Office of Export Enforcement (OEE) Special Agents are sworn 

Federal law enforcement officers with authority to bear firearms, 

make arrests, execute search warrants, serve subpoenas, search, 

inspect, detain, seize, and administratively forfeit items about to be 

illegally exported, reexported, or transferred (in-country), as well as 

conveyances involved in such exports, reexports, and transfers (incountry), and order the redelivery to the United States of items exported in violation of U.S. law. OEE is the only Federal law enforcement agency exclusively dedicated to the enforcement of export control laws, and that singular focus allows for the development of the requisite subject matter expertise to be able to effectively enforce a complex regulatory regime. Some cases may require 
94 

years of thorough investigation to bring a matter to a successful 

completion. 

OEE investigations are initiated on information and intelligence 

obtained from a variety of sources, including routine review of export documentation, overseas end-use monitoring, and industry information. OEE investigates both export violations by U.S. persons 

and the unauthorized reexport or transfer (in-country) by foreign 

persons of items subject to the EAR to prohibited end uses, end 

users, or destinations. OEE also has the authority to enforce restrictions on specific activities of U.S. persons, including those unrelated to shipments of items subject to the Export Administration 

Regulations (EAR), such as servicing, financing, or freight forwarding in connection with certain foreign weapons of mass destruction and military-intelligence end uses and end users. OEE 

works closely with other Federal law enforcement agencies to identify and act on export violations and with industry to raise awareness of compliance best practices and ‘‘red flag’’ indicators of potential illicit activities. 

For example, OEE works with U.S. Customs and Border Protection to train outbound officers on EAR requirements to identify 

suspicious cargoes for detention. Based on information gathered 

during the course of an investigation, OEE works closely with attorneys from the Department of Justice to prosecute violators 

criminally, as well as with the Office of the Chief Counsel for Industry and Security to bring administrative charges. Administrative penalties are implemented in final orders signed by the Assistant Secretary for Export Enforcement or the Under Secretary for 

Commerce for Industry and Security, depending on the procedural 

posture of the underlying proceeding. Export Enforcement also acts 

where appropriate to identify parties for addition to BIS’s Entity 

List, Unverified List, Denied Persons List, and Military End-User 

List. Export Enforcement is co-located in the same Department of 

Commerce bureau as Export Administration, allowing for close cooperation in the administration and enforcement of export controls. 

Export Enforcement provides advice and comments on the enforceability of new policies and regulations, and it works closely with 

Export Administration to routinely review export transactions to 

ensure compliance with the EAR. 

Q.2. Is the overall competitiveness of U.S. companies factored into 

the export control enforcement process? If so, how? 

A.2. Partnering with industry and academia is a critical aspect of 

export enforcement. No one knows their line of business, and the 

export control risks inherent in it, like a company or university 

itself does. U.S. companies and universities are at the forefront of 

so many technological breakthroughs. Given the increase in security risk that advanced technologies such as quantum computing, 

hypersonic weapons, and unmanned aerial vehicles now pose, we 

need industry to invest in their export enforcement capacity. We 

are focused, along with our colleagues in Export Administration, on 

educating companies and universities on our regulations. For example, OEE has conducted over 800 outreaches at companies with 

previous export ties to Russia and partnered with universities as 

part of our Academic Outreach Initiative to support their compli-
95 

ance efforts. For our part, our aggressive enforcement posture is 

meant to ensure that companies and universities that invest in an 

export compliance program are not placed at a disadvantage by 

those that do not. 

Q.3. What steps is Commerce taking to ensure that novel industries are fully aware of the due diligence requirements on export 

controls? 

A.3. BIS Export Enforcement conducts substantial industry outreach. We have agents located in numerous cities across the country that work with exporters to ensure that they understand our 

rules and the importance of compliance, and to provide resources 

as appropriate. We also launched an Academic Outreach Initiative 

to provide selected research universities with dedicated liaisons 

and resources to ensure that they understand their compliance responsibilities. In addition, our colleagues at Export Administration’s Office of Exporter Services also lead robust outreach efforts 

including seminars, webinars, and other outreaches to industry 

across the country. 

Q.4. How do these factors influence the magnitude of enforcement 

fines? 

A.4. We take many factors into account when calculating the magnitude of potential civil liability. Our penalty guidance, found in 

Supplement No. 1 to Part 766 of the EAR, describes how OEE 

makes penalty determinations in the settlement of civil administrative enforcement cases under part 764 of the EAR. We consider 

whether there was a voluntary disclosure, the egregiousness of the 

case, and other factors from aggravating (e.g., willful or reckless 

violation of the law) to general (e.g., the existence, nature and adequacy of an export compliance program) to mitigating (e.g., level of 

cooperation with our investigators). 

Q.5. In the last 12 months, how many times has the Foreign Direct 

Product Rule been exercised by BIS to regulate the reexport and 

transfer of foreign-made items? 

A.5. In terms of enforcing the Foreign Direct Product Rule, in April 2023, we announced a historic, $300 million settlement with 

Seagate Technology LLC and Seagate Singapore International 

Headquarters Pte. Ltd. related to alleged violations of the Foreign 

Direct Product Rule (FDPR) that applies to Huawei. 

As a general matter, compliance is the first layer of effective enforcement and Export Enforcement works to ensure that exporters 

understand their compliance obligations with our FDPRs, as well 

as other new or updated restrictions, to help ensure compliance on 

the front end. 

Q.6. How does BIS prevent the Foreign Direct Product Rule from 

creating a compliance regime that is overly burdensome or extremely difficult to abide by? 

A.6. Export Enforcement, along with our colleagues in Export Administration, work to ensure that U.S. exporters and broader industry understand the rules and their compliance obligations under 

them through seminars, public events, direct engagement with exporters who have questions through our Office of Exporter Services, 

formal Advisory Opinions, and other engagements. We understand 
96 

that effective compliance by industry is the frontline of export controls, and we stand ready and willing to assist with compliance efforts. 

Q.7. How does BIS evaluate the risk of export controls pushing 

companies to incorporate in other jurisdictions where they will not 

be subject to our export controls? 

A.7. As a general matter, BIS’s jurisdiction follows the item. Regardless of where a firm is legally incorporated, if the firm is engaging in a transaction with items subject to the EAR, then the 

firm must comply with the regulations. 

That said, the risk that companies may ‘‘design-out’’ U.S. content 

is a constant concern for export control policy and one reason why 

my Export Administration colleagues endeavor whenever possible 

to impose export controls on a multilateral basis with other key 

supplier Governments as well as spending substantial time working to ensure our international partners and allies understand our 

controls, the national security reasoning behind them, and the compliance obligations that their companies must abide by. 

Q.8. Does the People’s Republic of China (PRC) cooperate with export product end-user checks in the country? 

A.8. After a period of non-cooperation, the PRC Government has 

become more cooperative with our end-use check requests. This cooperation has improved after I issued a policy memorandum in October 2022. First, the policy notes that end-use checks must be 

scheduled and completed promptly. If 60 days pass without a requested check being conducted, we will initiate the regulatory process to add the foreign company to the Unverified List (UVL). Placement on the UVL triggers additional regulatory requirements on 

exports to the listed company. Until a successful end-use check is 

completed, we stop processing licenses for the company and impose 

pre-license checks on all subsequent license applications received 

for exports to it. 

Second, once the foreign party is added to the UVL, if we are not 

able to successfully complete an end-use check within the second 

60-day window, we will initiate the regulatory process to have the 

foreign party added to the Entity List. This policy has spurred cooperation by the PRC’s Ministry of Commerce and led to the completion of over 100 end-use checks in the PRC in a 9 month period. 

Q.9. Do BIS agents in the PRC face any restrictions that they 

would not face in other countries? 

A.9. BIS works with foreign Governments to establish end-use 

check processes in their respective countries. In China, the PRC 

Government must schedule and accompany BIS Export Control Officers during all end-use checks. Should any Government, including 

the PRC, prevent an end-use check from being completed, BIS has 

a policy to add the foreign party in question to the Unverified List, 

and then the Entity List if the end-use check continues to be prevented. 

Q.10. What steps is the Department taking to curb the transshipment of export controlled dual-use technologies? 

A.10. BIS leverages all-source information (e.g., open-source, classified, Government) to monitor diversion, conducts end-use checks 
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overseas, and investigates potential violations, including when 

items are transshipped without BIS authorization. On February 16, 

2023, BIS jointly announced with the Department of Justice (DOJ) 

the formation of a Disruptive Technology Strike Force. The Strike 

Force works to protect U.S. advanced technologies from being illicitly acquired and used by Nation-State adversaries to support: (1) 

their military modernization efforts designed to overcome our military superiority; or (2) their mass surveillance programs that enable human rights abuses. As part of this effort, we established 14 

strike force cells across the country, supported by an interagency 

intelligence cell in Washington, DC. Each operational cell consists 

of agents from the OEE, the Federal Bureau of Investigation, 

Homeland Security Investigations, and an Assistant U.S. Attorney, 

and uses all-source information (open source, proprietary, and classified) to pursue investigations and impose criminal and/or administrative penalties as appropriate. We have worked with DOJ to indict multiple Russian procurement networks that are facilitating 

the transshipment of sensitive items and, as part of the Strike 

Force, we have announced two cases against networks conspiring 

to divert controlled items to Russia. 

BIS has taken numerous other steps to curb the transshipment 

of export controlled dual-use items. For example, we are using the 

Entity List. Through the interagency process, we have listed 64 

companies, including 24 in the PRC, for their evasion activities related to export controls on Russia, imposing licensing requirements 

and preventing them from diverting commodities. We are also 

working with our international partners to prevent transshipment 

of controlled commodities. For example, we announced on June 28, 

2023, that the United States, Australia, Canada, New Zealand, and 

the United Kingdom have committed to formally coordinate on export control enforcement by sharing information and best practices. 

Q.11. Could you please describe the steps that BIS is taking to implement machine learning and data analytics into its examination 

of export control licenses and enforcement cases? 

A.11. BIS has entered into an interagency agreement with the National Security Agency to develop the Commerce Screening System 

(CSS). Using machine learning and data analytics, the CSS will 

automate the review of foreign entities appearing on export control 

licenses, better informing the export control license review process. 

The system is designed to inform licensing officers from across the 

interagency and our enforcement analysts and agents on foreign 

entities and procurement efforts. This will help prevent the 

issuance of licenses to parties of diversion risk and support the development of export enforcement leads and cases. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK 

FROM MATTHEW AXELROD 

Q.1. Thank you for discussing the Department of Commerce’s Disruptive Technology Strike Force and potential parallels to the Department of Justice’s China Initiative, which ended in 2021. In response to my question about what steps the Department of Commerce has taken to address civil rights concerns regarding any actual or perceived targeting of scientists of Chinese descent, you 
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1See https://www.banking.senate.gov/hearings/countering-china-advancing-us-national-security-economic-security-and-foreign-policy at 02:24:54. 

shared that the Commerce Department has established an Academic Outreach Initiative to work with 20 universities to protect 

their research from foreign actors. 1

What steps has the Commerce Department taken through the 

Academic Outreach Initiative, or through other work, to address 

civil rights concerns regarding any actual or perceived targeting of 

scientists of Chinese descent on the basis of their race, ethnicity, 

or national origin? Please be specific in any steps described. 

A.1. We strongly disavow anti-Asian racism, and racism of any 

kind. As Secretary of Commerce Gina Raimondo has stated, ‘‘there 

is no room in our path to competitiveness for racism or xenophobia. 

Chinese Americans have been—and will continue to be—an essential part of this American story of renewal.’’ Our enforcement efforts are focused on stopping sensitive technologies from being used 

by foreign Governments for malign purposes, like human rights 

abuses. 

Academic research institutions are an essential component of the 

scientific and technological success that powers the American economy. It is essential that we both safeguard sensitive research, 

while also maintaining an open, collaborative environment. The 

Academic Outreach Initiative is country agnostic. Instead, we are 

focused on partnering with universities that present a higher risk 

profile, which might include, for example, those that have ties to 

foreign universities on the Entity List, are involved in research and 

development for the Department of Defense, and/or conduct research in sensitive technologies subject to the Export Administration Regulations. 

Q.2. What safeguards and oversight mechanisms has the Commerce Department built into the policies and procedures of the 

Strike Force or other enforcement entities to ensure that Federal 

personnel tasked with carrying out its mandate do not target or are 

perceived to target Chinese Americans on the basis of their race, 

ethnicity, or national origin? 

A.2. Racism has no place in law enforcement. Last year, the Department of Commerce updated our mission statement to reflect 

our explicit commitment to ensuring all Americans benefits from 

economic growth and opportunity. This mission guides our work 

across programs every day to ensure racial equality is at the center 

of our work, including in law enforcement. The Disruptive Technology Strike Force builds on that commitment, as it is focused on 

critical technologies and their acquisition and use by Nation-State 

actors. The Strike Force’s mandate is to prevent critical technology 

from being acquired by authoritarian regimes and hostile NationStates without BIS authorization. Each participating agency within 

the Strike Force works in accordance with their agency’s respective 

privacy and civil liberties policies and procedures. 

Q.3. Did the Federal Government consult with civil rights groups 

in developing this Strike Force? If so, what was the feedback that 

the Strike Force received, and did the Strike Force implement it? 
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2 Id. 

If not, would that have been a reasonable step to take, especially 

considering the China Initiative? 

A.3. The Department of Justice heard concerns from the civil rights 

community that the ‘‘China Initiative’’ fueled a narrative of intolerance and bias. Those discussions helped inform their perspective in 

developing the Strike Force with us. The Strike Force is focused on 

the actions of the PRC Government, the Chinese Communist Party, 

and their agents—not the Chinese people or those of Chinese descent. The purpose of the Strike Force is to focus and prioritize enforcement efforts to prevent Nation-State actors, like the PRC Government, from advancing their development of these disruptive 

technologies—like quantum, hypersonics, and artificial intelligence. 

The Strike Force uses an all-tools approach, including everything 

from criminal indictments to administrative actions to industry 

outreach. 

Q.4. What are the Strike Force’s reporting requirements to both 

Congress and the public? 

A.4. Criminal actions and administrative resolutions are reported 

through regular channels pursuant to agency policy to Congress 

and to the public, including through press releases and the BIS Annual Report. 

Q.5. In your testimony, you stated that the Academic Outreach Initiative is currently working with 20 universities. 2 Does the Commerce Department have plans to expand the list of universities? If 

universities are not currently part of this list, what resources are 

available to them to seek compliance with relevant export controls? 

A.5. Earlier in July, I reached out to nine additional universities 

whose work gives them an elevated risk profile to offer them the 

opportunity to join the Initiative. We are currently working on several new webinars for our partner universities on subjects they 

have expressed interest in, like fundamental research. We are also 

partnering with university organizations like the Association of 

American Universities and the Association of University Export 

Control Officers to broaden the reach of our messaging, outreach, 

and partnership with the academic community. In addition, our 

team continues to reach out to groups engaged in similar work 

across the U.S. Government to ensure universities receive a consistent and fulsome message from their Government contacts. 

Q.6. For faculty members beginning new research projects in 

emerging technology areas where the end user and use case may 

be uncertain, what resources does the Commerce Department provide to ensure compliance with U.S. export regulations? Are these 

resources sufficient, and with what frequency does the Commerce 

Department evaluate the sufficiency of these resources? 

A.6. BIS publishes regular guidance, frequently asked questions, 

and other resource materials on the BIS website. Additionally, each 

partner academic institution participating in the Academic Outreach Initiative has an assigned Outreach Agent. The Outreach 

Agent is responsible for establishing, or strengthening, long-term 

partnerships with the university. Universities that are not cur-
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rently on the list should contact Export Enforcement or the Office 

of Exporter Services directly and we can assist in facilitating access 

to additional resources. 

Q.7. Does the Commerce Department maintain a list of lawful 

interactions that U.S. persons and universities may have with researchers, universities, or companies based in China? If so, where 

is this stored, and does the Commerce Department have a mechanism to share this with universities? If not, has the Commerce Department considered the utility of such a resource? 

A.7. BIS does not maintain a list of lawful interactions that U.S. 

persons and universities may have with researchers, universities, 

or companies based in China. BIS publishes regular guidance, frequently asked questions, and other resource materials on the BIS 

website. Additionally, each partner academic institution participating in the Academic Outreach Initiative has an assigned Outreach Agent. The Outreach Agent is responsible for establishing, or 

strengthening, long-term partnerships with the university. Universities that are not currently on the list should contact Export Enforcement or the Office of Exporter Services directly and we can assist in facilitating access to additional resources. 

Q.8. For researchers and institutions who seek to comply with U.S. 

export regulations concerning interactions with entities who have 

ties to the Chinese military, what resources should they use to 

search for possible links beyond Restricted Party Screening and 

open-source searches? What steps does the Commerce Department 

take to evaluate the sufficiency of these resources, and are there 

areas where additional Congressional support could improve these 

resources? 

A.8. Researchers and institutions who seek to comply with U.S. export regulations concerning interactions with entities that are subject to U.S. restrictions should start with the Consolidated Screening List tool that is maintained by our Department of Commerce 

colleagues at the International Trade Administration. This resource 

is available online and allows the public to search for names of individuals, companies, or academic institutions that are subject to 

a range of U.S. restrictions or are on specific lists. BIS does not 

provide proscriptive guidance to industry on other sources to check 

to vet parties to an export transaction, but does provide guidance 

to industry, such as through its Know Your Customer guidance in 

the EAR, outreach publications identifying potential red flags such 

as in a March 2023 tri-seal compliance note for industry with the 

Department of Justice and the Department of the Treasury focused 

on Russian evasion tactics, and frequently asked questions which 

are available on the BIS website. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR FETTERMAN FROM MATTHEW AXELROD 

Q.1. The CCP has poured billions into the acquisition of foreign 

technology to bolster their domestic supply over the past 10 years. 

I’m concerned about the CCP’s access to U.S.-made dual use and 

general-purpose technology—technology used in both commercial 

and defense sectors. CCP coercively acquires this tech both through 
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overt means and through covert cyber operations to obtain critical 

intellectual property. Ms. Kendler and Mr. Axelrod: how many 

USD worth of critical IP and technology has been obtained by the 

PRC in 2023 thus far? How confident are you that our current 

strategy against foreign access and theft of American technology is 

effective? What gaps remain? 

A.1. According to a 2013 study by the Commission on Theft of 

American Intellectual Property (https://www.nbr.org/publication/ 

the-ip-commission-report/IPCommission), the annual cost to the 

U.S. economy of counterfeit goods, pirated software, and theft of 

trade secrets is $225 to $600 billion. The PRC’s theft of American 

IP stifles innovation, harms research, threatens jobs, and creates 

unfair economic and competitive disadvantages for U.S. industries. 

BIS works with its interagency partners to enforce U.S. export 

control laws, including violations related to the transfer of specific 

technologies to the PRC without authorization. The formation of 

the Disruptive Technology Strike Force, announced on February 

16, 2023, promises to further enhance our ability to target illicit actors and protect critical technology assets from theft by PRC entities. 

Q.2. I’ve heard directly from my constituents in Pennsylvania 

about ongoing anti-Asian racism and violence. We must be very 

clear: today’s concerns are about the Chinese Communist Party 

Government—not people of Chinese descent and not Asian-Americans. The bottom line is that we must not enable racism as we consider our national security. 

A.2. From an Export Enforcement perspective, while most Federal 

law enforcement agencies have multiple areas of responsibility, our 

focus is singular. As the Export Enforcement arm of the Bureau of 

Industry and Security (BIS) our sole mission is to protect sensitive 

American goods and technology from falling into the wrong hands. 

Export Enforcement vigorously applies our administrative, civil, 

and along with the Department of Justice, criminal, enforcement 

authorities to address violations of U.S. export controls. Credible 

allegations of violations of our rules by PRC-based entities are investigated promptly, thoroughly, and effectively and if appropriate, 

penalties are imposed by BIS. While investigations can be complex 

and take time to reach resolution, we have taken or contributed to 

a number of administrative and criminal enforcement actions related to the PRC. Our enforcement efforts are focused on NationState actors, like the Government of the People’s Republic of 

China, and stopping sensitive technologies from being used by foreign Governments for malign purposes, like human rights abuses, 

and not on any person’s ethnic background. 

One primary way we are working to prevent foreign adversaries 

from obtaining critical advanced technologies is through the Disruptive Technology Strike Force, which I co-lead with Assistant Attorney General for National Security Matt Olsen at the Department of Justice. The purpose of the Strike Force is to focus and 

prioritize enforcement efforts to prevent our adversaries from advancing their development of these disruptive technologies—like 

quantum, hypersonics, and artificial intelligence. Consistent with 

our overall enforcement efforts, the Strike Force is focused on the 
102 

actions of our adversaries, like the Chinese Communist Party, and 

their agents—not the Chinese people or those of Chinese descent. 

We established 14 local cells, which include a Federal prosecutor 

plus agents from the Bureau of Industry and Security, Homeland 

Security Investigations, and the Federal Bureau of Investigation, 

across the country to investigate and prosecute violations of U.S. 

laws. The cells are also supported by an interagency analytic cell 

in Washington, DC. 

Q.3. What is your agency doing to combat anti-Asian racism and 

make sure our response is focused on the Chinese Government? 

A.3. We strongly disavow anti-Asian racism, and racism of any 

kind. As Secretary of Commerce Gina Raimondo has stated, ‘‘there 

is no room in our path to competitiveness for racism or xenophobia. 

Chinese Americans have been—and will continue to be—an essential part of this American story of renewal.’’ Our enforcement efforts are focused on Nation-State actors, like the PRC Government, 

and stopping sensitive technologies from being used by foreign Governments for malign purposes, like human rights abuses. The Office of the Director of National Intelligence’s 2023 Annual Threat 

Assessment is focused on the activities of Nation-State actors: 

China, Russia, Iran, and North Korea. Our enforcement investigations are predicated on violations of the EAR, with a priority on 

these Nation-State actors, and not any other factors. 
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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

LETTER SUBMITTED BY AMERICAN SECURITIES ASSOCIATION 
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LETTER SUBMITTED BY SENATOR BILL HAGERTY 
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