The Bureau of Industry and Security (BIS), the agency Washington relies on to enforce export licensing controls to stop sanctioned technology from reaching certain countries, said on Tuesday that aging technology and systems have left it struggling to process a growing number of Chinese companies being added to the U.S. Entity List, a huge increase in its workload.
“Over the past six years, BIS policies have led to increased trade volumes. [Peoples Republic of China] BIS imposed licensing requirements on China and applied a strategic review to those applications that included entities on the Entity List, it said in its review. [PDF] Its latest task has been to oversee trade with China.
Regulators detailed that the number of Chinese entities on the Entity List, a list of entities with which U.S. companies are prohibited from doing business, increased from 218 in 2018 to 787 in 2023. BIS processed approximately 4,000 license applications involving parties on the China Entity List during those years.
The agency said the “significant” increase in the total number of license applications was due to the addition of Huawei and SMIC to the list in 2019 and 2020, respectively.
BIS has historically used a highly manual process designed in 2006 to collect license data, but recognized that this method consumed significant resources and carried the risk of human error.
The department said it is working to improve its internal systems and processes to strengthen its internal analytical capabilities.
“However, the state of the underlying systems, which were not designed to communicate seamlessly with each other, and the need for human verification of the accuracy of the underlying data extracted, required significant staff time to execute in a manner that would ensure an accurate product,” the company acknowledged.
The regulator has pledged to work with Congress to secure funding that would allow it to modernize the central licensing system.
One reason for the increased demands on the agency and resulting overload of the system is that the Entity List has evolved beyond its original purpose. When it was first introduced in 1997, its purpose was to “inform the public about entities that have engaged in activities that may pose an increased risk of diversion to weapons of mass destruction programs.”
The list has expanded significantly over the years and now includes foreign nationals who may be involved in matters contrary to national security.
However, just because BIS has the same process does not mean that its policies are the same. For example, BIS introduced the Foreign Direct Product Rules (FDPR) and applied them to Huawei. BIS described this action as “[given] The U.S. government will have unprecedented control and insight into these entities' access to U.S. technology and foreign-produced products that are subject to this rule.
The agency also argued that its focus on country-wide management has allowed it to identify strategic sectors and items based on technical capabilities, calling this approach “more sustainable and effective” than individual license reviews.
Of the roughly 4,000 Entity List applications reviewed by BIS over the past six years, roughly two-thirds (worth $335 billion) have been approved, while the rest (a much larger amount worth $545 billion) have been denied or canceled.
BIS also revealed that it has already revoked eight additional licenses related to Huawei since the beginning of 2024.
