Axelrod Touts Enforcement Collaboration, Expansion

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Assistant Secretary of Commerce for Export Enforcement Matt Axelrod spoke to the 12th Annual Forum on U.S. Export & Re-export Compliance for Canadian Operations  Jan 31 in Totonto.  The following has been edited for brevity, for full text [here]

Simply put, export controls are a shared endeavor. And when it comes to export enforcement, cooperation is critical to ensure our shared security.    Countries implementing multilateral export control regimes have long known that such controls are critical to the world’s safety, and most effective when widely implemented across the globe. But our current geopolitical challenges, the increasingly rapid development of technology with the potential to provide asymmetric military advantage, and the countless ways in which the world is now interconnected, have raised the prominence and impact of export controls in unprecedented ways

And that means that the importance of export enforcement has risen in unprecedented ways as well. It’s not sufficient for likeminded countries just to have parallel controls on paper. It’s critically important, but it’s not sufficient. We also need to ensure a common commitment to effective implementation and enforcement of those controls.   In other words, export enforcement must be a shared focus across the globe. Strong multilateral export enforcement coordination is essential to keeping the world safe. All likeminded countries should be looking to build their export enforcement capacity, both individually and collectively.

But given the increase in security risk that advanced technologies – such as quantum computing, hypersonic weapons, and unmanned aerial vehicles – now pose, we need all likeminded countries to invest in their export enforcement capacity. Unlike other geopolitical challenges, export enforcement cannot be effective unless there is a coordinated global effort. Without such an effort, bad actors can simply bypass one country’s controls and source a sensitive commodity elsewhere.

We’ve done this before. Up until 1977, when the United States passed the Foreign Corrupt Practices Act (FCPA), no country in the world considered the bribing of foreign officials for business purposes to be illegal. Twenty years later, the Organization for Economic Cooperation and Development’s (OECD) Anti-Bribery Convention was signed.    We’re now beginning to see that same shift with respect to export enforcement. Like bribing a foreign official, exporting the most sensitive goods and technologies without appropriate safeguards is a collective harm; and we must work collectively as partners – through coordinated and aggressive enforcement action – to prevent these sensitive goods and technologies from falling into the wrong hands.

But it’s not enough just to impose multilateral controls; to be effective, controls need to be aggressively enforced, not only by the United States but through coordinated work with coalition partners. For the United States and Canada, that means coordinated work by our respective enforcement teams – my Export Enforcement team at the Bureau of Industry of Security (BIS) and Canada Border Services Agency (CBSA) here in Canada.

This partnership is already bearing fruit. During one of the temporary deployments last year, BIS and CBSA’s Counter Proliferation Operations Section (CPOS), working with U.S. Customs and Border Protection, stopped a shipment of drone antennas on the tarmac in Alaska before they could be illegally exported

Collaboration on enforcement doesn’t stop with just us and Canada. We are also working to coordinate more broadly with our other Five Eyes partners, as well as with ASEAN countries like Singapore, Malaysia, and the Philippines. And just last month, the U.S.-EU Trade and Technology Council (TTC) reaffirmed the importance of enforcing export controls in a parallel manner.

While 2022 required intense work on Russia, Russia was not our only priority. We remain laser- focused on the risk posed by other nation-states, such as the People’s Republic of China (PRC), Iran, and North Korea.  

To give a recent example of the challenges we face, just two weeks ago, a California man pled guilty for violating export control laws by secretly funneling sensitive aeronautics software to a Beijing university

The recipient, Beihang University, had previously been placed on our Entity List for helping to develop the PRC’s military rocket systems and unmanned air vehicle systems.

This case helps illustrate how the domains of national security and of academia are growing increasingly interconnected. To address this dynamic, we are actively engaging with U.S. academic institutions and research centers, in part through our Academic Outreach Initiative, on ways they can help safeguard their advanced research. We’re also working closely with our Canadian counterparts in helping academic institutions protect themselves from current and future threat actors.

We also changed our policy on how we respond to a host government that is preventing our ability to conduct end-use checks overseas… Under our new policy, such governments now have a choice. If they cooperate and the end-use checks are successful, then companies will be removed from our Unverified List. On the other hand, if they continue to prevent our end-use checks, we will initiate the process to have companies added to our Entity List.

 

After the policy became effective, we were able to complete successful end-use checks in China for the first time in over two years. In December, we removed 25 Chinese entities from our Unverified List after the satisfactory completion of end-use checks and verification of those entities’ bona fides in cooperation. And the policy has had an impact in other ways as well. We didn’t only remove entities from our Unverified List in December – we also moved nine Russian companies onto the Entity List because of Russia’s sustained failure to schedule our end-use checks.

Right now, we have ECO positions located in seven places around the world, in Beijing, Hong Kong, Frankfurt, Singapore, Istanbul, New Delhi, and Dubai. I’m excited to share that we’re now adding two more ECO positions, one in Helsinki and the other in Taiwan. These new positions, plus our new Export Control Analyst position in Ottawa and our enhanced partnership arrangement with CBSA, mean that we now have more resources devoted to protecting U.S. and Canadian technology from diversion than ever before.”

Kendler Calls for Cooperation

In a speech marking the opening of the 2022 Massachusetts Export Expo,  Assistant Secretary of Commerce for Export Administration Thea Kendler shared her experience at the Justice Department and how it informs her role enforcing Export Controls. 

“Right now, we face new challenges to our security and prosperity. We are seeing national security, foreign policy, and economics intertwine like never before. Authoritarian regimes and non-state bad actors seek to turn the strength that is our economic prosperity, into a weakness they can exploit.

“The list of threats and malign actors is long, and the threat environment is ever changing. we must tailor export controls to ensure that we don’t disincentivize your technological leadership and that we return resources to the United States for further innovation and research. we must make our export controls a multilateral – or plurilateral or bilateral – system as much as possible.

 

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