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Bolstering National Security Via an Empowered Export Control Agency

Picture of David Robusto

David Robusto

Policy Analyst

WASHINGTON, D.C., June 28, 2024 — Chinese President Xi Jinping has identified the integration of technologies like AI into the People’s Liberation Army (PLA) as a key component of its modernization. In a prospective future conflict where China leverages military AI capabilities such as autonomous weapons, automated cyber attacks, and AI-assisted strategic decision making, what would the U.S. do if we learned they were built using our own computing technology? 

 

Chinese development of advanced AI poses a threat to national security in general, as well as to human rights globally, but there is no justification to allow it to proceed on the back of U.S. technology. ARI is committed to pushing back against this. In service of this goal, ARI urged House and Senate appropriators to fully fund the Department of Commerce Bureau of Industry and Security’s (BIS) fiscal year 2025 request for $31.4 million in additional funding.

 

BIS is one of the U.S. government’s most important offices responsible for the national security of advanced technologies like AI. It develops and enforces export controls on dual-use and otherwise sensitive technologies. Thanks to these controls, China and our other adversaries cannot utilize U.S. technology to illegally bolster their economy, strengthen their military, or harm our critical infrastructure. 

 

Novel Responsibilities for Novel Threats

Although BIS traces its origins back to the Cold War, 21st century strategic competition has reemphasized the agency’s importance across administrations and across the aisle. In 2018, Congress passed the Export Control Reform Act which, in part, tasked BIS – in coordination with other agencies – to identify and control relevant “emerging” and “foundational” technologies, including AI. Starting in 2022, BIS took direct aim at AI technologies exported to the People’s Republic of China (PRC) through a series of controls on advanced computing chips, semiconductor manufacturing equipment, and supercomputing equipment. (Note these controls were updated in October 2023 and clarified in April 2024).  This expansion of BIS’s purview and increased activity from technologically sophisticated adversaries has significantly expanded the agency’s responsibilities. 

 

BIS now handles over 40,000 licensing requests per year, approximately double the number from 2012. Additionally, the total amount of goods subject to BIS coverage has increased dramatically. Exports subject to BIS license requirements have grown by approximately 126 percent since 2014, more than doubling the corresponding growth in total U.S. exports, which have risen by approximately 62 percent since 2010. Despite these additional responsibilities, BIS’s funding for creating and enforcing export restrictions has remained effectively flat since 2010, when controlling for inflation.

 

This habitual underinvestment has impeded BIS’s ability to effectively execute their mission across a number of vectors. Three primary areas the agency’s FY25 budget request seeks to improve include:

      • Effectively designing and enforcing country-specific controls.
      • Updating significantly outdated mission-critical software. 
      • Preventing hostile actors from using U.S. cloud services to develop dangerous AI models.
 
Supporting the Development and Enforcement of Effective Controls

BIS’s primary responsibilities are separated into export administration and export enforcement. The former office is broadly responsible for the analysis and engagement necessary to create effective export controls, while the latter is dedicated to enforcing those controls. Both offices would receive crucial mission support through fulfilling the FY25 budget request.

 

On the administration side, providing additional funding and personnel would allow BIS to better tailor controls to specific countries thanks to regional expertise and strengthened relationships with local trade ministries. On enforcement, additional resources would, among other things,  allow BIS to maintain full-time Export Control Officers (ECO) in Finland and Taiwan – positions previously temporarily supported by the FY 2022 Ukraine Supplemental appropriation. Taiwan is a crucial player in the AI hardware supply chain due to its dominance of the semiconductor manufacturing industry and these controls aim to reduce its ability to sell to China. While a highly imperfect measure, overall Taiwanese exports to China have dropped by over 30% since the beginning of 2022. Allowing this funding to expire would almost certainly lead to a significant increase in the illegal exfiltration of AI chips to China.  

 

Updating Mission-Critical Software

Once it became clear that BIS was to be a central player in geopolitical competition with China and conflict with Russia, several organizations began to examine the state of the agency’s technology. Most notably, in 2022 the Center for Strategic and International Studies (CSIS) released a report detailing how even relative to other federal agencies, BIS is far behind technologically. One example of this is that BIS relies on systems launched in 2006 and 2008 to manage export license applications and enforcement investigations. This year, BIS has requested funding to replace these systems with modern Cloud applications. 

 

Over 15 years since their introduction, the Simplified Network Application Process (SNAP-R) and the Investigative Management System (IMS-R) lack the tools necessary to meet their critical importance in fulfilling BIS’s mission. In BIS’s words, these systems also contain “significant cybersecurity vulnerabilities,” leaving major holes in the processes that secure our most advanced technology. While not sufficient to turn the agency into a powerhouse of modern analytics, providing BIS the funds to update these two mission critical systems is the minimum investment required for the agency to continue executing its mandate. 

 

Combatting Foreign Abuse of U.S. Compute

In addition to their export control programs, BIS has regulatory and enforcement authority over U.S.-owned Infrastructure as a Service (IaaS) providers. As of 2023, BIS is required to ensure these infrastructure platforms are not used by our adversaries to train dangerous AI systems. Spearheading this regulatory effort requires new expert personnel, analytics tools, secure data collection and storage, and more. Without this funding, acquiring the necessary personnel and technology to execute this mandate will come directly at the expense of the agency’s other core functionalities. 

 

Effectively Securing U.S. Technology

BIS has managed to craft export controls that, according to President Xi, “suppress China’s trade and technology development” and are “creating risks” (for China, that is). These controls are unique in that they aim to reduce China’s access to the entire semiconductor supply chain. BIS accomplished this by not only restricting U.S. firms’ exports, but also by placing controls on foreign chip companies that use U.S. technology, including industry leader Taiwan Semiconductor Manufacturing Company (TSMC). Japan and the Netherlands also instituted similar restrictions in 2023, bolstering the effectiveness of these controls by removing China’s ability to backfill semiconductor purchases. 

 

However, while these controls have earned President Xi’s ire, they are not currently maximally effective. China has still been able to acquire many of these chips, taking advantage of loopholes and suboptimal enforcement of the controls. Issues like transshipment and smuggling persist largely due to the lack of funding and staff at BIS required to close the gaps. 

 

On June 25th, the House Subcommittee on Justice, Science, and Related Agencies (CJS) released their Fiscal Year 2025 (FY25) appropriations act. The bill aims to “safeguard U.S. innovation by confronting China’s efforts to target every aspect of American enterprise.” However, we encourage the committee to consider the effect of proposed reductions to BIS’s funding (by $4.3 million – or -2.3% – from FY24 levels), which could undercut our national security and have the effect of helping China access sensitive, dual-use U.S. technology. 

 

As the Senate CJS subcommittee considers their corresponding bill, we urge them to take a different tack. By instead allocating additional funding, BIS can continue its critical work securing U.S. technology and ensuring we maintain our advantage over competitors. 

 

Click to view copies of ARI’s recent letters to the House and the Senate on this issue.

  

 

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About Americans for Responsible Innovation (ARI)

Americans for Responsible Innovation (ARI) is a nonprofit organization dedicated to policy advocacy in the public interest, focused on emerging technologies like artificial intelligence (AI). Learn more at www.ari.us.

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