Today, I submitted written testimony to the U.S. Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science and Related Agencies. Click here to download a pdf of the testimony.
Chair Shaheen, Ranking Member Moran, and Members of the Subcommittee:
Thank you for the opportunity to testify. My name is Samuel Hammond, and I am Senior Economist at the Foundation for American Innovation, a nonprofit organization focused on promoting innovation, improving governance, and strengthening national security. I am writing to respectfully request that the Subcommittee provide full funding to the Department of Commerce’s Bureau of Industry and Security (BIS), which requested $222.4 million for FY2024, to fulfill its mission of “ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.” This mission is expanding, consistent with the United States’ current strategy to compete with the People’s Republic of China and to deny Beijing access to technologies necessary to power innovations in artificial intelligence and supercomputing. Moreover, I write to suggest that the Subcommittee include report language requiring Commerce and BIS to report to Congress about its current capacity to enforce export control laws and to monitor and deter violations, including policy options for closing any identified gaps.
As background, BIS will receive $191 million in appropriations during FY2023. The Biden administration has requested $222.4 million for FY2024, or a 16.4 percent increase, which would fund 587 positions. The administration’s request offers several reasons for this increased funding, including to manage growing cybersecurity risks and to fulfill its growing regulatory and export control mission. In 2022, the Biden administration expanded the Export Administration Regulations to “implement necessary controls on advanced computing integrated circuits (ICs, computer commodities that contain such ICs, and certain manufacturing items,” and “expand[ed] controls on transactions involving items for supercomputer and semiconductor manufacturing end uses.” BIS’s FY2024 budget proposal includes a requested $93.5 million to fund 247 positions focused specifically on export enforcement, which reflects a modest increase from the prior fiscal year.
Given the importance of BIS’s mission in the United States’s national security and economic strategies, fully funding the BIS request and its modest increase is prudent, particularly given Congress and the Biden administration’s recent focus on improving American competitiveness. The CHIPS and Science Act of 2022 provided the Commerce Department with more than $50 billion for the CHIPS for America Fund to promote the American semiconductor sector. Fully funding the administration’s budget request for BIS, which reflects less than one percent of the new fund’s expenditures, is reasonable given the Bureau’s mandate to protect American technological leadership.
The Subcommittee could reallocate funding from other activities within the Commerce Department that are less critical to national security to offset the proposed funding increase for BIS. Moreover, the Committee and Congress could conduct additional oversight to require the Commerce Department to implement currently open watchdog recommendations from the Government Accountability Office and the Inspector General, which should result in cost savings that could be used to increase funding for BIS.
Further, the Subcommittee should require the Commerce Department and nonpartisan watchdogs to assess its capacity to fulfill its mission, given its ongoing expansion. For example, more than 247 personnel may be required to conduct BIS’s enforcement responsibilities. Requiring both the Commerce Department and the Government Accountability Office to assess BIS’s mission and current capacity to achieve it would inform future budget requests and congressional appropriations, consistent with the national security strategy. The Office of Inspector General is currently conducting an audit of BIS’s “effort to counter China’s military-civilian (MCF) strategy,” with the goal of “assess[ing] the adequacy of the actions taken by BIS to reduce the risk of China’s MCF threats.” The Office of Inspector General review and capacity assessments by the Department and GAO would help Congress determine if additional resources are needed.
In addition, the Subcommittee should require the Department of Commerce and BIS to report to Congress on its current capability to deter export control violations, smuggling, or third-party transactions of advanced chips and other technologies and present potential options for closing any identified gaps. The administration’s national security strategy of denying the People’s Republic of China technology critical to advancing artificial intelligence and supercomputing will not be achieved if U.S. export laws are evaded or third parties smuggle or sell certain chips to China. Research and historical experience show that the outcome of policies to increase or deny market access to foreign firms is highly sensitive to the implementation procedures used. This will be especially true of semiconductors, as China has already begun efforts to skirt export controls through sophisticated third-party and subsidiary arrangements. A Commerce Department assessment should provide recommendations for improving its ability to enforce export control laws, particularly under conditions of adversarial evasion tactics.
In conclusion, the Bureau of Industry and Security has a critical mission for U.S. national and economic security. Fully funding BIS to fulfill its mission should be a priority within the Commerce Department’s budget. Moreover, additional reporting by Commerce and GAO about BIS’s current capacity to fulfill its mission and recommendations for potential policy changes to deter export control violations would help Congress and the administration determine if additional resources and authorities are needed.
Foundation for American Innovation