U.S. Export Controls and China

Updated March 24, 2022

U.S. Export Controls and China

Since 2018, Congress and the executive branch have

revised—through legislation, regulation, and licensing

practices—the U.S. export control system that regulates

dual-use exports (goods and technology that may have both

civilian and military uses). Much of the legislative reform

has focused on controlling emerging and foundational

technologies, strengthening other technology controls and

licensing practices, engaging multilaterally to ensure U.S.

controls are effective, and considering the impact of

controls on the U.S. economy, including the foreign

availability of U.S. products subject to control. Many of

these changes were efforts to address concerns about the

People’s Republic of China’s (PRC or China) pursuit of

civilian and military leadership in advanced technologies

through U.S. commercial ties. Congress plays a key role in

overseeing the reforms it enacted and shaping the U.S.

export control regime to address U.S. national security and

foreign policy concerns, including those posed by China.

China’s Industrial Policies

China’s state-led industrial policies, such as Made in China

2025 (MIC 2025), seek to create competitive advantages for

China in strategic industries, in part by obtaining

technology from U.S. and foreign firms. MIC 2025 aims to

establish China’s leadership in emerging technologies

critical to future commercial, government, and military

capabilities. Priority areas include advanced manufacturing,

aerospace, artificial intelligence, information technology,

new materials, robotics, and semiconductors. China’s

military-civil fusion (MCF) program also seeks to leverage

MIC 2025 technological advancements for military

development. Some experts say that China’s approach blurs

commercial and military distinctions and may challenge the

U.S. export control regime’s ability to distinguish between

military and civilian end use and end users. China’s policies

in strategic sectors often require a PRC partner, frequently

state-tied, to own or otherwise control U.S. technology that

is transferred to China, potentially increasing risks that U.S.

technology could support China’s military.

U.S. Dual-Use Export Controls

The Export Control Reform Act of 2018 (ECRA) (P.L. 115232) reestablished nonemergency authority for the

President to control dual-use exports for national security

and foreign policy reasons and to coordinate with

multilateral export control regimes, and provided policy

requirements for setting controls. The Bureau of Industry

and Security (BIS) of the Department of Commerce

administers dual-use export controls and chairs an

interagency process that includes the Departments of

Defense (DOD), State, and Energy. BIS administers these

controls through the Export Administration Regulations

(EAR, 15 C.F.R. 730 et seq.), which includes the

Commerce Control List (CCL) of dual-use technologies

subject to controls. The EAR sets licensing policy for

specific destinations, end use, and end user controls. On the

CCL, national security (NS) controlled items are on the

Wassenaar Arrangement’s multilateral control list. The

EAR presumes denial for license applications of NS items

that would make a direct and significant contribution to

China’s military. Separate statutes and regulations control

nuclear materials and technology and defense articles and

services. U.S. law has prohibited arms sales to China since

1989. Congress has also mandated a policy of denial for

exports of satellite and space equipment to China.

Figure 1. 2020 U.S. Exports to China and BIS Actions

Source: CRS with reporting data from BIS.

Note: EAR99 items are subject to the EAR, but are not controlled.

Percentages are based on the value of U.S. exports.

U.S. Licensing Approach

The U.S. government only controls or restricts a small

percentage of U.S. technology exports to China in practice.

BIS has removed from the CCL or waived licensing

requirements for much of U.S. technology trade to China

since the 1990s as certain technologies have become more

widely available globally and in response to U.S. business

interests in the China market. Before new rules in May

2020, BIS waived license requirements for NS items

destined for civilian end use in China in sectors such as

aerospace, computing, and semiconductors. An estimated

18.1% of $124.6 billion in U.S. exports to China in 2020

($22.6 billion) involved dual-use technologies on the CCL

and subject to controls. BIS required licenses for 2.1%, or

$478 million of these CCL technology exports. Most CCL

technology exports—97.9% or $22.1 billion—went to

China without a license. (Figure 1).

Separately, BIS reported that it reviewed $112 billion in

licenses for U.S. software and technology exports to China

in 2020 and denied 2.2% ($471 million). The $112 billion

in licenses in 2020 increased from $6.9 billion in 2019; the

increase might reflect licenses, including for EAR 99 items,

required for PRC firms added to the EL since 2019. EAR

99 includes nonsensitive products and potentially sensitive

technologies in light of China’s dual-use programs. ECRA

called for a review of the CCL and EAR99 to determine

whether some EAR99 technologies should be added to the

CCL. In 2020, BIS denied three of 482 licenses to release

U.S.-controlled technology and knowhow to PRC nationals.

https://crsreports.congress.gov

U.S. Export Controls and China

BIS Entity List

Since 2018, the U.S. government has increased use of the

BIS Entity List (EL) to restrict some dual-use trade with

China by placing certain PRC firms of concern on the list.

The EL identifies persons involved, or with the potential to

be involved, in activities contrary to U.S. national security

or foreign policy interests. BIS typically requires a license

for any U.S. export of EAR items to those listed. EL listings

often presume an export denial, but licensing guidance—

such as narrow or low technology thresholds, partial listing

of firms, and case-by-case approval—appears to facilitate

the export of some U.S. technology and CCL items to PRC

firms on the EL. A lack of restrictions on 4G, 6G, cloud,

and, until recently, undersea cable technologies has allowed

Huawei to purchase U.S. technology. In 2020, Huawei sold

its Honor 5G mobile business to the PRC government. BIS

has not added Honor to the EL to extend Huawei

restrictions to the firm. EL restrictions for China’s foundry,

Semiconductor Manufacturing International Corporation

(SMIC), apply to technology below 10 nanometers (nm),

allowing trade at and above 14 nm to continue. In October

2021, the House Foreign Affairs Committee released BIS

licensing data for Huawei and SMIC from November 2020

to April 2021. Much of it involved semiconductor

technology: BIS approved 113 licenses for Huawei ($61.4

billion); and returned 48 ($29.8 billion) without action. BIS

approved 188 licenses for SMIC ($41.9 billion), and

returned 17 ($1.2 billion) without action.

 Clarifying that existing U.S. controls apply to re-

In August 2020, BIS amended the foreign-direct product

rule to restrict Huawei’s ability to acquire chips from any

source using U.S.-controlled equipment or software, such as

TSMC in Taiwan; other PRC firms are not restricted. In

April 2021, BIS added PRC firm Pythium to the EL for the

firm’s role in China’s hypersonic weapons program—BIS

does not appear to restrict Pythium’s and other PRC firms’

use of U.S. open source technology platforms and U.S.

software tools to design and test advanced chips for China’s

strategic advanced computing programs. In December

2021, BIS added China’s Academy of Military Medical

Sciences and eleven of its institutes to the EL; these

controls may not pertain to U.S. research ties with China.

Issues for Congress

Some Members have expressed concerns about a slow pace

of implementing some of the reforms required by statute.

For example, while BIS has initiated a rulemaking process

for emerging technologies and proposed an approach for

foundational technologies, it has established few new

controls. This, some argue, could impede congressional

reforms that expanded the authority of the Committee on

Foreign Investment in the United States (CFIUS) to review

PRC and other foreign investments in critical and emerging

technologies below thresholds of foreign control. Issues for

possible oversight or legislative action include:

Military-Tied Firms

In late 2020, BIS extended licensing requirements for PRC

firms identified as military-end users; it presumed denial for

certain, but not all, CCL exports to these firms. Many PRC

military firms do not appear to be on the BIS military-end

users list or the EL. The BIS lists include a subset of the

PRC military firms that Congress requires DOD to identify

in accordance with Section 1260H of the National Defense

Authorization Act for Fiscal Year 2021 (P.L. 116-283). In

some cases, BIS lists only parts of these firms.

ECRA Reforms

ECRA has provisions—which impact U.S. dual-use exports

to China—to reform or augment export control decisionmaking, licensing, and technology controls, including:

 Determining foreign availability by considering

comparable quality in ascertaining whether a global

alternative is comparable to a U.S. technology. Foreign

availability determinations can affect decisions on

whether to apply specific or general controls.

exports, regardless of the structure of the underlying

transaction, including identifying and considering any

foreign party to a license with a significant ownership

interest. This requires more detail on ultimate end users

and scrutiny of joint ventures. Additionally, after the

U.S. government decision in June 2020 to no longer

treat Hong Kong separately from China, BIS imposed

new licensing conditions for U.S. exports to Hong Kong

and re-exports from Hong Kong to mainland China.

 Requiring the President to create an interagency process

to create controls on “emerging and foundational

technologies” of concern—including through a review

of the CCL—and regulate their release to foreign

persons by, at a minimum, requiring an export license.

 Reviewing the interagency dispute resolution process

and requiring BIS to work with DOD on commodity

classifications to determine when a license is required.

 Adding a role for the Director of National Intelligence

and considering the U.S. industrial base in setting

controls and in licensing decisions.

 Defining dual-use to include law-enforcement

applications. Relatedly, crime control equipment exports

to China require a license. Concerns about China’s

human rights abuses and surveillance activities have led

to tighter scrutiny of these exports to China.

 The status of ECRA implementation and whether the pace and

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scope of actions are sufficient without greater oversight or

changes to the export control regime.

The impact of the pace and scope of ECRA’s implementation

on other congressional reforms like CFIUS.

The global context of export controls and practices to ascertain

whether to pursue more multilateral controls and reforms.

The status of controlling emerging and existing technologies,

and reforming the process for classification determinations and

licensing decisions, including for escalated cases.

The operating committee’s current voting structure and BIS’s

role as chair in determining licensing decision outcomes.

The level of congressional scrutiny of licensing decisions,

justifications, waivers, and exceptions, and whether to pursue

more frequent and regularized reporting to Congress to

strengthen its oversight of export controls in practice.

Karen M. Sutter, Specialist in Asian Trade and Finance

Christopher A. Casey, Analyst in International Trade and

Finance

https://crsreports.congress.gov

IF11627

U.S. Export Controls and China

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https://crsreports.congress.gov | IF11627 · VERSION 5 · UPDATED