Major Tech Companies Voice Concerns Over Upcoming BIS Foundational Tech Controls

The Bureau of Industry and Security this month released the full set of comments it received on its pre-rule for foundational technologies (see 2008260045 and 2010070012), including hundreds of pages of feedback from U.S. and global semiconductor companies urging the agency to refrain from imposing narrow, unilateral export controls. BIS also received comments from some of the world’s largest technology companies, including Google and Microsoft, both of which told BIS that its controls could create unmanageable problems for compliance programs.

Google, Boeing and semiconductor manufacturers Lam Research and Applied Materials voiced concerns similar to comments filed by several other technology industry groups (see 2011130037 and 2011020057), saying the controls should be imposed multilaterally and only on technologies that are not easily available in foreign countries. Google asked BIS to avoid controlling foundational technologies based on end-user or end-use controls, which it said are “operationally challenging for industry.” Boeing said commercial aviation technologies are already “appropriately controlled,” and new restrictions would “lead companies outside the U.S. to develop and adopt non-U.S. products and services that use these technologies, at the expense of the U.S. economy.”

Lam Research said BIS should be careful about imposing unilateral controls -- even if the restrictions are lenient -- because of how they would be perceived by international customers that don’t understand BIS export restrictions. For example: If BIS were to announce a case-by-case licensing policy on a certain technology with the intention to approve most of the license applications, Lam Research said, foreign companies would not understand that the licensing policy would be far more beneficial to industry than a presumption of denial policy.

“Foreign companies do not have the intuitive or practical understanding of how the U.S. export control system works,” the company said. “All they see is delay in getting the technology they need, a delay that does not exist with respect to non-U.S. suppliers of comparable technology, and the risk of a seemingly arbitrary denial by a U.S. government in a process into which they have no visibility.”

Applied Materials echoed those concerns and argued that recent U.S. unilateral restrictions have repelled foreign customers and hurt U.S. semiconductor manufacturers. “The majority of current and future purchases of semiconductor production equipment will be made by companies in China to manufacture wafers for use by Chinese and foreign companies,” the company said. “As we have seen, Chinese buyers have been migrating away from suppliers of U.S.-made production equipment and have been substituting foreign-made equipment instead.” Applied Materials estimated there was a 16% decrease in total purchases of U.S. semiconductor equipment in 2020, which translated to $2 billion in lost sales. “If this unilateral activity is to persist or expand,” the company said, “the injury to the U.S. equipment industry would be even more severe.” A BIS spokesperson said the agency takes the comments seriously and will take them into consideration when crafting potential controls.

Although Microsoft also warned against unilateral controls, the company and OpenAI, an artificial intelligence company, proposed that BIS create a new export control regime and monitoring system based on “digital solutions within the technologies themselves.” The novel approach would “directly enforce and monitor government-imposed controls on users and uses” through technology and software features implemented into the products, such as software “designed into sensitive technologies to enable real-time controls against prohibited uses and users.” Other products can incorporate built-in “hardware roots of trust,” which would require “authorization for access.”

The company said these digital solutions can be reserved for “the most sensitive technologies and be employed transparently,” adding that they would be a “far more powerful, dynamic, and targeted method for controlling exports of these important technologies” than BIS’s current process. They would be able to “implement and enforce government-created restrictions on inappropriate uses and users,” Microsoft said.

While Microsoft acknowledged that these tools would represent a fundamental shift in BIS’s end-use and end-user monitoring practices, the company said the results would be worth the effort. “We understand that this proposed digital transformation would constitute a significant change in how Commerce approaches export controls, but we strongly believe it is necessary to effectively navigate the promise and risk of the most important technologies in the US and worldwide,” Microsoft said. “While we acknowledge the effort required to create and monitor these tools, ultimately a digitally transformed export control system -- in addition to being more effective -- would be less burdensome than the traditional compliance and enforcement techniques of today.”