The Treasury Department is proposing to add eight military bases that would fall under the jurisdiction of the Committee on Foreign Investment in the U.S., including an Air Force base in North Dakota that was the subject of a controversial CFIUS decision last year. The proposed rule, released May 4 by Treasury’s Office of Investment Security, also would amend the definition for “military installation” to include six additional U.S. states. Comments on the changes are due June 5.
Exports to China
China denied media reports it's exporting drones to the Russian military to be used in Ukraine, the Ministry of Commerce said, according to an unofficial translation. The ministry said China has "strict controls" on drone exports, adding that while there is no international control on civilian drones, many Chinese drone-makers have self-imposed such restrictions. China will continue looking to strengthen its export controls on drones, the ministry said.
Although National Security Adviser Jake Sullivan (see 2304270066) and Treasury Secretary Janet Yellen (see 2304200058) confirmed in recent weeks that the administration is working on an outbound investment screening mechanism, their “vague” descriptions of the tool suggests the process has been difficult, a technology policy expert said. Martin Chorzempa, a research fellow with the Peterson Institute for International Economics, wrote in a May 3 post that the administration appears to be “having a challenging time balancing the planned restrictions against the concerns of a private sector that continues to have a stake in Chinese investments.”
A potential Chinese military invasion of Taiwan could lead to an unprecedented level of new sanctions and export controls against Beijing, including U.S. financial sanctions against major Chinese companies and export prohibitions on anything related to the country’s military, trade lawyer David Wolber said. Banks in particular are concerned about the possibility of sweeping financial restrictions, Chloe Cina of Deutsche Bank said, adding that some are beginning to prepare for a worst-case sanctions scenario.
U.S. export controls imposed against China’s semiconductor industry in October (see 2211010042) are so far having “only minimal effects” on the country’s artificial intelligence sector, Reuters reported May 3. Although the rules restricted shipments of certain chips “that have become the global technology industry's standard for developing chatbots” and other AI systems, including chips supplied by Nvidia, the U.S. technology company has created “variants of its chips for the Chinese market that are slowed down” to comply with the new license requirements, the report said.
The Senate will work over the next several months to build a bill Majority Leader Chuck Schumer, D-N.Y., sees as a sequel to its China package -- also known as the Chips Act -- that could expand China-related export controls and investment restrictions.
Israel should strengthen its foreign direct investment screening efforts to better protect its sensitive technologies, especially investments from China, House Speaker Kevin McCarthy, R-Calif., said, speaking May 1 before the Knesset, Israel’s parliament. He said he is “glad” Israel “has put into place a process to review foreign investors” but “strongly encourages Israel to further strengthen its oversight of foreign investment, particularly Chinese investment.”
U.S. hardware supplier MaxLinear said it submitted a “comprehensive” voluntary self-disclosure to the Bureau of Industry and Security in March detailing its potential illegal exports to a Chinese foundry on the Entity List. The company, which submitted an initial notification to BIS last year (see 2211070014), has since hired outside counsel who recently completed a “privileged investigation” of the potential violation, according to its April filing with the SEC. The company also “took immediate action to remediate, including by preventing recurrence.”
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Placing export controls now on quantum information science technologies likely would “cause more harm than good,” Sam Howell, a research assistant with the Center for a New American Security, said in a May 1 article for the Lawfare blog. Although the U.S. could take several paths in imposing quantum technology restrictions -- including specific end-user controls or broader restrictions targeting “entire integrated quantum systems” -- she said each carries “significant pitfalls and are unlikely to be effective in protecting the U.S.’s strategic edge at this stage of development.”