The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing today in which it considered the nominations of Alan Estevez and Thea Kendler for key positions at the Bureau of Industry and Security at the Commerce Department. As explained by Senator Sherrod Brown (D-OH) during his opening remarks, “Mr. Estevez would lead the Bureau of Industry and Security at the Commerce Department as Under Secretary for BIS. Mr. Estevez would play a pivotal role in helping advance our country's national security, foreign policy and economic objectives by implementing an effective export control regime”; and “[a]s Assistant Secretary of Commerce for Export Administration, Ms. Kindler would be responsible for safeguarding our national security by overseeing BIS's export licensing system.” Estevez’s opening testimony is here; Kendler’s opening testimony is here.
During the hearing, the Senators on the Committee asked the nominees a number of questions. We focus here on the questions and responses related to China, including on export controls generally, key technologies, national security, human rights, intellectual property, working with allies, the Entity List, and Huawei and Honor.
In his introductory remarks, Senator Pat Toomey (R-PA) offered some general comments on the role of BIS:
Now turning to today's nominees, Mr. Estevez and Ms. Kendler, you'd serve in Commerce's Bureau of Industry and Security, known as BIS, and of course BIS determines which US goods are too sensitive to be shipped abroad. In the face of China's drive for dominance in key tech sectors, BIS's mission today is as important as it's ever been. By setting US export control policy on items used for both civilian and military purposes, BIS effectively has the power to reshape the supply chains of entire industries. That means BIS must craft export controls in a prudent, thoughtful and effective manner that advances US national security interests without unduly harming American domestic industry. This challenge is typified by BIS's efforts to impose congressionally mandated controls on both emerging and foundational technologies, which I expect that you would prioritize.
Turning to the Q & A, Senator Brown asked Ms. Kendler a question about export controls and human rights:
Brown: Ms. Kendler, if confirmed you'll be charged with administering our export control system as you know. How would you use BIS authorities to address genocide and human rights violations and oppressive surveillance in China and elsewhere?
Kendler: Thank you, Senator, I share your deep concern about the Uighur people in Xinjiang. We cannot permit US technology to be used in human rights abuses. If confirmed, I will use all of BIS's tools, the licensing process, the entity list, the military end user list and so on to scrutinize license applications involving the PRC. I would also work with partners in our agency and with multilateral regimes to amplify our export controls. But I wouldn't hesitate to impose unilateral controls if necessary to keep United States technology out of the hands of human rights abusers.
Senator Thom Tillis (R-NC) asked Mr. Estevez questions about intellectual property theft and about working with allies:
Tillis: Mr. Estevez, I was chair of the intellectual property subcommittee in judiciary, now ranking member, and for years, we have had testimony, the theft, led by the Chinese Communist Party, theft of intellectual property, and we saw them double down during the pandemic, trying to steal information on essential diagnostics, treatments and cures for COVID-19. Can you talk about your vision for how we can be best positioned to combat the growing threat of the Chinese Communist Party's coordinated efforts to steal our intellectual property? And how can we make sure that we preserve American innovation?
Estevez: Thank you for that, Senator. I'd note that during my time at the Department of Defense, I also worked to protect intellectual property of the defense industrial base. China is certainly guilty of anti competitive coercive practices, including intellectual property threat. And I would, in my position, use the authorities given the Commerce Department under the Export Control Reform Act to ensure that we're not providing technology to China that can be used to steal intellectual property, and using CFIUS to protect the American businesses from Chinese intellectual property theft.
Tillis: Also, there was a question earlier about export controls. The concern that I have is that our European allies and partners do not necessarily share the same or have the same posture that we do with respect to China as an economic threat. Bilateral export controls are the best way to go, but given that we may have a lukewarm response from some of our trading partners and allies, what's your view of using unilateral export controls and cite any specific examples if they're relevant?
Estevez: Thank you for that. As you said, Senator, multilateral export controls are the most effective. If we don't use multilateral export controls, it's like damming up half the river, as one of my predecessors said. With that said, if we need to use a unilateral export control to protect a particular technology, that's American technology, from being exported, we will do that ... . And the follow up to that would be then to work with our allies to bring them to show them the data around that and hopefully bring the multilateral regimes into compliance.
Senator Bill Hagerty (R-TN) asked Mr. Estevez about general export control policies relating to China, the Entity List, Huawei, and Honor:
Hagerty: Mr. Estevez, … you've been nominated to lead the Bureau of Industry and Security, it's a position that is one of the most important across the government for our strategic competition with the Chinese Communist Party. The decisions that you make now can have generational impacts. And I'm very concerned about the national security risks of doing business with CCP controlled entities and national champions. And while the Trump administration imposed export controls to prevent telecom giant Huawei and its ilk from dominating the 5G and Internet of Things arenas here in the US, they also did it to prevent these companies from accessing sensitive US information. I'm concerned that the Biden administration appears to be moving in a direction that would reverse this national security policy, such as his recent decision to grant licenses for the sale of auto chips to Huawei. I'd like to start with this question. Do you feel that Huawei and other CCP backed national champions pose a national security threat and an economic security threat to the United States?
Estevez: Thank you for that question. In my past role at DoD, I read about Huawei almost every day in my morning read. And I would say that Huawei does present a national security threat to the United States. And it's my understanding that there's been no change in policy regarding Huawei. They remain on the Entity List and they remain under scrutiny.
Hagerty: I appreciate that. As US ambassador to Japan, in my previous position, I worked very hard with the Japanese government, to get them to likewise agree to block entities like Huawei from their system so that we could have a clean internet system and ability to communicate with our allies, other countries like Australia, New Zealand have followed suit. I'm hopeful that the UK will do the same. Mr. Estevez, will you commit to keeping Huawei on the Entity List under your tenure?
Estevez: I see no reason that Huawei would come off the entity list, unless things change, Senator.
Hagerty: Mr. Estevez, there's a disturbing trend that is underway that I've been watching for those companies that are on the Entity List, making an attempt to restructure themselves, to make themselves smaller in a way, to get themselves in a position that they could somehow circumvent the Entity List itself, and get beyond what the designation originally intended. Are you aware of this sort of activity?
Estevez: Again, Senator, you know, during my time at the Department of Defense, I represented the Department on CFIUS, and I watched lots of maneuvers by Chinese companies or shell companies or split off companies to try to get around US regulatory structures. And if I'm confirmed, I intend to keep a close eye on doing that. And we will review repeatedly to ensure that we're doing the right things to protect national security with regard to the PRC.
Hagerty: I'm pleased to hear you say that, again, I've seen these types of attempts as well. But the effort to restructure and structure around our designations I think is something that should be a top priority and the top concern, should you be confirmed, and I appreciate that. I also would like to ask you, if you could commit to taking a very close look at Huawei's recently spun off smartphone brand called Honor. Based on open source reporting, do you have any opinion on whether Huawei is using the spin off brand to minimize or circumvent Huawei's own designation on the entities list?
Estevez: You know, as I just said, I've seen previous maneuvers by the Chinese. I too read the Washington Post article yesterday on Honor. And it's something I'll have to look at when I get to the department, should I be confirmed. I do not have the information in front of me that would give me the full picture on that.