Senate Probe Slams Commerce Dept for Inadequate Enforcement of Chipmaker Sanctions

The U.S. Senate’s Permanent Subcommittee on Investigations has revealed that the Department of Commerce’s enforcement of bans and sanctions imposed by the Biden administration against Russia and China has been largely ineffective due to insufficient funding. As reported by the Associated Press, the Bureau of Industry and Security (BIS), which is responsible for export controls and the protection of U.S. technology, is not adequately equipped to fulfill its responsibilities, relying heavily on the voluntary compliance of regulated companies.

This revelation follows numerous reports that despite existing sanctions, high-tech American components like chips have been found in Russian drones and missiles, with Russia importing approximately $1.7 billion worth of chips in 2023.

Similarly, the U.S. faces challenges in controlling exports to China as sanctioned entities continue to create new firms to import American technology prior to facing any bans. Despite a comprehensive export ban on advanced technology such as Nvidia’s H200 AI chips to China, recent reports indicate that a Chinese businessperson managed to procure 200 units of Nvidia’s top-tier AI GPUs earlier this month.

In response to these findings, U.S. Department of Commerce spokesperson Charlie Andrews stated, “Although BIS’ budget has remained unchanged for ten years, the bureau tirelessly works to achieve its goals and protect U.S. national security.”

Andrews also mentioned that increased funding from Congress would better prepare the bureau to tackle the evolving challenges related to national security.

The Senate report highlighted that the BIS has only 11 export control officers worldwide, making it virtually impossible to perform end-use checks or verify the legitimacy of even a small percentage of companies purchasing American chips. Additionally, the Department of Commerce lacks sufficient experts on China and Chinese linguists, complicating efforts to track the distribution of U.S. semiconductors.

The committee advised that the Commerce Department should receive additional funding to expand the BIS, deploy more staff, and enhance enforcement of export controls. It also suggested that companies violating sanctions should face steeper fines and that their compliance with export controls should be verified by independent third parties, not solely internally.

Commerce Secretary Gina Raimondo has expressed skepticism about the long-term effectiveness of sanctions against China. She noted that while these measures might temporarily hinder Chinese technological advancement, the country’s innovation will persist as it finds ways to circumvent these restrictions. Raimondo emphasized the need for the U.S. to significantly invest in its semiconductor manufacturing and research and development to maintain a competitive edge.

Amid these findings, the political landscape in Washington is causing uncertainty for the U.S. chip industry. Although the CHIPS and Science Act, backed by the Biden administration, received bipartisan support, President-elect Donald Trump has expressed dissatisfaction with the policy.

Trump’s spokesperson indicated a preference for tariffs and reduced regulations rather than direct subsidies and funding, suggesting that companies investing billions into the American economy could see some regulatory relief.