Telephonic Press Briefing on Export Controls

MODERATOR:  Good morning to everyone from the U.S. Department of State’s Asia Pacific Media Hub.  I would like to welcome everyone joining the call.  Today we have the honor of hosting an on-the-record briefing with the U.S. Department of Commerce’s Assistant Secretary for Export Enforcement Matthew Axelrod and Assistant Secretary for Export Administration Thea Rozman Kendler.  Assistant Secretary Axelrod and Assistant Secretary Kendler will discuss regional engagement on export controls, Russia/Belarus sanctions, and the inaugural Women in Strategic Trade Conference.  After their opening remarks, Assistant Secretary Axelrod and Assistant Secretary Kendler will take questions from participating journalists.

I’ll now turn it over to Assistant Secretary Axelrod for his opening remarks.  The floor is yours.

ASSISTANT SECRETARY AXELROD:  Hey, thanks so much, and thanks to everyone for joining the call.  We’ve had a terrific week here in Singapore, and to me, the week has really been all about the power of partnerships.  We’ve been meeting both in a group setting in our conferences and in individual bilateral meetings with a host of our colleagues from governments in the region, and it’s been incredibly productive.  We’ve been able to share best practices on enforcement and learn from each other, and that’s really been a terrific – it’s just a terrific week.

In my view, at no time in history have export controls and their enforcement been more important than right now given everything that’s going on in the world and the – particularly what’s been going on with Russia’s invasion of Ukraine.  I think it’s really brought to the fore how powerful a tool export controls are, and I think that today – the discussion this week really focused on the impact that export controls can have.  The – just from examples from Russia, there have been numerous press reports that due to the export controls that have been put in place by the United States and 37 other countries, Russia has been unable to repair and rebuild its tanks and other weaponry because they lack critical components.

The Russian and Belarussian commercial airplane traffic has decreased 77 percent, with Russian airlines having to cannibalize their fleets to keep the remainder operational.  And Vladimir Putin himself has noted that the export controls and sanctions that have been imposed have put Russia in a, quote/unquote, “state of disarray.”  And that impact has only come about because it’s been a broad-based effort, and export controls and export enforcement really is a team sport, and that’s been one of the themes of this week is the importance of that partnership.

We live in an increasingly interconnected world, and that interconnected world needs an interconnected response, an interconnected action when it comes to preventing the most sensitive technologies and goods from ending up in the most dangerous hands.

We’ve been highlighting sort of three different types of partnerships this week.  First of all, partnerships with industry and academia.  Obviously, industry is on the front lines here, right.  We in the government – on the government side don’t do this alone.  We really work with industry to educate them about the export rules and then help them comply.  We’d rather prevent violations from occurring in the first place than enforce on the back end, although of course we enforce on the back end as well.

A second level of partnerships we’ve been discussing is within our own countries, partnership across domestic law enforcement agencies.  And the third is the one that really has been a focus this week, which is partnership among countries, and particularly this week we were discussing a few countries in the region.  And different countries have different sort of systems of export controls, but the common thread has been a recognition of how important those controls are and the importance of working together.

And so I just wanted to thank the folks from Singapore customs for hosting us this week and the other countries in the region for being here and being dedicated to trying to make sure that export controls are strong and are enforced, and also for their shared and continued partnership.  So that’s it for me.  I guess over to Assistant Secretary Kendler.

ASSISTANT SECRETARY KENDLER:  Thank you.

MODERATOR:  Thank you, Assistant Secretary Axelrod.  I’ll now turn it over to Assistant Secretary Kendler.  The floor is yours.

ASSISTANT SECRETARY KENDLER:  Thank you, and thank you so much to all of you for gathering today.  We’ve had an absolutely productive and effective week participating in the three events that were held here in Singapore: the 10th Joint Industry Outreach, the first, inaugural Women in Strategic Trade event, and our Southeast Asia Forum on Export Controls – I think this was the second of those ever to be held.  We’re deeply grateful for our partners in Singapore customs and also in Japan’s ministry of economics, trade, and industry for co-hosting these events, as well as our partners in the U.S. State and Energy Departments who lead a lot of the engagements here in the Southeast Asia region.

For me, it was a personal and professional highlight to deliver the keynote address at the women in international – the Women in Strategic Trade event.  I focused on the fact that export controls as a field tends to draw from areas that are historically male-dominated like STEM and national security, and yet here in this region of the world we have women leaders really showing how it’s done in strategic trade controls, and it was a pleasure to be part of that effort.

I called for partner countries to join in engaging the entire spectrum of society’s diversity and talent, especially women, to train and prepare the next generation of leadership and build stronger partnerships to ensure we channel the burgeoning technological advancement to make the world more peaceful and prosperous.  That was a message that was well received and we had a hearty discussion of women’s role in strategic trade controls.

Before that, I delivered keynote remarks also at the Joint Industry Outreach highlighting our – the impact of our export controls on Russia’s ability to resupply its military, as Matt Axelrod already noted.  And of course that effort would not be possible without alignment of partner countries and the additional support and compliance of private industry, which was one of the themes of my remarks.

Global security is a shared responsibility between government and industry, and so speaking at events like Joint Industry Outreach is particularly important.  I asked industry to continue engaging with Commerce on this.  We’ve actually, here in the Bureau of Industry and Security at the Commerce Department on our Russia controls alone, since early March we have conducted almost 3,000 individual and specific outreach activities.  So we are eager to engage with industry to make sure that they are complying with our Russia and Belarus controls and that they don’t inadvertently stumble into violations.

In addition to the industry outreach, we had an opportunity here to focus with foreign partners on issues of critical importance to the Commerce Department, including emerging technology and controls related to specific end users and end uses.  These conferences were an excellent opportunity to meet representatives of regional countries in ASEAN in different stages of export control development.  We talked about the importance of export controls to a country.  We certainly covered technology exports to Russia.  We identified opportunities for future engagement and we talked about the increasing presence of multinational corporations in the Southeast Asia region.

And in light of that increasing presence and given Commerce’s clear focus on the semiconductor industry, I took advantage of the opportunity of being here to meet with several multinational companies with Singapore operations to discuss the semiconductor supply chain and the impact of U.S. export controls, including what we refer to as the foreign direct product rule, on their business.

I’m also grateful, I should mention, to the two companies that invited my team and me to visit their clean operations here in Singapore.

It’s been a very full week filled with themes that we care deeply about in the Bureau of Industry and Security at the Commerce Department, and I’m very fortunate to have had the opportunity to meet with so many representatives of countries that are committed to common goals in this field.  Thank you.

MODERATOR:  Thank you, Assistant Secretary Kendler.  We will now begin the question and answer portion of today’s call.  And our first question was one of the questions submitted in advance.  It goes to Amanda Lee of the South China Morning Post in Hong Kong.  She asks, “My question is on the U.S. exports of  dual-use products.  Is the U.S. likely to tighten export controls on these products?  And is it likely that there will be some form of coordination in the Asia Pacific region?

ASSISTANT SECRETARY KENDLER:  Thanks, Amanda.  I’ll take that one.  It is likely that the U.S. will tighten export control on dual-use products.  It is (inaudible) relax some controls on dual-use products.  Export controls is a constantly evolving tool to match the national security and foreign policy landscape, and so you saw us impose new controls on items down to EAR – our lowest level of technology – on Russia, when we have to identify them using harmonized tariff schedule codes in our regulations because that’s what was important in that environment.

We are also always looking at emerging technologies and assessing whether we need to add new technical controls to our regulations so that we capture the most cutting-edge of innovations.  Fortunately, many of our controls are written as floors, and so a lot of emerging technologies are already captured in that – in our list of technologies.  But we are always striving to improve our lists and make them more relevant to today’s environment.

I’m not in a position to outline any specific policy changes right now, but we are taking a comprehensive approach to implement actions related to technologies, as I noted, and also end uses and end users.  I think I’ll leave it there.  Thank you.

MODERATOR:  Okay.  Our second question came from Amy Chew of the South China Morning Post in Malaysia.  She asks, “Are there any countries or companies in Southeast Asia where semiconductor companies are exporting smart chips to Russia in violation of sanctions?  If yes, is it possible to name them and what action is being taken by the U.S.?  Are these semiconductors being used to manufacture military weapons used in Ukraine?”

ASSISTANT SECRETARY AXELROD:  Thanks, Amy.  I’ll take – I’ll take that one.  So far we haven’t seen sort of broad-based efforts by particular countries in the region to evade the sanctions.  I think when it comes to semiconductors in particular, we are focused on a couple of things from an enforcement perspective.  One, we’ve been doing outreach to U.S. industry to educate them about the controls.  Second, we’ve been doing outreach with key overseas suppliers to educate them as well.  Third, we are able to monitor U.S. exports to see what’s going and make sure that things aren’t going that aren’t supposed to.  Fourth, we can look at – do analysis of Russian import information.  And fifth, we’ve been surging people to do end-use checks in countries both in the region and elsewhere, places that might be diversion points for things to – including semiconductors – to go to Russia.

So I guess we’ve been trying to take a multifaceted approach to make sure that semiconductors aren’t going to Russia in violation of the controls.  It doesn’t mean that there won’t be one-offs here and there, but so far we haven’t seen sort of a systematic, widespread evasion when it comes to semiconductors.

MODERATOR:  The next question goes to Feliz Solomon  of the Wall Street Journal in Singapore.  Operator, please open the line.

QUESTION:  Hi, this is Feliz Solomon from the Wall Street Journal.  Thank you so much for your time today.  My question is about sanctions and compliance, but it may not be squarely in your purview, so hopefully you can answer it.  I would like to know how regional officials are responding to the G7 plan to cap the price of Russian oil.  Are they supportive?  Do they think it’s going to be difficult to enforce?  And have countries like Indonesia signaled an openness to signing on formally or even just implicitly complying by negotiating lower?

ASSISTANT SECRETARY AXELROD:  Yes, thanks, Feliz.  I think as you noted at the top of the question, it’s really – that’s really not us.  That’s the Treasury Department, and we wouldn’t – we wouldn’t want to speak for them just like we wouldn’t want them to be speaking for us.  So I’d have to refer you to the Treasury Department for that one.  Sorry.

QUESTION:  Okay.  Is it something that you’ve been asked about?  Is it just even casually coming up in your conversations?

ASSISTANT SECRETARY AXELROD:  No, it’s really not (inaudible) our – I mean, remember the Treasury Department does the financial sanctions; we do the trade sanctions, right: technologies and goods.  So something like price caps really is squarely – there are a couple – some things that sometimes scrabble, but that – that’s not one of the areas.  That’s really squarely in Treasury’s lane.

QUESTION:  All right, thank you.

MODERATOR:  The next question goes to Ken Cheng of the Epoch Times in Taiwan.  Operator, please open the line.

QUESTION:  I’m Ken Cheng from Epoch Times, Taiwan.  I would like to ask, there has – there was a report on September 11th from Reuters that they say the U.S. Government plans next month to broaden curbs on U.S. shipments to China of semiconductors used for artificial intelligence and chip-making tools.  Can you comment on that?  Thank you.

ASSISTANT SECRETARY KENDLER:  Thank you.  I can’t comment specifically on that, but I am familiar with the reporting and it is correct that we recently took actions to restrict trade and servicing of specific advanced semiconductors essential for highly capable AI applications, artificial intelligence applications.  And those restrictions include license requirements on some activities such as performing a service or contract that may benefit a Chinese military intelligence end user as well as exports of those items in support of military activities – exports, re-exports, and transfers in country.

So we’re at – we issued directives that certain companies must come to BIS for approval of transactions involving those kinds of items and activities.  We don’t normally – we’re normally restricted in the kinds of information that we can provide about company-specific actions, but given the importance of this we determined it was in the national interest to confirm that we sent letters to specific companies.  And the companies must come to us for approval of transactions now involving those kinds of items and activities.  Commerce together with our export control partner agencies – Defense, Energy, and State – would review any such applications and adjudicate them in accordance with national security and foreign policy considerations.  Thanks.

MODERATOR:  All right.  Well, that concludes today’s call.  I would like to thank Assistant Secretary Axelrod and Assistant Secretary Kendler for joining us, and thank you to all of our callers for participating.  If you have any questions about today’s call, you can contact the Asia Pacific Media Hub at AsiaPacMedia@state.gov.  Information on how to access a recording of this call will be provided by AT&T shortly.  Thank you and have a great day.