Kevin Wolf is a partner at Akin Gump Strauss Hauer & Feld LLP, where he focuses on international trade practice. From 2010 until 2017, he served as the Assistant Secretary of Commerce for Export Administration in the Bureau of Industry and Security (BIS) at the Department of Commerce.
During his tenure at the Department of Commerce, Wolf was the primary strategist and driving force implementing President Obama’s export control reform, a massive, seven year interagency effort to substantially rewrite the defense trade and most dual-use export controls.
What's your view of the success of the export reforms implemented during your tenure at Commerce? Are they being sustained by the Trump Administration?
Based on my time in government and my year-and-a-half now in private practice, I’m pleased with how the export control reform efforts turned out. The definitions, license exceptions and revised lists work and work well.
The policy goals of
- enhancing interoperability with our NATO+ allies,
- reducing the incentive to design out U.S. content,
- allowing the agencies to focus more on transactions of concern and
- increasing the reliability and predictability of the regulations
have been met and continue.
Although there is still much more to be done, we got done what we said we’d get done — other than creating a single export control agency, which will have to wait until the next administration.
The Trump Administration has not changed any of the reform rules. Indeed, to its credit, it has continued the process of regularly reviewing categories, although the pace of updates to the categories is considerably slower than should be the case.
BIS has asked for comments on emerging technologies that should have export controls. What's your sense of new computing and electronics/wireless technologies that will emerge from this process?
No one knows, but if the administration follows the standards in the new Export Control Act that became law on August 13, 2018, then the new controls will only be over narrowly tailored critical emerging and foundational technologies that are essential to national security and will not harm domestic research in the technologies.
The best way to increase the odds of a thoughtful outcome consistent with the new law is for industry to engage, i.e., to file comments on how to define the technologies at issue, such as whether they are available outside the United States and whether domestic research in the technologies would be harmed if unilateral controls were imposed.
I’m confident that the export control agencies will take well-supported, relevant comments into serious consideration when preparing new proposed rules on emerging and foundational technologies. If not, then we can speak about how to address that outcome.
Note: The BIS notice of proposed rulemaking was published in the Federal Register on November 19, 2018 and may be reviewed here
5G, the next generation wireless technology, has become an “arms race,” with (hyperbolic) arguments suggesting the country first to market will have world technological leadership. Other than the benefits of economic development from 5G, do you see national security risks?
Most of the components used in 5G applications are not export controlled and are essentially common to other uncontrolled civil applications. Indeed, the regulations encourage civil telecommunications applications. That said, there are a small number of some key components of 5G systems, such as certain kinds of MMICs, that warrant their current dual-use controls, because they also have significant military applications.
The possibility of dominance by Chinese companies in the general 5G space has been identified by the Trump Administration generally and in specific cases that warrant enhanced investment and technology transfer-related controls. I don’t know if the responses would have been different under another administration.
Because the size and international character of the 5G industry is moving so quickly, the Administration will need to move equally as quickly to align the corresponding investment and export.
To the State Department’s credit, it recently revised one of its electronics controls so that its regulations (the ITAR) no longer capture key components of current 5G systems. When we wrote the regulations in 2013, the components were in exclusive military application. Their applications evolved, and the State Department responded accordingly so as not to impair U.S. 5G development.
The U.S. economic relationship with China is a lightning rod for the Trump Administration. Setting aside the question of balance of trade, please explain the administration's strategy for addressing the technology competition between the two countries.
Although the vast majority of U.S. exports to China are purely commercial and do not create any national security issues, there is, nonetheless, a long history of entities in China attempting to acquire dual-use items for use in military applications. There is also a strict arms embargo on the export of U.S.-origin military items of any sort to China. The military and dual-use export control regulations are designed to identify and stop such exports.
As a result of the Obama Administration’s reform efforts, more enforcement resources were devoted to investigating and enforcing such prohibitions. The Trump Administration has not changed such controls or policies.
The change has been with respect to commercial and dual-use exports and foreign investment rules. The Trump Administration’s policy with respect to such issues is largely driven by the Chinese state policy in its “Made in China 2025” plan to acquire large categories of emerging and foundational technologies through exports and direct investment, in order to enhance its economy and, in part, its military.
In response, Congress and the Administration worked well together, including with significant industry input, to negotiate and get passed in August two new laws to address such issues:
- The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA).
- The Export Control Reform Act of 2018 (ECRA).
They combine to modernize the interagency committee assigned to review foreign direct investments to ensure that they don’t create unresolved national security risks — known as the Committee on Foreign Investment in the United States (CFIUS) — and the export control system administered by the Commerce Department and supported by multiple other parts of the government.
While the legislation is not perfect, it is remarkable on both substantive and process grounds, because it
- Addresses vulnerabilities in our existing investment screening processes related to critical technology, while remaining focused on national security and asserting that the U.S. not only welcomes foreign investment but actively promotes it.
- Provides robust support and a mandate for the export control agencies to think creatively about how to address future threats involving emerging technologies — but without harming domestic research.
- Recognizes that the United States is not alone in the world and that if we want to prevent our adversaries from gaining military or technological advantages over us, we need to work with our allies on both investment reviews and export controls.
- Improves over time, perhaps as important a point as any.
Earlier versions of the legislation would have placed substantial unnecessary burdens on U.S. companies, created extraterritorial restrictions that would have made little sense and, most likely, have harmed U.S. competitiveness and overwhelmed the U.S. government to the point that it might have actually harmed our national security. However, because Congress used a regular order, nonpartisan, bicameral, (mostly) civil, principled process that included robust hearings, thoughtful debate and engagement with industry representatives, former officials from Democratic and Republican administrations, other subject matter experts and administration officials, the more unworkable and anti-competitive parts of the bill were eliminated.
There is bound to be genuine concern that the new CFIUS and export control authorities could be implemented poorly, abused or not adequately supported with sufficient staff. But such concerns should not lead to unfounded fears that it will be harder to invest in the United States or engage in domestic research involving emerging and foundational technologies. The legislation addresses such fears with considerable procedural protections, transparency and by creating as little uncertainty as possible.
However, it is not enough to state that the legislation avoided many of the pitfalls that could have discouraged benign investment, research and development in the United States or unnecessary regulatory burdens. Instead, businesses need to remain vigilant and ready to hold the executive branch accountable for following a sound, sober and professional regulatory process that doesn’t re-litigate old battles that Congress debated and dispensed with — but instead lands on an investment and emerging technology review control regime that provides certainty to industry, adheres to the standards in the legislation and protects U.S. national security.
Last year's sanctions on ZTE, preventing U.S. companies from exporting products, nearly put ZTE out of business. Were you surprised by such a step and do you think it was warranted? Do you expect similar sanctions on Huawei?
Many things about the case surprised me, but I do not know enough about what was happening behind the scenes to provide thoughtful comments. And I have no idea about whether similar actions will be taken against Huawei.
Many U.S. technology companies have complex, interdependent relationships with China. It looks like the coming year will be uncertain and may have disruptions in normal business. For technology companies doing business in China, what guidance do you have to balance their business interests with national security?
The key to maintaining confidence in supply chains and engaging in such business is to
- Have a solid understanding of the existing export controls.
- Make sure your customers are similarly well informed (and, thus, not responding based on rumor or myth).
- Have internal control plans in place to be able to respond quickly to changes.
- Stay engaged with the government and potential regulatory changes, particularly with respect to emerging and foundational technologies.
The Administration is actively seeking comment from industry on the impact of export controls on a regular basis. Companies should stay involved and vigilant.