McCaul Leads House Chairs Urging Action Against Huawei and SMIC

Letter

"Dear Under Secretary Estevez,

We write regarding recent reports that Huawei Technologies Co. (Huawei) has developed a smartphone containing 7-nanometer (nm) chips, capable of supporting 5G, produced by the Chinese state-owned Semiconductor Manufacturing International Corp. (SMIC). Due to the ubiquity of U.S. origin technology throughout the semiconductor supply chain, these reports suggest a violation of U.S. export control regulations.

We are extremely troubled and perplexed about the Bureau of Industry and Security's (BIS) inability to effectively write and enforce export control rules against violators, especially China. For more than two years, our committees and numerous members of Congress have written you regarding loopholes in BIS rules attempting, unsuccessfully, to restrict technology to Huawei and SMIC, among others. Despite this knowledge and continued Congressional pressure to adopt stricter policies, BIS has continued to grant licenses to Chinese Communist Party (CCP) controlled companies, such as SMIC, worth hundreds of billions of dollars. These companies support the CCP's military and have been responsible for manufacturing semiconductors that power Huawei's 5G devices, in violation of BIS' export controls.

In accordance with the primary goal of preventing malign actors from obtaining or diverting sensitive technologies outlined before the Foreign Affairs Committee earlier this year, the Department should immediately take the following actions:

Establish a sanctions authority under the International Emergency Economic Powers Act focused on People's Republic of China (PRC) companies that flout U.S. technology controls, and leverage this authority to designate SMIC and Huawei with full blocking sanctions;

Exercise the authorities under 19 U.S.C. § 1864 to strategically bar the import of SMIC produced semiconductors, particularly those that pose risks to national security, into the United States;

Place SMIC and Huawei and all of their subsidiaries on the Entity List, with a Foreign Direct Product Rule (FDPR) designation;

Implement a policy of denial for all items subject to the Export Administration Regulations (EAR) for Huawei and all of its subsidiaries and spin-off, and successors (e.g. Honor);

Implement a policy of denial and remove all license exceptions for all items subject to the EAR, not just those below 14nm, to SMIC;

Revoke all existing licenses for SMIC and Huawei; and

Pursue criminal charges against executives from SMIC and Huawei.

Our committees request a briefing led by BIS in coordination with the offices at the Departments of Defense, State, and Energy that oversee export controls regarding the national security implications of China's violations and circumventions of U.S. export controls, by September 28th.

The circumstances before us demonstrate the need for additional pressure and more effective export controls on our adversaries. We need to enforce laws under your authority against them and not play into their hands. Times have changed in our relations with China. It is beyond time for our bureaucracy to as well."

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