BIS’ Export License Approval Process Reduces Risk of Threats from China’s Military-Civilian Fusion Strategy, but BIS Should Take Additional Steps to Mitigate Risks of Unauthorized Technology Release to China’s Military

We conducted this audit to assess the adequacy of the Bureau of Industry and Security’s (BIS’) efforts to reduce the risk of threats from China’s Military-Civilian Fusion strategy. We specifically reviewed BIS’ process for approving export license applications, as well as its response to a related management alert we issued in October 2023. Based on our sample of export license applications, we found that BIS’ approval process was adequate in reducing the risk of controlled items being inappropriately approved for export to China for potential use to support China’s military advancement. However, we also found that BIS, in consultation with other federal agencies, made a policy decision to exclude certain deemed exports and reexports from regulatory licensing requirements. (A deemed export is a release in the United States of controlled technology to a foreign person; the release is “deemed” an export to the person’s most recent country of citizenship or permanent residency.) BIS and other agencies have concluded that subjecting U.S. companies to deemed export licensing requirements could impair U.S. innovation and technological leadership. However, this decision may allow the release of U.S.-controlled advanced computing and semiconductor manufacturing technology and software source code to China. As a result, China might gain access to technologies and software it could use to enhance its military capabilities. We recommended that BIS take further action to mitigate the risk of unauthorized release of these technologies and software.