US to Shun Export Control Dialogues, Seek ‘Massive’ Increase in China Penalties, BIS Chief Says

Kessler, speaking to BIS employees during a March 27 town hall meeting, said he wants the agency to shift away from the avenues the U.S. has previously used to coordinate export controls with allies, specifically mentioning the multilateral Wassenaar Arrangement and the Trade and Technology Council (TTC).

The current U.S. technological lead over China is “something like 18 to 36 months,” and “I'm not going to spend 12 of those months in the TTC, or doing that with Japan or something,” he said, according to a recording of the meeting obtained by Export Compliance Daily.

Kessler, who was sworn in as BIS undersecretary in late March (see 2503200011), was asked by one BIS official to outline his “vision for engagement” with U.S. trading partners if BIS doesn’t plan to use traditional export control forums and dialogues used by previous administrations. Kessler said the U.S. needs to instead be “aggressive” and “forceful” with allies.

“Time is running out. We can't have another multilateral, we can't have another structured dialogue. The TTC is like a curse word,” Kessler said. “We're done with that. We're out of patience, and we don't have the time as a country.”

But in written testimony during his nomination hearing in February (see 2502270041), Kessler said “diplomacy and international cooperation are an important element of effective export controls.” He told the Senate Banking Committee that it’s “critical to engage with America’s partners and allies around the world to defend and promote America’s technological leadership.”

A BIS spokesperson didn't comment.

The Biden administration worked for years to coordinate its Russia-related restrictions with dozens of nations and its China-related chip controls with Japan and the Netherlands (see 2407170040 and 2403270038); some technology policy analysts predicted the Trump administration would abandon those efforts (see 2411140037). Biden officials also worked with the EU to collaborate on export controls through the TTC, which doubled as a forum for BIS and European Commission officials to keep in regular contact (see 2502200051 and 2411130045).

Kessler outlined a different plan for the BIS approach to trading partners, telling agency officials last week that the U.S. will first determine what kind of export controls it wants allies to impose, and then “we're going to go and get it. We're going to have a plan for if they go along with us, and we'll have a plan for if they don't. But we need to be serious about this, because it's not a game.”

He added: “Trade negotiations, TTC -- these things go on for years and decades and the issues remain unresolved, and we're just done with it. We don't have the time anymore.”

One BIS official during the meeting noted that the agency recently paused approvals of employee travel to Wassenaar and other multilateral export control regimes. Kessler said he’s looking into whether that travel is “a wise expenditure of resources,” but he said he hasn’t officially rejected any requests so far.

“I'm reviewing it to see if it's a good use of money,” Kessler said. “We're supposed to be good stewards of taxpayer dollars, and I'm approaching the job from that vantage point.”

Kessler added that the current multilateral export control system is “less effective and less relevant,” specifically pointing to Wassenaar. Technology policy analysts have long called for the regime to be modernized (see 2009290042), and the forum has achieved fewer results in recent years as it has struggled to advance certain export control proposals because Russia remains a member with veto power (see 2405300063).

“As an organization like the Wassenaar arrangement, as an organization, we need to pivot away from those, devote less resources to those, and devote more resources and attention and strategic thinking to the real challenge,” Kessler said, “which is the China threat and our strategic competition with China.”

One of the agency’s highest priorities will be ramping up enforcement and penalties against Chinese companies, he said. BIS should be focusing on “high impact, including high-dollar value, cases,” especially involving companies illegally diverting export-controlled technology to China as well as Chinese companies located outside of the country.

“We want to focus on cases that are going to be a powerful deterrent to violating the rules,” Kessler said. He noted that Commerce Secretary Howard Lutnick recently called for a “dramatic increase” in export fines (see 2503180041).

"Sometimes I use the word massive -- a massive increase in enforcement to have that deterrent effect," Kessler said.

Iran is also an enforcement focus, Kessler said, referring to President Donald Trump’s February memorandum ordering U.S. agencies to increase pressure against Tehran (see 2502050020). “If we catch bad guys in other areas too, by all means, bring the cases,” he said, “and I'll be fully supportive.”

Kessler also was asked during the town hall about a recent “lack of communication and transparency” within BIS. He said he supports better communication within and among BIS employees, but he warned officials about speaking too openly with exporters and other companies and industry groups.

“I'm not trying to grow communication externally with exporters,” he said. “We're an agency with a national security focus, and the communication with parties outside of BIS should be very cabined-in.”

Exporters, trade lawyers and trade compliance officers often depend on conversations with BIS officials to understand U.S. export control policies and compliance expectations, and BIS officials similarly rely on conversations with industry to understand the impact of U.S. export controls.

Industry officials said they were frustrated in recent weeks that BIS hadn’t publicly acknowledged an export licensing pause that began in early February as part of a broader export control policy review (see 2502130068, 2502190018 and 2503180057).

Kessler said BIS officials can speak with companies about the details of their pending export license applications, but they should keep all other communication to a minimum, especially about “internal deliberations” or other policy matters.

“We're going to be deliberating about some of the most important, sensitive market-moving issues that are out there, and to have the trust within the organization, to have honest and open deliberations, we have to not be communicating with industry, except about those very narrow things like license applications that they've submitted themselves,” he said. “So, I'm not promoting communication with industry in that way.”

Kessler said he’s still thinking about how he wants to change BIS and about his priorities over the next few months. He said he’s planning meetings with senior agency officials about what items should be subject to export controls that aren’t already, and “how do we ramp up enforcement as quickly as possible?”

He’s also considering revising the bureau’s organizational structure and the way “we engage” with other U.S. agencies that are also involved in export control decisions.

“Part of that means stepping away from some of the things that have preoccupied us in the past. Not that we always need to. It's going to be a question of degrees, right?” he said. “But some of the problems that preoccupied us in the past, like the multilateral institutions, those things may not be front and center in export control policy in the future, and we need to adapt as an organization to that.”

Kessler also said the agency may need to prepare for staffing changes. The Trump administration is “very focused on efficiency,” he said, specifically mentioning the Department of Government Efficiency, which has spearheaded a purge of the federal workforce through both layoffs and retirement offers.

The Trump administration has pushed out multiple senior career BIS officials (see 2502270009) and other senior officials have retired, sparking concerns from former officials, trade lawyers and compliance professionals who fear the agency is losing some of its foremost experts on the Export Administration Regulations (see 2502280006).

“We want government to work better. And there's also a degree of frustration with inefficiency in government that's been unaddressed, largely unaddressed, for a long time,” Kessler said. He added that “everybody who's worked in government” has been frustrated by the inefficiency of bureaucracy or by some workers who “aren't carrying their weight.”

“We should tackle those problems head on. We should be vigilant about inefficiencies and try to stamp them out,” he said. “And I will be your partner in doing that.”

At the same time, Kessler said he also believes BIS may need more resources and funding, including a better information technology system. “I do think that there's a place for growing,” he said, “because I would say the size of BIS is not commensurate with the importance of the issues that we’re charged with addressing.”

Lawmakers, who appropriate funding for federal agencies, have repeatedly told Kessler they support the BIS mission, he said, and that they want to see more export enforcement. They also told Kessler that they support initiatives by the Office of Information and Communication Technology and Services, which published a rule earlier this year to restrict imports of certain connected vehicles from China and Russia (see 2503240028).

Kessler said there are “legislative proposals floating around” that would codify the ICTS's authority. He also said he met with Republican and Democratic congressional staffers on March 26 to discuss BIS.

“I think it's an incredible blessing that Congress is supportive -- both parties,” he said. “It feels like in this environment, Democrats have to take a stand against the administration, whatever that's about. But behind closed doors, Democrats, too, will be very supportive of what BIS does, and even of me personally and the views that I have.”

He said that support from the Hill puts BIS in a “really good space to be operating.”

“It gives us a lot of momentum and a lot of room for -- a lot of runway,” he said. “We can drive our programs forward, be ambitious, and we're going to have the support of Congress and the American people, as well as the administration.”

The Trump administration recently announced a $20 million funding cut for BIS for FY 2025, causing concern among some members of the Senate Banking and Appropriations committees (see 2503270005).

Asked how the Trump administration plans to approach existing export controls against Russia, including the sweeping restrictions that have been in place since Russia’s invasion of Ukraine in 2022, Kessler said many of those decisions will be made by the White House.

“Russia is a more complicated case, because the relationship with Russia is dynamic,” he said. The Export Control Reform Act “requires that export controls be administered in a way that supports the national security and foreign policy objectives of the United States. But we don't set those objectives. It’s the President and the State Department, they set the objectives. And so there's less certainty about Russia right now.”

He said the administration “really cares about outcomes and speed and excellence,” noting that Trump specifically mentioned export controls and ICTS authorities in the day-one memo outlining his American-first trade policy (see 2501210023).

“I think that that presidential trade memorandum is a really important road map for the administration,” Kessler said. “The administration wants to use trade in a strategic way. We don't want to have everything in its own box the way that it has been in the past. We want to use all the tools in the toolbox to, like I said, to achieve real outcomes for America -- and not slowly. We want to do it now.”