US government turmoil stalls thousands of export approvals, sources say

Reuters

3 days ago

Aug 1 (Reuters) - Thousands of license applications by U.S. companies to export goods and technology around the globe, including to China, are in limbo because turmoil at the agency in charge of approving them has left it nearly paralyzed, two sources said.
While U.S. Commerce Secretary Howard Lutnick has become a familiar face touting President Donald Trump's tariff and trade deals, sources said the export bureau under Lutnick's command has failed to issue expected new rules, stifled communications with industry representatives, pushed out experts, and lost staff through buyouts and resignations.
Shipments of artificial intelligence chips from Nvidia (NVDA.O), opens new tab to China are the most high-profile example of licenses not being swiftly approved. The company said July 14 the government assured it licenses would be granted for its H20 chip, and it hoped to start deliveries soon. Lutnick and other officials confirmed sales would be allowed.
But sources said this week no licenses have yet been issued, and billions of dollars of AI chip orders are at stake.
One U.S. official said the backlog of license applications is the lengthiest in more than three decades.
A spokesperson for Nvidia declined to comment. The Department of Commerce did not respond to a request for comment.
The turmoil and resulting inaction at an agency tasked with promoting overseas trade and safeguarding American technology are alarming both those seeking tougher restrictions on exports to China and companies trying to sell their wares abroad.
'Licensing is how the U.S. does business and competes globally,' said Meghan Harris, who served on the National Security Council in the first Trump administration and has worked at Commerce. "Delays and unpredictability put us at an unnecessary disadvantage."
The Commerce Department's Bureau of Industry and Security averaged 38 days per export license application in fiscal year 2023, the most recent data available, denying 2% of 37,943 applications.
The license process enforces U.S. export restrictions in an effort to make sure sensitive goods and technology do not reach countries or entities whose use of the items could harm U.S. national security.
Some staff have criticized Jeffrey Kessler, who became BIS undersecretary in March, saying he has micromanaged the bureau and failed to communicate adequately.
Kessler did not respond to a request for comment.
At a staff meeting soon after he took office, Kessler urged BIS staff to limit communications with company representatives and industry officials, according to two additional sources, who said he later asked for all meetings to be entered on a spreadsheet.
Getting approval from Kessler's office to attend meetings with other government agencies has also been tricky, those sources said.
Sources spoke anonymously because they were not authorized to speak publicly.
Frustration is growing within U.S. industry.
'We're seeing whole sectors where there is no movement or indication if or when licenses will be issued," including license applications for semiconductor manufacturing equipment worth billions of dollars, said Sean Stein, president of the US-China Business Council.
While the clock is ticking on license applications, 'Chinese companies are exploring and doing deals with suppliers in China and other countries,' he said. 'The longer we have the delay, the more market share we're going to lose."
Jim Anzalone, president of Compliance Assurance, a Florida-based trade consultancy, said he has seen delays in license approvals for sensors, radars, and sonar to Latin America and other parts of the world. 'There's nothing official about what the policy is and when the backlog would be cleared,' he said.
He has received denials sporadically after submitting some two dozen applications months ago to export semiconductor manufacturing equipment to China, including four denials on Wednesday, he added.
Sources stressed that some licenses are getting approved, especially exports to allied countries, and they noted that some communication with companies continues, especially around license applications.
Commerce is also delaying regulatory changes. The agency said in May it would rescind and replace a Biden administration rule before it went into effect that month restricting where AI chips can be exported, but the agency has not done so yet.
Other rules, which sources said have been drafted for months, have not been published, including one to expand export restrictions to subsidiaries of companies already banned from receiving controlled U.S. exports.
Meanwhile, important staff vacancies such as China-based export control officers have not been filled, and high-level career employees have resigned. A retirement party was held this week for Dan Clutch, acting director of the BIS Office of Export Enforcement, the latest experienced staff member to leave.