Key Takeaways from IPC's North American Executive Forum
By Richard Cappetto, Senior Director, North American Government Relations
On a news-filled day at the Department of Commerce, IPC CEO John W. Mitchell hosted the agency’s chief export enforcement officer to speak candidly with members. The North American Executive Forum brought together more than two dozen CEOs and other executives from across the electronics manufacturing industry to discuss pressing issues impacting both our industry and national security. The central focus of this installment of the quarterly forum was export controls, a critical topic that is increasingly affecting how businesses operate in the global marketplace. The forum featured a keynote discussion with the Honorable Matthew S. Axelrod, Assistant Secretary for Export Enforcement at the U.S. Department of Commerce, Bureau of Industry and Security (BIS) who highlighted his agency's priorities to enforce export controls and wrangle the diversion of electronics components for prohibited end-users.
Earlier in the day, the BIS made news with two major announcements. First, the agency issued along with the other G7 countries, updated guidance on preventing the diversion of exports to evade sanctions imposed on Russia. Secondly, the agency gave notice of a proposed rulemaking which would prohibit the import of certain software and hardware for use in connected vehicles.
Given this backdrop of increased trade regulation, Assistant Secretary Axelrod, a 20+ year veteran law enforcement officer, shared his insights and priorities in addressing the complex and evolving set of geopolitical challenges. He gave an overview of the risks presented by foreign adversaries that actively acquire and divert U.S. technologies to bolster military capabilities and to exert geopolitical influence with the intent to harm the United States and its allies. During the discussion, Axelrod shared examples of recent major enforcement actions, as well as examples of red flags that signal high-risk customers that he and his agency have uncovered. In sharing these examples, Axelrod urged the industry to stay informed, vigilant, and strive to comply with the U.S Government’s export controls.
Axelrod assured the participants, that the agency’s strategy is to focus restrictions on the smallest category of critical items possible, that represent national security threats, and to allow the vast majority of business to continue. In sharing his priorities, he described them as being based on two key factors: the significance of the military application of a given technology and the destination of the export. The most sensitive technologies, particularly those with clear military end uses, are under the greatest scrutiny. For example, technology that can be used to develop hypersonic munitions, quantum computing, and artificial intelligence represent a high risk, and there for are prohibited and would be subject to greater enforcement priority.
Multiple participants asked questions and shared feedback alluding to the reality of challenges facing electronics manufacturers in the sheer scale and complexity of global supply chains. How can companies ensure that their products do not end up in the wrong hands when supply chains span multiple countries and involve countless suppliers and customers? Axelrod shared that the agency is striving for transparency and partnership. He repeatedly stressed that the agency appreciates and is interested in companies doing their best to mitigate diversion. He IPC members to share challenges and best practices, and to engage with the agency both directly and through IPC as a representative for the entire industry. He stressed the preference to work collaboratively on the front-end with businesses, rather than having to investigate and impart penalties through the enforcement process. "We are asking everyone to think about what more they can do," Axelrod said, calling on manufacturers to vet their customers more thoroughly. A key recommendation was to not only ask customers about their immediate intentions but to probe further and understand where those customers plan to sell products down the line. This kind of due diligence is essential, especially when dealing with high-risk customers, which poses the greatest concern in the export enforcement landscape.
Several helpful resources were shared during the webinar, which are included below. He also urged Members to introduce themselves and become familiar with their local BIS field office.
Enforcement leadership | Bureau of Industry and Security (bis.gov)
Related News – Notice of Proposed Rulemaking to prohibit import of certain hardware and software in connected vehicles
The discussions at the North American Executive Forum underscored a crucial message for IPC members: The United States Government is prioritizing export controls, with a particular focus on stemming the flow of electronics components to Russian weapons. It is the responsibility of companies to conduct strong due diligence on their customers, to ensure their exports do not end up in the wrong hands. Electronics manufacturers are on the front lines of protecting U.S. technological superiority and, by extension, national security. Axelrod’s comments were clear: this is the "new normal." The rapid pace of technological development is only increasing, and with it, the potential military applications of new technologies. As export controls become an increasingly important part of the electronics manufacturing landscape, IPC remains committed to supporting its members through education, advocacy, and strategic partnerships.
For more information, please reach out to me at RichardCappetto@ipc.org or 202-661-8096.