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Kessler defends rescission of late-administration AI diffusion rule, committee presses on licenses and IT needs
Summary
Under Secretary Kessler told lawmakers the Biden-era AI diffusion rule was "hastily constructed" and unsuitable for implementation; members pressed BIS on license-processing timelines, whether the agency adhered to interagency review on license actions, and on the need to modernize BIS IT and provide the committee a formal budget justification.
Under Secretary Kessler told the committee he rescinded the Biden administration's AI diffusion rule because it was unworkable and risked disrupting global markets for critical technologies.
"The diffusion rule was very problematic. The diffusion rule was something that the Biden administration did, in its final hours before leaving office. It was hastily constructed. It established a regime, a worldwide regime for controlling chips that was, bureaucratic, heavy handed," Kessler said. He added that the rule "drew arbitrary distinctions between different countries" and "was not ready for prime time," which prompted BIS to rescind it before it became effective.
Several members expressed concern about BIS licensing performance. Representative Meeks said the committee had not received Commerce's detailed congressional budget justification and asked when it would be provided; Kessler replied he believed department budget documents had been provided and said he would follow up. Meeks and others also asked about whether license suspensions had followed required interagency and White House processes; Kessler said BIS adheres to interagency procedures for license-related actions and consults the Departments of State, Energy and Defense when required.
The committee also discussed statutory timelines. Members noted the Export Control Reform Act requires BIS to process license applications within 30 days and asked what steps BIS is taking to meet that goal. Kessler said BIS has a dedicated export administration staff that processes applications and that the agency is actively reviewing its licensing processes.
Members pressed BIS's outdated IT infrastructure. One lawmaker said BIS had not fully replaced IT systems since 2008; Kessler acknowledged most BIS systems run on platforms nearly two decades old and said cybersecurity and modernization would be priorities for any appropriated funding.
Why it matters: Licensing decisions and regulatory clarity determine how industry and foreign partners can access sensitive U.S. technologies. The diffusion rule's rescission and questions about IT and licensing timelines indicate the committee will monitor BIS operations as it considers funding requests.
Kessler told lawmakers BIS will follow statutory processes and consult interagency partners when taking licensing actions, will pursue IT modernization, and will provide the committee missing documents as needed.
