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Lawmakers press BIS on entity-list actions for Russia; proposal aims to close "subsidiary" loophole
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Summary
Members asked why BIS has not added Russia-linked companies to the entity list recently and urged more frequent actions; a separate bill, the Stop Shells Act, was described to close a subsidiary ownership loophole used to evade controls.
A number of members raised concerns that BIS has not recently placed additional Russia-linked companies on the entity list in connection with Russia's war in Ukraine.
A member questioned whether BIS had added any companies to the entity list related to Russia since the change in administration. Under Secretary Kessler said BIS has continued enforcement actions addressing Russian parties and that the agency would add entities to the list if a formal interagency process supported that step: "If we identify Russian parties that we believe should be added to the entity list, we would do that," he said.
Separately, Representative Self, the subcommittee chair on Europe, outlined proposed legislation called the Stop Shells Act, which would close a subsidiary loophole by applying entity-list restrictions to subsidiaries that are 50% or more owned by an entity already on the entity list or on the military end-user list. Representative Self said corporate due-diligence firms had identified thousands of Chinese subsidiaries that are at least 50% owned by entities already on the entity list, and he asked whether Kessler agreed closing the loophole would be useful. Kessler said in principle he agreed there was a problem and that he would work with lawmakers on the details.
Kessler reiterated BIS follows an interagency process to add entities to the list and that those processes include coordination with intelligence and other partner agencies.
Why it matters: The entity list is a primary enforcement tool for restricting technology flows to actors that threaten U.S. national security. Lawmakers expressed urgency about moving quickly to add entities when evidence supports it and discussed statutory fixes to limit evasive ownership structures.
Kessler told the committee BIS would act where the interagency process identified entities to add, and he offered to work with lawmakers on possible legislative tools, such as foreign direct product rule adaptations and subsidiary-based measures.
