Insights

For executives and exporters, the era of treating export controls as a compliance checkbox may be coming to an end. Testifying before the House Foreign Affairs Committee on July 14 regarding the 2027 budget for the Bureau of Industry and Security (BIS), Commerce Under Secretary Jeffrey Kessler outlined BIS’s priorities, key trade initiatives, and future projects shaping U.S. trade policy. According to Kessler, BIS remains focused on protecting the “crown jewels” of the American economy: critical technologies and supply chains.¹

As geopolitical tensions escalate—from semiconductor competition with China to pressure campaigns involving Iran—recent White House actions underscore this focus:

• January 2026: The White House invoked Section 232 authority to address imports of semiconductors, semiconductor manufacturing equipment, and related products, citing concerns that dependence on foreign chip supply chains could threaten national security.²

• July 2026: The White House issued a Section 232 review of commercial aircraft, jet engines, and related parts, citing risks from foreign supply chain dependence, counterfeit components, and insufficient domestic manufacturing capacity.³

Against this backdrop, it is clear that the executive views the BIS and other trade-related departments as an enforcement arm of the broader national security strategy.

Furthering this point, Kessler noted, “Too many in the business community viewed export controls as a cost of doing business – not a reason to change behavior. All of that has changed dramatically under this Administration.”⁴ BIS penalties increased more than 18-fold between 2024 and 2025, rising from $16 million to $324 million. In 2026, Kessler stated, administrative penalties had already doubled compared with the prior year. ⁵

Recent enforcement actions include:

• A $252 million settlement with Applied Materials involving the alleged illegal transshipment of semiconductor manufacturing equipment.

• A $95 million administrative penalty against Cadence Design Systems involving semiconductor design software exports.

• A $36 million Bosch settlement tied to the diversion of microelectronics and automotive software to an Entity List company.

BIS is also pursuing criminal cases involving alleged attempts to divert servers containing advanced semiconductors through third countries, highlighting the agency’s growing focus on complex global supply chains and indirect transfer risks.

The Next Phase: Broader Oversight

Kessler argued that BIS’s enforcement resources are currently stretched, with investigators facing more cases and leads than they can handle. The President’s proposed FY27 budget request would increase BIS enforcement funding from $122 million to $301 million—a 147% increase— while expanding enforcement staffing by 370 positions.⁶

Additional budget requests include increased funding for BIS’s Export Administration unit to strengthen licensing reviews and supply chain investigations. In particular, the unit would use appropriations to hire “specialized engineers and technical experts” who could provide expertise and assessments on more complex technologies and supply chain structures.⁷

Moreover, two major compliance trends are expected to continue throughout President Trump’s term.

First, the increased use of and attention to Section 232 measures is likely to continue. This trend is reflected in Under Secretary Jeffrey Kessler’s request for an additional $20 million in funding for the BIS unit that administers the Section 232 program.

Second, BIS is expected to continue expanding its mandate beyond traditional export controls. Kessler highlighted the agency’s Office of Information and Communications Technology and Services (OICTS), which is implementing restrictions to limit foreign-adversary technology risks in connected vehicles. The Connected Vehicles Rule will restrict foreign-adversary software in U.S. passenger vehicles beginning with Model Year 2027, and certain connected hardware beginning in Model Year 2030.⁸

Importantly, Kessler suggested this approach could expand into additional industries: “In the future, we expect the administration of this rule to become more routinized, and BIS will consider creating new regimes for other sectors that have risks to technology supply chains.”