The internal chaos at the U.S. Department of Commerce has led to thousands of export licenses being backlogged, including NVIDIA chips

The U.S. Department of Commerce's Bureau of Industry and Security is facing the most severe export license backlog crisis in nearly 30 years, with thousands of export license applications covering various regions around the world being stalled, including export licenses for high-value products such as NVIDIA's artificial intelligence chips.

On August 1, media reports indicated that sources revealed that high-value export licenses, including those for NVIDIA AI chips, have yet to be approved. NVIDIA previously stated that the government had committed to approving its H20 chip license, but sources confirmed this week that the relevant licenses have still not been issued, involving AI chip orders worth billions of dollars.

This chaotic situation stems from internal management issues within the agency responsible for export controls at the Department of Commerce. The agency not only failed to timely issue new regulations but also restricted communication with industry representatives, leading to a loss of professionals and a significant decline in work efficiency.

Analysts pointed out that the delays in license approvals are putting U.S. companies at a disadvantage in global competition, while also raising concerns among those advocating for stricter export restrictions and companies seeking overseas sales opportunities.

Export License Backlog Hits 30-Year High

A U.S. official stated that the current backlog of license applications is the worst in over 30 years. Reports indicate that the Bureau of Industry and Security took an average of 38 days to process each export license application in fiscal year 2023, handling a total of 37,943 applications with a rejection rate of 2%.

The export license process is a crucial means by which the U.S. implements export controls, aimed at ensuring that sensitive goods and technologies do not flow to countries or entities that may threaten U.S. national security. However, the current delays in approvals are undermining the effectiveness of this mechanism.

Meghan Harris, who served as a member of the National Security Council during Trump's first term, stated: "License approvals are the way the U.S. conducts business and competes globally. Delays and uncertainty put us at an unnecessary disadvantage."

Jim Anzalone, president of Florida-based trade consulting firm Compliance Assurance, noted that he has seen delays in the approval of licenses for exporting sensors, radar, and sonar equipment to Latin America and other parts of the world.

Sean Stein, chairman of the U.S.-China Business Council, pointed out that license applications for semiconductor manufacturing equipment worth billions of dollars are currently stagnant, stating:

"We see the entire industry making no progress and have no idea when licenses will be issued."

Stein warned that as the time for license applications drags on, "relevant companies are exploring and making deals with suppliers in their own countries and other nations. The longer the delays, the more market share we lose."

Management Changes and Other Factors Cause Operational Chaos

Sources indicated that Jeffrey Kessler, the deputy secretary of the Bureau of Industry and Security who took office in March this year, has been criticized for micromanaging the agency and lacking effective communication.

According to two informed sources, Kessler requested staff to limit communication with business representatives and industry officials during an employee meeting shortly after taking office, and subsequently required all meeting records to be documented in spreadsheets Obtaining approval from the Kessler office to participate in meetings with other government agencies has also become difficult. These restrictions further impact the agency's operational efficiency.

Meanwhile, important vacancies have not been filled in a timely manner, and senior career employees are resigning in droves. Reports indicate that this week, Dan Clutch, the acting director of the Export Enforcement Office of the Bureau of Industry and Security, held a retirement party, becoming the latest senior employee to leave.

Additionally, the Department of Commerce is also delaying regulatory changes. The agency stated in May that it would withdraw and replace regulations before the Biden administration's restrictions on AI chip exports take effect, but no action has been taken to date.

Other rules that have been drafted for months have also not been released, including new regulations extending export restrictions to subsidiaries of companies that have been banned from receiving U.S. controlled export goods