The office guarding America's AI advantage is

The office guarding America's AI advantage is quietly grinding to a halt

A July 2026 NBC News investigation reveals the Bureau of Industry and Security under Trump appointee Jeff Kessler has slowed licensing, frozen the Entity List, and tilted toward industry — turning a national-security tool into a trade-bargaining instrument.

The federal office charged with keeping advanced American technology like AI semiconductors away from foreign adversaries has been "increasingly constrained" by its own leader's slow decision-making, muddled policy, and close embrace of industry, according to interviews with over a dozen government and industry insiders by NBC News. The Bureau of Industry and Security under Commerce Under Secretary Jeff Kessler is not merely understaffed — it is being repurposed from a national-security gatekeeper into a trade-bargaining instrument. The shift benefits Nvidia and chipmakers who win case-by-case approvals, the Trump trade team that keeps the Entity List as a dangling threat, and Chinese firms like DeepSeek that remain off the blacklist eight months after interagency clearance — while eroding the credibility of the U.S. export-control regime that allies and adversaries alike once treated as the operative constraint on the diffusion of sensitive technology.

A licensing system under strain

The numbers tell the story of an agency that has stopped functioning as designed. A March 2026 CSIS survey of U.S. technology exporters — distributed through the Semiconductor Industry Association, ITI, and SEMI — found that 56 percent of respondents experienced license review times averaging over 180 days, with one-third reporting waits exceeding 300 days. The FY2023 average was 38 days. Firms described communication with BIS as having "broken down," with some engaging outside counsel to obtain information that "used to be routinely shared." The Export Practitioner reported waits of six to ten months in some semiconductor cases, according to a summary of its reporting by Exa Research. A former official described the situation to Politico as "a massive screw-up."

This is not simply a capacity problem. BIS's own statutory mandate — codified in the Export Control Reform Act of 2018 — declares that the export-control system "must ensure that it is transparent, predictable, and timely." The law, which restructured BIS's authorities in Title 50 of the U.S. Code, directs the Secretary of Commerce to "keep the public appropriately apprised of changes in policy, regulations, and procedures" and to maintain licensing processes that are efficient. A system where review times balloon from 38 days to 300 is operating well outside its statutory design parameters. The CSIS survey analysis is blunt: "The challenges appear primarily administrative in nature and therefore resolvable within existing authorities." Yet they have persisted and deepened.

The Export Compliance Daily reported in June that BIS is "hampered by dysfunction, little productivity, low morale" under Kessler, with critical enforcement positions vacant and outreach to industry diminished, per Exa Research's summary. Career staff describe a leadership that centralizes decision-making at the top while slowing the casework that used to flow through technical experts — a pattern that converts an agency built for speed and precision into one that bottlenecks at a single desk. A Washington Trade & Tariff Letter analysis described "a persistent stalemate" with thousands of pending applications and stalled rulemaking, despite Kessler's assurances to Congress that BIS was "driving forward."

The Entity List freeze and the DeepSeek question

The starkest evidence that something has shifted at BIS is the Entity List itself. From 2018 through 2024, BIS added entities to the blacklist every 35 days on average — a cadence that let the list track procurement networks and shell companies that continually rename and reroute to evade controls. Since October 2025, it has added none. As of June 26, 2026, eight months had passed without a single addition — the longest such gap since 2008, according to CSIS.

This is not because the candidates have run out. The Straits Times reported that an interagency committee cleared more than 100 names for listing — including DeepSeek and ChangXin Memory Technologies — but the designations were never published, per Exa Research's summary. The implication is that the hold is political, not analytical. The Entity List's value as a control tool erodes when it stops expanding: procurement networks shift to new intermediaries faster than a static list can track them, and the deterrent effect of potential listing weakens when firms observe that the threat is no longer being executed. As CSIS noted, "a list that stops expanding tracks fewer of the relevant actors, eroding its value as a control."

The freeze tracks closely with the broader trade détente that followed the October 2025 Trump-Xi summit in Busan. After that meeting, Commerce paused export-control actions affecting China and suspended the "affiliates rule" — the September 2025 expansion that would have extended restrictions to an estimated 20,000 Chinese firms — for one year. The pattern is consistent with the view that export controls are being held in reserve as bargaining leverage rather than deployed as a standing national-security instrument. CSIS's "Reining in the Export Control Arms Race" analysis put it starkly: "When measures once deemed nonnegotiable for national security reasons are traded away for economic concessions, adversaries and allies alike have rational cause to question the legitimacy of the system."

The Anthropic whipsaw

If the Entity List freeze shows BIS withholding controls, the Anthropic episode shows the opposite — controls deployed abruptly, then withdrawn, with the office struggling to articulate a consistent rationale. On June 12, 2026, Commerce sent Anthropic a letter imposing export controls on its latest models, Fable 5 and Mythos 5, requiring a license for any foreign national — including the company's own employees — to access them. Anthropic shut off the models for all customers to ensure compliance. Three weeks later, on July 1, Commerce lifted the restrictions after Anthropic agreed to "proactively detect and address security risks" and work with the government on standards for upcoming models, Al Jazeera reported. Commerce Secretary Howard Lutnick personally notified the company in a letter widely circulated online.

The episode exposed a legal-authority problem. The AI Diffusion Rule — the Biden-era framework that would have governed AI model weights — was repealed in May 2025 and is "not currently being enforced," meaning BIS had no standing regulation under which to impose the Anthropic controls. A CSIS analysis concluded that "Commerce does not have the authority to reinstate enforcement on specific provisions of the AI diffusion rule, including model weight controls, to an individual company." The controls were imposed through an ad hoc "Is Informed" letter — a narrow stop-gap mechanism — and then reversed through a negotiated agreement. The result is that the most powerful AI model access restrictions in U.S. history lasted 19 days and ended in a voluntary deal.

Brookings framed the episode as self-defeating for an administration whose AI Action Plan aims to "drive adoption of American AI systems, computing hardware, and standards throughout the world." Cutting off foreign access to the most advanced U.S. models — then reversing course within weeks — feeds exactly the "distrust of U.S. technology, U.S. companies, and the U.S. government" that has fueled global ambitions for "AI sovereignty" among allies and competitors alike. The administration's own June 2 executive order, Executive Order 14409, states that "nothing shall be construed to authorize creation of any mandatory governmental licensing, pre-clearance, or permitting requirement for the development, publication, release or distribution of AI models." The Anthropic letter contradicted that principle in practice, then relapsed into voluntarism — leaving industry with no clear standard for when or whether BIS will act.

Who benefits

The winners from BIS's paralysis are identifiable and specific. Nvidia and other chipmakers benefit from the case-by-case licensing approach that the December 2025 H200 approval exemplified: Brookings noted that Trump's decision to approve H200 exports to China, while not Nvidia's most advanced chip, is about six times as powerful as the H20 previously allowed — a commercial windfall that the licensing backlog's slow pace now shields from rapid subsequent restriction. Chinese firms like DeepSeek and CXMT benefit from the Entity List freeze, which keeps them off the blacklist despite interagency clearance. The Trump trade team — Lutnick, Treasury Secretary Scott Bessent, and USTR Jammasem Greer — benefits from retaining export controls as a bargaining chip in talks with Beijing, as BBC reporting on the London trade talks confirmed: Lutnick's inclusion was described as welcome because he is "behind some of the very harsh export controls of technology to China."

The losers are equally concrete. U.S. exporters losing customers and revenue to foreign competitors who face faster, more predictable licensing regimes abroad — the CSIS survey documented firms reporting exactly this. The career staff at BIS, whose technical expertise is being sidelined by centralized decision-making. And the broader U.S. national-security architecture, which depends on allies trusting that American export controls are durable security commitments rather than episodic trade tactics. As CSIS's arms-race analysis warned, the erosion of credibility "makes it harder to rally allies for multilateral or plurilateral controls, which are the most effective way to deny sensitive technologies to adversaries." China's January 2026 targeted export controls on Japan — which cut Chinese rare-earth exports to Japan by 43 percent in two months — demonstrate how rapidly a credibility gap can translate into supply-chain disruption for U.S. defense and semiconductor partners.

A historical echo

The current moment has a historical parallel that longtime export-control hands recognize. The CSIS "BIS Redux" analysis noted that the argument over whether BIS has been "captured" by the industry it regulates has been made "for at least 35 years" — it was the reason BIS was stood up as an independent bureau in the mid-1980s, separated from Commerce's export-promotion arm. The concern then, as now, was that an office simultaneously responsible for promoting trade and restricting sensitive technology transfers would tilt toward the commercial interest. What is different now is the explicitness of the tilt: Lutnick personally notifying Anthropic of lifted restrictions, Kessler's described "close embrace of industry partners," and the deliberate freeze of the Entity List all signal that the balance has shifted from the security side to the commercial side — and that the shift is policy, not accident.

Diplomat View

The BIS slowdown is not a staffing problem that more hiring will fix. It is a deliberate repurposing of export controls from a national-security instrument into a trade-negotiation tool — one that maximizes Lutnick's leverage in talks with Beijing while minimizing the friction for U.S. chipmakers who sell into the Chinese market. The result is a system that is simultaneously too slow for legitimate exporters, too unpredictable for AI developers, and too porous for the national-security hawks who built it. The forecast depends on three things: whether the one-year suspension of the affiliates rule expires on schedule in October 2026, whether the Entity List drought breaks before DeepSeek and CXMT receive long-cleared designations, and whether Congress moves to clarify BIS's authority over AI model weights after the Anthropic whipsaw exposed the legal gap. If none of those happen, the current drift continues — and the U.S. export-control regime continues its transition from guardrail to bargaining chip.

What to watch:

• October 2026: The one-year suspension of the affiliates rule expires. If Commerce does not reinstate it, the 20,000-firm expansion is effectively dead.
• Fall 2026 congressional session: Hill pressure on BIS authority over AI model weights may produce legislation closing the gap the Anthropic letter exposed.
• Next Entity List update: The first addition after an eight-month freeze will signal whether the pause was tactical or structural.