Export Restrictions = Win or Lose?

Summary: Everyone has a choice: use the right way or wrong way to build revenue. To WIN, you need to know about the new export restrictions for semiconductors and related manufacturing equipment

In mid-October, the US Government placed new restrictions on the export of Semi-Conductors.  The restrictions were created to manage security risk and to limit technology transfer to China. When trade restrictions are followed, companies can defend proprietary technology and win profits.  However, if businesses do not follow the export rules, it can be ‘Game Over’ because corporations and their leaders risk penalties including:

  • Fines
  • Revocation of business licenses
  • Jail time

Which path will you follow?

It is not just companies that need to beware; even links with respected universities and well-respected professors can pose risks. Universities often play a key role in developing new technologies and have global connections which are not always clear and distinct.  For readers who may think penalties, including jail time, is hyperbole, here are some examples:

Exporters and manufacturers of semiconductors, components for those semiconductors, or related manufacturing equipment, should be particularly vigilant.  Companies trading in these commodities need to actively avoid sales of items subject to export controls when receiving orders from:

  • new clients
  • unknown customers
  • developing economies

Vigilance should be maintained even if those customers or countries are not directly or obviously flouting sanctions because sanctioned entities are usually aware of US export regulations and are constantly attempting to circumvent those sanctions.  The bad guys will try to circumvent sanctions by ordering restricted items through third parties who may not be well-versed on US export regulations and how they may apply to their products.

Foreign companies and entities use a variety of strategies to circumvent restrictions.  They often and prey on smaller companies with fewer resources to maintain a comprehensive export risk management program.  As a general rule, the largest US exporters have the knowledge and resources to manage the risk, track sanctions, and implement the most current systems and processes to manage the risks and thwart the bad guys. Smaller companies and organizations selling sub-components can be in a difficult position to manage these risks due to limited resources.

Best Practices for Following the New Restrictions

There are 8 primary practices that work together to provide best practices.  They are listed below.  The single most important is management commitment.  Without leadership commitment, any risk management program will eventually be undermined.

  • Management commitment
  • Risk assessment
  • Export Authorization
  • Record keeping
  • Training
  • Audits
  • Corrective actions
  • Export policy manual

Here is a link the Export Compliance Guidelines [https://www.bis.doc.gov/index.php/documents/pdfs/1641-ecp/file] the document that discusses best practices in detail.

For manufacturers handling semiconductors and related manufacturing equipment, It should be an easy choice: win profits or run the risk of fines or worse.  If you want some support working through these restrictions ChemJays can help.

October 17, 2023- The Department of Commerce announced today that an updated package of export control rules would be implemented for exports of “advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to embargoed countries and the People’s Republic of China”.
Details can be found here in a press release from BIS
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