BIS: Company’s ‘Inadequate’ Compliance Controls Led to Illegal Transfers to China’s SMIC
The Bureau of Industry and Security reached a $1.5 million settlement this week with an international procurement company after its Shanghai affiliate admitted to illegally transferring low-level semiconductor equipment to a Chinese company on the Entity List.
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Exyte China, a member of the Germany-headquartered Exyte Management group of companies, helped to provide about $2.8 million worth of flowmeters, pressure transmitters, logic controllers and voltage sag protectors to Semiconductor Manufacturing International Corp., China’s largest chip maker, which was added to the Entity List in 2020. Exyte voluntarily disclosed the shipments to BIS after realizing that the items needed a license, BIS said in an enforcement order, adding that all the items were classified under the Export Administration Regulations as EAR99.
BIS said the shipments took place between March 2021 and March 2022, when Exyte China illegally helped with the in-country transfer of six voltage sag protectors, one programmable logic controller, 450 flowmeters, 75 exhaust stack flowmeters and 352 pressure transmitters from Chinese suppliers to SMIC. Although Exyte knew the items were destined for SMIC and that they would be used for the production of a chip fab within China, BIS said Exyte didn’t realize the equipment needed an export license.
The company “did not appreciate that a licensing requirement pursuant to the EAR applied to the in-country transfers of goods subject to the EAR by China-based distributors to a customer in China,” the BIS order said. The agency pointed to Exyte’s “inadequate corporate compliance controls,” and it said its compliance program wasn’t structured in a way that helped it catch that it needed a license to move EAR-controlled items from a Chinese distributor to a company on the Entity List.
In total, BIS said Exyte transferred 884 EAR99 items to SMIC across 13 occasions. The agency said the items were mostly used in chip facilities to measure, control or adjust voltage, exhaust pressure, volume or mass flow.
Exyte must pay BIS $1.5 million within 75 days of the order. Until then, the company can’t use any BIS export license or exception.
An Exyte spokesperson didn’t immediately respond to a request for comment.