Companies could face a variety of compliance challenges if the U.S. expands its foreign direct product rule to capture exports to Russia, Cooley's Annie Froehlich, an export control lawyer, said in a Feb. 3 Atlantic Council blog post. The U.S. has reportedly considered using the rule if Russia further invades Ukraine, which could limit Russia’s ability to import certain foreign-produced chips, integrated circuits and microprocessors, the post said. “If regulatory actions are imposed, assessing exposure and implementing appropriate compliance responses will be challenging.”
Chip export news
Two senators this week asked the Commerce Department to say whether it opposes stronger export controls against SMIC, China’s top chipmaker, as has been reported in the media, and to explain why.
The House’s America Competes Act of 2022 would revise and introduce a range of new export control and sanctions provisions, including new restrictions on exports of electronic waste-related goods, more designations targeting China for human rights abuses and a repeal of the sunset of the Magnitsky human rights sanctions regime. The bill, unveiled this week as the response to the Senate’s U.S. Innovation and Competition Act, would also require the Biden administration to conduct “periodic” reviews over its export controls for surveillance equipment, urges the administration to reexamine U.S. export policies for countries that supply weapons to terrorist organizations and calls for better harmonization of U.S. export control and sanctions policies with allies.
The U.S. and the European Union should better align their export license exceptions, export controls and policies to avoid “unnecessary friction on trade” between the two sides, particularly surrounding chip equipment, the Semiconductor Industry Association said. The group said American semiconductor companies depend on overseas markets in Europe, and regulatory harmonization could help to “level playing fields with respect to export controls, particularly their scope, application, and enforcement.”
The U.S. this week imposed new sanctions against Russia for its “destabilizing” activities in Ukraine and privately previewed a harsher set of potential trade restrictions, including major new export controls on chip equipment. Although it remains unclear if those specific export restrictions would be coordinated with allies, the U.S., Germany and the U.K. all said Jan. 20 that they are ready to impose “massive consequences and severe economic costs” on Russia if it continues down a path to war.
The Office of Foreign Assets Control imposed investment restrictions on SenseTime Group Ltd., a major Chinese technology company, and sanctioned 15 people and 10 other companies for human rights abuses, the agency said Dec. 10. SenseTime, which had prepared to price shares Dec. 10 in its initial public offering in Hong Kong, will now be subject to a U.S. investment ban and added to OFAC’s list of companies with ties to China’s military (see 2106030067).
The European Union should better align its definition of “basic scientific research” with the U.S.'s to create a more level playing field under U.S. and EU export regulations, said Aude Jalabert of the European Semiconductor Industry Association. Jalabert, speaking during the EU’s annual export control forum Dec. 8, said the EU’s definition is “stricter and maybe more narrow than some foreign definitions,” and only exempts “very basic technology and research fields.”
The Commerce Department is seeking nominations for a new Industrial Advisory Committee on microelectronics research development, manufacturing and policy, the agency said this week. The committee, to be composed equally of representatives from the semiconductor industry, federal laboratories and academic institutions, will advise the administration on how best to maintain U.S. leadership in microelectronics manufacturing and support the semiconductor sector. The agency will accept committee nominations on an ongoing basis “and will be considered as and when vacancies arise.”
The Bureau of Industry and Security added 27 entities to the Entity List for illegally selling technology to China, North Korea and other sanctioned countries, for supporting China’s military modernization efforts or for contributing to Pakistan’s nuclear and missile programs, the agency said Nov. 24. The Entity List additions include a range of laboratories and companies operating in the semiconductor, microelectronics and machinery sectors in China, Japan, Pakistan and Singapore, including several major Chinese chip companies.
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