The law firm of Buchanan Ingersoll & Rooney said today that the U.S. government has charged two U.S. citizens and two Chinese nationals under the U.S. Export Control Reform Act (ECRA) and money laundering laws for allegedly exporting cutting-edge chips to China.
The firm said a recently unsealed indictment filed in the United States District Court for the Middle District of Florida alleges that the accused individuals conspired to violate U.S. export controls by shipping graphics processing units (GPUs) with advanced AI and supercomputing applications to China through Malaysia and Thailand.
The following is excerpted from BI&R‘s announcement:
The indictment alleges that the individuals took actions with intent to evade the provisions of the Export Control Reform Act and the Export Administration Regulations, in violation of 50 U.S.C. § 4819(a)(1) and (2)(G) and 15 C.F.R. § 764.2. The accused individuals face a maximum of 20 years in prison for each ECRA count, 10 years for each smuggling count and 20 years for each money laundering count.
The chips are subject to a Department of Commerce October 2022 Bureau of Industry and Security (BIS) rule that restricts sensitive chip exports to China, and is promulgated pursuant to the authority granted to the Department of Commerce by the ECRA. The indictment states these rules restrict “exports of items that could make significant contributions to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States.” The rule imposes restrictions on a range of advanced computing semiconductor chips and semiconductor items and controls on transactions for supercomputer and certain integrated circuit end-uses.
According to the indictment, the four accused knew that licenses were required to export these items to China but never sought or obtained a license for any of these exports despite their knowledge.
Technology companies and other industry players can expect to see more ECRA and money laundering charges filed against individuals and entities that export technologies subject to Export Administration Regulations controls. Technology companies should heed the Government’s increasing law enforcement that prohibits exporting sensitive technologies to foreign nations. Companies should ensure their supply chains have a high level of understanding and accountability for knowing their ultimate end-users. It will also be important for technology companies to understand the state of U.S. law and regulations surrounding sensitive technologies to ensure that advancing business interests does not cause them to run afoul of the Government’s enforcement priorities.
