The Bureau of Industry and Security (BIS) recently announced a $4.25 million settlement with Alpha and Omega Semiconductor Incorporated (AOS) for 15 violations of the Export Administration Regulations (EAR). This case isn’t just about a fine; it offers critical strategic takeaways for any tech company navigating the complexities of U.S. export controls.
The Issue: Unlicensed Shipments to Huawei
Between May and November 2019, AOS exported approximately 1,650 power controllers, smart power stages, and related accessories from the U.S. to an AOS facility in China, which then transferred them to Huawei Technology Co. Ltd. This occurred despite Huawei being on the BIS Entity List since May 16, 2019, which required a license for such shipments. In eleven of these instances, BIS determined that AOS knew or had reason to know that an EAR violation was occurring or about to occur in connection with the initial shipments.
Key Strategic Takeaways for Your Business:
- Entity List Designation Demands Immediate Action: The moment a counterparty is added to the BIS Entity List, it will trigger immediate and stringent licensing requirements, typically for all EAR-controlled items. Do not assume existing practices or prior approvals remain compliant. Your export control framework must be agile enough to pivot instantly.
- “Knowledge” is Broad and Implies Due Diligence: BIS’s definition of “knowledge” includes having “reason to know” an EAR violation is occurring or about to occur. This means that your organization can be accountable for what it should have known. Even if items are foreign-produced, exporting them from the U.S. to an Entity List party without BIS authorization can be a violation if your internal processes fail to flag that risk.
- U.S. Export Point is a Jurisdiction Trigger: Regardless of where a product is designed or manufactured, if it’s exported from the United States, it becomes subject to the EAR. In other words, your point of export can determine jurisdictional control. This is a critical consideration for global supply chains, even for foreign-designed components.
- Legal Advice Alone Is Insufficient; Internalizing Compliance is Key: Simply obtaining legal advice is insufficient. AOS’s failure to disseminate clear guidance from their counsel to relevant employees led to continued unauthorized shipments. Your compliance policies must be understood, actionable, and rigorously enforced company-wide. This requires more than just a policy document; it demands robust training, clear workflows, and continuous internal audits.
- No “Sample” Exemption Exists: The idea that “samples” for qualification or testing are exempt from U.S. export control regulations is a dangerous misconception. There is no special carve-out for evaluation units. Every shipment, regardless of its perceived value or purpose, can be subject to the EAR.
The $4.25 million civil penalty underscores the severe, tangible consequences of EAR non-compliance. This settlement serves as a stark reminder for all tech companies to conduct a thorough review of their export compliance programs, particularly concerning dealings with designated entities and the movement of items from U.S. soil.
