How new export control rules may target Russia and China

Legislation | | MIC Customs Solutions |

What impact could new export controls on computer components have on China, and could western nations be doing more to close loopholes for these items to prevent chips reaching Russia?

Export control regulations are some of the most important rules that any exporters and importers need to be aware of, especially when it comes to items related to national security and so-called 'dual-use' goods that have both civilian and military applications. Penalties for breaching these regulations can be high, ranging from the loss of licenses to large fines and even prison sentences.

Therefore, it's essential that all businesses are up-to-date on the latest developments in this area to maintain compliance. This may be especially important given current geo-political tensions, especially those between the west and nations such as Russia and China.

Indeed, the US has recently introduced new export control rules that are said to be specifically aimed at hindering China's development of advanced technologies. At the same time, a new report has called on western nations to do more to tighten their export controls to prevent Russia from evading new sanctions imposed following its invasion of Ukraine. 

So what new rules and potential further export controls should companies doing business with Russia or China be aware of?

US moves to tighten controls on computer components

It was announced in August that the US is adopting new export controls for technologies that can be used in the manufacturing of items such as advanced semiconductors and gas turbine engines.

These include materials such as gallium oxide and diamond for use in semiconductors, electronic computer-aided design software known as ECAD made for the development of integrated circuits and pressure-gain combustion technologies that can be used in rockets and hypersonic systems.

Under secretary of commerce for industry and security Alan Estevez explained: "Technological advancements that allow technologies like semiconductors and engines to operate faster, more efficiently, longer, and in more severe conditions can be game changers in both the commercial and military context."

While the US has said these moves are "essential to the national security" of the country, it has been suggested by commentators that the rules are intended to strengthen the US' position in chipmaking at the expense of China, which it sees as a strategic competitor.

China's trade ministry has criticized the move as a "violation" of international trade rules, with Export Compliance Daily reporting a spokesperson as saying it will "inevitably hinder international scientific and technological exchanges" and "threaten the security and stability of global industrial and supply chains", according to an unofficial translation.

Elsewhere, the US has also announced further export controls to China on high-end graphics processors and artificial intelligence (AI) accelerators. The likes of Nvidia and AMD are set to be particularly affected by these rules.

Brady Wang, an analyst with Counterpoint Research, told Nikkei Asia: "The US ban now applies to the most premium lines of graphic processors and AI accelerators, which are used for powerful computing and simulating enormous amounts of data ... That means China may need to buy more older generations of GPUs and more equipment to reach a similar level of tech development."

Report calls on Western nations to address exports to Russia

Elsewhere, a new report has called on countries around the world to do more to restrict the export of technology such as computer chips to Russia, after US and Japanese-made semiconductors were reportedly found in Russian weapons systems recovered in Ukraine. 

Chips made by Texas Instruments and Sony have been found in weapons systems on the battlefield, according to the study by the Royal United Services Institute .

Although the direct export of such items is now heavily restricted, the report suggested there may be many ways in which the Russian military could exploit loopholes to obtain these components, such as acquiring consumer electronics via intermediaries in places like Hong Kong and Malaysia.

Report co-author Gary Somerville said: "How is Russia possibly getting hold of this stuff? When we actually looked through a lot of these components, they are quite prosaic and in many ways ubiquitous, they can be found in any sort of electronics really – microwaves, dishwashers."

The EU and UK have already adopted tighter export controls as part of wide-ranging sanctions against Russia. The EU's sixth round of sanctions, for instance, included greater restrictions on chemical products that could be diverted to manufacture weapons, while the seventh package added further controls on 50 additional items.

These included materials relating to law enforcement activities, manufacturing equipment that may be used to produce industrial components or weapons, medical products that could be associated with the development of biological weapons, and special materials such as fibers used in aircraft.