The Bureau of Industry and Security (BIS) released its latest Don’t Let This Happen to You! report, summarizing recent U.S. export control civil and criminal enforcement actions. The report provides insights on U.S. trade control enforcement priorities, including:

• The illicit diversion of U.S. and western technologies to Russia to support that country’s war in Ukraine, including machine tools and semiconductors
• Controls on advanced technologies that could pose a threat to national security, including artificial intelligence (AI), quantum computing, and biotechnology
• The diversion of U.S.- and western-made components to terrorist groups in the Middle East
• China’s acquisition of items that could be used to undermine human rights and regional security, particularly related to AI and supercomputing.

The report reflects an increasing emphasis on trade controls enforcement by the United States. For example, last year saw the largest number of export control convictions and temporary and post-conviction denial orders and the largest standalone export control penalty. 

A key theme throughout the report is a crackdown on diversion and the networks that allow for the illicit flow of goods to malign actors. The case studies provided in the report reflect the great lengths to which malign actors and adversaries go to unlawfully obtain U.S. technologies, including using third parties, shell companies, transshipment, and complex banking arrangements.

Such schemes included Chinese nationals establishing a U.S. front company to pose as domestic customers to obtain advanced integrated circuits, a Bulgarian company that attempted to purchase electronics components for Russian military use by providing false end user information and structuring the shipment through intermediary countries in order to evade detection by its supplier and banks, and a U.S. front company purchasing aviation components for export to Iran through a series of shell companies and bank accounts held in Turkey.

These schemes reflect the increasing sophistication of diversion efforts, and the need for U.S. and western industry to continue to update internal procedures to monitor for and protect against the illegal flow of their dual use technologies to malign end users. 

The report is a reminder of the far extraterritorial reach of U.S. export controls. Companies that mistakenly believed they were operating outside the bounds of U.S. jurisdiction have been the subject of significant enforcement proceedings.

In April 2023, for example, BIS imposed its largest ever penalty of $300 million on Seagate for transacting with Huawei, which is on the BIS Entity List. In this case, Seagate sold hard drives manufactured outside of the United States with tools that were the direct product of U.S.-origin technology. The tools were caught by application of the Foreign Direct Product Rule, a complex export jurisdiction rule that BIS has expanded in recent years to capture a broader range of items made abroad, without regard to incorporation of any U.S. content. 

Companies that produce or sell dual use goods—particularly in the electronics, industrial, and advanced technology sectors—should ensure that they have adopted sufficient risk-based compliance controls, particularly given the extensive efforts of adversaries to gain access to sensitive technologies and the U.S. government’s commitment to enforcement.  These BIS enforcement publications provide helpful guidance in describing specific fact patterns, common evasion attempts, compliance expectations and best practices, and enforcement priorities.