Export controls shift to enforcement
The rulemaking has slowed while the penalties have grown. The policy is now being made in settlement agreements rather than in the register.
Maxence Pira via UnsplashExport control policy is usually read in the rules. For advanced semiconductors it now has to be read in the penalties, because the rulemaking has slowed while enforcement has become considerably more expensive.
Practitioners tracking the shift describe a year defined by enforcement actions in the semiconductor supply chain, including a penalty against one equipment maker among the largest the agency has imposed.
Licensing policy moved in the opposite direction at the same time. Counsel advising exporters note a revision of the review posture for advanced computing chips, moving certain applications from near-automatic denial toward case-by-case consideration with conditions attached.
Those two movements are not contradictory, though they read that way in headlines. A narrower set of prohibitions enforced seriously is a coherent policy, and arguably a more honest one than a broad prohibition enforced selectively.
It is also considerably harder for a company to plan against. A rule states what is forbidden. An enforcement posture states what will be punished, and the gap between the two is filled by counsel making judgment calls about risk.
The compliance burden has moved accordingly. The expensive work is no longer reading the control list; it is knowing the end user, the end use, and the several parties between the exporter and the destination, none of whom the exporter chose.
That is where the penalties have concentrated. The cases turn less often on shipping a prohibited item than on inadequate diligence about where a permitted item ultimately went.
Legislators have noticed the discretion this creates and pushed back. Proposals to give Congress a firmer hand in licensing reflect a concern that a policy administered case by case is a policy that can be traded away in a negotiation.
For the industry the practical consequence is that certainty is not coming. A licence granted with conditions is a relationship with a regulator rather than a permission, and it can be revisited.
Companies that have adjusted well treat export compliance as an operating function rather than a legal review: knowing the customer chain continuously, rather than certifying it once at the point of sale.