US enhances export control enforcement with nationwide initiative focused on advanced technologies
On February 16, 2023, the Department of Justice (DOJ) and the Department of Commerce’s Bureau of Industry and Security (BIS) announced a new enforcement initiative aimed at preventing and prosecuting evasion of US export controls on critical technologies such as semiconductors, artificial intelligence, additive manufacturing and advanced biosciences. As a result, the stakes have never been higher for companies in these industries – and those that form part of their supply chains – to do their part to prevent attempts to circumvent US export controls and sanctions.
The latest initiative establishes an interagency Disruptive Technology Strike Force (Strike Force) that pools federal law enforcement resources “to target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.” The Strike Force is led by the DOJ’s National Security Division and BIS’s Office of Export Enforcement and includes experts from across government, including the FBI, Homeland Security Investigations and officials representing US Attorneys’ offices from the Atlanta; Boston; Chicago; Dallas; Houston; Los Angeles; Miami; New York City (Southern and Eastern Districts of New York); San Jose, California; Phoenix; Portland, Oregon; Washington, DC; and Northern Virginia metropolitan areas.
The Strike Force will initially direct its efforts at tracing the end users and end uses of products, software and technology sold by US companies in the “supercomputing and exascale computing, artificial intelligence, advanced manufacturing equipment and materials, quantum computing, and biosciences.” According to the Strike Force, these technologies are a top enforcement priority because of their potential for military and intelligence-related applications, such as weapons design and testing, and breaking encryption algorithms, that are used by adversaries to threaten US national security.
The Strike Force’s mission encompasses enforcement and disruption activities, enhancing administrative enforcement of US export controls, fostering private sector partnerships and utilizing international partnerships for enforcement. The Strike Force will also leverage data analytics and work with source intelligence to develop investigations.
The Strike Force is yet another clear example of the US government’s scrutiny of companies in advanced technology sectors that may be the targets of unscrupulous attempts to evade US export control and sanctions laws. It follows announcements such as DOJ’s creation of Task Force KleptoCapture in March 2022, which has been enforcing sanctions and export restrictions imposed by the US – in coordination with international partners – in response to Russia’s invasion of Ukraine. As noted in a previous alert, Task Force KleptoCapture has been very active in the enforcement arena since its creation. The Strike Force will only expand these efforts, with a broadened focus on China, Russia, Belarus, Iran and North Korea.
Expect the Strike Force to prioritize enforcement of US export controls on semiconductor technology and electronics. A likely early focus of the Strike Force will be companies’ compliance with US export controls on semiconductor technology announced in October 2022. As explained in an earlier alert, these controls require careful due diligence on the end users and end uses of US technology that may be used in military, semiconductor fabrication and advanced computing applications in China. The Strike Force is also likely to examine efforts by companies to prevent the supply of US electronics and other components to projects supporting military activities of sanctioned countries – such as the electronics parts and components found in unmanned aerial vehicles used by Iran and supplied to Russian military forces in Ukraine.
The Strike Force’s close coordination with the Intelligence Community will give it broad vision over cross-border supply chains. A key feature that distinguishes the Strike Force from previous strike forces will be its mandate to closely coordinate with the Intelligence Community. The Intelligence Community’s involvement can be expected to provide vision on supply chains across borders that will enhance the Strike Force’s ability to identify disruption and enforcement opportunities that might not otherwise be available through traditional law enforcement channels.
Businesses in certain metropolitan regions can expect heightened scrutiny and outreach. The Strike Force’s operational relationships in 12 metropolitan areas is another feature that distinguishes it from the Task Force KleptoCapture and is more consistent with previous strike forces, such as the COVID-19 strike force created last fall. Businesses in these regions can expect more enforcement scrutiny and an increase in government inquiries and outreach.
Action steps for companies
In light of these developments, companies should review their compliance programs, supply chains and know-your-customer due diligence to ensure they measure up to federal guidelines. Companies should also ensure that they have policies and procedures to respond appropriately to law enforcement outreach, inquiries and formal legal processes, and to guide internal investigations when the need arises. By being prepared, companies have an opportunity to mitigate any potential enforcement risks and act as responsible partners in ensuring US national security.
Businesses that do become aware of a sanctions or export control violation should be prepared to leverage the voluntary self-disclosure mechanisms under US export control and sanctions laws. In doing so, they should be mindful that the DOJ’s National Security Division, Department of the Treasury’s Office of Foreign Assets Control and BIS each have specific requirements for such voluntary self-disclosures.
Find out more about the implications of this development by contacting the authors or your DLA Piper attorney.