The Department of Justice (DOJ) is reshaping the Criminal Division’s white-collar program to focus on tariff and trade fraud. In the past months, DOJ has significantly narrowed the scope of Foreign Corrupt Practices Act enforcement. Now, DOJ is dedicating significant additional resources and attention to tariff evasion. On July 10, acting Assistant Attorney General of the Criminal Division Matt Galeotti announced that the Department of Justice’s Market Integrity and Major Frauds Unit will be renamed and will expand its focus to include investigating and prosecuting tariff evasion schemes and other trade fraud. Galeotti told Bloomberg that DOJ is also shifting “significant personnel” from a consumer protection branch to the criminal division as part of this reorganization.

The addition of resources, including assigning experienced white-collar prosecutors to tariff evasion cases shows DOJ’s commitment to rooting out trade fraud and signals a heightened risk of criminal prosecution for companies importing goods into the United States that are misclassified, undervalued, or declared with the incorrect country of origin.

Background

In May 2025, DOJ identified trade and customs fraud, including tariff evasion, as one of the Criminal Division’s top enforcement priorities. Galeotti directed prosecutors to hold individual wrongdoers accountable and “prioritize schemes involving senior-level personnel or other culpable actors, demonstrable loss, and efforts to obstruct justice.”

DOJ also announced an expansion of its Corporate Whistleblower Awards Pilot Program. Under the expanded program, tips that lead to forfeitures in corporate cases involving “trade, tariff, and customs fraud” are now eligible for monetary awards, increasing the likelihood of insiders or competitors tipping off prosecutors. DOJ has indicated that they are already receiving whistleblower tips and voluntary disclosures related to trade fraud.

What companies can do

In addition to helping importers comply with their reasonable care expectations under the customs regulations, the following steps can also help mitigate potential criminal enforcement risks:

  • Review the country of origin, valuation, and classification of the company’s imports. Although negligent errors in these areas have always created civil enforcement risks, as well as an obligation to pay unpaid duties, origin, valuation, and classification decisions that may have seemed advantageous but have not been appropriately vetted could create criminal enforcement risks. Individual employees who approved these decisions could also be personally exposed.
  • Ensure the company has appropriately designed internal controls. A well-designed customs compliance program, including periodic, independent audits, can help prevent and detect potential issues. An effective whistleblower program also encourages internal reporting, allowing the company to investigate and remediate potential issues. Additionally, these types of controls can mitigate potential penalties if a violation occurs. A focused risk assessment along with periodic testing of operating effectiveness of controls can help bolster compliance with applicable regulations.
  • Train employees to identify and escalate potential “red flags.” Whether the company serves as the importer of record or receives foreign-origin goods after they are imported, employees should be trained to identify potential “red flags” that may indicate tariff evasion is occurring, such as the relabeling of shipping containers or repackaging of goods. Those “red flags” should be escalated within the company’s legal and compliance structure and appropriately investigated. Companies that have reason to know the importer is taking steps to evade tariffs but fail to take steps to further inquire could be subject to criminal investigation.
  • Ensure routine inquiries from U.S. Customs and Border Protection (CBP) are escalated for review. In many instances, operations personnel may receive and respond to Requests for Information (CF-28s) and Notices of Action (CF-29s) from CBP without escalating those items to the compliance or legal departments for further review. Although these may be routine inquiries, CBP’s questions can also help the company proactively identify errors and evaluate whether to file a prior disclosure to mitigate potential penalties.
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Key takeaways

  • On July 8, 2025, President Trump indicated that the United States would impose 50% tariffs on copper imports. The tariffs are expected to be imposed by end of July or start of August.
  • In response to the threat of tariffs, the global copper market has experienced significant change, as traders and end users seek to stockpile metal in the United States ahead of potential tariffs.
  • Legal issues that may arise with tariffs and market conditions include: which party is responsible for costs of tariffs, delays in transport and logistics, and counterparty defaults.
  • Market participants can take practical steps to limit the risk of legal issues arising, including stress testing their copper sale and purchase contracts.

Introduction
On July 8, 2025, President Donald Trump indicated that the United States would impose 50% tariffs on copper imports. It is understood that the tariffs will be imposed by the end of July or start of August. This follows the US Commerce Department’s initiation of an investigation into copper imports announced in late February. Since the announcement, U.S. copper imports have increased significantly, as traders and end users seek to stockpile the metal ahead of any potential tariffs.

The prospect of U.S. tariffs has had a pronounced effect on the global copper market, including:

  • Comex and LME price differentials: The price differential between the Commodity Exchange (COMEX) copper contract, which requires physical delivery in the United States, and the London Metal Exchange (LME) copper contract, which allows physical delivery at various global locations, has reached unprecedented levels.1
  • Inventory shifts: Significant volumes of copper have been shipped out of Europe and Asia and into the United States. This has led to “acute shortages” of the metal in Europe and Asia.2
  • Backwardation: Copper prices have moved into backwardation, meaning that the spot price (i.e., the price for immediate delivery) is higher than the forward price (i.e., the price for delivery at a future date). In June 2025, the LME spot price was nearly $400 per metric ton higher than the three-month forward price, which has been described as “one of the biggest ever backwardations.”3 
  • Risk of Short Squeeze: Market commentators have raised concerns about a potential “short squeeze,”4 where rising prices force holders of short positions to buy at a loss to cover their positions, but in doing so drive up prices further, exposing other short position holders to additional losses. 

Given the scale and pace of developments, any legal issues arising from current market conditions – and the potential imposition of tariffs – are likely to be specific to individual market participants, contract terms and factual circumstances. Nonetheless, some broader considerations may be generally relevant to market participants buying and selling physical copper ahead of the potential tariff imposition.

Responsibility for the cost of import duties
Parties contracting to sell or purchase physical shipments of copper for delivery into the United States should ensure their contracts clearly specify which party is responsible for any import duties that may be imposed. Under the U.S. customs regulations, the importer of record is responsible for any duties and tariffs.

While there is variation across the market, spot contracts for the sale and purchase of base metals (which usually consist of a short trade confirmation incorporating general terms and conditions (GTCs)) typically provide that taxes, tariffs and duties imposed on the metal in the country of origin will be borne by the seller, and those imposed in the country of discharge or the importing country are to be borne by the buyer. Where such a provision applies, the buyer will be responsible for the cost of any U.S. tariffs imposed on copper imports, even after the execution of the contract.

Some base metals GTCs may not include an express provision relating to taxes and duties but instead incorporate Incoterms. In such cases, if, for example, the trade confirmation provides for delivery on an FOB basis, the buyer will be responsible for the cost of any tariffs, whereas if the trade confirmation provides for delivery on a DDP basis, the seller will be responsible for the cost.

The position may be less certain where the contract does not contain an express provision relating to taxes and duties and does not incorporate Incoterms. In such cases, if governed by English law, the contract will need to be interpreted based on the entirety of its contractual provisions. If there are conflicting provisions there may be increased scope for dispute.

Consequences of delays in transport and logistics
If tariffs on U.S. copper imports are imposed, even relatively minor delays in transport and logistics could result in copper shipments arriving after the tariffs come into effect and being subject to import duties that would not have applied otherwise. The risk of these delays may be increased as market participants put a strain on transport and logistics services in the rush to import shipments before tariffs are imposed. Further, given President Trump’s indication that the tariffs could be set at 50% of the value of the copper, such delays could have a significant financial impact on the party bearing the cost.

For example, if a shipment is due to arrive in the United States before the tariffs come into force but is delayed due to congestion at the load port and the buyer is required to pay the tariffs, the buyer may seek to bring a claim against the seller for those additional costs. The question of whether the seller would be liable for such additional costs will likely depend on whether the shipment was delivered late under the contract, and if so and on this scenario, whether the port congestion fell within the definition of the force majeure (FM) clause in the contract. In some cases, there also may be an issue as to whether the additional costs were reasonably foreseeable such that they would be recoverable as damages.

To limit the risk of liability for such claims, before concluding a trade parties should consider whether the contractual timeframes for performance of their obligations can be fulfilled even if some delays occur. Where transport or logistics delays do occur in connection with a shipment, a seller should immediately consider whether the delays fall within the definition of FM, and if so, give notice of an FM in accordance with the contractual provisions – even if the delays are likely to be minimal or seems inconsequential at the time.

Risk of counterparty defaults
The unique current market conditions, combined with recent disruption to copper production, may increase the risk that counterparties fail to meet their obligations under sale and purchase contracts.

In relation to sellers, the current shortage of copper supplies in Asia and Europe may result in parties being unable or unwilling to source shipments for concluded contracts requiring delivery in these regions. For example, due to the arbitrage opportunities created by the significant price differentials between U.S. and non-U.S. copper and the copper spot and forward price, there may be an economic incentive for a seller to renege on its obligations to an existing buyer and instead resell the shipment to another buyer.

In relation to buyers, if a buyer agreed to purchase a copper shipment for delivery into the United States based on the mistaken expectation that tariffs would not be imposed at the time of import, the imposition of the tariffs may mean that it is no longer economically rational for them to take delivery of the shipment.

While economic reasons ordinarily will not excuse a party from non-performance of its obligations under a sale contract, parties may seek to rely on clauses that give them a route to suspend or terminate their obligations on other grounds. Examples of such clauses typically seen in base metals GTCs include the abovementioned FM and material adverse change, the latter of which may entitle a party to declare an event of default if there is a deterioration in the other party’s creditworthiness. Parties looking to avoid their obligations may also seek to take advantage of inadvertent or technical breaches by the other party to engineer a right of termination, for example, an event of default caused by a short delay in opening a letter of credit.

Parties can limit the risk of counterparty defaults by contracting with reputable, creditworthy counterparts who may be less likely to walk away from their contractual obligations if the market turns against them. Parties can also prepare for potential counterparty defaults by familiarizing themselves with their contractual rights and remedies if it appears a counterparty may fail to perform its obligations. Finally, as a defensive measure, parties should exercise diligence to avoid an inadvertent breach of contract that a counterparty might exploit to engineer a termination.

Conclusion
Current conditions in the global copper market have undoubtedly created commercial opportunities and challenges for suppliers, traders and end users alike. These challenges and opportunities appear set to continue – and may intensify – as the imposition of tariffs on U.S. copper imports potentially draws closer. It remains to be seen whether the market uncertainty will lead to widespread legal issues between parties under copper sale and purchase contracts, and if so, the nature of those issues. In the meantime, market participants may consider stress testing their contracts to ensure they are prepared for any legal consequences that may arise.

1. Copper’s Transatlantic Divide: What The Price Gap Between New York And London Means For Traders
2. Copper​ Market Hit by Major Supply Squeeze as LME Inventories Drop
3. Copper Faces Historic Squeeze With LME Stockpiles Depleting Fast
4. Copper prices surge as traders rush to beat Trump tariffs

Thanks for reading. We welcome your feedback and questions. Reach out to any of the authors or your regular Reed Smith contact.

On July 8, 2025, the U.S. Department of Agriculture (USDA) announced the National Farm Security Action Plan (Action Plan), a sweeping initiative to protect American agriculture as a matter of national security. Among its most consequential provisions are forthcoming restrictions on foreign adversaries (e.g., China) from purchasing or controlling U.S. farmland. Highlights of the Action Plan’s key provisions are described below.

Ban on farmland acquisitions by foreign adversaries

  • The USDA will work with Congress and state partners to pursue swift legislative or executive action to prohibit the direct or indirect purchase or control of American farmland by nationals from countries of concern or other foreign adversaries.
  • The USDA will also work with state legislators to quickly push through laws that will ban further purchases, with a particular focus on parcels of land near U.S. military bases.
  • Existing ownership arrangements are expected to be reviewed for compliance and potential risks.
  • The Agricultural Foreign Investment Disclosure Act (AFIDA) process will be aggressively reformed, including the creation of an online filing system for enhanced transparency, geospatial reporting, and increased civil penalties for late or knowingly false filings.
  • A new online portal will allow farmers, ranchers, and the public to report suspected false or failed AFIDA filings and claims of adversarial foreign influence in farmland transactions. Submissions may be made anonymously or with contact information for follow-up.

CFIUS and the USDA Memorandum of Agreement

  • The USDA will sign a joint Memorandum of Agreement with the Department of Treasury, which chairs the Committee on Foreign Investment in the United States (CFIUS), to ensure regular coordination on reviews of covered foreign transactions involving farmland, agricultural businesses, agricultural biotechnology, or the broader agriculture industry.
  • This agreement is designed to facilitate timely information sharing and strengthen the federal government’s ability to identify and address national security risks associated with foreign investment in U.S. agriculture.

Broader supply chain and security measures

  • The USDA will collaborate with federal partners to identify critical agricultural inputs and materials, including fertilizers, chemicals, minerals, and components relevant to both agriculture and national defense.
  • Regular risk assessments and crisis simulation exercises will be conducted to identify and address vulnerabilities in storage, transportation, and importation of agricultural products.
  • Import restrictions will be modernized to prevent the entry of dangerous biochemicals and biological agents, with enhanced enforcement across the supply chain.

Protection of nutrition programs

  • Enhanced enforcement measures will be implemented to prevent fraud and abuse in nutrition programs such as SNAP, with a focus on compliance, benefit trafficking, and card skimming.
  • Retailers complicit in fraud will be disqualified, and collaboration with law enforcement will be strengthened to combat criminal activity.

Research security and program evaluation

  • All USDA-funded research must directly benefit American producers and prevent collaboration with foreign adversaries.
  • Entities receiving USDA funding must certify they are not owned or controlled by foreign adversaries and disclose foreign gifts or contracts.
  • Programs such as SBIR, STTR, and BioPreferred will be reviewed to prevent exploitation by foreign entities, with enhanced due diligence and revocation of certifications as needed.
  • USDA funding will be prioritized for domestic use, with a focus on American-made technology and innovation.

Biosecurity and critical infrastructure

  • The USDA will work with federal and state partners to strengthen responses to plant and animal health threats, including the development of vaccines and control methods for priority diseases and pests.
  • Partnerships with agencies like DARPA will promote military readiness and agricultural security.
  • Cybersecurity resources and information sharing will be expanded to protect agricultural operations from cyber and ransomware attacks.
  • Workforce development initiatives will support a new generation of agro-defense professionals.

The Action Plan introduces a robust framework to prevent foreign adversaries from acquiring U.S. farmland and to increase federal oversight of foreign investment and activities in the agricultural sector. The forthcoming ban on such acquisitions, coupled with enhanced CFIUS coordination, will significantly impact how land transactions involving foreign entities are scrutinized and approved.

Businesses engaged in agricultural land transactions, agribusiness investments, or related supply chain activities should expect increased due diligence requirements, more rigorous reporting obligations, and the potential for heightened regulatory review. It is essential for stakeholders to review current and planned transactions for compliance with these new proposed restrictions, monitor developments in federal and state legislation, and engage proactively with legal counsel to navigate the evolving landscape. Early preparation will be critical to ensuring continued access to U.S. agricultural assets and to mitigating risks associated with foreign investment restrictions.

As anticipated, on June 30, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the implementation of President Trump’s Executive Order, “Providing for the Revocation of Syria Sanctions.” This action adds to General License 25 and removes the broad U.S. sanctions previously in place against Syria and the former regime, while maintaining sanctions on former Syrian President Bashar al-Assad, and other actors responsible for destabilizing the region, by expanding the scope of Executive Order 13894.

The key developments include the following:

  • OFAC has removed 518 individuals and entities from the Specially Designated Nationals and Blocked Persons (SDN) List who were previously sanctioned only under the Syria program. This action unblocks their property and interests in property. The full list, which may be found here, but includes the Syrian Company for Oil Transport, the Central Bank of Syria, the Lattakia Port General Company, SYTROL, the Banias Refinery Company, and the Homs Refinery Company.
  • The Executive Order waives the requirements to impose certain export controls under the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 and the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 and immediately confirmed that the export of U.S.-origin food and medicine is permitted (see FAQ 1222). Previously, only U.S.-origin food and medicine classified as EAR99 under the Department of Commerce’s Export Administration Regulations (the EAR) could be exported to Syria without authorization.
  • New FAQs clarify, among other things, that establishing correspondent banking relationships with Syrian financial institutions is now permitted, meaning that U.S. dollars may now be used for sanctions and export control-compliant transactions.
  • Some targeted sanctions remain, where OFAC has designated 139 individuals and entities affiliated with the former Assad regime under E.O. 13894 (as amended), as well as under other Iran and Counter Terrorism authorities. Sanctions remain in place for Bashar al-Assad, his associates, human rights abusers, captagon traffickers, individuals linked to Syria’s past proliferation activities, ISIS and Al-Qa’ida affiliates, and Iran and its proxies.
  • The Department of State has announced that it will examine the potential full suspension of the now-temporarily suspended Caesar Act.

Note however that caution is still required where:

  • OFAC has announced that it may continue to investigate and enforce apparent violations of the Syrian Sanctions Regulations that occurred prior to July 1, 2025.
  • Certain entities will remain blocked under other sanctions programs. Accordingly, reliance on General License 25 may still be required in certain circumstances. See FAQ 1223 for more details here.
  • Comprehensive export controls remain in place under the EAR, despite the waiver of some requirements to impose export restrictions on Syria.
  • The EU and UK still have limited sanctions in place against Syria, meaning certain transactions may still be prohibited under their respective sanctions regimes, even if permitted under U.S. law.

Please contact a member of the Reed Smith team below should you have any questions.

As global trade barriers rise and regulatory frameworks grow more complex, data centers must implement robust legal strategies to address customs valuation, origin rules, import/export controls, and maintenance-related trade challenges.

In a recent post, published as part of our Data Centers: Bytes and Rights series, we highlight and examine five key compliance areas that legal teams should consider when managing regulatory risks in this highly regulated and technology-driven sector.

Update: On May 29, the Court of Appeals for the Federal Circuit issued an immediate administrative stay of the CIT’s judgment and injunction. The plaintiffs-appellees will have until June 5 to respond to the government’s motion for a stay. The government will have until June 9 to file a reply brief. The Federal Circuit will then consider the motion to stay the CIT’s judgment and injunction pending the outcome of the appeal. In the meantime, imports will continue to incur tariff-related charges.

On May 28, the Court of International Trade (CIT) declared two sets of President Trump’s tariff-related executive orders invalid as contrary to law: (1) the orders implementing the “fentanyl” tariffs on Canadian-, Chinese-, and Mexican-origin goods; and (2) the orders implementing the reciprocal tariffs. The CIT permanently enjoined each of the executive orders, and the government almost immediately filed notice of its appeal. The government also filed a motion to stay enforcement of the CIT’s ruling.

What tariffs are impacted by this ruling?

The ruling impacts:

  • The “fentanyl” tariffs on Canadian-origin goods (Exec. Order  No. 14193)
  • The “fentanyl” tariffs on Chinese-origin goods (Exec. Order No. 14195)
  • The “fentanyl” tariffs on Mexican-origin goods (Exec. Order No. 14194)
  • The changes to the de minimis exemption for Chinese-origin goods (Exec. Order No. 14195)
  • The reciprocal tariffs (Exec. Order No. 14257)
  • Any amendments or modifications to any of the executive orders above

What tariffs are not impacted by the ruling?

The ruling does not impact:

  • The Section 301 tariffs on Chinese-origin goods.
  • The Section 232 tariffs on aluminum and derivative products, automobiles, automobile parts, or steel and derivative products.
  • The pending Section 232 investigations on commercial aircraft, jet engines, and parts; copper; critical minerals and derivative products; medium- and heavy-duty trucks and truck parts; pharmaceuticals, pharmaceutical ingredients, and derivative products; semiconductors, semiconductor manufacturing equipment, and derivative products; or timber and lumber.

What happens next?

The government has already filed notice of its appeal to the Court of Appeals for the Federal Circuit, as well as a motion to stay enforcement of the CIT’s ruling until the conclusion of the appeals process.

Even if the CIT does not think the government is likely to succeed on its appeal, the court may still grant the stay to avoid future administrative issues for U.S. Customs and Border Protection (CBP) if the tariffs are ultimately upheld. As a practical matter, the court may see it as easier for importers to file corrected entry summaries to remove the tariffs, rather than requiring CBP to track entries that were imported without the tariffs and apply those retroactively.

The parties may also ask the Federal Circuit to expedite the appeals process.

Assuming a stay is not granted, the CIT is expected to issue the administrative orders to effectuate the permanent injunction by June 7. In the meantime, CBP will need to make updates to the Automated Commercial Environment (ACE), modify the Harmonized Tariff Schedule of the United States, and issue guidance to importers.

What’s the practical impact of the ruling today?

Until CBP issues guidance on the ruling, importers should anticipate that entries will continue to be processed with tariff-related deposits. Consistent with CBP’s approach under Executive Order 14289, clarifying which tariffs do not “stack” together, CBP may then require importers to file Post Summary Corrections to request tariff refunds.

If importers have impacted entries that may liquidate before guidance is issued, they should consider requesting that CBP suspend liquidation on those entries. If entries liquidate, protests may be required to recover tariff refunds.

On May 23, the Office of Foreign Assets Control (OFAC) issued Syria General License 25, which authorizes a significant portion of previously prohibited transactions. The general license does not, however, amend or modify any of the existing Syria-related export controls under the International Traffic in Arms Regulations or Export Administration Regulations.

What does the general license authorize?

Subject to the limitations below, the general license authorizes:

  • All transactions prohibited by the Syrian Sanctions Regulations, 31 C.F.R. Part 542 (other than those with blocked persons as described below).
  • Transactions with the Syrian government[1] prohibited under existing sanctions regulations.
  • Transactions prohibited under existing sanctions regulations with certain sanctioned persons listed in the annex to the general license, as well as any entity in which one or more of the persons listed in the annex directly or indirectly owns a 50% or greater interest. The entities listed in the annex include the Central Bank of Syria, major state-owned enterprises, port and maritime entities, other financial institutions, and media and tourism agencies and entities.

What does the general license not authorize?

The general license does not authorize:

  • Any transactions involving any individual or entity on the Specially Designated Nationals and Blocked Persons List (SDN List) (other than those listed on the annex to the general license) or in which a sanctioned person owns, directly or indirectly, individually or in the aggregate, a 50% or greater interest.
  • The unblocking of any property or interests in property blocked pursuant to any sanctions regulations as of May 22, 2025.
  • Any transactions for or on behalf of the Russian, Iranian, or North Korean Government.
  • Any transactions related to the transfer or provision of goods, technology, software, funds, financing, or services.

[1] The Syrian government includes: (a) the state and the Government of the Syrian Arab Republic, as well as any political subdivision, agency, or instrumentality thereof, including the Central Bank of Syria;

(b) any entity owned or controlled, directly or indirectly, by the foregoing, including any corporation, partnership, association, or other entity in which the Government of Syria owns a 50% or greater interest or a controlling interest, and any entity which is otherwise controlled by that government; (c) any person that is, or has been, acting or purporting to act, directly or indirectly, for or on behalf of any of the foregoing; and (d) any other person determined by OFAC to be included within paragraphs (a) through (c). 31 C.F.R. § 542.308.

On May 13, 2025, the Bureau of Industry and Security (BIS) announced its intent to rescind the Biden administration’s Framework for Artificial Intelligence Diffusion (AI Diffusion Rule) that is scheduled to go into effect on May 15. BIS will publish a Federal Register notice formalizing its decision. In the meantime, Under Secretary of Commerce for Industry and Security Kessler has instructed BIS not to enforce the AI Diffusion Rule.

BIS separately announced actions to strengthen export controls on advanced computing integrated circuits (ICs).

New policy statement on advanced computing ICs and commodities used to train AI models

The new BIS policy emphasizes the catch-all controls under Part 744 of the Export Administration Regulations (EAR), warning that knowledge of items being used to train AI models can trigger license requirements or penalties. Specifically:

  • The policy clarifies that exports, reexports, or transfers (in-country) of advanced computing ICs and related commodities (e.g., ECCNs 3A090.a, 4A090.a, and related .z items) intended for training AI models may require an export license when the intended end use or end user is for military-intelligence applications or weapons of mass destruction in China or other Country Group D:5 nations.
  • The prohibitive policy extends to U.S. persons providing “support” or services that facilitate such training, and it applies even when items are routed through third-party infrastructure as a service (IaaS) providers.
  • Persons doing business with advanced computing ICs and related commodities must conduct heightened due diligence, follow new BIS “red flag” guidance, and avoid “self-blinding,” as violations can lead to civil or criminal penalties.
  • Non-U.S. companies doing business in China with advanced computing ICs and related commodities can be at risk of being designated on the Entity List if foreign-made items are supplied to these targeted end uses and end users, even where no violation occurs.

Guidance on protecting supply chains against diversion tactics

BIS published new guidance for industry outlining “red flags” and due diligence steps that industry should adopt to prevent diversion of advanced ICs.

  • Expanding on previous guidance in related contexts, under BIS’s identified “red flags” include sudden order spikes, use of residential addresses, and inadequate data center infrastructure.
  • BIS guidance on due diligence includes customer vetting, end-use/end-user certifications, infrastructure attestations, and heightened scrutiny of data centers that have the infrastructure to operate servers containing advanced ICs greater than 10 megawatts.

Guidance on risks of using Chinese advanced ICs

BIS issued guidance warning that advanced-computing ICs meeting the parameters for control under Export Control Classification Number (ECCN) 3A090 that are developed or produced by companies located in, headquartered in, or whose ultimate parent company is headquartered in Country Gorup D:5 (including China) or Macau may implicate General Prohibition 10 under the EAR. Because these ICs were likely developed or produced in violation of U.S. export controls, they are presumptively subject to General Prohibition 10, exposing anyone who uses, transfers, or otherwise services them without authorization to significant enforcement risk.

BIS specifically identified the Huawei Ascend 910B, 910C, and 910D as being subjection to the presumption that General Prohibition 10 restrictions apply.

Companies purchasing advanced-computing ICs will need to vet their supply chain to prevent follow-on violations resulting from this treatment.

Additionally, non-U.S. companies who have such ICs in their inventory or use the ICs in their products will need to assess how to handle the ICs without violating the EAR, which may require voluntary disclosure and requests for General Prohibition 10 authorizations. 

BIS’s actions signal a sharpened enforcement focus. Companies should confirm proper BIS authorization was obtained before purchasing or integrating these advanced-computing ICs. Companies should also map their supply chains for advanced AI hardware, implement robust know-your-customer and end-use verification protocols for any AI-related transactions, obtain BIS licenses where needed, and evaluate future dealings involving Huawei Ascend or other China-designed ECCN 3A090 ICs.

On 4 April 2025, Singapore Customs and the Ministry of Trade and Industry issued a joint advisory on Singapore’s export controls relating to advanced semiconductor and artificial intelligence (AI) technologies (the Advisory).

The Advisory emphasised that businesses operating in Singapore must act transparently and fully comply with applicable laws and regulations on export controls. Such compliance is expected to extend beyond Singapore’s own export controls, with an express warning from the Singapore authorities that they will not condone the deliberate circumvention or violation of other countries’ export controls by Singapore intermediaries or any international business using its association with Singapore.

The Advisory noted that, in recent years, export controls had been unilaterally imposed by other countries on advanced semiconductors, semiconductor manufacturing equipment and AI-related technologies. By way of example, the Bureau of Industry and Security, which is the primary agency under the U.S. Department of Commerce charged with overseeing national security and high-technology issues, has issued export control regulations relating to semiconductors and semiconductor manufacturing equipment, as well as their derivative products.

The Advisory was issued following recent enforcement actions by the Singapore authorities (for further details, see below).

Ramping-up of export controls enforcement by Singapore authorities

Singapore’s export control regime is primarily governed by the Strategic Goods (Control) Act 2022 (SGCA) and the Regulation of Imports and Exports Regulations. The SGCA regulates the transfer of strategic goods and technologies, such as dual-use goods that are capable of military application. Goods and technologies that meet the technical specifications described in the Strategic Goods (Control) Order (SGCO) are subject to controls under the SGCA. Singapore’s export controls are aligned with major multilateral export control regimes and the sanctions imposed by the United Nations Security Council. A contravention of the SGCA may constitute an offence and can result in corporate and individual liability, with the imposition of fines and/or imprisonment. Increased penalties are prescribed for subsequent convictions. The primary enforcement agencies responsible for administering Singapore’s export controls are Singapore Customs (the government’s enforcement agency for customs and trade measures) and the Singapore Police Force.

Although Singapore’s export control regime does not oblige the relevant Singapore authorities to enforce the unilateral export controls of other countries, the Advisory makes clear that the authorities will not allow individuals or businesses operating in Singapore to use Singapore as a conduit for illicit trade activities in the areas of advanced semiconductor and AI technologies.

Recent enforcement actions confirm Singapore’s readiness to investigate companies and arrest individuals in Singapore that are suspected of engaging in fraudulent or dishonest practices to evade the export controls to which they are subject.

In February 2025 (a few weeks before the Advisory was issued), it was reported that three individuals were charged with fraud under Singapore’s criminal laws for allegedly facilitating the movement through Singapore of computer servers which were suspected of containing highly advanced chips from a well-known U.S. technology company. It was alleged that the individuals used Singapore-based entities to make false representations to two suppliers of these servers in order to mask the servers’ actual final destination. The total amount linked to these cases was reportedly in the region of S$500 million (~US$390 million). If convicted, the individuals could face imprisonment and/or fines for each fraud charge.

It was reported that the Singapore Police Force and Singapore Customs had conducted a joint operation in February 2025, raiding 22 locations in Singapore, seizing a substantial number of electronic devices and documentary records, and arresting nine individuals (including the three individuals who were charged). Since then, the authorities have also requested bank statements from various financial institutions to trace the movement of funds linked to the implicated individuals. Singapore Customs has indicated that it will continue to investigate this matter for possible violations of Singapore’s import and export control regulations.

Following the Advisory and the government probe discussed above, Singapore Customs updated its circular on 8 April 2025 to require that entities and declaring agents making declarations for the import and export of goods must state the final destination country of the goods, rather than making a declaration based on the consignee address in the commercial invoice.

In 2023, a Singapore entity was fined more than S$1.1 million (~US$0.8 million) for two counts of exporting strategic goods without the requisite export permits, in contravention of the SGCA. A sales manager and a director in charge of the entity’s import and export operations were also fined S$35,000 (~US$26,000) and S$45,000 (~US$34,000) respectively for their involvement. The entity had falsely declared to the Norwegian authorities that a multibeam echosounder system, which consisted of sub-systems listed as controlled goods under the SGCO, was for export to Indonesia. However, the true end-user was a Myanmar entity that had been rejected twice previously by the Norwegian authorities. The sales manager had fraudulently listed an Indonesian entity as the end-user to deceive the Norwegian authorities into approving the export to Singapore.

Conclusion

The Advisory, related regulatory updates and recent enforcement actions demonstrate the Singapore authorities’ readiness to safeguard the integrity of Singapore’s status and reputation as a key node in global supply chains and as a global trading hub.

Multinational companies with Singapore operations and businesses with supply chains that run through Singapore should therefore be on heightened alert in the current regulatory and trade climate, particularly in the semiconductor industry or where sensitive AI-related technologies are involved. They will need to carefully navigate the regulatory landscape to avoid being implicated in, or inadvertently facilitating transactions that could run afoul of, overlapping domestic and international export control regimes. In this regard, the Advisory encourages businesses to be proactive in taking steps to mitigate the risk of inadvertent violations of applicable export controls (including those of other countries). These steps include implementing robust internal compliance programmes, such as know-your-customer practices, end-user screenings, and risk-based screening procedures that focus on potential red flags (e.g., abnormal shipping routes).

Reed Smith has extensive experience advising on and conducting investigations in relation to export control-related matters, including in the Asia-Pacific region. Reed Smith is licensed to operate as a foreign law practice in Singapore. Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith’s Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.

U.S. concerns surrounding the proliferation of the Chinese shipbuilding industry pre-date the current tariff wars.  Under the previous Biden administration, on March 12, 2024, various U.S. labor unions filed a petition requesting an investigation into the acts, policies, and practices of China targeting the maritime, logistics, and shipbuilding sectors for dominance.

Following a year-long investigation, including input from industry and a public consultation, the United States Trade Representative (“USTR”) determined that China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance is unreasonable and burdens or restricts U.S. commerce and is therefore actionable under Sections 301(b) and 304(a) of the Trade Act.

Continue Reading U.S. section 301 strikes back: Additional U.S. port service fees on vessels with China nexus; potential far-reaching implications for leaseback arrangements