Two indicted for 'illegally exporting' chip gear from US to China

One Chinese national arrested in Chicago while another suspect thought to be abroad

Two Chinese nationals were this week accused by the US of attempting to illegally export chipmaking kit to a company back home, in another twist in the tech wars between the two nations.

The US Department of Justice (DoJ) said the pair, Anson Li and Lin Chen, were charged with conspiracy to illegally export US tech to a sanctioned Chinese business, Chengdu GaStone Technology Company (CGTC). If convicted, the pair face lengthy prison sentences and hefty fines. The indictment was unsealed on April 25.

Li is believed to be still in China, so the wrath of American justice seems likely to fall on Chen, who was arrested in Chicago this week.

It is understood that the tech in question was a DTX-150 Automatic Diamond Scriber Breaker machine from Dynatex International of Santa Rosa, California. This is used to slice semiconductor wafers into individual dies, and under Department of Commerce regulations, requires a license and authorization to export to CGTC.

According to the DoJ, the two defendants allegedly planned to acquire a machine for CGTC through an intermediary company called Jiangsu Hantang International (JHI), a proxy the Feds claim the pair fraudulently represented as the purchaser and end user.

In order to carry out the deception, or so the Feds allege, the duo are said to have instructed Dynatex International to ensure that the export information associated with the sale did not list CGTC as the ultimate receiver of the shipment.

"As alleged, the defendants sought to evade export controls to obtain US semiconductor manufacturing technology for a prohibited Chinese company," claimed Assistant Attorney General Matthew G Olsen of the Justice Department's National Security Division.

The Chinese outfit was added to the Department's Entity List In August 2014, the DoJ confirmed, which meant that exporting goods to the company from the US is not allowed without a difficult-to-obtain license.

The indictment claims the illegal activity took place between May 2015 and August 2018, when the document alleges Li and Chen conspired to evade the export restrictions imposed by the Commerce Department against CGTC.

"The export restrictions at issue in this case were put in place to prevent the illicit procurement of commodities and technologies for unauthorized military end use in the People's Republic of China," US Attorney for the Northern District of California Ismail Ramsey said in a statement, re-iterating Washington's claimed reason for blocking exports to companies in the country.

For conspiracy to violate the International Emergency Economic Powers Act (IEEPA), the two defendants could face of up to 20 years in prison and a $1 million fine. They are also charged with false electronic export information activities, carrying up to five years in prison and a $250,000 fine, and up to 10 years in prison and a $250,000 fine for smuggling. A federal district court judge will ultimately determine the sentence imposed.

Dynatex, manufacturer of the DTX-150 equipment, was found to be in violation of the Export Administration Regulations (EAR) for the same incident by the Department of Commerce in 2021, and entered a settlement agreement in which it was ordered to pay a penalty of $469,060.

The order relating to this states that Dynatex was informed that CGTC was on a black list prior to engaging in the transactions, but that it improperly continued to ship items to the Chinese outfit without the required authorization after it was aware that the recipient was on the entity list.

Meanwhile, CGTC is alleged to have been linked to other export violations. Back in 2018, two men were arrested on federal charges of illegally obtaining technology and integrated circuits with military applications that were exported to a Chinese company without the required export license. The monolithic microwave integrated circuits at the heart of that case were allegedly shipped to CGTC. ®

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