U.S. Government Reduces Export Controls for Selected Companies

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U.S. Government Reduces Export Controls for Selected Companies

The Commerce Department’s Bureau of Industry and Security (BIS) has announced that five companies in China have been approved for the newly created Validated End-User (VEU) program. U.S.-based companies selling to customers with VEU status no longer will be required to apply for individual U.S. export licenses for many items. This is a significant improvement in export control policy since it makes it easier to export to civilian end-users in China. An advocate for the VEU program, SEMI lobbied actively over the past year to help ensure a positive outcome for our industry.

Selected Companies and Approved Items

The Commerce Department released the first list of approved VEU customers in a Federal Register notice on October 19, 2007. Four of the five companies receiving this new status are in the semiconductor industry: Applied Materials China, National Semiconductor Corporation, SMIC and Hua Hong NEC Corporation. The other company is a Boeing joint venture. According to the BIS website, approved “eligible items” for the semiconductor companies include:

  • Applied Materials China: pressure transducers, semiconductor raw materials and spare parts for ion implantation, etching, wafer handling, and lithography equipment
  • National Semiconductor: analog-to-digital converters
  • Semiconductor Manufacturing International Corporation (SMIC): pressure transducers, chemical handling equipment, chemicals, semiconductor raw materials, and semiconductor manufacturing equipment
  • Hua Hong NEC (HHNEC): pressure transducers, chemicals, chemical handling equipment, semiconductor raw materials, and semiconductor manufacturing equipment

These companies were approved for VEU status after a complete review of their engagement in civil end-use activities, compliance with U.S. export controls, and agreement to on-site visits. Additional VEU designations for China are expected to be announced in the coming months. This program is also available to companies in India.

VEU Program Benefits

By reducing the licensing burden for sales to major customers in China, the VEU program allows U.S. companies to be more competitive in this important market. The program reduces the number of exports to China that require a license, which decreases paperwork and administrative burdens. It will save time and allow companies to supply their VEU customers more quickly and without the delays and uncertainty typically associated with individual license applications. By facilitating exports to civilian end-users in China, this program will help keep high-paying, quality technology jobs in the U.S.

The VEU program allows the Commerce Department to direct its attention to more pressing export control security issues rather than focusing on routine and repetitive licenses to commercial customers. About $54 million in exports described as "eligible items" in the Federal Register notice required licenses for export to the five VEU companies in 2006. This represents about 18 percent of licensed exports to China that year. The Commerce Department estimates that the new VEU companies accounted for 150 licenses between 2002 and 2006.

In June 2007, the Commerce Department updated the U.S. dual-use export control policy towards China and created the VEU program. In announcing the first list of VEU approvals, Mario Mancuso, Under Secretary of Commerce for Industry and Security stated, “The steps we are taking today are good for American exporters and jobs, and good for national security. This common-sense approach makes it easier for U.S. companies to sell to pre-screened civilian customers in China consistent with our national security requirements."

SEMI—A Strong Advocate for Export Control Reform

SEMI has been a strong advocate for the creation of the VEU program due to its potential to streamline trade for major customers in China. In fact, SEMI was one of the most supportive groups in the U.S. business community urging the creation of the VEU program. Influencing positive changes to U.S. export control policy is difficult, and SEMI considers the creation of the VEU a great success.

SEMI urges Chinese customers to consider whether the VEU program would work for them. American companies and U.S.-based subsidiaries of overseas companies should also consider whether their Chinese facilities might want to apply. SEMI will monitor how well the program works and will advocate for future changes if warranted.

In another important export control project, the Commerce Department has asked for public comment on the structure of the Commerce Control List. SEMI is preparing extensive recommendations and is urging the government to overhaul the controls related to semiconductor equipment and materials. Watch for more details from SEMI in the coming weeks.

For information on the VEU program or other export control issues, please visit www.bis.doc.gov or contact the SEMI Washington DC office.