Big fines coming for US export violations, says ex-Commerce official, as China sales probed

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By Karen Freifeld

(Reuters) – The U.S. Commerce Department is likely to impose hefty fines on companies in the coming months for illegally shipping technology to customers in countries like China, a top department official who left last month said on Thursday.

Matthew Axelrod, as Commerce’s assistant secretary for export enforcement during the Biden administration, pushed for tougher penalties against companies that violated export controls on China, Russia and Iran.

He signed off on a $300 million penalty on Seagate Technology in 2023 for shipping 7 million hard drives to China’s Huawei, which is on the U.S. Commerce Department Entity List that restricts sending U.S. goods and services to the company because of its risks to national security.

“We had hoped some major investigations would resolve in 2024, but it looks like it will now be 2025,” said Axelrod, who expects the Trump administration to aggressively enforce export controls. He is joining the Gibson Dunn law firm on Monday.

Axelrod would not identify the companies under scrutiny.

But San Jose, California-based Cadence Design Systems , a chip design software firm, said in a filing last week that it began discussions in December with the Commerce and Justice departments regarding “preliminary findings of their investigations and a potential resolution” of a matter related to certain customers and business activity in China.

Another open investigation involves Santa Clara, California-based chip equipment maker Applied Materials, which is being probed by both the Commerce and Justice departments over shipments to China’s top chipmaker, Semiconductor Manufacturing International, as Reuters reported in 2023.

In a filing last week, Applied Materials said it had continued to receive government subpoenas, which started in 2022 and related to certain China customer shipments. The company was cooperating with the government, the filing said, and could not predict the outcome.

Spokespeople for Applied Materials and Cadence declined comment beyond the disclosures. The Commerce Department did not respond to requests for comment.

A Justice Department spokesman declined comment on matters that it said “may or may not be under investigation.” But, the spokesman said, the department’s National Security Division “continues to aggressively investigate and prosecute export control violations to secure advanced U.S. technology from illicit acquisition by nation state adversaries.”

In addition to boosting civil penalties, Axelrod helped launch a Disruptive Technology Strike Force with the Justice Department in 2022 to file criminal cases against those who help foreign adversaries obtain sensitive U.S. technology, work he also expects to continue, even if not under the same initiative.

Axelrod, an official in the Justice department before Commerce, will co-chair a new practice at Gibson Dunn on sanctions and export enforcement.

(Reporting by Karen Freifeld, Editing by Louise Heavens and Lincoln Feast.)