Corruption Crime & Compliance Episode 396 -- Commerce Department Levies Second Largest Fine Against Applied Materials for Illegal Exports to China
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Mar 3, 2026 A major $252M fine against Applied Materials for exporting semiconductor gear to a China Entity List company. Tightened export-control enforcement and the limits of creative regulatory interpretations. Dispute over whether foreign assembly avoids U.S. rules. Compliance breakdowns, internal overrides, and broad enforcement remedies discussed.
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EAR Jurisdiction Follows The Product Not The Location
- BIS treats EAR jurisdiction as product-based, not where final assembly occurs.
- Applied shipped ion implanters partly built from the U.S. to Korea, but BIS said U.S. origin remained and EAR still applied.
Applied's Dual Build Finish In Korea To Preserve Sales
- Applied implemented a dual build: partial assembly in Massachusetts, finishing in Korea, then re-exported to SMIC without a license.
- The Korea step used U.S. shipped components solely to finish SMIC orders, which BIS rejected as creating a foreign-made item.
Substantial Transformation Is A Customs Doctrine Not An EAR Escape
- Substantial transformation is a customs concept, not an EAR test, so companies cannot rely on it to avoid export controls.
- BIS said de minimis rules don't apply because no foreign-made item existed after Korean work.