Historically, the semiconductor sector has been subject to broad export-control rulemaking by the Bureau of Industry and Security (BIS). Recently, however, the agency has shifted toward a more aggressive enforcement phase, particularly targeting semiconductor manufacturing equipment (SME) companies.
For SME companies, the issue is no longer just whether a tool requires a license to export. BIS increasingly looks at servicing, software support, foreign assembly operations, supply-chain arrangements, and support provided by U.S. persons.
The recent Applied Materials settlement highlights this shift. The company agreed to pay approximately $252 million to resolve allegations involving semiconductor equipment exports or reexports linked to China. Applied Materials conducted assembly operations abroad and argued, using the substantial transformation test, that the items were not of U.S. origin and therefore not subject to the Export Administration Regulations (EAR). However, BIS clarified that the substantial transformation test is a customs law concept and does not apply to the EAR.1 BIS emphasized that EAR jurisdiction is based on whether an item is of U.S. origin, and noted that even if parts are assembled abroad, all U.S.-origin and foreign-origin parts were exported from the United States.2
The key takeaway is that BIS appears willing to closely examine global manufacturing and assembly structures, particularly where U.S. engineering, coordination, or management remains involved.
SME companies should revisit export-control assumptions about foreign affiliates and overseas manufacturing, evaluate servicing and software-support exposure, increase diligence with Chinese importers and distributors, and ensure export compliance programs operate effectively across engineering, sales, logistics, and field-service teams.
The current direction from BIS strongly suggests that semiconductor export controls will remain a long-term enforcement priority. For SME companies, export compliance is increasingly becoming part of normal business operations rather than a narrow legal function.
Legal issues differ based on situations. If you want to discuss how the export controls landscape changes, and impacts you, reach out to the authors or to your Centre attorney.
1 See, BIS’s full order, settlement agreement, and Proposed Charging Letter against Applied Materials, UNITED STATES DEPARTMENT OF COMMERCE, February 11, 2026.
2 United States export regulations apply to all items that are exported from the US (including software downloaded from a server located in the US); all items that are US-origin (i.e., manufactured or designed in the US); and all items that contain more than a de minimis amount (typically 25% for non-US embargoed countries) of US-origin content.
