U.S. government eases export controls for 4 semi industry players

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 10/19/2007

To remove individual license requirements on exports of certain U.S.-controlled items to certain companies in an effort to facilitate and help increase bilateral high technology trade while maintaining a secure U.S. export control system, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) announced Thursday that it has approved five screened companies in China for “validated end-user” (VEU) status.

The companies that have received the VEU status are Applied Materials China, a subsidiary of Applied Materials Inc. and supplier of semiconductor manufacturing equipment, commercial airline part manufacturer Boeing Hexcel AVIC I Joint Venture (BHA), chip maker National Semiconductor Corp., along with semiconductor foundries Semiconductor Manufacturing International Corp. (SMIC), and Shanghai Hua Hong NEC Corp. (HHNEC).

These companies are the first group approved for the program, established as part of a broader update to U.S. export control policy for China. Today’s rule change is believed to help U.S. businesses maintain a leadership role in the China market. These companies will be authorized to receive certain U.S.-controlled items without individual export licenses – thereby speeding time to market.

As the program expands and matures, The BIS said it could facilitate millions of dollars of U.S. exports to China and with increased trade with China, will help to keep high paying, good quality technology jobs in the U.S.

BIS Under Secretary Mario Mancuso said in a statement, “The approval of these VEU candidates is the latest step in implementing our dual-use export control policy towards China, which strikes the right balance in our complex relationship. 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.”

The BIS also noted that the VEU program for China is meant to make transactions easier, faster and more reliable with customers that meet rigorous security requirements established by an interagency review process, and is expected to help U.S. exporters remain competitive in one of the fastest-growing markets for American companies and facilitate exports to civilian end-users in China.

By removing routine exports to specific, security screened companies from the traditional interagency review process, BIS said it, and other relevant agencies, can better focus their resources on review of exports that raise greater security concerns.

In 2006, the approved companies imported nearly $54.3 million dollars worth of U.S.-goods under licenses, or about 18 percent of total licensed exports to China.

The program will also allow U.S. companies to better compete in China, particularly in trade sectors where foreign competitors are already selling similar items with sectors likely to benefit from the VEU program including electronics, semiconductor equipment, and chemicals.

Companies granted VEU status will be published in the Federal Register and added to a list maintained in the Export Administration Regulations.

These companies accounted for 150 licenses between 2002 and 2006 were approved for VEU status after a thorough review of such factors as the entity’s record of exclusive engagement in civil end-use activities; the entity’s compliance with U.S. export controls; the need for an on-site review prior to approval; the entity’s capability of complying with the requirements of authorization VEU; the entity’s agreement to on-site reviews to ensure adherence to the conditions of the VEU authorization by representatives of the U. S. Government; and the entity’s relationships with U.S. and foreign companies, the BIS explained.

These approvals are the latest step in the Commerce Department’s implementation of a June 2007 update to U.S. dual-use export control policy towards China.

This effort has been led by Mancuso to promote continued U.S. strategic technology leadership, advance national security, foreign policy and economic objectives by ensuring an effective dual-use export control and treaty compliance system, the BIS explained. Dual-use items have commercial uses, but also have conventional military and weapons of mass destruction applications, the bureau added.

Specifically, Applied’s China facility performs maintenance, installation and warranty support for the company’s customers in China. The approved facilities are located in Beijing, Shanghai, and Wuxi and the approved items include pressure transducers, semiconductor raw materials and spare parts for ion implantation, etching, wafer handling, and lithography equipment.

BHA’s composites manufacturing facility produces composite parts for secondary structures and interior applications for commercial aircraft, including the Boeing 787. The approved facility is located in Tianjin and the approved items include raw materials for producing composite structures and machine tools for composite manufacturing.

National operates three sales and marketing representative offices in China, engaged in the company’s products primarily through authorized local distributors. The approved facilities are located in Beijing, Shanghai, and Shenzhen and the approved items are analog-to-digital converters.

SMIC offers IC manufacturing services and its approved facilities are located in Beijing, Chengdu, Shanghai, and Tianjin and the approved items include pressure transducers, chemical handling equipment, chemicals, semiconductor raw materials and semiconductor manufacturing equipment.

HHNEC’s approved facilities are located in Shanghai and the approved items include pressure transducers, chemical handling equipment, chemicals, semiconductor raw materials, and semiconductor manufacturing equipment.

Finally, BIS said it will continue to rigorously monitor compliance with the regulations.