Department of Commerce Settles With Semiconductor Developer Over Exports of Foreign-Produced Electronics From the United States to Huawei

On July 2, 2025, the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce (Commerce) announced that it had entered into a settlement agreement with California-based Alpha and Omega Semiconductor Incorporated (AOS) for 15 violations of the Export Administration Regulations (EAR). According to BIS, AOS exported foreign-designed and foreign-produced EAR99 items to Huawei Technology Co. Ltd. (Huawei) without required authorization from BIS. AOS agreed to pay $4,250,000 in civil penalties.

According to BIS’ order, AOS, a designer, developer, and supplier of power semiconductors, started negotiating with Huawei in 2018 to provide Huawei its digital power products. The negotiations started before Huawei was designated on Commerce’s Entity List on May 16, 2019. When Huawei was added to the Entity List, AOS halted shipments to Huawei while it analyzed whether BIS authorization was required to continue supplying products. AOS consulted its outside counsel, who apparently provided general advice that the products assembled in China and that did not contain more than de minimis amounts of controlled U.S.-origin content would not require a BIS license because such products are not subject to the EAR. The outside counsel, however, noted that AOS should seek case-by-case, fact-specific advice for products AOS planned to provide to Huawei if it was unsure whether the specific products were subject to the EAR.

When AOS was later informed that Huawei was interested in receiving AOS’ products for testing and evaluation, AOS did not seek further guidance on whether it was permitted to export such sample products directly from the United States to Huawei. Over the next two weeks, AOS exported four shipments of sample products to its facility in China and then transferred them (in-country) to Huawei. These shipments violated the EAR because they involved items that were exported from, transferred from, or transited through the United States, and Huawei’s designation on the Entity List prohibited exports, reexports, or transfers (in-country) of all items subject to the EAR without authorization from BIS.

Later, AOS learned from its outside counsel that products exported from, transferred from, or transited through the United States may not be provided to Huawei. AOS, however, did not distribute this guidance to its employees. After receiving the guidance, AOS made 11 more shipments to Huawei from the United States. Regarding these 11 shipments, BIS found that AOS acted with “knowledge” (which, under the EAR, includes actual knowledge and reason to know) of a violation, given the guidance.

This settlement serves as a reminder that, absent certain exclusions, all items that are in the United States (including in a U.S. Foreign Trade Zone or moving in transit through the United States) are subject to the EAR when exported from the United States, triggering applicable export license requirements under the EAR. Here, because the items were foreign-designed, foreign-produced, and contained a de minimis amount of controlled U.S.-origin content, they would not have been subject to the EAR if not for their shipment from the United States. The settlement also demonstrates the importance of distributing legal/compliance advice throughout the organization and incorporating the same into the organization’s compliance program. Had AOS done so, it may have been able to prevent at least the latter 11 EAR violations that stemmed from the “knowledge” it had acquired of the shipments’ prohibited status from its outside counsel’s guidance.

For questions about this settlement agreement or other export controls or sanctions matters, contact the authors or any of their colleagues in Arnold & Porter’s Export Control & Sanctions or White Collar Defense & Investigations practice groups.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.