On January 7, 2026, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) imposed a $1.5 million civil penalty on Exyte Management GmbH (“Exyte”), a Germany- headquartered engineering and procurement company, after its Shanghai affiliate Exyte Shanghai Ltd., (“Exyte China”) admitted to illegally causing the transfer of approximately $2.8 million in EAR-subject semiconductor equipment to Semiconductor Manufacturing International Corp. (“SMIC”), China’s largest chip manufacturer. BIS designated SMIC on the Entity List in 2020, resulting in the prohibition of the export, reexport, and transfer of all items subject to the Export Administration Regulations (EAR) to SMIC without specific authorization. Exyte must pay the penalty within 75 days to maintain its BIS export privileges.

The settlement continues an ongoing theme by BIS to enforce provisions of the EAR that prohibit activities other than exports, reexports, or transfers. Here, each of the violations were due to Exyte China “causing” another violation of the EAR, a penalty more akin to what is typical in a U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) settlement. It also reflects a continued focus on transactions that involve companies that are listed on the Entity List and on transactions that involve sensitive technologies, including semiconductors.

Between March 2021 and March 2022, Exyte China facilitated 13 in-country transfers totaling 884 items, including voltage sag protectors, programmable logic controllers, flowmeters, and pressure transmitters from Chinese suppliers to SMIC. All items were classified as EAR99 and used in chip fabrication facilities. Despite knowing the items were destined for SMIC, Exyte failed to recognize that an export license was required.

BIS cited Exyte’s “inadequate corporate compliance controls” as the root cause, noting the company “did not appreciate” that EAR licensing requirements applied to in-country transfers from Chinese distributors to Entity List customers. Exyte’s voluntary self-disclosure after discovering the violations influenced the settlement outcome.

This action highlights a critical compliance gap: in-country transfers within China remain subject to the EAR when U.S.-controlled items are destined for Entity List parties, even absent cross-border movement. Companies using local affiliates or distributors in China must ensure their compliance programs capture downstream transfers to restricted end users as BIS continues expanding Entity List designations in the semiconductor sector.