US Chip Company Receives BIS Warning Letter; UK Firm Discloses Potential Violations

California-based Arteris, a multinational semiconductor company, said it received a warning letter from the Bureau of Industry and Security after it disclosed potential export control violations (see 2110130040). The company was given the warning earlier this year after BIS decided “not to refer this matter for criminal or administrative prosecution,” Arteris said in an August SEC filing.

In a voluntary disclosure to BIS last year, Arteris said it maintained business relationships with HiSilicon Technologies and Chongxin Bada Technology Development, both of which are on the Entity List. The chip company said it provided information on the Export Administration Regulations to Bada after it was added to the Entity List in 2020 (see 2008260038), and entered into a contract with and provided products to HiSilicon the same week that company was added to the Entity List as an affiliate of Huawei in 2019 (see 1905160072).

Arteris said it no longer does business with either company and has taken “remedial measures to help prevent similar situations from occurring in the future.” After deriving about 31.2% of its revenue in 2020 from companies that are on the Entity List, Arteris said it derived 0.1% of its revenue from those companies in 2021.

The company said it can be challenging to secure BIS export licenses, which can limit its “ability to export or sell our products” and can “harm our international and domestic revenue.” Arteris also said the U.S. has “increased its Entity List materially in recent years, which affects the range and number of customers, including Chinese customers available to license our products and technology.”

Another company, U.K.-based aerospace manufacturer Vertical Aerospace, said it submitted an initial voluntary self-disclosure to BIS earlier this year after determining it may have violated the EAR. The company said it “inadvertently” released export-controlled technology to four employees of a third party without “appropriate authorization.”

The manufacturer said it “terminated” those employees’ access to the technology “immediately upon discovery,” conducted an internal review and was advised by a lawyer to submit a disclosure to BIS’s Office of Export Enforcement. Vertical Aerospace said it plans to submit a final voluntary disclosure to BIS with the results of its internal review. If OEE determines the company committed an export violation, Vertical Aerospace said “we do not expect a monetary penalty and, if a monetary penalty is received, we do not expect that it would be material to the business.”

The manufacturer said its “key suppliers” are Honeywell, Leonardo, Rolls-Royce and GKN, all of which have “substantial engineering resources” based in the U.S., which makes its supplies subject to certain export restrictions. “Due to the cutting-edge nature of our industry and aircraft, the U.S., U.K. or other governments, could make key technologies that we, or our suppliers, are developing or are intending to use, subject to export control legislation, including the U.S. International Traffic in Arms Regulations or the Export Administration Regulations,” the company said.