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The Diplomat
a day ago
- Business
- The Diplomat
Southeast Asia's Transshipment Dilemma in the China-US Trade War
The United States' tightening of export controls on advanced technologies, led by the Bureau of Industry and Security (BIS)'s Entity List and Foreign Direct Product Rule, aims to curb Chinese access to sensitive U.S. technologies. Yet these tools are increasingly circumvented through Southeast Asia, where Chinese firms exploit jurisdictional loopholes by routing goods through affiliates in open economies such as Singapore, Malaysia, Vietnam, and Cambodia. In addition, Chinese companies facing higher tariff rates have resorted to routing their goods through countries in Southeast Asia. These transshipments are a topic of increasing concern for Washington, as evidenced by their special mention in trade deals reached with Vietnam and Indonesia. While these evasion tactics challenge U.S. trade policy enforcement, they pose a deeper risk to Southeast Asia's long-term economic integrity, regulatory autonomy, and strategic positioning between the United States and China, the region's two largest trade partners. Southeast Asia's success relies on the continued openness of trade, but that very openness is now under stress as external regulations collide with free trade norms. Southeast Asian countries must now navigate the complex task of maintaining economic prosperity and neutrality, while preventing their jurisdictions from becoming conduits for regulatory evasion. Recent events highlight the extent of the challenge. Between April and July of this year, Vietnam intercepted over 2,000 shipments falsely labeled 'Made in Vietnam' but traced to Chinese factories. Vietnamese firms were also cited by BIS for transshipping AI-capable chips from U.S. suppliers to blacklisted Chinese entities. Malaysian tech hubs such as Penang and Johor have been flagged for similar rerouting practices. Meanwhile, in 2024, the U.S. Commerce Department ruled that solar modules assembled in Cambodia, Malaysia, Thailand, and Vietnam with Chinese inputs violated U.S. trade laws. Policy responses from impacted countries indicate the increasing recognition and concern of effects on regional economies. Singapore, for instance, has introduced stronger disclosure requirements, tightened enforcement against shell companies, and improved cooperation with multilateral initiatives like the Financial Action Task Force. Malaysia has escalated audits under its Strategic Trade Act and is investigating how shell firms enable transshipment schemes. While these moves are not a concession to U.S. pressure, they are a strategic response rooted in the understanding that weak oversight carries long-term risks to sovereignty and reputation. In response to these policies, Chinese leaders have strengthened diplomatic engagement with Southeast Asian countries to deepen economic ties to the region and position China as a champion of free trade. For Southeast Asian countries, the core issue is not just about complying with external demands but also involves building resilience and frameworks for regulation. If the region becomes a default route for the circumvention of global controls, it could erode trust with major trade partners, provoke unilateral countermeasures, and compromise the predictability that has made Southeast Asian economies attractive to investors. Moreover, such dynamics threaten to reduce the region's autonomy in shaping future trade and technology governance frameworks. At the same time, Southeast Asian states must carefully navigate their deep and complex economic ties with China. Many regional supply chains are integrated with Chinese production. Any moves perceived as aligned with U.S. restrictions risk provoking economic retaliation. Therefore, the challenge is not to choose sides but to assert a coherent trade strategy that can adapt to external pressure while maintaining credibility. This balancing act is especially critical as broader trends reshape Indo-Pacific trade dynamics. U.S. tariffs on Chinese goods, new industrial policies, and rapidly accelerating free trade agreements are altering what trade integration looks like. The question is not whether Southeast Asia should align more with U.S. or Chinese policy frameworks. It is whether the region can lead in building a trade architecture that upholds both openness and integrity. That means pushing for export control mechanisms that are not externally imposed but co-developed – ones that reflect Southeast Asian priorities in innovation, data governance, and strategic autonomy. As the Indo-Pacific enters an era that prioritizes technology and trade, countries like Singapore, Malaysia, Cambodia, and Vietnam are increasingly central to determining the new status quo. Strengthening regulatory clarity, improving cross-border coordination, and safeguarding the region's neutrality are investments in long-term regional strategy. By continuing to address these challenges on their own terms, Southeast Asian nations can help define a new model of trade resilience that resists being a pawn of great power competition and instead reflects the region's own values of openness and balanced diplomacy.
Politico
21-07-2025
- Business
- Politico
The tech woes of America's tech cops
With help from Alfred Ng and Aaron Mak Frustration is brewing around the government office whose job is to track the most exquisite, cutting-edge American technology as it moves around the world. Though a wonky agency known mostly to trade and tech insiders, the Bureau of Industry and Security at the Commerce Department operates at the cutting edge of the $600 billion global semiconductor industry. It polices American export controls by approving or rejecting export licenses and pursuing enforcement actions. You might think the BIS would have sophisticated tools to deploy — but in fact, America's global tech cop is hobbled by software that in some cases hasn't been updated in two decades. In a series of hearings and interviews, insiders have described an agency struggling to cope with creaking software even as its workload has ballooned in recent years. Last year, then-undersecretary of Commerce Alan Estevez, who led BIS, told Congress licensing applications had doubled to 40,000 since 2012 while some of its 'antiquated' software dated back to 2006. The state of affairs has shocked tech policy experts. 'The IT infrastructure at the Bureau of Industry and Security is a legitimate national security threat to the U.S.,' said a senior Republican aide on the House Foreign Affairs Committee, which oversees BIS. (The aide requested anonymity to speak about ongoing discussions in Congress.) A Democratic House staffer said BIS under the Biden administration responded at a glacial pace to requests for information, including important questions on applications for export licenses to Chinese tech companies. 'It took them over a year to get back to Congress with licensing data about SMIC and Huawei,' said the aide, who was not authorized to speak to the press. The BIS did not respond to DFD's questions on its software. Its current leader, Commerce Department undersecretary Jeffrey Kessler, told lawmakers in June that the president's budget requested $303 million for the agency, 'the single largest investment in BIS history, and one that will significantly bolster our ability to protect national security.' The House and Senate are also making efforts to shore up the agency. The House has suggested appropriating $303 million for BIS, while the Senate has suggested $211 million. Either would be an increase from the current $191 million. But it's not clear if that would cover the full software overhaul insiders say is needed — and Congress might not manage to pass appropriations bills before an Oct. 1 shutdown, which could mean flat funding for the near term. The BIS has become increasingly important in American policy over its four decades of existence, as the U.S. has expanded its use of export controls for foreign policy. During President Donald Trump's first term, he placed Huawei and SMIC on the 'Entity List' of blacklisted companies. His administration used the Foreign Direct Product Rule to extend U.S. export controls to goods made with U.S. components, even if the products were manufactured outside the U.S. Both of those are policed by the BIS. Biden built on those controls, both by enacting new restrictions on the export of advanced AI chips, and by adding Russian companies to the 'Entity List' over Moscow's invasion of Ukraine. As BIS was handling a bigger slice of the global tech trade, its systems struggled to keep up. Speaking to HFAC last year, Estevez said his agency was using 'manual pulls' of data for Congress. The Democratic House aide said BIS brought staffers in for a demonstration. 'It was very distressing,' the aide said. 'Mostly I felt really really bad for the people who work at Commerce.' The staffer pointed to frustrations at all levels, from disconnected systems handling major BIS responsibilities to character limits that made it hard to search accurately for company names. 'The search functions are alarmingly inadequate,' the staffer said. In an effort to modernize, the agency awarded Palantir $3.5 million in 2024 for data center services. However, that was far from the scale of overhaul a database would require. Even if lawmakers increase BIS's budget, the ancient tech is only one part of its problem. The agency staff has been in turmoil since Trump took office, with top leaders on chip export controls departing. David Feith, who handled technology at the National Security Council, was dismissed in April. A bipartisan bill HFAC lawmakers introduced last week would require the bureau to nearly double the ranks of BIS export control officers around the world to 20, from 11 today. Kessler told lawmakers last month that extra BIS money would enable the agency to hire nearly 200 special agents across the U.S. as well as 30 officers overseas. Michael Sobolik, a senior fellow at the Hudson Institute who previously worked as an aide to Sen. Ted Cruz (R-Texas), said ramping up BIS staff could come at the expense of a tech reboot. 'If that money is going to have to go to cover new hires, and if the tech is really as old as it seems like it is, that may not be enough,' said Sobolik. Jessie Blaeser contributed to this report. AI pricing argument hits the airlines Some lawmakers want to know how Delta Airlines is using artificial intelligence to set 'individualized fares' for customers — an emerging industry practice that critics fear abuses people's privacy and creates higher costs. The letter, sent by Sen. Ruben Gallego (D-Ariz.) and joined by Sen. Richard Blumenthal (D-Conn.) and Mark Warner (D-Va.) on Monday and exclusively provided to POLITICO, asks Delta CEO Ed Bastian to disclose what data the company uses to train its algorithm for setting prices, how many customers are paying for prices determined by AI and what steps the company is taking to evaluate the potential impact of AI on its pricing. Unlike discounts for broad groups such as teachers, veterans and senior citizens, individualized pricing sets specific prices for different people, with critics saying the goal is to set the highest price that people are willing to pay. It also uses more personal information, such as a person's web browsing behavior, social media activity, financial status and location, the Federal Trade Commission said in a January report. Delta did not immediately respond to requests for comment. Delta told investors on a July 10 earnings call that it plans to use AI to set pricing for 20 percent of its domestic flights by the end of 2025. The company expects to eventually personalize all flight prices. The practice of using people's data to set individualized prices, which the FTC calls 'surveillance pricing,' has been a concern among state lawmakers who worry it will lead to higher prices. Business lobbyists have pushed back against regulations, arguing that individual pricing can bring discounts to consumers. Delta has until Aug. 4 to respond to the senators' letter. Incoming: Trump's AI Action Plan Trump is set to release his long-awaited AI Action Plan on Wednesday — and POLITICO's Mohar Chatterjee reports that it will center on cutting regulation, competing with China and suppressing 'woke AI.' The president called on his AI and crypto czar, David Sacks, and other White House tech advisers to develop the action plan in a January executive order. The order rolled back AI safety guardrails that President Joe Biden put into place through his own EO. Mohar obtained an overview of the action plan on Friday, and reports that it will include provisions for streamlining permitting for data center construction, ensuring that federal AI systems are not ideologically biased, promoting AI exports and withholding funds from states with restrictive AI laws. Many of these aims align with the administration's light-touch approach to AI — for example, it backed a state AI law moratorium in the spending bill. That provision was cut, and members of Congress are now trying to get bipartisan support for AI regulations in statehouses. Yet, as POLITICO's Morning Tech team points out, using this action plan to push for state AI deregulation could be a potential workaround to Congress' rejection of the moratorium. post of the day THE FUTURE IN 5 LINKS Stay in touch with the whole team: Aaron Mak (amak@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ and Daniella Cheslow (dcheslow@
Korea Herald
15-07-2025
- Business
- Korea Herald
Trump govt. begins security probes into semiconductor material, drone imports ahead of possible tariffs
US President Donald Trump's administration has begun investigations into imports of a semiconductor material and unmanned aircraft systems to determine their effects on America's national security, Commerce Department notices showed Monday. On the Federal Register, the department's Bureau of Industry and Security posted the notices on the probes on polysilicon and the UAS that Commerce Secretary Howard Lutnick initiated July 1 under Section 232 of the Trade Expansion Act of 1962, in what could be a step toward imposing tariffs on those items. Under Section 232, the president is provided with authority to adjust imports into the US when he determines they threaten to impair national security. In the notices, the bureau said the investigations will look into the effects of polysilicon and its derivatives, as well as UAS, their parts and components. Polysilicon is a crucial material used in the semiconductor industry. The department plans to collect public comments for 21 days since the official posting of the notices. By law, the commerce secretary has 270 days to present his department's findings and recommendations regarding the imported products to the president. Within 90 days after getting a report from the secretary, the president is to determine whether he concurs with the department's findings and make a decision. (Yonhap)
Yahoo
30-05-2025
- Business
- Yahoo
Exclusive-Synopsys halts China sales due to US export restrictions, internal memo shows
By Liam Mo and Brenda Goh BEIJING (Reuters) -Semiconductor design software firm Synopsys has told staff in China to halt services and sales in the country and stop taking new orders to comply with new U.S. export restrictions, according to an internal letter reviewed by Reuters. The U.S. has ordered a broad swathe of companies to stop shipping goods to China without a license and revoked licenses already granted to certain suppliers, Reuters reported on Wednesday, citing people familiar with the matter. Products affected include design software and chemicals for semiconductors, they said. Synopsys on Thursday suspended its annual and quarterly forecasts after it received a letter from the Bureau of Industry and Security of the U.S. Department of Commerce, informing it of new export restrictions related to China. The internal letter sent to staff in China on Friday said "based on our initial interpretation, these new restrictions broadly prohibit the sales of our products and services in China and are effective as of May 29, 2025." To ensure compliance, Synopsys said it was blocking sales and fulfillment in China and halting new orders until it receives further clarification. The measures affect all customers in China, including employees of global customers working at sites in China and Chinese military users wherever they are located, the letter added. The steps Synopsys is taking in light of the new restrictions have not been previously reported. Synopsys did not immediately reply to a request for comment. Alongside Cadence and Siemens EDA, Synopsys is among the top three companies that dominate electronic design automation (EDA) software that chipmakers can use to design semiconductors used in everything from smartphones to computers and cars. Restricting Chinese firms' access to EDA tools would be a big blow to the industry as Chinese chip design customers heavily rely on top-of-the-line U.S. software. Synopsys, Cadence and Siemens's Mentor Graphics control more than 70% of China's EDA market, Chinese state news agency Xinhua reported in April. Chinese companies that have said they use Synopsys and Cadence software include design firm Brite Semiconductor, Zhuhai Jieli and semiconductor IP portfolio provider VeriSilicon. The letter sent to staff in China on Friday also said that Chinese customers' access to its customer support portal SolvNetPlus had been disabled. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
29-05-2025
- Business
- Yahoo
What To Expect Now That Trump Has Scrapped Biden's Crippling AI Regulations
President Donald Trump pledged to remove barriers to American leadership in AI in January. The president recently made good on this promise by directing the Bureau of Industry and Security (BIS) to scrap President Joe Biden's Framework for Artificial Intelligence Diffusion on May 13, two days before it was set to go into effect. Although it is unclear what the Trump administration will replace it with, the rescission of the Biden-era framework recognizes the necessity of exporting American chips and AI to maintain America's technological, economic, and strategic dominance. The Biden framework would have amended export regulations to impose a worldwide license regime on all advanced semiconductors designed for data center use. This would have also hit graphics processing units (GPUs) used for AI acceleration, including foreign product chips that are "direct products" of American technology. This would have not only subjected geopolitical rivals such as China to strict controls but also restricted the number of GPUs sold to 150 other countries, many of which are close trading partners and allies, such as Israel, and some which are NATO members (Greece, Portugal, Poland, Latvia, Estonia, and Lithuania), per the Center for Strategic and International Studies. Neil Chilson, head of AI policy at the Abundance Institute, tells Reason that the diffusion framework "established a world-wide regime that would have restricted American companies from trading with friends and allies overseas." Chilson says the rule's rescission helps American companies keep the global lead in AI technology. Keegan McBride, a senior policy adviser in emerging technology and geopolitics at the Tony Blair Institute for Global Change, agrees. McBride tells Reason that rescinding the Biden rule "opens up new opportunities for innovation, economic growth, and global engagement." With the Biden-era framework dead, the Trump administration has announced its "Industry Guidance to Prevent Diversion of Advanced Computing Integrated Circuits." Instead of imposing a complex regulatory scheme, the new guidance informs semiconductor manufacturers how to remain in compliance with existing export restrictions that have been in place since October 2022. The guidance still recognizes the danger of China acquiring advanced chips through transshipment or diversion and by accessing data centers. The guidance also provides "common sense recommendations about how companies can help [prevent] such chips from ending up in Chinese hands," explains Chilson. Chilson anticipates the guidance to be followed by "a new rule that attempts to address some of the divergence scenarios highlighted in the guidance" and expects a more tailored solution that reflects awareness of the negative effects of the Biden approach. Matthew Mittelsteadt, a technology policy research fellow at the Cato Institute, is less optimistic. "At this juncture, the administration has signaled a desire to negotiate controls bilaterally, country by country," which Mittelsteadt warns may lead to "195 country-specific flavors of AI export controls" that would hamper American companies' competitiveness and overburden the license processors at the Commerce Department. Overinclusive regulations like Biden's Framework for Artificial Intelligence Diffusion would have hampered economic growth and national security; capping demand for American-made advanced GPUs reduces revenue to domestic semiconductor and AI firms that require capital to invest in research and development, innovate, and maintain industry dominance. McBride is confident that the Trump administration understands that the "active promotion of American AI to the global community" is a crucial component of winning the AI race against China. Hopefully, he's right. The post What To Expect Now That Trump Has Scrapped Biden's Crippling AI Regulations appeared first on
