Taiwan committee hears bill to criminalize unlicensed AI chip exports to China

Hearing on a new offence

The bill is a Democratic Progressive Party amendment to the Foreign Trade Act sponsored by legislator Chung Chia-pin. It would ban exports of specified integrated circuits, key wafer materials, components and chipmaking equipment to mainland China without government approval. It would also cover controlled goods routed through a third country and confiscate illegal gains. Taiwanese officials and commentators said the amendment would close a gap by making unauthorised export of listed chips, materials and equipment a criminal offence in its own right. Passage is still needed, and the government has not set a start date.

Violators would face up to 10 years in prison and fines of NT$5 million to NT$10 million, or roughly US$155,000 to US$310,000. The 10-year maximum is twice the five-year maximum under existing strategic-high-tech-goods rules. William Liu, director-general of the International Trade Administration at the Ministry of Economic Affairs, told the hearing the purpose of export controls had changed.

"Export controls have shifted from preventing weapons proliferation to becoming a strategic tool for countries to protect their technological edge and national security."

The gap prosecutors hit

Under current law, an unlicensed AI chip shipment to China is not a crime in Taiwan. Prosecutors fall back on other domestic statutes.

In August, prosecutors in Keelung indicted nine people, including the general manager of Flying Tiger Technology and staff at local units of Nvidia and Super Micro Computer. The group allegedly diverted 74 Nvidia B300 servers to Chinese buyers for a profit of more than NT$600 million, or US$18.5 million. Authorities intercepted 56 of the 130 servers in the case, Yahoo News reported. None of the nine faced an export charge; prosecutors built the case on breach of trust and document forgery.

Criticism and limits

Tseng Chih-chao, deputy secretary-general of the Association for Chinese Economic and Financial Research, said the amendment may not be enough because it targets only chips and related equipment and materials. He asked why it singles out mainland China when the US trade agreement also covers North Korea, Iran and Russia. He said the government should fix the general control mechanism rather than pass a law that is merely a policy statement.

Wang Guo-chen, an associate research fellow at the Chung-Hua Institution for Economic Research, said the amendment is in line with the US-Taiwan reciprocal trade agreement and Taiwan's national security interests. He warned that Taiwanese firms in China could be caught in a crossfire, facing Chinese fines if they follow US law and stop selling chips there, or US export controls if they listen to Beijing.

Liu also listed four methods smugglers use:

• laundering the origin of goods through third countries;
• setting up shell companies in Southeast Asia and the Middle East;
• declaring high-end AI chips as ordinary consumer chips;
• dismantling chipmaking tools and reassembling them overseas.

No start date yet

The bill still has to pass the legislature. Minister of Economic Affairs Kung Ming-hsin declined to say when the government would implement separate measures to add AI servers and advanced semiconductors to the controlled items list. The ministry is studying a full package for high-end chips. No penalty schedule or final product list has been published.