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Strategic Trade Act 2010 Compliance Semiconductors Trading and Fabrication

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Introduction

A Malaysian-based trading company primarily engaged in the trading and wholesale of semiconductors and fabrication services, faced allegations of supplying electronic components to Russian firms linked to the military-industrial complex.  This has resulted in the company being added to the United States' unilateral sanctions list. The case highlights the importance of Malaysia's Strategic Trade Act 2010 (STA 2010) and compliance with Strategic Trade Management (STM) regulations.


Context and Background

The US Department of the Treasury sanctioned the business as part of a broader action targeting over 300 entities across multiple countries. The sanctions aim to restrict the supply of strategic items potentially used in military weapon development. 


Malaysia enforces the STA 2010 to regulate exports, transits, transshipments, and brokering of such strategic items. Under STA 2010, companies involved in trading potentially strategic goods are required to:


  1. Register with Malaysia's Strategic Trade Management (STM) Unit.
  2. Obtain export permits for controlled items.
  3. Perform due diligence to ensure their products are not used for prohibited purposes or by unauthorized end-users.


Key Findings

  • Non-Compliance with STA 2010: The business is not registered under STA 2010 and has not applied for export permits, as per records.
  • Lack of Due Diligence: The company failed to ascertain critical information regarding the final destination, end-user, and usage of its products.


Lessons Learned

  1. Importance of Registration and Compliance: All companies involved in the trade of strategic items must register under STA 2010 and ensure compliance to avoid legal repercussions.
  2. Due Diligence Obligations: Businesses must verify the end-use and end-user of their products to prevent misuse and ensure alignment with national security and international obligations.
  3. Global Repercussions of Non-Compliance: Failure to comply with export control laws attracts domestic penalties and international sanctions, damaging the country's reputation and the business's viability locally and internationally.


Recommendations

  • Enhanced Awareness and Training:  Businesses to be more aware by seeking out awareness programs in sectors dealing with strategic items to understand STA 2010 requirements and obligations.
  • Strengthened Monitoring Mechanisms: Increase oversight and auditing of companies involved in the business of strategic goods to ensure compliance.
  • Collaborative Efforts: Engage with stakeholders, locally and internationally, to align with global export control regimes to avoid similar cases in the future.


Takeaway

This case underscores the critical role – of business being aware of domestic and international acts and action to safeguard national and international security. It also highlights the necessity for companies to actively comply with STM regulations to avoid sanctions and maintain trust in global trade networks.


The Association of Innovative Educational Research is a nonprofit organisation (NPO) committed to promoting strategic, secure, and sustainable technology transfer practices that foster safe research across the industry, academia, and government ecosystem.  Be a member of AIER today or for more information, email us at aierasean.org@gmail.com

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