US Relied on Inaccurate Information From Competitor for Entity Listing, YMTC Says
Chinese semiconductor company Yangtze Memory Technologies Corp. accused the Bureau of Industry and Security of illegally withholding documents related to its placement on the Entity List, adding that the government acted on "inaccurate" information from YMTC competitors when it imposed stringent export license requirements on the company in 2022. The firm also questioned whether the End-User Review Committee, the interagency group that makes decisions on adding or removing companies from the Entity List, followed proper protocol when it voted to put YMTC on the list.
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Both YMTC and its Japan-based affiliate said they reviewed their business records and found “no evidence” of the company having violated the Export Administration Regulations. There's also no “legal or factual bases for the assertion that YMTC presented a ‘risk of diversion’” to Entity Listed companies, such as Huawei or Hikvision, it said in a complaint filed this month in the U.S. District Court for the District of Columbia.
The complaint was filed nearly a year after YMTC sued BIS over a related matter, saying the agency was failing to provide documents under the Freedom of Information Act, partly because it was relying on a “novelly broad” interpretation of the Export Control Reform Act of 2018 (see 2505300055). BIS responded in July, saying it was properly relying on a FOIA disclosure exemption (see 2507170051).
In the separate suit filed this month, YMTC said it submitted new FOIA requests in August after suspecting that its addition to the Entity List was an error, but BIS hasn’t given YMTC a determination or “any other substantive response.” The company asked the court to order BIS to produce records that explain the reasoning behind YMTC’s placement on the list.
A BIS spokesperson didn’t immediately respond to a request for comment.
The company said it believes it was added to the list after the End-User Review Committee (ERC) received “one or more proposals, likely with supporting documents,” outlining reasons for Entity List placement. But those proposals “included inaccurate or misleading information furnished or disseminated, directly or indirectly, by one or more of Plaintiffs’ competitors,” it said.
YMTC noted that it submitted a removal request to BIS last year after carrying out an internal investigation of its business dealings and finding no evidence of EAR violations. It also found “no evidence of any unlawful or diversionary transactions; and that there were no legal or factual bases for the assertion that YMTC presented a ‘risk of diversion’” to China-based Huawei or Hikvision, despite a 2022 final rule from BIS that said there was a risk.
The chip company also said it has “responded to BIS’s numerous requests for voluminous business records, including sales records and technical information,” adding that the government “never conveyed any allegation of unlawful conduct by YMTC.” It also submitted a white paper to BIS in May, which detailed YMTC’s “history of commitment to U.S. export control compliance, as well as the comprehensive anti-diversion measures YMTC has taken, and would be willing to implement, in order to be removed from the Entity List.”
In addition, YMTC pointed to what it said was unusual language in the 2022 BIS rule that put the company on the Entity List. That rule said “the agencies represented on the ERC determined to add” YMTC Yangtze Memory Technologies, which is different than the shorter phrase BIS normally uses: that “the ERC determined to add” a company to the list.
This was “an anomalous phrase that obscured the identity of the body (or bodies) that made that determination,” YMTC said. “BIS’s Entity List rulemakings published in the Federal Register rarely use the phrase ‘the agencies represented on the ERC’ to identify the decision-makers responsible for adding a party to the Entity List.”
The BIS rule didn’t explain “why the ERC itself did not determine to add Plaintiffs to the Entity List,” YMTC said, and it also didn’t say “whether they made that determination in compliance with Supplement No. 5’s majority vote requirement and internal escalation process.”