Big fines coming for companies with export violations, says ex-Commerce official

The U.S. Commerce Department is likely to impose hefty fines on some large companies in the coming months for offenses such as illegally shipping technology to customers in China, according to a top department official who left last month.

Matthew Axelrod, as Commerce's assistant secretary for export enforcement during the Biden administration, pushed for tougher penalties against companies that violated export controls on China, Russia and Iran.

He signed off on a $300 million penalty on Seagate Technology in 2023 for shipping 7 million hard drives to China's Huawei, which is on the U.S. Commerce Department Entity List that restricts sending U.S. goods and services to the company because of its risks to national security.

"We had hoped some major investigations would resolve in 2024, but it looks like it will now be 2025," said Axelrod, who expects the Trump administration to aggressively enforce export controls. He is joining the Gibson Dunn law firm on Monday.

Axelrod would not identify the companies under scrutiny. But one open investigation involves Santa Clara, California-based chip equipment maker Applied Materials, which is being probed by both Commerce and the Justice Department over shipments to China's top chipmaker, Semiconductor Manufacturing International Co, as Reuters reported in 2023.

Another probe involves San Jose, Calif-based Cadence Design Systems, a chip design software firm. In 2021, Cadence received an administrative subpoena from the Commerce department requesting the production of records relating to certain customers in China, according to its disclosures. Another subpoena, from the Justice Department, arrived in 2023.

In a Feb. 21 filing, the company said it began discussions in December with Commerce and Justice regarding "preliminary findings of their investigations and a potential resolution of this matter."

The Commerce and Justice departments did not immediately respond to requests for comment. Nor did Applied Materials and Cadence TK.

In addition to boosting civil penalties, Axelrod helped launch a Disruptive Technology Strike Force with the Justice Department in 2022 to file criminal cases against those who help foreign adversaries acquire sensitive U.S. technology, work he also expects to continue, even if not under the same initiative.

Axelrod, an official in the Justice department before Commerce, will co-chair a new practice at Gibson Dunn on sanctions and export enforcement.

As Commerce Secretary Howard Lutnick said in an answer tied to his confirmation hearing: "I intend for strong enforcement of export controls to be a hallmark of my tenure."