Trump’s AI Plan Goes All in on Export Controls and Enforcement

Since China’s DeepSeek launched its breakthrough app, a noisy debate has intensified regarding America’s resolve on export controls. Two recent events provide a clear signal that cuts through the noise.

It would be a mistake to assume that export controls are all about a particular item or technology. Not so. US export controls also encompass end-use and end-user provisions. Who gets the item (or technology) and what they will use it for are as important as the technological parameters of the item.

Earlier this year, we anticipated that US export controls enforcement would increasingly focus on such end-use and end-user catch-all provisions—rather than item-based technological thresholds—and those catch-all provisions’ emphasis on “knowledge” as defined under the US Export Administration Regulations (EAR) would become increasingly important.

The full definition of “knowledge” under the EAR sits at the core of the end-use and end-user provisions. “Knowledge” is not simply black-and-white actual knowledge. The full definition of “knowledge” under the EAR includes both actual knowledge as well as “an awareness of a high probability.”

Two recent events have underscored the importance of these intertwined and complementary trends—promoting exports of the American AI tech stack on one hand with enhanced export controls enforcement on the other—for legal & compliance teams, executives, and boards of directors.

First, on July 23, the White House announced America’s AI Action Plan. Much attention has focused on the first two “pillars” of the artificial intelligence plan: innovation and infrastructure.

Equally important, but somewhat overlooked, is pillar three, “Lead in International AI Diplomacy and Security,” which:

• Recommends enhanced enforcement, in collaboration with the intelligence community, where there is a “high risk” of diversion of “advanced, U.S.-origin AI compute”
• Emphasizes end-use and end-user controls
• Floats the concept of full-stack AI export packages, to be reviewed holistically by the Department of Commerce and others (which portends potential “stack sweeps”)

On July 28, the Department of Commerce’s Bureau of Industry and Security announced a $95 million penalty on Cadence Design Systems, Inc.—its largest standalone penalty in two years. This was also part of an overall $140 million resolution that also included a criminal guilty plea agreed with the US Department of Justice’s National Security Division. This enforcement action was based on publicly disclosed facts of efforts by multiple entities in China and Cadence’s own China employees to evade US export controls.

This is a signal that, consistent with pillar three, the US will continue to use export controls to protect its national security interests, and that preventing exports—either directly or indirectly—to Chinese entities on the Entity List remains a national security priority, regardless of the ebbs and flows of trade negotiations.

This was also the first significant corporate enforcement action driven not by actual knowledge by the company involved that an export was prohibited, but by the full definition of “knowledge” under the US export controls, which includes “an awareness of a high probability” that an export is destined for a prohibited recipient as a basis for exporter liability. It follows an Aug. 15, 2024, precursor resolution emphasizing the same full definition of “knowledge” under the EAR.

This renewed emphasis in both policy and enforcement on the catch-all provisions and their reliance on “high probability” awareness represents a profound—and incredibly powerful—shift in export controls enforcement.

As we’ve written previously, the “high probability” standard isn’t unique to US export controls and has become the new national security paradigm for white-collar enforcement. In addition to fueling prior Foreign Corrupt Practice Act enforcement, it was included in the Department of the Treasury’s outbound investment rule and the Department of Commerce’s Information and Communications Technology and Services framework.

The AI Action Plan’s commitment to cutting red tape to promote innovation and infrastructure doesn’t mean getting rid of export controls. Companies accordingly need to re-evaluate their assessments of export control risks to ensure they consider the full definition of “knowledge”—both in fact and in a way that they can demonstrate to boards, to management, and even to BIS and DOJ if necessary.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Michael Huneke is co-chair of the sanctions, export controls, and anti-money laundering practice group and partner in the global investigations, enforcement and compliance practice group at Hughes Hubbard & Reed.

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