Case Explained: International Trade and Export Controls, Sanctions and Tariff Enforcement Article | White Collar Law and Investigations – Legal Perspective

II.  Department of Commerce/Bureau of Industry and Security (BIS): Export Controls Enforcement

The Bureau of Industry and Security (BIS) remains at the center of the Trump Administration’s efforts to restrict the flow of sensitive technology to strategic rivals, particularly China. While the pace of new rulemakings slowed in 2025 following the departure of several longtime career officials, the Administration’s commitment to aggressive export control enforcement has remained steadfast. Secretary of Commerce Howard Lutnick has pledged a “dramatic increase” in BIS enforcement activity, and recent enforcement actions indicate that BIS will increase its enforcement activity in 2026. 

a.  Enforcement Landscape

The past year has seen major enforcement actions underscoring BIS’s aggressive posture toward violations involving proscribed Chinese entities and priority technology sectors such as semiconductor manufacturing.

The most significant enforcement action ever levied by BIS came in February 2026, when BIS announced a settlement agreement and $252 million civil penalty against California-based Applied Materials Inc. and its subsidiary, Applied Materials Korea, Ltd.—the largest penalty in BIS history. At issue was Applied Materials’ export of semiconductor manufacturing equipment to Semiconductor Manufacturing International Corporation (SMIC), an Entity List designee based in China, without the required BIS licenses. The equipment—ion implanters—was assembled in South Korea using components that were either U.S.-origin or shipped from the United States. Applied Materials had argued that the machines were “substantially transformed” through assembly and testing in South Korea and therefore qualified as foreign-origin items not subject to Export Administration Regulations (EAR). BIS rejected this argument, declaring that the “substantial transformation” test used under U.S. customs laws does not apply to export control origin determinations. BIS imposed the maximum statutory penalty—calculated at twice the value of the underlying transactions—indicates that BIS gave no mitigating credit and sought to send a strong message consistent with its commitment to aggressive enforcement of China-related export controls. As part of the settlement, BIS also required two internal audits of Applied Materials’ export controls compliance program, with results to be submitted to BIS, and imposed a three-year suspended denial order. 

In another prominent example, in July 2025, Cadence Design Systems, Inc. reached a comprehensive resolution with both DOJ and BIS regarding the unlawful export of electronic design automation (EDA) hardware, software, and semiconductor-design technology to the National University of Defense Technology (NUDT)—a Chinese military university on the Entity List. The resolution included a guilty plea by Cadence to a charge of conspiracy to commit export control violations, approximately $117 million in criminal penalties (comprising roughly $72 million in fines and $45 million in forfeitures), and a BIS civil settlement of approximately $95 million in which Cadence admitted to 61 violations of the EAR. DOJ alleged a detailed pattern of willful violations, including the use of aliases to conceal the true end user, direct communications with NUDT personnel, and efforts to hide the destination of exports from Cadence’s own compliance personnel. The criminal resolution also imposed a five-year probation period requiring annual compliance reports to DOJ and prompt reporting of any further violations. BIS’s civil settlement similarly required two internal audits with results submitted to the agency. 

The Cadence and Applied Materials cases illustrate several key takeaways for companies operating in high-risk sectors. Companies that fail to voluntarily self-disclose violations—especially when willful misconduct or aggravating factors are present—can expect substantial penalties. Violations involving proscribed Chinese entities, particularly those on the Entity List, and involving priority areas such as semiconductor manufacturing will be treated with the utmost severity. 

b.  Key Regulatory Developments

Perhaps the most consequential regulatory action was the adoption, and then suspension, of the “Affiliates Rule.” Issued by BIS on September 29, 2025, and modeled on OFAC’s long-standing 50 percent ownership rule, the Affiliates Rule extended export control restrictions under the Entity List and Military End-User (MEU) List to all foreign entities that are 50 percent or more owned, directly, or indirectly, by one or more listed parties. The Affiliates Rule replaced BIS’s previous “legally distinct” standard, which captured only entities specifically named on the lists or non-legally distinct affiliates such as branches, but failed to cover unlisted foreign subsidiaries. BIS emphasized that the rule was designed to close loopholes, stating that “[u]nder this Administration, BIS is closing the loopholes and ensuring that export controls work as intended.” The Affiliates Rule imposes significant new compliance burdens, requiring exporters to undertake affirmative due diligence into the ownership of foreign counterparties and to treat any ownership interest by a listed party as a red flag. The rule became effective immediately, though BIS issued a Temporary General License providing limited relief for transactions involving entities in certain allied countries. 

However, following meetings between President Trump and Chinese President Xi Jinping in late October 2025, Treasury Secretary Scott Bessent announced a one-year suspension of the rule’s enforcement. The suspension, effective November 10, 2025, came as part of a bilateral agreement in which China agreed to suspend newly implemented rare earth export controls for one year. The rule has not been rescinded, and companies should prepare for its eventual enforcement when the suspension expires. That said, companies should follow developments closely as the rule will inevitably be the subject of further diplomatic efforts as the administration seeks to balance multiple foreign policy, national security, and trade priorities.  

c.  Looking Ahead

The Trump Administration has signaled that it will largely continue the Biden Administration’s approach to preventing the flow of sensitive technology to China but it has indicated more willingness to balance trade and commercial considerations. The White House’s“America First Trade Policy” memo calls for policies that “maintain, obtain, and enhance our Nation’s technological edge” and “identify and eliminate loopholes in existing export controls.” New export controls on more advanced semiconductors are expected in the near future. The Administration is also expected to expand export controls related to AI, quantum computing, biotechnology, and critical minerals, and may be more willing to impose unilateral export controls rather than seeking alignment with allied countries.

Processing times for BIS license applications have increased to their highest levels in more than 30 years, which can lead to snarled supply chains, lost sales, and difficulties onboarding foreign-national employees. Companies should therefore build in longer lead times when seeking BIS authorization. 

III.  Department of the Treasury/OFAC: Sanctions

a.  The Sanctions Enforcement Landscape 

OFAC’s sanctions enforcement in 2025 was marked by high-dollar penalties, individual accountability, and sustained attention on financial “gatekeepers” and process discipline. Enforcement efforts consistently resulted in multi-million dollar penalties, including one penalty of over $200 million. Russian sanctions accounted for the majority of enforcement activity through the year’s end, primarily targeting facilitators of financial and real estate transactions benefitting sanctioned Russian oligarchs, though enforcement activity continued at a steady pace under the Iranian, Cuban, Crimean, Syrian, Venezuelan, and Counter-Narcotics sanctions regimes, among others. OFAC also signaled its enforcement interest beyond the usual sectoral targets of sanctions enforcement, including through an action against a U.S.-based sports academy in February 2026. 

b.  Focus on Gatekeepers in the Financial Services Industry and Russia Sanctions

In its OFAC’s enforcement action against GVA Capital Ltd., a San Francisco based investment firm, for violations of Russia-related sanctions, resulted in the imposition of the statutory maximum penalty of $215,988,868.  OFAC found that senior level persons in the firm understood that GVA was engaging in investment management activity in the United States on behalf of a Russian Specially Designated National (“SDN”), Suleiman Kerimov.  OFAC also charged 28 violations (corresponding to 28 months of non-compliance) of its Reporting, Procedures and Penalties Regulations for a failure to comply with an administrative subpoena. Coupled with substantive factors such as the direct, knowing involvement of senior management in the transactions at issue, this history of non-compliance supported OFAC’s conclusion that GVA’s violations were egregious, helping drive its decision to impose the statutory maximum penalty. In its enforcement release concerning the GVA penalty, OFAC announced a core aspect of its enforcement strategy going forward: a focus on financial “gatekeepers—such as investment professionals, accountants, attorneys, and providers of trust and corporate formation services, among others,” who “occupy crucial financial and legal positions that place them at particular risk of knowingly or unwittingly furnishing access by illicit actors to the licit financial system.” 

OFAC’s settlement with IPI Partners, LLC the week before, in a matter concerning transactions benefitting the same SDN, similarly saw OFAC fault IPI’s incomplete disclosures to outside counsel and limited early cooperation. Likewise, OFAC was unconvinced by the “use of proxies or legal structures that may conceal a blocked person’s interest” with respect to IPI’s knowledge, finding that “[i]ndividuals and companies with reason to know of such circumstances cannot later claim ignorance even if a blocked person has no nominal ownership or overt role” in the transactions at issue. Ultimately finding that IPI’s conduct was non-egregious but not voluntarily self-disclosed, OFAC settled for a $11,485,352 payment from the company. 

OFAC’s enforcement of the Russian sanctions program included enforcement actions imposing individual accountability. In November 2025, OFAC imposed a $4.6 million penalty on an individual acting through a real estate investment company King Holdings LLC to mortgage, renovate, and sell real estate owned by a person blocked under OFAC’s Russia sanctions. OFAC did provide an apparent off-ramp initially, however—contacting the individual before the ultimate sale to inform them that they could apply for an OFAC license to seek authorization. When the individual continued with the project without seeking OFAC approval and further continued after receipt of an OFAC cease-and-desist letter, OFAC ultimately proceeded against the individual personally.  

c.  Focus on widely accessible internet platforms and the value of remediation

Widely accessible internet platforms – such as retail brokerages – present significant compliance challenges and pose potentially extraordinary sanctions exposure, OFAC’s enforcement action against Interactive Brokers LLC in July 2025 illustrates how effective remediation efforts can help mitigate penalties even in those circumstances. The Connecticut-based broker‑dealer resolved 12,367 apparent violations spanning sanctions regimes for Iran, Cuba, Syria, Crimea, Russia, Venezuela, and the Chinese military‑industrial complex for $11,832,136. OFAC credited the company’s undertaking of an internal sanctions compliance review and ultimate voluntary disclosure to OFAC. Thus, despite a serious and extensive violations history including funds transfers to blocked Russian banks, dealings in property of blocked persons under the Venezuela and Syria Sanctions Regulations, and provision of brokerage and investment services to customers in several sanctioned countries, the company was ultimately subject only to an $11.8 million settlement payment—rather than anything close to the statutory maximum penalty of over $5.2 billion, or even the base civil monetary penalty of $60.1 million. 

d.  Foreign distributors, subsidiaries, and overseas staff pose sanctions compliance risks

Iran- and Cuba-related resolutions in 2025 reinforced that non-U.S. affiliates, third-party distributors, and overseas employees of U.S. subsidiaries can generate direct primary-sanctions liability. On July 8, 2025, Harman International Industries, Inc. settled for $1,454,145 after overseas employees of a U.S. subsidiary facilitated diversions to Iran of consumer audio electronics products through a UAE distributor, internally using euphemisms to mask the destination. OFAC characterized the conduct as egregious but credited voluntary self‑disclosure, cooperation, and significant remediation efforts. 

Similarly, on July 2, 2025, Key Holding, LLC agreed to pay $608,825 because its newly acquired Colombian subsidiary continued (post-acquisition) to coordinate 36 unlicensed shipments to Cuba, underscoring acquirer liability and the expectation that U.S. parents promptly extend sanctions compliance controls and training to newly-acquired foreign subsidiaries. These examples highlight the range of compliance risks posed by foreign distributors, foreign subsidiaries and overseas staff for U.S-based companies.

e.  Broad investigative interest in sanctions compliance

While OFAC’s enforcement priorities have focused on business services providers such as investment managers and financial and logistics facilitators, it has looked beyond such entities towards less obvious targets as well. In February 2026, OFAC  announced a $1.7 million settlement with the IMG Academy, LLC sports training school. OFAC claimed that IMG violated its Counternarcotics sanctions regime by allegedly transacting with two individuals associated with a Mexico-based drug cartel, allowing the enrollment and attendance of the SDNs’ two “student-athlete children.”   The lesson for private institutions that accept tuition and other financial support from international clients is that they must consider risk-based sanctions screening with respect to such potential transactions. In the settlement, OFAC noted that educational institutions must be attentive to sanctions compliance – an important word of warning especially in light of the Administration’s focus on higher education in other contexts.

f.  What to expect in 2026

Enforcement actions over the past year indicate three enforcement trends. Russia‑related matters will continue to be in OFAC’s focus, with sustained emphasis on transactions for the benefit of designated oligarchs, and special focus on market “gatekeepers.” OFAC will also continue to target the conduct of overseas affiliates, distributors, and sales staff that may enable prohibited transactions. Finally, OFAC’s early‑2026 actions in education and individual conduct signal a wider sphere of potential sanctions risk for private U.S. institutions that have not historically operated in high risk countries or industries. Finally, OFAC continues to firmly push for voluntary self‑disclosure, early and complete cooperation, and credible remediation as avenues to potentially reduce sanctions liability.  OFAC has demonstrated its willingness to impose higher penalties for incomplete responses, late or inaccurate reporting, and senior‑level participation in sanctions evasion. 

IV.  CBP and Related Agencies: Tariff Enforcement

a.  The Supreme Court Strikes IEEPA-Based Tariffs 

Beginning in February 2025, the Trump Administration invoked the International Emergency Economic Powers Act (“IEEPA”)—a 1977 statute which is one of the bases of executive authority to impose sanctions but has never before been used to impose tariffs—to levy duties on imports from Canada, Mexico, China, and eventually nearly all U.S. trading partners. Over the following months, the Administration repeatedly modified these tariffs, with rates reaching as high as 145 percent on Chinese goods and additional country-specific duties imposed on Brazil, Russia, and others. 

i.  The Supreme Court’s Decision in Learning Resources v. Trump

On February 20, 2026, the Supreme Court issued one of its most consequential trade law decisions in decades, holding 6-3 in Learning Resources, Inc. v. Trump that IEEPA does not authorize the President to impose tariffs. The decision disrupted the Administration’s tariff program. The President terminated these IEEPA-based tariffs the same day, and CBP halted their collection effective February 24, 2026. The terminated tariffs encompassed virtually the entire IEEPA tariff architecture—the trafficking tariffs on Canada, Mexico, and China, the global reciprocal tariffs, the country-specific duties on Brazil and India, and the secondary tariff orders related to Cuba, Venezuela, Russia, and Iran. 

The scope of the disruption, while dramatic, must be understood in context. The IEEPA-based tariffs were only one layer of a much larger tariff regime. These IEEPA tariffs were layered on top of existing tariff regimes under other statutory authorities—including Section 232 tariffs on steel, aluminum, automobiles, semiconductors, and other products, and Section 301 tariffs on imports from China and Nicaragua—none of which were affected by the Supreme Court’s ruling. 

As Justice Kavanaugh observed in dissent, the Learning Resources decision does not prevent the President from imposing “most if not all” of the same tariffs under other statutory authorities, potentially “with a few additional procedural steps.”  The Administration moved within hours of the decision to reimpose tariffs under alternative statutory authorities and to launch new trade investigations that would support imposition of other tariffs. The President issued a new executive order imposing a 10 percent tariff on goods from all countries under Section 122 of the Trade Act of 1974, with plans to increase the rate to 15 percent, and launched new Section 301 trade investigations designed to maintain negotiating leverage and pressure trading partners. The legal foundation of the Section 122 tariffs is itself uncertain, as Section 122 is limited to temporary surcharges addressing “balance-of-payments deficits”—a predicate the government itself has previously acknowledged may not be satisfied by trade deficits.

ii.  Refunds and Ongoing Litigation

The decision also raises immediate questions regarding the billions of dollars in IEEPA tariffs CBP collected over the past year. The Supreme Court remanded the refund process to the lower courts, and more than 1,000 suits have been filed in the Court of International Trade to preserve refund rights.  Recently, in Atmus Filtration, Inc. v. United States, 26-cv-1259 (Mar. 4, 2026), the Court of International Trade ordered the Administration to refund IEPPA tariff duties to importers of record but suspended its ruling to give CBP an opportunity to prepare to handle the complex process of refunds.  Companies that paid IEEPA tariffs should preserve all records of entries, duty payments, and tariff cost allocations, and should consult with counsel regarding administrative mechanisms to protect their refund rights.

iii.  End of the De Minimis Rule

The Administration’s July 30, 2025 suspension of the de minimis exemption—which previously allowed duty-free importation of up to $800 in merchandise per person, per day—remains fully in effect and represents another critical area of enforcement exposure. Following the Learning Resources decision, the Administration immediately signed a new executive order that re-grounds the suspension under alternative legal authorities, expressly invokes IEEPA, and directs CBP to continue collecting duties on shipments that would otherwise qualify for the statutory exemption. CBP has confirmed in subsequent guidance that all low-value shipments remain subject to full tariff obligations. The elimination of de minimis treatment has closed what was once one of the most widely used channels for duty-free importation—particularly for direct-to-consumer e-commerce shipments from China—and importers should expect CBP to actively enforce tariff collection on these previously exempt goods.

V.  U.S. Foreign Investment Restrictions 

The Committee on Foreign Investment in the United States (CFIUS) enters 2026 with enforcement firmly established as a defining feature of the regime. In 2024, CFIUS assessed a record five monetary penalties. In early 2025, the Administration issued the “America First” Investment Policy to maintain an “open investment environment” for allies and partners while protecting against threats from foreign adversaries. The policy builds on prior actions, including the Biden Administration’s Executive Order 14105 and final regulations issued in October 2024 targeting outbound investment in specific technologies in “countries of concern,” primarily the People’s Republic of China (PRC). The designated “foreign adversaries” under the policy include the PRC (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela.

CFIUS has also demonstrated a continued willingness to pursue divestiture orders, one of the most severe enforcement outcomes available. On July 8, 2025, President Trump issued an executive order prohibiting the acquisition of California-based Jupiter Systems by Suirui Group, a Chinese company acting through its Hong Kong subsidiary Suirui International, finding that the transaction “threatens to impair the national security of the United States.” The order required Suirui to divest all of its interests in Jupiter Systems within 120 days. 

In January 2026, the Trump Administration ordered HieFo Corporation, a Delaware-incorporated entity controlled by Chinese investors, to divest its acquisition of digital chips and related businesses from EMCORE Corporation—a transaction that had closed in April 2024. The President found “credible evidence” that HieFo Corporation—a Delaware company “controlled by a citizen of the People’s Republic of China”—through its acquisition of Emcore Corporation’s “digital chips and related wafer design, fabrication, and processing businesses,” “might take action that threatens to impair the national security of the United States.” The Order further concluded that no other provision of law besides CFIUS’s authority under Section 721 of the Defense Production Act could “provide adequate and appropriate authority” to protect national security in this matter. While the Order does not detail the specific intelligence or strategic concerns underlying the decision, the nature of the assets involved—semiconductor chip design and wafer fabrication technology—combined with Chinese control over those assets drove the outcome. The severity of the perceived threat is further reflected in the breadth of the required divestiture, which covers all interests and rights in the Emcore Assets. Only nine such divestiture orders have occurred in the past decade, three of which have come in the past two years alone.

Looking ahead, the Trump Administration’s America First Investment Policy directs heightened scrutiny of investments from “foreign adversaries,” particularly China, in sectors tied to critical technology, critical infrastructure, healthcare, personal data, agriculture, energy, and real estate near sensitive sites. The Administration has also signaled an intent to move away from “overly bureaucratic” mitigation agreements, favoring outright blocking or divestiture for transactions involving foreign adversary countries. Companies and investors involved in cross-border transactions should assess their CFIUS exposure proactively, particularly where the target business touches sensitive sectors or where the investor has any nexus to a designated foreign adversary.

VI.  The Impacts of Forced Labor Prevention on U.S. Trade Policy

The Trump Administration has continued to make good use of the Uyghur Forced Labor Prevention Act (UFLPA) as its most potent legal tool for preventing the importation of goods made with forced labor.  While the UFLPA focuses on curbing forced labor abuses against persecuted minority communities in China, the law also strengthened the ability of CBP to detain goods derived from forced labor in many other jurisdictions where forced labor poses significant challenges – in particular, Malaysia, Cambodia, Vietnam.  Other countries from which imports have been flagged at high rates include Thailand, India, Bangladesh, the Philippines, and Nicaragua. 

There is some debate over whether the Trump Administration is paring back UFLPA enforcement or remaining relatively consistent with efforts over previous years, and to the latter extent, whether the Administration is sufficiently building on enforcement.  The law provided human rights NGOs and researchers that map forced labor risks with a more direct conduit to regulators at DHS and CBP, and this input has been playing a sizeable role in setting the direction of CBP inspections into goods from high-risk sectors and countries.  According to a 2025 report led by Laura Murphy – a leading modern slavery researcher and a former top advisor on the issue at DHS – there were periods in 2025 when detentions dropped, particularly in April and May, before returning to levels more in line with past years.  In addition, the report posits that the Administration has not been proactive in adding new companies to the UFLPA Entity List.  The List identifies companies that are legally presumed to be using forced labor and hence bans all of their products from entering the United States.  

The vicissitudes of enforcement across time and administration aside, the rate at which detained shipments are subsequently released had on average hovered at about 50% before the Trump Administration, meaning shipments had a fairly significant chance of being eventually deemed free of forced labor.  When the 2025 year is factored into the release rate, releases since the UFLPA went into effect drop to about 35%.  But it’s not yet clear whether this affirms that the evidentiary bar is being raised by Trump’s CBP, or if other factors are at play.

Regardless, the release rates remain high and intimate that regulators may not yet have the resources and manpower to consistently apply the UFLPA’s stringent “clear and convincing” evidentiary standard that importers are supposed to demonstrate in order to rebut a presumption of forced labor.  Although there are likely situations in which importers have successfully challenged detentions that meet or fall below the statutory standard, it would be unwise for any company to conclude that enforcement is lax or unpredictable.  

The UFLPA was passed with overwhelming bipartisan support in Congress and both parties see the law as a powerful mechanism for countervailing China’s ambitions.  Additionally, the Trump Administration’s trade war with China stands to gain from consistent application of the UFLPA, insofar as many U.S.  goods flow from supply chains that either originate in China or overlap with Chinese industries.  The Administration is continuing to prioritize the inspection of goods in high-risk sectors that include automative manufacturing, electronics, polysilicon, apparels, and steel; and critical minerals such as lithium and copper.  More commercial sectors, product types, and materials could be added in the future, and CBP continues to weigh risk mapping data provided by researchers and civil society.

The Trump Administration is also taking advantage of new bilateral and regional trade agreements to advance forced labor prevention efforts in key trading partner nations.  Provisions compelling governments to take greater action against forced labor could very well figure into the reauthorization of the U.S.-Mexico-Canada Agreement, which is a key legislative priority for Congress in 2026.  The USMCA, the signature trade policy of Trump’s first term, included language in Articles 23.12 and 23.6 calling for closer coordination between Washington, Mexico City, and Ottawa on eradicating forced labor in North American supply chains.  After the USMCA went into effect, Canada enacted a law that requires companies to report on their efforts to prevent forced labor and child labor, while Mexico’s Department of Labor promulgated a regulation prohibiting the import of goods made with forced labor. 

  

Outside of North America, the U.S.-Malaysia Agreement on Reciprocal Trade that was signed in October 2025 also refers to forced labor obligations.  Article 2.9 requires Malaysia to implement a ban on imports made with forced labor within two years of the Agreement’s enforcement date.  Importantly, Article 2.9 further calls for Washington and Kuala Lumpur to share best practices regarding enforcement of the UFLPA and Malaysia’s import prohibitions.  Similarly, with respect to the U.S.-Cambodia Agreement on Reciprocal Trade, Article 2.8 requires Phnom Penh to implement a UFLPA-like prohibition on imports.  Commitments to eradicating forced labor are also referenced in the White House’s new agreements with Vietnam and Thailand, and Article 1.19 of the U.S.-Bangladesh Agreement on Reciprocal Trade that was signed in February obligates Dhaka to increase the number of labor inspectors and carry out unannounced inspections to identify forced labor and child labor violations.  This extends to Export Processing Zones, where regulatory regimes can be weaker and forced labor risks more acute.

With UFLPA inspections especially trained on these countries, the trade agreements are a further sign that companies will need to prioritize forced labor prevention in their policies, due diligence, risk assessment process, and the monitoring of supply chain partners. 

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In 2025, we saw a sweeping realignment of U.S. trade enforcement priorities and an aggressive expansion of tools used in centering those priorities. Looking ahead to 2026, we can expect the exercise of all available criminal enforcement tools, an expansion of export controls, and a widening sphere of potential sanctions risk for private institutions, all within a dynamic tariff landscape. We will continue to follow these trends as the year progresses.