Mapping the Chip Smuggling Pipeline and Improving Export Control Compliance

Export control evasion of controlled chips is a known concern, but the specifics of this activity are opaque. In addition, a systematic analysis of the entire chip smuggling pipeline, from initial procurement to unlawful distribution, remains conspicuously absent. This study aims to bridge that methodological gap. It dissects the smuggling pipeline into four distinct stages—(1) initial procurement, (2) evasion of customs controls, (3) port exit, and (4) transshipment—and identifies 11 potential smuggling tactics.

This report finds that export control evasion is likely more prevalent than suspected due to an underappreciation of the range and dimensionality of individual smuggling tactics, and the compounding risk profile that emerges when multiple tactics are combined together. To improve export control compliance, this report proposes that the U.S. government secure the initial sales of chips through a certification program for chip distributors and mandate the use of preapproved logistics providers, tagged at the point of sale, to inoculate against the risk of illicit diversion when exiting a port. This will be supplemented by the use of digital waybills to reduce documentation fraud and facilitate traceability. Logistics providers will be required to report to the Bureau of Industry and Security (BIS) on any consignments not received within a specified timeframe, pinpointing suspicious entities and facilitating targeted and timely spot checks by the BIS. In addition, this report also recommends the use of modern data analytics software to improve the detection of evasive tactics as well as the formation of dedicated regional units, comprising experts from the BIS and secondees from individual customs authorities, to strengthen intelligence sharing, risk profiling, interdiction, and investigation competence.

This report is made possible by general support to CSIS. No direct sponsorship contributed to this report.