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Ninth Circuit Affirms Seven-Year Sentence for Ex-Professor Who Exported Chips to China
Opinion Says Shipping Military-Grade Semiconductor Materials Without License Implicates National Security Within Meaning of Enhancement Guidelines
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals on Friday affirmed the seven-year prison sentence of a former UCLA electrical engineering adjunct professor relating to his exporting of military-grade semiconductor chips without a license to China in collaboration with a Chinese enterprise that develops weapons.
At issue was whether a sentencing enhancement applicable when “national security controls were evaded” is implicated by the defendant’s behavior. The defendant Yi-Chi Shin, who lived part-time in Hollywood Hills and worked for U.S.-based defense contractors between 1992 and 1997, argues that his behavior was more akin to recordkeeping errors than a violation of national security.
Beginning in 2010, Shin conspired with Kiet Mai—who was charged separately—to approach Cree, a U.S. semiconductor designer and fabricator, to arrange for the manufacture of high-powered semiconductor chips known as monolithic microwave integrated circuits (“MMICs”). Shih was working in collaboration with China Avionics Systems Co. Limited (“AVIA”), a Chinese enterprise that develops military weapons.
Cree requested the completion of an export questionnaire per federal regulations. Shih completed the questionnaire under Mai’s name, affirming that any MMICs manufactured by Cree would not be subject to export control regulations and writing “N/A” when asked whether the product would be shipped outside of the U.S.
Using Cree’s portal, Shih and his Chinese colleagues then designed the MMICs and the U.S. manufacturer made the chips according to their specifications. The MMICs were then exported to China.
Licensing Requirements
Federal regulations found in the International Emergency Economic Powers Act (“IEEPA”) require that a license be obtained for the export of certain items, which are assigned an Export Control Classification Number (“ECCN”). The list of ECCNs provides the “reasons for control” associated with each number.
One such “reason for control” is described as relating to the proliferation of chemical and biological weapons, nuclear nonproliferation, national security, missile technology, regional stability, crime control and detection, and anti-terrorism. The export of items fitting that description require a license if being shipped to certain countries, including China.
In July 2019, a jury found Shih guilty of 18 counts of violating various offenses arising out of the export of the MMICs, including a violation of the IEEPA based on the fact that the semiconductor chips were assigned ECCNs that listed national security as a reason for control.
Senior District Court Judge John A. Kronstadt of the Central District of California ordered entry of a judgment of acquittal on the violation of the IEEPA violation, finding that the government had not proven that a license was required to export the MMICs, and declined to apply a sentencing enhancement providing for a higher base level if national security controls were evaded.
The Ninth Circuit reversed and reinstated the conviction on the overturned count. Kronstadt, on remand, applied the enhancement and sentenced Shih to two seven-year terms of imprisonment, to be run concurrently.
Senior Circuit Judge Andrew D. Hurwitz authored the opinion affirming the judgment. Senior Circuit Judge Richard A. Paez and Circuit Judge Jacqueline H. Nguyen joined in it.
Foreign Policy Controls
Shih contends that the ECCNs associated with his semiconductor chips are foreign policy—rather than national security—controls because they were added to comply with treaty obligations under the Wassenaar Arrangement (“WA”), an international arrangement governing certain international arms trades.
Unpersuaded, Hurwitz said:
“[E]ven if these ECCNs were added to the CCL to comply with the WA, it does not follow that the ECCNs cannot also be national security controls. Indeed, the treaty’s signatories had reasons for defining the items covered and subjecting them to regulation. These included the promotion of ‘responsibility and transparency in the global arms trade’ and the prevention of ‘destabilizing accumulations of conventional weapons.’ ”
He continued:
“The [government] also assigns specific ‘reasons for control’ to each ECCN….And, the listed reasons for control for the relevant ECCNs during the period of Shih’s conduct were (1) national security, (2) missile technology, (3) nuclear nonproliferation, and (4) anti terrorism….Thus, the district court did not err in finding that the export controls Shih evaded were implemented for national security reasons.”
Recordkeeping Errors
The defendant also contends that the application of the higher base term was inappropriate in his case because his actions are akin to recordkeeping errors and do not rise to the level of the other categories listed in the governing “reason to control,” things such as the proliferation of nuclear, biological, and chemical weapons.
Hurwitz said:
“To be sure, the Sentencing Commission has recognized that developing guidelines for ‘administratively-related criminal violations’ can pose difficult problems, particularly when attempting to distinguish between a mere failure to comply with regulatory requirements and the harm that can stem from that violation….But the Commission addressed this particular problem by ‘provid[ing] a low base offense level’ for simple ‘recordkeeping or reporting offense[s],’ while allowing ‘substantive harms that do occur in respect to some regulatory offenses, or that are likely to occur, [to] increase the offense level.’ ”
However, the judge opined:
“Shih’s attempts to cast his conduct as one of these ‘recordkeeping or reporting offenses’ is plainly unavailing. It is undisputed that Shih ‘had business dealings with’ a Chinese company whose ‘business involved missiles.’…Shih also hid his identity from Cree, falsely wrote ‘N/A’ when asked whether the product would be shipped outside of the U.S., and represented that the MMICs were not subject to export controls. The evidence thus amply supports the district court’s conclusion that this was not a mere recordkeeping offense. Rather, Shih’s conduct triggers the Sentencing Commission’s very concerns about the ‘substantive harms’ associated with criminal regulatory offenses that warrant the higher base offense level.”
The case is U.S. v. Shih, 23-3718.
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