Red Flags Rising

Mike and Brent follow-up on Mike’s being quoted in Dow Jones Risk Journal regarding the unexpected export control consequences of the Israel-Iran conflict. They discuss the geopolitical context (00:39), the article by Richard Vanderford and Mengqi Sun (01:22), the risk that Iran tries to evade U.S. export controls (and sanctions) by procuring replacement parts and equipment through third-party intermediaries (02:12), the cautionary tale of an Alabama resident sentenced to five years in U.S. federal prison for diverting items to Iran (03:29), the need to be cognizant of “catch-all” U.S. export controls related to ballistic missiles and WMD programs (including nuclear) and those controls reliance on the full definition of “knowledge” to include “an awareness of a high probability” (04:42), increased tracking and investigative activity by the U.S. government (06:19), how companies need to think about responding to “red flags” (06:45), the likely impact of forensic review of battlefield recoveries on requests by Israel and NGOs to companies for assistance in tracing item or component flows to Iran (07:44), and the likelihood of increased, rather than decreased, activity by U.S. agencies as a result of the conflict (09:52). They conclude with another segment of Brent Carlson’s “Managing Up” (12:26).

The Dow Jones Risk Journal article (June 13, 2025) (subscription req.): https://article.dowjones.com/djriskjournal/articles/israel-attack-could-bring-new-business-risks-even-if-not-followed-by-more-sanctions-9f0dab93?mod=risk-compliance_feat1_dow-jones-risk-journal_pos4&_gl=1*eca83t*_gcl_au*OTM2NjQxODc2LjE3NDI1ODkxNDI.*_ga*MTQ0NTg1NTk4LjE3NDI1ODkxNDI.*_ga_K2H7B9JRSS*czE3NTAyMTQ5MjgkbzMxJGcxJHQxNzUwMjE0OTQ4JGo0MCRsMSRoNTM5NTk0NjQx

The Wall Street Journal Morning Risk Report (June 16, 2025): https://createsend.com/t/d-3CAD0099A1F7C65A2540EF23F30FEDED

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Brent & Mike’s “Fresh Looks” Series: www.hugheshubbard.com/fresh-looks

Mike and Brent welcome Tom Blass, Editorial Director of World Export Controls Review (WorldECR) Magazine that is now part of Dow Jones. Mike and Brent discuss with Tom how he and Mark Cusick started WorldECR more than a decade ago to help bridge the gap between law and geopolitics in sanctions and export controls (00:36), the recent acquisition of WorldECR by Dow Jones (04:43), some of the particular challenges Tom and Mark faced in getting WorldECR off the ground (06:30), their realization that they were creating a community (07:12), what Tom has observed in terms of geopolitics and how geopolitics have driven regulatory and enforcement activity (10:13), what Tom looks for in submissions for publication, especially in terms of balancing depth and accessibility (12:57), upcoming WorldECR events in Brussels, London, Washington, and Silicon Valley (16:19), and the direction the sanctions and export control profession is heading (21:05). Then back by popular demand is Brent Carlson’s “Managing Up” segment (24:07).

WorldECR: https://www.worldecr.com/

WorldECR Events Information & Registration: https://www.worldecr.com/events/

About Tom Blass and Mark Cusick: https://www.worldecr.com/about-us/

Tom on LinkedIn: https://www.linkedin.com/in/tom-blass-1886135/

Mark on LinkedIn: https://www.linkedin.com/in/mark-cusick-3b763420/

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Mike and Brent unpack the May 13, 2025, due diligence guidance from the U.S. Bureau of Industry & Security. They describe what happened on May 13 (00:00), the guidance from BIS on General Prohibition 10 and Huawei Ascend chips (03:34), the related BIS policy statement (04:13), and then focus on the BIS “Industry Guidance to Prevent Diversion of Advanced Computing Integrated Circuits” (04:47), specifically the underlying U.S. national security concerns (05:50), relevant key takeaways from Episode 13’s special guest Dana W. White (06:51), the significance of the Industry Guidance’s reference to the WMD and military-intelligence catch-all provisions (08:29), the historical pre-1993 “KYC Guidance” cross-referenced by BIS in the new Industry Guidance (11:53), how the historical “KYC Guidance” is often misunderstood through selective quotation devoid of relevant context (13:34), the new “red flags” identified in the May 13, 2025 Industry Guidance (16:10), the key takeaways of the Industry Guidance (17:55), a warning about over-reliance on the Industry Guidance’s statement about existing end-use certificates (18:47), and the practical implications of the Industry Guidance for trade compliance teams (19:36). They then conclude with the next installment of Brent Carlson’s “Managing Up” (21:26).

BIS May 15, 2025 Industry Guidance: https://www.bis.gov/media/documents/ai-counter-diversion-industry-guidance-may-13-2025.pdf

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Brent & Mike’s “Fresh Looks” landing page: www.hugheshubbard.com/fresh-looks

Mike and Brent welcome Dana W. White, Managing Partner at the Juno Collective, to share her thoughts and analysis regarding China and U.S. export controls based on her long career of public service in a variety of national security-related roles. Mike, Brent, and Dana discuss Dana’s national security background (00:49), what happens “behind the scenes” that leads to U.S. agencies determining national security threats exists (02:28), how knowledge-sharing is both the strength and the Achilles’ heel of free societies (06:11), how U.S. businesses and business leaders play an important part in our national security (07:26), the challenge of finding reliable data points from which to infer export controls compliance risks (09:37), what business leaders should understand about how the relationship between the U.S. and China is different today than when China joined the World Trade Organization (11:21), how Dana and the Juno Collective help clients to understand and mitigate risks (13:46), and the common pitfalls companies face when responding to inquiries by the U.S. Congress (18:45). They conclude with yet another segment of Brent Carlson’s “Managing Up” (20:23).

More about Dana W. White and the Juno Collective: https://www.juno-collective.com/about

Contact Dana W. White: [email protected]

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Brent & Mike’s “Fresh Looks” series: www.hugheshubbard.com/fresh-looks

In a timely episode discussing end-use and end-user controls and how the full definition of “knowledge”--to include “an awareness of a high probability”--runs through those controls, Mike starts by summarizing key developments on May 13, 2025, right before publication, specifically issuance that day of three key guidance documents by the U.S. Bureau of Industry & Security (BIS) on exactly these topics in the context of advanced computing integrated circuits, Huawei, Infrastructure as a Service (IaaS), and data centers (00:00). Mike and Brent then discuss the end-use and end-user catch-all provisions and why they are often overlooked (02:31), how those catch-all provisions apply to real-world scenarios (05:02), why the Entity List is best thought of as a “backstop” to the end-use and end-user provisions (08:21), what to do if a customer or counterparty ends up on the Entity List (10:34), the collective knowledge doctrine and its implications (15:12), how and where to draw the line in risk-based due diligence of distributors and resellers (16:45), the pros and cons of raising an advice of counsel defense (18:49), how boards of directors can best fulfill their duty of oversight (21:11), and the importance of periodic risk assessments that include the potential risks under the “high probability” standard (23:43). Mike and Brent then conclude with Brent’s recurring segment, “Managing-Up” (26:48).

The Three May 13, 2025 BIS Guidance Documents related to Advanced Computing Integrated Circuits:

BIS Policy Statement: https://www.bis.gov/media/documents/ai-policy-statement-training-ai-models-may-13-2025

Industry Guidance: https://www.bis.gov/media/documents/ai-counter-diversion-industry-guidance-may-13-2025.pdf

Guidance on General Prohibition 10: https://www.bis.gov/media/documents/general-prohibition-10-guidance-may-13-2025.pdf

"The Blind Men and the Elephant": https://www.linkedin.com/posts/mhuneke_huneke-worldecr-april-2024-blind-men-activity-7218965733731373056-oKHG?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAE_zFwB6ELW6Yitzba7Kt-wYyoqEFq6I6s

More about Mike: https://www.linkedin.com/in/mhuneke/

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

“Fresh Looks” landing page: www.hugheshubbard.com/fresh-looks

Mike & Brent return with a point-counterpoint episode on U.S. export control policy. After discussing the latest news about U.S. AI export controls (01:03), they discuss the points and counterpoints related to whether we should have export controls at all (04:57), the relevance of the national security justifications offered by the U.S. Department of Commerce in promulgating its regulations (06:52), the lessons of Ukraine battlefield recoveries (09:59), the views of Anthropic’s CEO, Dario Amodei, on risk and how to push any industry to a more-compliance mindset (rather than acquiesce to the race to the bottom) (10:44), why Brent shouldn’t talk about the old days of corruption (12:08), and how not only the export controls’ design but also their enforcement by government and compliance efforts by industry are all relevant factors to consider in assessing export controls’ effectiveness (14:53). They conclude with the latest installment of Brent’s “Managing-Up” segment (23:04).

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

The "Fresh Looks" landing page: https://www.hugheshubbard.com/fresh-looks

Mike & Brent propose an AI Diffusion Rule path forward to help both companies and the U.S. government. They start with an update on last-minute reporting before the episode was published (00:00) then cover the attention the AI Diffusion Rule is getting before its May 15, 2025 compliance date (03:56), the Rule’s similarity’s to the First World War’s “rationing system” for export controls (08:08), a report by Barath Harithas of the Center for Strategic & International Studies (CSIS) about the AI Diffusion Rule (09:15), how the AI Diffusion Rule incorporates by reference for companies in Tier 2 countries several new U.S. inbound and outbound restrictions that turn on the “high probability” standard (10:53), a CSIS report by Gregory C. Allen on DeepSeek and AI export controls in which Allen raises concerns about a high-regulation, low enforcement (or high loopholes) environment—which Mike & Brent refer to as Allen’s “One-Way Policy Fallacy” (13:21), and what Tier 2 countries (e.g., India, Israel, Singapore, Saudi Arabia, and the UAE)—and their U.S. design or manufacturing companies can do to best position customers in such countries to have national companies become National Validated End Users to obtain more chips (19:07). They conclude with the latest installment, back by ever-increasing popular demand, of Brent Carlson’s “Managing-Up” segment (23:51).

CSIS, Barath Harithas, The AI Diffusion Framework: Securing U.S. AI Leadership While Preempting Strategic Drift (Feb. 18, 2025): https://www.csis.org/analysis/ai-diffusion-framework-securing-us-ai-leadership-while-preempting-strategic-drift

CSIS, Gregory C. Allen, DeepSeek, Huawei, Export Controls, and the Future of the U.S.-China AI Race (Mar. 7, 2025): https://www.csis.org/analysis/deepseek-huawei-export-controls-and-future-us-china-ai-race

Gregory C. Allen’s “AI Policy” Podcast: https://podcasts.apple.com/us/podcast/the-ai-policy-podcast/id1726253148

Bloomberg Law, Michael Huneke, Outbound Investment Rule Embraces New National Security Paradigm (Nov. 7, 2024): https://news.bloomberglaw.com/us-law-week/outbound-investment-rule-embraces-new-national-security-paradigm-1

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Their “Fresh Looks” series: https://www.hugheshubbard.com/fresh-looks

Mike & Brent jump into tariffs to focus on practical strategies to navigate these uncertain times and to mitigate the risk of future enforcement actions. Specifically, they discuss what longer-term geopolitical trends help businesses to plot a strategy despite being whipsawed by tariff news each day (01:57), a recent and helpful Foreign Affairs article, by Emily Kilcrease and Geoffrey Gertz of the Center for a New American Security (03:21), the recent book "Chokepoints: American Power in the Age of Economic Warfare" by Edward Fishman and his description of the "impossible triad" between economic interdependence, economic security, and geopolitical competition (04:21), relevant historical background on the rise of China after the Second World War and its current oversupply problem (04:54), how severe pressures on businesses in both the U.S. and China will create white collar compliance risks today and enforcement risks tomorrow (07:42), customs evasion enforcement risk under the U.S. False Claim Act (FCA) and the FCA's definition of "knowledge" (08:06), the importance of dynamic assessments of customs evasion risks (11:25), potential fines and penalties from U.S. Customs & Border Protection (CBP) and U.S. Department of Justice (DOJ) enforcement (12:54), a deeper dive into the FCA's "knowledge" standard and its similarities to the "high probability" standard under the U.S. Export Administration Regulations (EAR) (16:14), and practical strategies for companies trying to manage these risks (17:50). Then they conclude with another installment, back by increasing popular demand, of Brent Carlson's "Managing-Up" segment (20:39).

Geoffrey Gertz & Emily Kilcrease, "A World Safe for Prosperity How America Can Foster Economic Security," Foreign Affairs Magazine: https://www.cnas.org/publications/commentary/a-world-safe-for-prosperity

Edward Fishman, "Chokepoints: American Power in the Age of Economic Warfare": https://a.co/d/duy9b5t

More about Mike: https://www.linkedin.com/in/mhuneke/

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

Our "Fresh Looks" series: www.hugheshubbard.com/fresh-looks

Mike & Brent react to recent media reports of several congressional committees demanding information from U.S. companies. They revisit their March 14, 2024, NYU PCCE blog post, "“Expect Some Illumination”: A Fresh Look at U.S. Congressional Hearings in the Era of Sanctions and Export Controls as the New FCPA" (01:21), then discuss common pitfalls to avoid when providing information to Congress, including the importance of thinking critically about how your data could be interpreted and used by Congress (02:28), how information provided by Congress can be shared across the U.S. federal government (03:38), the danger of being distracted by political theater (04:13), the value of having a "red team" (or "blue team," depending on your political leanings) vet your data with hostile eyes before sending data to Congress (06:48), anticipating and preempting difficult questions that the data might raise (08:06), keeping in mind the geopolitical context (09:05), ensuring that investor relations and communications coordinate with legal and compliance regarding public statements (10:30), and the oversight role of boards of directors (12:49). They conclude with another installment, still by popular demand, of Brent Carlson's "Managing Up" (14:05).

Mike & Brent's prior NYU PCCE post: https://wp.nyu.edu/compliance_enforcement/2024/03/14/expect-some-illumination-a-fresh-look-at-u-s-congressional-hearings-in-the-era-of-sanctions-and-export-controls-as-the-new-fcpa/

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

The entire "Fresh Looks" series: hugheshubbard.com/fresh-looks

Mike & Brent connect the dots between the Administration's signals regarding U.S. export control enforcement, recent media reports, and how trade compliance teams can best prepare for what comes next. They discuss the overall climate of uncertainty (01:03), an April 8, 2025 report by Reuters about a potential large U.S. export controls fine in the works (01:35), how companies can best respond to a counterparty being put on the U.S. Bureau of Industry & Security's "Entity List" (05:47), how to respond to U.S. government outreach or administrative subpoenas (07:27), an April 10, 2025 report by Export Compliance Daily about a potential uptick in administrative subpoenas (11:39), their prior "Fresh Looks" post on responding to government inquiries (13:51), and conclude with another installment of Brent Carlson's "Managing-Up" (17:38).

Reuters article: Karen Freifeld, "Exclusive: TSMC could face $1 billion or more fine from US probe, sources say," Reuters (Apr. 8, 2025): https://www.reuters.com/technology/tsmc-could-face-1-billion-or-more-fine-us-probe-sources-say-2025-04-08/

Export Compliance Daily: Ian Cohen, "Gov't May Be Issuing More Export Control-Related Subpoenas, Industry Lawyer Says," ECD (Apr. 10, 2025) (subscription required): https://exportcompliancedaily.com/article/view?search_id=24312&id=2302224

More about Brent: https://www.linkedin.com/in/brent-carlson-41ba692/

More about Mike: https://www.linkedin.com/in/mhuneke/

Mike & Brent's "Fresh Looks" Series: https://www.hugheshubbard.com/fresh-looks