PETALING JAYA: The Investment, Trade and Industry Ministry (Miti) has maintained that Malaysia did not violate the Strategic Trade Act (STA) 2010 in the recent case involving the alleged shipment of restricted US artificial intelligence (AI) chips, although authorities are still assessing if other laws were breached.
This was in reference to the alleged fraud case involving Nvidia’s sanctioned AI chips, where servers containing the chips were shipped from Singapore to Malaysia through false representation of their final destination.
Singaporean authorities, who launched the investigation last month, had stated that it remains unclear whether Malaysia was the final destination for the servers containing the AI chips, or if they were subsequently shipped elsewhere.
In written replies to StarBiz, Miti stated while it acknowledged the possibility of heavier restrictions and sanctions from the United States on Malaysia’s semiconductor players as a result of this issue, it stands guided by existing domestic laws and regulations.
“With regards to the Nvidia chips being diverted via Malaysia, it must be emphasised that the STA 2010 was not violated for this transaction.
“However, assessments are ongoing by various authorities to determine whether other laws and regulations have been breached,” it said.
STA 2010 regulates the export, transshipment, transit and brokering of strategic items and technology, including dual-used items and technologies, that may facilitate design, development and production of weapons of mass destruction.
This legislation was enacted after the United Nations (UN) Security Council passed a resolution in 2004, which required member states to establish export control systems to prevent the proliferation of weapons of mass destruction.
The Act also incorporates the Strategic Item List (SIL), which categorises strategic items into several groups, including military goods, dual-use items and other technologies with potential applications in weapons development.
Parties involved in the trade of these items must register with the Strategic Trade Secretariat and obtain permits from Miti.
To this end, the ministry said the AI chips that were alleged to have made their way into Malaysia (based on a fraudulent declaration by three Singapore-based traders who are currently facing charges in Singapore) are not included in the SIL under STA 2010.
“The AI chips are not controlled by the European Union as well as by most of the countries around the world that adopt strategic trade control including four other countries in Asean – Singapore, the Philippines, Thailand and Lao People’s Democratic Republic,” Miti stated.
Further, it stated that should Malaysia include AI chips in the SIL, an STA permit would be required for all exports, transit, transshipment and brokering of these chips worldwide, including to the United States.
“If implemented, the ruling would also impact US manufacturers and exporters based in Malaysia,” Miti said.
The trade ministry also highlighted that it has continuously engaged with the United States and other relevant authorities on Malaysia’s legal provisions, which is the STA 2010 in this case.
While it acknowledges the seriousness of this case to the United States under its Export Restriction Laws, Miti stressed there is a need to thoroughly assess the inclusion of AI chips into the SIL.
“There is a need to determine the specific technology which may facilitate design, development and production of weapons of mass destruction, as well as the impact to the semiconductor industry overall, including their investments, in Malaysia,” Miti said.
In line with established policies, Miti stressed that Malaysia maintains its stance of non-alignment and the principle of not recognising any unilateral sanctions and export restrictions on any country unless the resolution for the sanctions was adopted by the UN.
“However, while Malaysia generally does not impose specific restrictions on export, we always urge exporters to exercise due diligence before pursuing their trade transactions,” it said.
To be sure, a trade war is a lose-lose game, not only for the major economies, but also for their trade partners.
Miti said the country will continue to engage with the United States and other countries on the matter at hand and keep channels of communication open.
This is particularly on potential violations of Malaysia’s laws and regulations that could impact local exporters and economy at large. “Malaysia will continue to collaborate with the United States on the Joint Industry Outreach programme to raise awareness amongst industry players on the restrictions of AI chips exports to China.
“We are also open to collaborating with the United States in raising awareness among industry players on trade compliance, particularly concerning AI chips and semiconductors,” Miti said.
