Nothing Was Smuggled

What Belgium’s chip espionage case reveals about a blind spot in export control enforcement

By Jeffrey A. Newman, Esq. MBA with ai help

On September 7, 2026, Belgian federal prosecutors disclosed that they had been holding a 52-year-old man since May 10, when police arrested him at Brussels Airport as he prepared to board a flight to Beijing. The Wall Street Journal’s Kim Mackrael reported the story that day, and it ran in the September 8 print edition as “EU Fears Intensify Over Chinese Tech Espionage.” The Journal deserves the credit for surfacing it and for its investigative reporting in general.

The man, identified in Belgian reporting only as H.L., was born in Beijing and holds both Chinese and Belgian nationality. Prosecutors are investigating espionage, participation in a criminal organisation, misuse of company assets, and unlawful disclosure of company secrets. He has not been convicted of anything. His lawyer, Dimitri de Beco, denies the accusations. Police are still seeking a second suspect. Investigators have seized data storage devices and communications equipment and say the investigation may point to the unlawful transfer abroad of specialized intellectual property and trade secrets relating to the production of gallium nitride chips.

What should interest American compliance officers is not the arrest. It is what did not happen.

Nothing was smuggled. No container was mislabeled. No end-user certificate was falsified. No shipment moved through a cutout company in Southeast Asia. The technology was purchased — openly, in a disclosed transaction, from an American company. Everything alleged to have followed happened on the inside, done by people who had legitimate access because they owned the building.

That is the blind spot. Export control enforcement is built to catch things in motion. This did not move.

The fab

The plant in Oudenaarde, in East Flanders, was Belgium’s last industrial chip fab. It opened in 1983 as MIETEC, was acquired by Alcatel Microelectronics in 1990, by AMI Semiconductor in 2002, and by ON Semiconductor in 2008. Work on gallium nitride began on site in 2009.

In September 2021, a new entity called BelGaN Group BV was formed as a joint venture between Rockley Management (HK) Ltd. and Wuxi Group Ltd., both of Hong Kong. In February 2022, onsemi divested the site to BelGaN. The company’s own filings describe the transaction: a Form 10-Q filed May 2, 2022 records the divestiture of the Oudenaarde site, comprising primarily the assets, liabilities and relevant employee group related to the six-inch front-end wafer manufacturing facility, with a nominal gain recognized. The FY2022 Form 10-K reports cash consideration received for the Belgium fab of $19.9 million, one of four fabs divested that year under what onsemi later described as its “Fab Right” strategy. onsemi entered into wafer supply agreements with the buyers of those facilities, so the commercial relationship with Oudenaarde continued after the sale.

A few months after the takeover, according to Belgian public broadcaster VRT, a company called Gankool opened in Fujian province making the same technology. Euronews reported that the same investors set up the Chinese company and transferred sensitive licences and technologies to it. Prosecutors say there are indications that H.L. held a senior research position at BelGaN while simultaneously serving as a director of a Chinese company engaged in similar manufacturing, established a few months after he joined the Belgian firm and financed by a Chinese investment fund.

BelGaN filed for bankruptcy on July 31, 2024. Roughly 440 people lost their jobs. The equipment was auctioned in about 1,800 lots, raising over €23 million, with Chinese companies among the main buyers. The premises sold to a European investor for €20.35 million. The criminal investigation grew out of the insolvency proceedings — Belgian authorities were examining how the company failed when the espionage question opened up.

Why nothing caught it

Belgium had no national foreign investment screening mechanism when the deal closed. The Belgian FDI regime, established by a cooperation agreement concluded November 30, 2022, entered into force on July 1, 2023 — seventeen months after the February 2022 closing — and applies only to agreements signed on or after that date. Semiconductors are expressly named among the strategic technologies it covers. They were not covered yet.

Belgium’s State Security Service, the VSSE, has since described a practice it calls “Copy to China”: methods by which Chinese entities obtain technology or expertise from European companies and research organisations before reproducing it in China. It identified semiconductors, artificial intelligence and biotechnology as sectors of particular interest.

And there is this. In 2016, the United States blocked the Chinese acquisition of the German equipment maker Aixtron on national security grounds. In November 2023, Aixtron agreed to deliver a G10-GaN MOCVD system to BelGaN, then under Hong Kong ownership.

The American question

Gallium nitride is not a generic commodity. The Bureau of Industry and Security has identified GaN, along with silicon carbide, as a leading material for producing sophisticated microwave and millimeter-wave devices controlled under ECCN 3A001.b and high-power semiconductor devices controlled under ECCNs 3A001.g and 3A001.h. Substrates fall under ECCNs 3C001, 3C005, and 3C006. The underlying technology is controlled under ECCN 3E001, with related technology under 3E003. BIS addressed these classifications in its August 15, 2022 rule implementing the 2021 Wassenaar Arrangement decisions on four Section 1758 technologies — the emerging and foundational technology track under the Export Control Reform Act.

And Hong Kong is not a separate place under American export law. Executive Order 13936, issued July 14, 2020, declared Hong Kong no longer sufficiently autonomous to justify differential treatment relative to the People’s Republic of China. BIS suspended all license exceptions providing Hong Kong preferential treatment effective June 30, 2020. On December 23, 2020, BIS removed Hong Kong as a separate destination under the Export Administration Regulations altogether, on the stated ground that it could no longer distinguish between the export of controlled items to Hong Kong and to the PRC.

BelGaN Group BV was formed by two Hong Kong entities in September 2021. The sale closed in February 2022. Both dates fall after that reclassification.

Here is what that does and does not establish, stated plainly.

It does not establish that anything improper occurred. Whether any American export obligation attached depends on United States-origin content, de minimis calculation, and the classification of the specific technology transferred. A Belgian fab’s process technology may be foreign-origin and outside the EAR entirely. Whether licences were sought, obtained, or required is not public. No authority in any country has accused onsemi or any other American party of wrongdoing here, and nothing in this piece should be read to suggest otherwise. The company’s public filings disclose no export-control investigation or enforcement matter, and its FY2021 annual report states its belief that operations are in material compliance with applicable trade regulations, technology transfer restrictions and ITAR.

What it establishes is structure. This transaction sat squarely in the zone where American technology-transfer obligations attach, and the answer to whether they did is knowable only to the people who were inside it. That is the entire problem, and it is not unique to this deal.

What a U.S. company or individual is supposed to check

The rules are published and they are more specific than most people assume.

The EAR’s definition of knowledge, at 15 C.F.R. § 772.1, covers not only positive knowledge but also awareness of a high probability that a circumstance exists. Awareness may be inferred from conscious disregard of known facts and from willful avoidance of facts.

Supplement No. 3 to Part 732 sets out the operative standard of care. Absent red flags or an express requirement, exporters have no affirmative duty to go behind a customer’s representations. But once red flags surface in information reaching the firm, there is a duty to check out the suspicious circumstances and inquire about end use, end user, and ultimate destination. BIS instructs firms not to self-blind — not to tell the sales force to avoid discussing end use, not to put on blinders that prevent learning relevant information — and states that an affirmative policy of avoiding bad information would not insulate a company and would usually be an aggravating factor.

The provision that matters most for anyone reading this from inside a company is the next one. An employee’s knowledge can be imputed to the firm, making it liable. BIS says that failing to establish procedures to ensure such knowledge reaches responsible senior officials could itself be regarded as a form of self-blinding.

The regulation assumes someone inside knows.

The red flag list has grown from thirteen indicators to twenty-nine, almost all of the additions semiconductor-specific. Red Flag 27 gives the flavor: an end user in a facility physically connected to one producing advanced-node integrated circuits is itself a red flag, because a bridge between two buildings can bring both within § 744.23. And General Prohibition Ten, at § 736.2(b)(10), bars proceeding with a transaction with knowledge that a violation has occurred or is about to occur.

One rule aimed precisely at corporate structure is currently switched off. The BIS Affiliates Rule, extending Entity List and Military End-User licensing to entities majority-owned by listed parties, took effect September 29, 2025 and was suspended November 10, 2025 for one year under the trade understanding reached in Busan, in exchange for China suspending its rare earth controls. It returns November 9, 2026 absent extension. BIS says it will keep evaluating national security interests in non-listed affiliates meanwhile, and the underlying obligations continue.

What proof actually looks like

Turn now from Belgium to the American enforcement record, where the evidentiary questions have already been litigated and admitted.

In April 2023, BIS imposed a $300 million civil penalty on Seagate Technology — the largest standalone administrative penalty in the agency’s history. After BIS imposed the Huawei foreign direct product rule in August 2020, two of the three companies capable of making hard disk drives stopped selling to Huawei. Seagate continued and became Huawei’s sole supplier, signing agreements naming it a strategic supplier with priority over others. In January 2021, a supplier notified Seagate that essential equipment in its plants was subject to the EAR and would trigger a license requirement if used in production destined for a listed Huawei entity. Shipments continued. BIS found 429 transactions involving roughly 7.4 million drives worth over $1 billion, and identified the cause as Seagate having read the rule to require evaluation of only the last stage of manufacturing rather than the whole process. Seagate admitted the conduct.

In July 2025, Cadence Design Systems pleaded guilty to conspiracy to commit export control violations and agreed to penalties exceeding $140 million across DOJ and BIS. According to the agreed statement of facts, employees of its Shanghai subsidiary knew the National University of Defense Technology was on the Entity List and continued transacting through a third party, used aliases to conceal the end user, communicated directly with NUDT personnel, and worked to hide the destination from Cadence’s own compliance staff.

Both were administrative and criminal matters rather than False Claims Act cases. But they show what the proof looks like: a supplier’s written warning that went unheeded, a legal reading that happened to permit a billion dollars in sales, concealment from a company’s own compliance function. None of that is visible from outside. All of it was visible to employees.

Who could have seen it

Somebody always can. The process engineer who watches a recipe leave. Counsel who sees which licences move and which do not. The finance staffer who notices promised capital never arriving. The equipment vendor. The HR manager processing a second directorship.

The government knows this, and has built a reporting system around it that pays only institutions. Since April 2023, BIS has treated a deliberate decision not to disclose a significant violation as an aggravating factor, and it openly solicits reports about other companies, including competitors, offering “exceptional cooperation” credit that can be applied against a future enforcement action even for unrelated conduct. A September 2024 final rule codified this, adding a new aggravating factor for failure to disclose. It works: BIS reported nearly 80 percent more serious-violation disclosures in FY2023 than the prior year, and more reports about the conduct of others than ever before.

But credit against a future penalty is worth something only to an entity that expects one day to be prosecuted. It is worth nothing to a person. An engineer who reports what she saw receives no award, and the country’s dedicated whistleblower programs — the False Claims Act, the SEC, the CFTC, FinCEN — reach export control conduct only obliquely, through a federal contract, a securities disclosure, or a sanctions nexus.

Congress has noticed. The Stop Stealing Our Chips Act would create a BIS whistleblower program paying 10 to 30 percent of penalties collected in qualifying actions, and we have written about what it would mean.

A note on status. The Stop Stealing Our Chips Act is not law. The Senate passed S. 1473 by unanimous consent on May 20, 2026. The House companion, H.R. 6322, was reported out of the Foreign Affairs Committee on April 22, 2026 by a vote of 43 to 1, and the Congressional Budget Office issued its cost estimate on August 27, 2026. What the bill has not received is a vote on the House floor. Nothing visible is blocking it. It is waiting for time. If the House does not act before the 119th Congress ends on January 3, 2027, both bills expire and the process starts over in the next Congress. Readers should confirm current status, which can change quickly.

Belgium’s last chip fab was bought, mirrored, and closed. Four hundred and forty people watched it happen. If any of them understood what they were seeing while it was happening, there was no one paying to hear it.

Jeff Newman Law is a national whistleblower law firm handling False Claims Act, SEC, and export control matters. The firm can be reached at www.JeffNewmanLaw.com or at 617-823-3217.