In brief
On 14 July 2025, Malaysia’s Ministry of Investment, Trade and Industry (“MITI”) issued Directive No. 1/2025 (“Directive”), imposing controls on the export, transshipment, and transit of high-performance AI chips. The Directive is issued under Section 12 of the Malaysian Strategic Trade Act 2010 (“STA 2010”), which provides for a “catch-all” control mechanism, allowing MITI to regulate unlisted items where there is knowledge or reasonable belief that they may be used in connection with the proliferation of weapons of mass destruction (WMD). The Directive underscores Malaysia’s commitment to addressing growing concerns over the misuse of its territory as a transshipment hub to circumvent U.S. export control restrictions.
In detail
The Directive requires any person intending to export, transship, or bring in transit certain advanced AI chips to notify MITI at least 30 days in advance if they know or have reasonable grounds to suspect that the chips may be used in a restricted activity. “Restricted activity” refers to any activity that supports the development, production, handling, usage, maintenance, storage, or proliferation of any WMD and its delivery systems, or transactions with any party engaged in such activities. Upon notification, MITI will decide whether to allow the intended export, transshipment, or transit movement subject to a permit requirement.
The scope of the Directive is defined in Annex I, which lists specific categories of advanced AI chips, including 3U090, 3A001.u, 4U090, 4A003.u., 5A002.u, 5A004.u, and 5U992.u. These categories cover a range of high-performance integrated circuits (IC) such as GPUs, TPUs, neural processors, and other AI accelerators, characterized by defined total processing performance (TPP) and performance density thresholds. The scope of goods is largely adopted from the expanded categories of advanced computing IC chips in the U.S. Export Administration Regulations (“EAR”). Notably, the scope of IC chips captured under category code 3U090 in the Directive mirrors the scope provided under 3A090 in the EAR. Certain exceptions are allowed under the Directive. For example, under 3U090, IC chips that are not designed or marketed for use in data centres and have a TPP below 4800 are excluded from the scope of the catch-all control.
Additionally, while the accompanying media statement indicated that U.S. origin AI chips would be subject to control, the Directive itself does not explicitly limit the application of the Directive to U.S. origin chips. It is notable that the catch-all control under STA 2010 applies as long as restricted activity is involved, regardless of where the chips originate from. Given that the potential involvement of WMD activity is required to trigger the application of the Directive, the extent to which the export of U.S. origin AI chips for non-WMD-related purposes (including to Chinese tech companies for use in AI applications) will face heightened scrutiny or enforcement by MITI remains to be seen.
It should be noted that a permit application to MITI must be accompanied by a re-export license from the originating country and an export control classification from the manufacturer. These requirements necessitate exporters to ensure compliance not only with Malaysia’s domestic regulations but also with foreign export control regimes, including the U.S. EAR, which imposes re-export controls on AI chips. Notwithstanding the Directive, it is important for exporters to verify whether the technical specifications of their AI chips presently fall within the scope of the Malaysian Strategic Trade (Strategic Items) List, last updated on 2 June 2025. If so, they would constitute strategic items that would require a permit from MITI for export, transshipment, or transit, regardless of whether they fall within the scope of Annex I.
Remarks
The issuance of the Directive marks a notable progression in Malaysia’s export control framework, particularly in relation to advanced AI chips, as international scrutiny over access to advanced AI chips continues to grow.
Businesses should proactively monitor forthcoming guidance from MITI regarding implementation details and enforcement trends to ensure timely and effective compliance. The Directive underscores the importance of end-use and end-user due diligence and reinforces the need to ensure compliance with all applicable export control regimes, which includes U.S. export control law which has extraterritorial application. In an increasingly complex and geopolitically sensitive regulatory environment, it is essential for legal, compliance, and technical teams to work in tandem to assess risk, classify products accurately, and maintain robust documentation evidencing their compliance steps. This is imperative for maintaining compliance and mitigating enforcement risks.
