Malaysia Announces New Permit Requirement for Advanced AI Chips under the Strategic Trade Act
On 14 July 2025, Malaysia’s Ministry of Investment, Trade and Industry (“MITI”), by way of a media statement, announced that, with immediate effect, the export, transhipment, and transit of high-performance artificial intelligence (“AI”) chips (“Advanced AI Chips”) of United States (“U.S.”) origin are subject to a Strategic Trade Permit under the Strategic Trade Act 2010 (“STA 2010”).
The permit requirement is imposed pursuant to Section 12 of STA 2010, a “Catch-All Control” provision which applies where an individual or company knows or has reasonable grounds to suspect that an item, even if not listed in the Strategic Items List (“SIL”), may be used in a restricted activity.
In essence, Section 12 of STA 2010 applies even though Advanced AI chips are not currently listed in the SIL. We understand that this regulatory measure is part of Malaysia’s broader effort to close regulatory gaps while it undertakes further review on the inclusion of Advanced AI chips into the SIL of the STA 2010.
MITI concurrently issued a directive titled “Directive of the Strategic Trade Controller No. 1/2025: Declaration of Unlisted Items under Section 12 of the Strategic Trade Act 2010 [Act 708]” (“Directive”), which sets out further guidance on the application of Section 12 in relation to Advanced AI chips.
Any person who intends to export, tranship, or bring in transit Advanced AI Chips, as specified in paragraph 6 and Annex I of the Directive, must notify the Strategic Trade Secretariat (“STS”), MITI, at least 30 days in advance if:
- the person knows that such chips are intended to be used, wholly or in part, for or in connection with a restricted activity; or
- the person has reasonable grounds to suspect that such chips are intended or likely to be used, wholly or in part, for or in connection with a restricted activity. (emphasis added)
A “restricted activity” as defined in Section 2 of the STA 2010, refers to:
- any activity supporting the development, production, handling, use, maintenance, storage, inventory, or proliferation of weapons of mass destruction and their delivery systems; or
- participation in transactions with persons engaged in such activities.
The Directive imposes an obligation to apply for a STA permit following the relevant authority’s decision on whether to allow the activity to proceed. The permit application must be accompanied by a re-export licence from the originating country and an export control product classification from the manufacturer.
The Directive clarifies that it applies specifically to unlisted Advanced AI Chips falling under the following item category codes:
(i) Category 3: 3U090; 3A001.u;
(ii) Category 4: 4U090; 4A003.u; 4A004.u; 4A005.u; and
(iii) Category 5: 5U992; 5A002.u; 5A004.u
Comprehensive product descriptions and parameters are provided in Annex I of the Directive.
This development comes against the backdrop of wider reforms to Malaysia’s strategic trade control regime. Earlier this year, MITI published a series of proposed amendments to the STA 2010 for public consultation, and conducted an industry engagement session on 13 January 2025 to solicit feedback from stakeholders on the proposed amendments. These updates are aimed at aligning Malaysia’s strategic trade control framework with international standards, enhancing enforcement powers, and facilitating compliance.
MITI’s media statement makes clear that Malaysia stands firm against any attempt to circumvent export controls or engage in illicit trade activities. Strict legal action will be taken against any individual or company found in breach of the STA 2010 or related laws. While Malaysia remains committed to facilitating trade and investment in accordance with international best practices, MITI expects that all entities operating in the country ensure compliance with all applicable international obligations to avoid potential exposure to secondary sanctions.
Comments
It is noteworthy that the unlisted Advanced AI Chips set out in Annex I correspond with the following U.S. Export Control Classification Numbers (“ECCN”) set out in Supplement No. 1 to Part 774 of the Export Administration Regulations (“EAR”), commonly known as the Commerce Control List (“CCL”):
(i) Category 3: 3A090; 3A001.z.4.a; 3A001.z.4.b;
(ii) Category 4: 4A090; 4A003.z; 4A004.z.1; 4A004.z.2; 4A005.z.1; 4A005.z.2; and
(iii) Category 5: 5A992.z.1; 5A992.z.2; ECCN 5A002.z; ECCN 5A004.z.
In addition, the Directive does not expressly restrict its application to Advanced AI Chips of U.S.-origin, unlike the media statement. That said, the requirement to include a re-export license as part of the export permit application suggests that the Directive contemplates its applicability to U.S.-origin Advanced AI Chips, since the U.S. is the only country which has a re-export license requirement for technology that falls under the EAR. As a practical matter, businesses dealing with Advanced AI Chips should ensure that they consider whether with the Directive applies to them prior to export, tranship or transit of such goods from or through Malaysia.
The use of the “Catch-All” controls is also interesting, as the existing provision should be sufficiently broad to capture Advanced AI Chips that were exported, transhipped or transited from or through Malaysia for restricted activities. Nevertheless, it is clear that the Malaysian authorities have introduced these new rules to clarify the licensing requirements for Advanced AI Chips.
Businesses involved in the manufacture, distribution, export, or transport of Advanced AI chips from or through Malaysia should:
- Evaluate whether any current or anticipated transactions fall within the scope of Section 12 of the STA 2010;
- Comply with the 30-day advance notification obligation under Section 12 of the STA 2010 where applicable;
- If required, ensure a Strategic Trade Permit is obtained prior to export, transhipment, or transit of the in-scope items;
- Ensure internal protocols are in place to identify red flags, monitor end-use, and screen counterparties and transactions in accordance with both Malaysian and relevant foreign export control measures;
- Review and update their internal policies, procedures, and compliance frameworks to align with the requirements in MITI’s statement; and
- Seek legal advice, where appropriate, in transactions involving controlled technologies or transnational business dealings subject to foreign export control regimes, including for the accurate export control classification for in-scope products.
As geopolitical attention to high-performance computing and AI technologies intensifies, Malaysia remains committed ensuring that it is not used as a jurisdiction to circumvent U.S. controls on Advanced AI chips. It is also a signal of the type of proactive measures that the Malaysian authorities will take when broader legislative updates to the STA take effect from January 2026.