Introduction
Malaysia’s regulatory framework is increasingly influenced by geopolitical factors, particularly in relation to US export controls. Recent developments have highlighted Malaysia’s role in the global trade of advanced AI technology, prompting regulatory responses to address potential illicit activities and align with international standards.
Description
Malaysia’s regulatory framework is significantly shaped by geopolitical dynamics [7], particularly concerning US export controls [7]. Recently, a Chinese company reportedly circumvented these controls by utilizing Malaysian data centers equipped with American-made AI chips [7], raising US concerns about Malaysia’s potential role in facilitating illicit trade [7]. This situation underscores the challenges Malaysia faces in regulating its position as a logistics and export hub for advanced AI technology [7].
In response to these challenges and recent US tariffs aimed at addressing perceived trade imbalances, the Ministry of Investment [2] [5] [8] [9], Trade and Industry (MITI) has implemented immediate restrictions on the export, transshipment [1] [2] [4] [5] [8] [9], and transit of high-performance AI chips originating from the United States [1] [8] [9]. Effective immediately [2] [4] [5] [8], these transactions now require a Strategic Trade Permit under the Strategic Trade Act 2010 (STA 2010) [1] [8] [9]. Exporters must notify the relevant authority at least 30 days in advance of any export or transshipment of these chips [4], particularly if there are reasonable grounds to suspect that an item could be misused or used for restricted activities [8]. This regulation [1] [2] [3] [4] [5] [6] [7], based on Section 12 of the STA’s Catch-All Control provision [9], acts as a catch-all control for items not specifically listed in the Strategic Items List (SIL) [2]. This initiative aims to address regulatory gaps while a review is conducted on the potential formal inclusion of these AI chips in the SIL [8]. MITI has emphasized the importance of compliance with international obligations to mitigate the risk of secondary sanctions and has expressed its commitment to preventing the circumvention of export controls and illicit trade activities, warning of strict legal action against breaches of the STA 2010 or related laws [8].
Additionally, the Malaysian trade ministry is tightening oversight of the data center industry, which is integral to the AI supply chain [3], and is investigating claims that a Chinese firm may be utilizing Nvidia-equipped servers within its borders to train large language models [1]. Recent legal actions in neighboring Singapore have highlighted concerns over the fraudulent misrepresentation of AI server destinations [3], although Malaysian authorities have not found evidence of such activities within their jurisdiction [3]. By enforcing these trade controls [6], Malaysia is enhancing its trade governance framework and aligning with international standards [6], thereby closing potential loopholes for unregulated exports [6]. This proactive approach to safeguarding sensitive goods reflects the need for responsible management of critical technologies like AI chips in an interconnected global economy [6].
Meanwhile, the US Department of Commerce is reportedly developing new export restrictions on AI chips [4], following the rescission of previous AI Diffusion rules [4]. The forthcoming regulations are expected to focus on specific categories of AI chips and end-users, aiming to ease compliance for legitimate transactions while still addressing high-risk diversions [7]. This shift indicates a more focused enforcement strategy that prioritizes collaboration with allies and restricts technology access to perceived threats [7], further enhancing Malaysia’s reputation as a reliable player in the global semiconductor market [7]. Nvidia’s CEO has stated there is no evidence of chip diversion [3], and Malaysia’s trade ministry has expressed a willingness to engage in dialogue with the US to address any misunderstandings [3], cautioning that unilateral restrictions could disrupt legitimate trade and innovation [3].
Conclusion
The regulatory adjustments in Malaysia signify a crucial step in ensuring fair global trade practices while safeguarding national interests. By aligning with international standards and addressing potential regulatory gaps, Malaysia is reinforcing its position as a responsible participant in the global semiconductor market. These measures not only enhance Malaysia’s trade governance framework but also contribute to the broader effort of maintaining a balanced and secure global trade environment.
References
[1] https://www.businesstimes.com.sg/international/asean/malaysia-tightens-export-controls-us-origin-ai-chips-amid-tariff-talks-washington
[2] https://www.malaymail.com/news/malaysia/2025/07/14/malaysia-acts-to-avoid-us-sanctions-amid-escalating-global-ai-chip-war/183871
[3] https://economictimes.indiatimes.com/small-biz/trade/exports/insights/malaysia-controls-ai-chip-exports-as-us-targets-china-smuggling/articleshow/122553207.cms
[4] https://theoutpost.ai/news-story/malaysia-implements-permit-requirements-for-us-origin-ai-chip-trade-17686/
[5] https://www.scmp.com/week-asia/economics/article/3318099/malaysia-imposes-trade-permits-us-linked-ai-chip-shipments
[6] https://timesofinnovation.com/global-trade/malaysia-enforces-trade-controls-on-ai-chips-with-us-origin/
[7] https://www.jdsupra.com/legalnews/post-recission-forecasting-the-4099399/
[8] https://www.thestar.com.my/news/nation/2025/07/14/malaysia-tightens-export-controls-on-us-origin-ai-chips
[9] https://www.thevibes.com/articles/news/110477/govt-enforces-export-controls-on-us-origin-ai-chips-under-strategic-trade-law
