Semiconductors and other restricted goods shipped through China and Hong Kong to support Russia’s war efforts have decreased by a fifth this year, according to previously undisclosed U.S. Commerce Department data. However, Hong Kong remains a key location for evading global sanctions.
Transshipments of Common High Priority Items (CHPL), which include advanced components such as microelectronics likely to be used in Russia’s war in Ukraine, fell by 28% through Hong Kong from January to May, a U.S. Commerce Department official told Reuters. During the same period, transshipments through mainland China, excluding Hong Kong, dropped by 19%.
Reuters is reporting these previously undisclosed numbers for the first time.
The U.S. Commerce Department has emphasized its efforts to restrict Russia’s access to technologies and other items needed for its military operations in Ukraine. Both Hong Kong and China are viewed by the U.S. as critical sources for Russia’s military supplies, including semiconductors and drone parts.
An official stated that while there has been some success in slowing down this trade, China remains the primary concern. The U.S. and its allies have accused China of aiding Russia’s war by exporting necessary parts and equipment.
The U.S. State Department and Treasury have imposed multiple sanctions on entities globally linked to Russia’s military, including shell companies in Hong Kong diverting semiconductors. The decline in illicit flows is attributed to aggressive U.S. enforcement and engagement with companies whose products are being transshipped.
Hong Kong has not responded to questions about the transshipment of goods to Russia but stated it enforces United Nations Security Council sanctions as directed by China’s Foreign Ministry. China’s Customs Administration and Foreign Ministry did not respond to Reuters’ requests for comment, and there was no response from the Russian embassy in Washington.
Transshipment Data of Restricted Goods
| Item | Transshipment Location | Period | Decrease in Transshipment |
|---|---|---|---|
| CHPL Items | Hong Kong | Jan-May 2024 | 28% |
| CHPL Items | Mainland China (excluding Hong Kong) | Jan-May 2024 | 19% |
C4ADS, a global security non-profit based in Washington, reported that over 200 Hong Kong-registered firms shipped nearly $2 billion worth of goods to Russian buyers between August and December 2023. This included $750 million worth of CHPL items shipped via Hong Kong during that period. Some restricted goods were sent to sanctioned Russian firms.
Companies like Nvidia, Texas Instruments, and Intel have stated they comply with U.S. export regulations and oppose their products’ use in Russian military equipment. Nvidia highlighted instances where its goods were shipped to Moscow-based firms, including Lotos, through Hong Kong-based companies.
The CFHK report noted that the ease of setting up and registering new firms in Hong Kong has led to a proliferation of intermediaries facilitating restricted trade and monetary flows, including with Iran and North Korea. Some of these firms have been sanctioned by U.S. authorities.
Reuters found that many offices of consigners in Hong Kong, as named in customs records and corporate filings, were shuttered or located in rundown buildings. For example, Align Trading, a consigner for Vectrawave chips, had an address in a neglected room filled with hundreds of registry letters. Attempts to reach company directors were unsuccessful.
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