Senator Tom Cotton (R-Arkansas) has called on Secretary of Commerce Howard Lutnick to take further action to prevent the illegal diversion of U.S. export-controlled chips through Malaysia. In a letter sent on October 30, Cotton emphasized that smuggling undermines American leadership in artificial intelligence and supports the growth of China’s domestic AI sector.
Cotton noted that Malaysian authorities have started addressing the issue by tightening controls and cracking down on illicit chip diversion. He stated, “Malaysian officials have begun cracking down on illicit diversion of chips and strengthening their own controls to ensure continued access to advanced U.S. chips, but proactive leadership from the United States is welcome. The Commerce Department has an opportunity to provide Malaysia with the support and resources it needs to achieve this goal. Curbing chip smuggling in Malaysia will increase U.S. business opportunities in Southeast Asia, which is crucial as Malaysia seeks to become a regional datacenter powerhouse, hopefully running on American technology.”
In his letter, Cotton recommended that the U.S. government offer guidance and share best practices with Malaysian officials to help establish a strong screening program for foreign direct investment and beneficial ownership information. He suggested this would enable Malaysia to better assess new datacenter entities for potential involvement by the Chinese Communist Party.
Cotton also urged collaboration with industry partners on software- and firmware-based anti-diversion techniques for advanced chips exported to Malaysia, highlighting the role of U.S. companies in developing such solutions. He proposed that customs clearance procedures could be improved for shipments containing anti-diversion mechanisms.
He pointed out that Malaysia could serve as a testing ground for these strategies, allowing both governments and private companies to refine implementation processes. Cotton referenced former President Trump’s AI Action Plan, which includes directives for using location verification features on advanced AI hardware as part of export control measures.
“While Congress works to codify President Trump’s directives to help with U.S. export promotion and enforcement, I hope you take advantage of this chance to leverage American talent and technology,” Cotton wrote in closing. “President Trump has acknowledged export controls as a critical tool of U.S. economic and technological statecraft. We have no time to waste.”
