The Library Media — Science, Technology & Health · AI News & Intelligence Desk
By Eleanor Ever Loyal
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The Commerce Department approved Chinese companies to assemble or handle advanced Nvidia chips after a national-security safeguard designed to capture ownership links to restricted entities had been suspended. A New York Times investigation found approved businesses with apparently vacant offices and corporate connections to companies already on the Entity List. The approvals remain in place.
The United States has a licensing system designed to prevent advanced artificial-intelligence technology from reaching entities that present national-security risks. It has restricted companies on the Commerce Department’s Entity List, scrutinized applications involving sensitive technology and, in September 2025, adopted a rule intended to prevent restricted companies from circumventing those controls through affiliated businesses.
A year later, that last safeguard was switched off.
And the licensing record now has an uncomfortable problem: companies approved to assemble or handle Nvidia’s advanced H200 AI chips include businesses whose physical operations and corporate relationships raise questions about whether the vetting process was adequate.
A November 7 investigation by The New York Times, titled U.S. Cleared Nvidia Chips to Chinese Firms With Empty Offices and Troubling Ties, examined approximately two dozen Chinese companies approved to buy or handle H200 chips. That approximate number comes from people familiar with the approvals, according to the Times, and should not be treated as an independently established total.
The investigation’s most striking findings concern two companies approved as server assemblers: New Matrix, in Beijing, and Maginfra.
The distinction matters. Neither company should be described as an approved end-user buyer on the basis of this reporting. They were approved as assemblers or handlers, meaning their authorized role involved incorporating the advanced chips into AI servers.
The Times also does not establish that H200 chips were delivered to either company.
What the investigation establishes is a question about the licensing decision itself: how did companies with the reported characteristics receive approval to participate in the supply chain?
The companies behind the approvals
According to the Times investigation, reporters physically visited the registered office of New Matrix in Beijing.
The company had been incorporated approximately 17 months earlier and was approved earlier in 2026 to assemble H200 chips into AI servers.
What reporters found was a bare concrete shell. The industrial park where the company was registered had no record of it.
That physical finding is significant because the company’s corporate background also raised questions.
The Times reported that corporate filings connect New Matrix’s principal owners to Wise Road Capital, which was placed on the Commerce Department’s Entity List in 2024.
Its founder, Li Bin, chairs state-backed Tsinghua Unigroup. A subsidiary of that group, New H3C Semiconductor Technologies, was placed on the Entity List in 2021 over work with the Chinese military.
These are distinct corporate relationships, and the distinctions matter. The reporting identifies connections; it does not establish that every company in those relationships is legally identical or that every connection automatically makes New Matrix subject to the same restrictions.
The second company, Maginfra, was approved in September 2026 as an H200 assembler.
Its listed address, according to the Times, was a locked room containing chairs and empty desks. Workers elsewhere on the floor told reporters that nobody used the space.
The investigation also identified connections between Maginfra and Inspur, which was placed on the Entity List in 2023 as a supplier to the People’s Liberation Army. Analysts linked the companies through shared staff and patents.
The Times flagged two additional businesses.
Zhejiang Yindun Cloud Technology operates in data centers owned by Range Intelligent, which serves provincial defense bureaus and satellite defense networks.
Shanghai Jiatang operates out of state-owned Datang Telecom.
The picture is not that every company on the approvals list was questionable.
The Times also identified legitimate approved names, including Baidu, BYD and Tesla Shanghai.
That distinction is important. A licensing process cannot be judged simply by the nationality of the applicants or by the presence of Chinese companies on an approved list. The relevant questions concern the identity of the applicant, its ownership, its actual operations, its relationships and the permitted use of the controlled technology.
The problem identified by the investigation is that some approvals appear to have survived those questions despite circumstances that warranted closer examination.
The safeguard designed for precisely this problem
The most consequential part of the story may not be any individual office visit.
It is the regulatory mechanism that was supposed to address indirect ownership.
In September 2025, the Bureau of Industry and Security adopted the Affiliates Rule.
Its purpose was to close a familiar gap in export controls: a company placed on the Entity List could otherwise potentially conduct restricted business through another company it owned.
Under the rule, a company at least 50% owned by an Entity List party automatically inherits the applicable restrictions.
The logic is straightforward.
A restriction on a corporate entity becomes less effective if the restricted entity can establish or use another company to perform the same activity without that affiliate inheriting the restriction.
The Affiliates Rule was intended to prevent that form of circumvention.
But the safeguard was suspended.
A BIS rule filed November 5, 2026, identified as Federal Register document 2026-22793, keeps the Affiliates Rule suspended until January 10, 2027.
The timing deserves attention. The suspension was extended two days before the Times investigation was published.
That does not establish that the suspension caused any particular licensing decision, or that the companies identified by the Times would necessarily have been prohibited from receiving approval had the rule been active.
Those are legal and factual questions that require the underlying ownership records, licensing files and applicable regulatory determinations.
But the relationship between the suspension and the investigation is difficult to ignore.
The safeguard was designed to catch ownership links involving restricted entities. The investigation subsequently identified approved companies with reported connections to businesses already on the Entity List.
The mechanism that might have captured certain qualifying ownership relationships was not operating.
That is the central governance issue.
What was the licensing process supposed to establish?
An export-control approval is not merely an administrative permission slip.
It is a national-security decision.
For advanced computing technology, the government must evaluate who is receiving authorization, what role the applicant will perform, what relationships could affect the transaction and whether the proposed activity presents risks under the applicable export-control framework.
In this case, the distinction between assembler and end user is particularly important.
An assembler may not be the ultimate purchaser or operator of the finished server. But its position in the supply chain can still matter. It may handle controlled components, integrate them into systems and participate in the production process through which advanced computing capacity becomes available.
That makes the identity and reliability of the assembler relevant to the licensing decision.
The Times’ reporting raises questions about whether the Department adequately established the physical and corporate reality behind certain applicants.
A company with an apparently unused office is not automatically a sham. Shared patents or personnel do not, without more, establish prohibited ownership or control. Connections to an Entity List company do not automatically establish that the applicant itself is restricted under every applicable rule.
But those facts are reasons to ask what investigators examined and what evidence supported approval.
The distinction between a legitimate company with an unusual structure and a shell operating as a vehicle for another entity is precisely the kind of distinction a national-security licensing process must be capable of making.
The government’s response
BIS has defended its process.
A spokesperson told the Times that the agency “scrutinizes every application for national security risk.”
That is the agency’s stated position.
However, the Commerce Department has issued no public statement specifically addressing the approvals identified in the investigation, and it has not publicly revoked any of them.
The gap between the agency’s general assurance and the specific findings is now where the scrutiny belongs.
Which ownership relationships were examined?
Were the physical premises independently verified?
Were shared personnel, patents and corporate affiliations identified during review?
Did the suspension of the Affiliates Rule change the information or restrictions applicable to the applicants?
And, most importantly, would the same approvals have been issued if the rule had been in force?
The public record described by the Times does not answer those questions.
It would be premature to declare the approvals unlawful. It would be equally premature to treat the agency’s general assurance as a complete answer to the investigation.
A licensing decision is only as reliable as the information and standards applied to it.
The January deadline
The Affiliates Rule’s suspension is currently scheduled to continue through January 10, 2027.
Between now and then, the United States faces a practical problem: the government must continue administering sensitive technology controls while a mechanism specifically designed to address certain corporate ownership relationships remains suspended.
That does not mean every transaction involving an affiliate of an Entity List company is automatically unrestricted. Other export-control requirements and restrictions remain relevant. Nor does the suspension establish that any of the companies identified by the Times has received H200 chips.
It does mean that the regulatory framework is operating without this particular automatic ownership safeguard.
For Congress, the investigation raises questions about oversight of the Commerce Department’s licensing decisions and the policy behind extending the suspension.
For BIS, the immediate questions concern the specific applications, the adequacy of the underlying vetting and whether any approvals warrant reconsideration.
Three developments deserve attention.
First, whether Congress seeks explanations or records concerning the approvals and the suspension of the Affiliates Rule.
Second, whether BIS issues a substantive public response or revokes any of the approvals identified in the reporting.
Third, whether the Affiliates Rule returns to force on January 10, 2027, or whether the suspension is extended again.
The larger issue is not whether every Chinese applicant should be presumed dangerous, nor whether every corporate connection proves an export-control violation.
It is whether the United States can credibly administer national-security restrictions when the corporate relationships those restrictions are designed to capture are not consistently visible in the licensing process.
The Times found companies approved to participate in an advanced-chip supply chain whose listed premises appeared empty and whose reported corporate relationships reached into businesses already subject to U.S. restrictions.
The government says it scrutinizes every application.
The next task is to demonstrate what that scrutiny actually established.
A safeguard that exists in regulation but is suspended cannot do the work it was written to perform. And an approval that looks complete on paper is not, by itself, evidence that the underlying national-security questions have been answered.
The question now is not simply who received permission. It is what the government knew when it gave it.
Eleanor Ever Loyal is Lead Counsel of the Catalina AI Wealth Organization and writes the regulation and governance beat for The Library Media’s AI News & Intelligence Desk.
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