Key Takeaways
- BIS reached a $1.7 million settlement with Plexon, Inc. over unlicensed exports of neural recording systems to a Chinese research institution on the Commerce Department’s Entity List.
- Medical, life sciences, and research products are not exempt from U.S. export controls. Even EAR99 items can require a license based on the destination, end user, or end use.
- When selling into highly-regulated markets like China, exporters should conduct transaction-level review and apply ongoing restricted party screening to existing customers and distributors.
On August 14, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced a settlement with Plexon, Inc., a Texas neuroscience technology company. BIS asserts that Plexon exported neural recording systems to a restricted Chinese research institution without appropriate authorization under the U.S. Export Administration Regulations (EAR). The EAR is the set of regulations that control exports of U.S. dual-use items; BIS is the main government agency responsible for administering and enforcing the EAR.
The settlement is a cautionary tale for companies in the medical, life sciences, and research sectors: medical products and technologies are not outside the reach of U.S. export controls.
Link to Background on Plexon, Conduct in Violation of U.S. Export Controls Background on Plexon, Conduct in Violation of U.S. Export Controls
Plexon manufactures neuroscience technology, including the OmniPlex Neural Recording Data Acquisition System, that analyzes brain activity. According to BIS, between February 2022 and August 2023, Plexon exported eight OmniPlex systems and related accessories through its Asian distributor to the Academy of Military Medical Sciences (AMMS) in China. The value of the products was approximately $180,000.
AMMS and 11 of its research institutes were added to the BIS Entity List in December 2021 based on concerns that the organizations were supporting Chinese military end uses and end users, including research involving purported brain-control weaponry. Because AMMS is on the Entity List, a license is required to export or transfer in-country any U.S. dual-use item to AMMS. Plexon did not obtain a license for the eight transactions.
To resolve the matter, Plexon agreed to pay a $1.7 million civil penalty. BIS suspended the penalty for five years and will waive it if Plexon:
- Completes an external audit of its export compliance program.
- Commits no additional EAR violations during that period.
BIS also imposed a suspended five-year denial of export privileges, which will also be waived if Plexon complies with the settlement terms.
Link to Medical and Research Products May Require Export Licenses Medical and Research Products May Require Export Licenses
The Plexon settlement is noteworthy for companies that export medical, laboratory, and research equipment. Simply because a product is primarily for medical or scientific use does not mean that there are no export controls on the product. Even exports of otherwise lightly-controlled items, such as those covered by the EAR’s catch-all export classification EAR99, may require a license because of the destination, end user, or intended end use. (Note that in-country transfers of EAR99 items to restricted parties, as we described in this article from January 2026, may require a license, too.)
Link to What Does the Plexon Settlement Mean for Export Compliance Programs? What Does the Plexon Settlement Mean for Export Compliance Programs?
In some ways this was an easy miss for Plexon. Presumably, company routinely – and correctly – exports its products without a license. A history of license-free shipments does not mean the next shipment will also be license-free. A change in the customer, destination, product classification, or intended use can change the licensing analysis.
The settlement thus underscores the importance of conducting export control review at the transaction level rather than relying solely on the general nature of a company’s products. AMMS was added to the Entity List in December 2021, while Plexon’s alleged violations began approximately two months later and continued into 2023. Existing customers and distributors should be subject to ongoing screening rather than relying on diligence conducted only when a relationship is first established.
Please contact the authors if you have any questions.
The authors wish to thank Tris Sebesta for his contributions to this content.