Two Chinese men were taken into custody for allegedly smuggling Nvidia H100 and H200 chips to China, the U.S. Justice Department announced on Monday, Reuters reported. The arrests come as President Donald Trump authorized the export of Nvidia’s H200 AI processors to Beijing, signaling a high-stakes balancing act between national security concerns and commercial interests.
Prosecutors allege that Fanyue Gong, a Chinese citizen living in New York, and Benlin Yuan, a Canadian citizen originally from China, conspired with employees of a Hong Kong-based logistics company and a China-based AI firm to bypass U.S. export controls. Court documents indicate that the defendants obtained the chips through straw purchasers, mislabeling shipments to appear destined for U.S. or third-country customers. The chips were processed in U.S. warehouses, relabeled, and prepared for export, prosecutors said.
Another individual, Alan Hao Hsu, and his company previously pleaded guilty to smuggling and unlawful export activities, funneling more than $160 million worth of export-controlled Nvidia chips. “Operation Gatekeeper has exposed a sophisticated smuggling network that threatens our Nation’s security by funneling cutting-edge AI technology to those who would use it against American interests,” said Nicholas J. Ganjei, U.S. attorney for the Southern District of Texas.
Trump’s decision to allow H200 exports comes with a 25% fee on sales and is seen as a compromise to maintain U.S. leadership in AI while restricting the latest Blackwell chips. Nvidia shares rose following the announcement. While the move permits sales under conditions reviewed by the U.S. Commerce Department, concerns remain about the potential military applications of advanced AI chips in China. Several Democratic senators criticized the decision as a “colossal economic and national security failure,” warning it could boost China’s industry and defense capabilities.
Analysts note that Beijing may still regulate or limit the import of H200 chips due to cybersecurity concerns, despite Chinese firms’ interest. Experts suggest China would likely purchase the chips, but the state’s caution and preference for domestic alternatives could affect actual adoption. The smuggling arrests and export authorization highlight the complex intersection of trade, national security, and global technological competition in the AI era.
