On Tuesday, Reuters reported that Chinese companies are continuing to acquire US chip-making equipment by exploiting holes in the export controls being implemented by Washington, according to the US-China Economic and Security Review Commission (USCC).

In 2022 the United States implemented restrictions on the export of its most advanced computing chips intended for use in artificial intelligence applications, as well as chip-making equipment, in the hopes of constraining the advancement of China’s ability to produce and develop advanced semiconductor chips which would advance its military capabilities. The raft of restrictions has since been expanded, resulting in the blacklisting of a number of Chinese tech companies.

The USCC’s annual report noted that although the restrictions cut the export of US semiconductors to China by about 50% since last year,($6.4 billion), in the first eight months of 2023, the South Asian nation was still able to purchase some $3.1 billion worth of American chips, and chip-making equipment. The report noted that those exports may have included banned advanced technologies, since, “importers are often able to purchase the equipment if they claim it is being used on an older production line.”

The monitoring body noted, “with limited capacity for end-use inspections, it is difficult to verify the equipment is not being used to produce more advanced chips.”

The report also determined that the US restrictions had caused China to increase its purchases of advanced chip-making equipment from other countries, primarily Japan and the Netherlands, which earlier this year implemented their own curbs on exports of the technologies.

As an example, between January and August of 2023, China imported $3.2 billion of semiconductor manufacturing equipment from the Netherlands, which marked an annual increase of 96.1%. The report pointed out that over the first eight months of 2023, according to Chinese customs data, the nation’s chip-related imports increased by 90% year over year in just the third quarter.

The report also found that the restrictions appeared to have failed to stall China’s technological advancement. The report noted that in September of 2023, Chinese tech major Huawei debuted its Mate 60 Pro smartphone which was powered by a high-end 7-nanometer chip. Researchers believe that the chip could not have been made without US-produced equipment, leading industry experts to suggest that the chip may have been made with older US technology which was not restricted from export.

The USCC report warned that China’s technological advances “call into question the efficacy of current export control implementation,” pointing out that the restrictions are “intended not only to ensure the United States stays several generations ahead” of China but also that America “maintain as large of a lead as possible.”

China has been critical of the export restrictions, claiming they are a violation of internationally recognized free-trade rules.