technology (“U.S. Products”) are subject to the EAR when exported and re-exported to and from all international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments. If a regulator determines, even in error, that the company or its subsidiaries are not in compliance with applicable laws, regulations, or executive orders or designates the company or its subsidiaries as sanctioned entities or otherwise prohibits third-parties from transacting with them, such determination could result in negative impacts to the company’s sales, customer relationships, and reputation that could have a material negative impact on the company’s business and financial condition.
For example, on October 8, 2025, three of the company’s subsidiaries in China were added to the “Entity List” of the BIS, which restricted their ability to receive exports of U.S. technology from suppliers. On October 17, 2025, the BIS issued a temporary authorization that allowed these entities to resume their normal business activities, and the entities were formally removed from the Entity List on November 11, 2025; however, during the intervening time period, the subsidiaries were unable to receive shipments from many suppliers and fulfill corresponding customer orders, which had an adverse impact on the Company’s operating results for the fourth quarter of 2025.
In addition, licenses or proper license exceptions may be required by export regulations, including the EAR, for the shipment of certain U.S. Products to certain countries, including China, India, and other countries in which the company operates. The company may not be able to effectively monitor the activities of all of its employees involved in regulated export or shipment activities, which may lead to the company’s failure to prevent violations of such regulations.
Failure to obtain and apply required authorizations, or other non-compliance with the EAR, OFAC regulations, or other applicable export regulations could result in a wide range of penalties including the denial or restriction of export privileges, significant fines, criminal penalties, and the seizure of inventories, any of which could have a material adverse effect on the company’s business. The company’s distribution process also includes the use of third parties that operate outside of the company’s direct control. Noncompliance with applicable import, export, and other laws, regulations, or executive orders by these third parties may result in substantial liability to the company and harm the company’s reputation.
Further, the company is also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, and other anti-bribery and anti-money laundering laws in the countries in which it conducts business. The company can be held liable under these laws, which are often interpreted broadly, for the corrupt or other illegal activities of its employees, agents, contractors, counterparties, and third parties it engages to provide services, even if it does not explicitly authorize or have actual knowledge of such activities. Any violations of these laws and regulations may result in substantial civil and criminal fines, penalties, disgorgement, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
The company’s global business also could be negatively affected by trade barriers, such as tariffs, export restrictions, embargoes, and other governmental protectionist measures, which may decrease demand for the company’s products. Such measures can be imposed suddenly and unpredictably and, in the case of tariffs, may increase the prices of many of the products that the company purchases from its suppliers. Tariffs and other protectionist measures, and the additional operational costs incurred in minimizing the number of products subject to them, could adversely affect the operating profits for certain of the company’s businesses and customer demand for certain products, which could have an adverse effect on the company’s business and results of operations.
In the event that the company pays tariffs for imported products that are re-exported outside of the United States, the company may be eligible for refunds of certain tariffs. In order to qualify for these tariff drawbacks, the company must provide data and documentation to the U.S. government that it must obtain from third-party sources, such as its suppliers. There is no guarantee the company will be able to obtain this additional data and documentation from those other sources, which could result in the U.S. government rejecting the drawback requests. There have been, and there could be, additional administrative costs in furtherance of these efforts.
Ongoing litigation regarding U.S. tariffs issued pursuant to the International Emergency Economic Powers Act, including two matters recently heard by the U.S. Supreme Court, has created additional uncertainty regarding the potential effects that tariffs may have on the company’s business. The U.S. Supreme Court’s ruling in those or other similar matters could result in significant changes to U.S. tariff policies, the effects of which are difficult to predict, but could include the
