The US Department of Commerce’s Bureau of Industry and Security (BIS) has recently issued two new Interim Final Rules collectively referred to as the Updated Rule, which significantly revise and expand export controls related to semiconductor manufacturing equipment (SME), integrated circuits (ICs), and supercomputers. These rules, published in the Federal Register on October 25, 2023, aim to strengthen and streamline existing export controls to address national security concerns and ensure continued US technological leadership in artificial intelligence (AI) development.
The Updated Rule builds upon the comprehensive regulations introduced in the 7 October 2022 rule (7 October Rule), which marked a significant shift in US export control policy. The 7 October Rule imposed expanded export controls on SME, advanced ICs, and supercomputers, along with new end-use restrictions and restrictions on US person dealings related to these items. The Updated Rule refines and extends these controls and introduces several key revisions.
Key Revisions in the Updated Rule
- Focus on Artificial Intelligence: The Updated Rule’s primary goal is to strengthen US technological leadership in AI. It addresses national security concerns related to AI development and closes loopholes that entities with AI ties to China could exploit. This is especially pertinent as AI technologies play a pivotal role in modern AI systems like large language models.
- Additional Controls on SME: The Updated Rule extends the controls on SME to capture additional tools and equipment essential for advanced IC development. It also revises Export Control Classification Numbers (ECCNs) for previously controlled SME and expands controls to cover more destinations, preventing circumvention via third countries.
- Additional Controls on Semiconductors: ECCN 3A090 now covers more ICs with specific processing performance parameters, aiming to control ICs comparable to those controlled in the 7 October Rule.
- Updated License Exceptions and License Review Policies: Certain items and destinations subject to the new controls have more favorable license exceptions and review policies. For instance, License Exception Notification Advanced Computing (NAC) introduces a notification requirement for exports of specific ICs. A 25-day advance notification process applies to exports to Macau and specific destinations.
- New End-Use Restrictions: The Updated Rule introduces new end-use controls, including controls on advanced computing and technology developed by entities in Macau or Country Group D:5, preventing entities from setting up servers to train AI models contrary to US national security interests.
- Revisions to US Persons Regulations: US person restrictions related to semiconductor manufacturing, advanced ICs, and supercomputing now also apply to Macau and Country Group D:5. Certain exclusions for US persons are added to avoid restricting certain activities.
- Entity List Additions: Moore Threads Technology and Biren Technology, along with their subsidiaries, are added to the Entity List due to their involvement in developing advanced computing ICs.
- Allusion to Future Cloud Computing Controls: BIS hints at potential future controls on cloud computing, seeking public comments on controlling infrastructure as a service (IaaS) access for large AI foundation models.
These revisions expand and refine export controls on semiconductors and related technologies, reflecting the US government’s commitment to safeguarding national security interests and maintaining a leadership position in AI technology. Companies involved in this sector should carefully assess the impact of these changes on their operations and compliance efforts.
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