In a recent development, on October 25, 2023, the U.S. Department of Commerce Bureau of Industry and Security (BIS) introduced updated export controls concerning advanced computing items and semiconductor manufacturing equipment under the Export Administration Regulations (EAR). These adjustments build upon the interim final rule established on October 7, 2022, with the intention of enhancing existing regulations. Here, we present five key takeaways from these updates for supply chain stakeholders:
1. Response to Industry Developments:
- BIS has expanded controls to address recent industry developments, including the emergence of new technology not covered by prior regulations and concerns regarding circumvention risks.
- New performance criteria and additions to the Commerce Control List (CCL) have broadened the scope of controlled items, including advanced chips and equipment used in chip production.
2. Refined Controls Based on Feedback:
- In response to feedback, BIS has refined certain controls to ensure they target specific objectives while minimizing unintended consequences.
- End-use controls have been narrowed to apply only to items listed on the CCL, focusing on front-end production equipment and related items.
- U.S. person controls have been revised, including exclusions to accommodate U.S. individuals employed by foreign companies not owned by entities in restricted regions.
3. Guidance for Compliance:
- BIS has provided industry guidance to assist with compliance. This includes the identification of “red flags” to detect potential EAR violations.
- The model certification introduced earlier now applies to all Foreign Direct Product (FDP) rules and can be provided by any entity in the supply chain.
- Clarity has been offered on determining when additional due diligence is necessary for end-use and U.S. person controls.
4. Licensing and Exceptions:
- In light of expanded controls, BIS has introduced new license exceptions tailored to the updated restrictions.
- A new License Exception Notified Advanced Computing allows specific exports, reexports, and transfers of certain chips to expanded lists of Restricted Countries.
- Temporary General Licenses (TGLs) have been revised to minimize supply chain disruptions, providing alternatives to sourcing from restricted countries.
5. Industry Input and Ongoing Evaluation:
- BIS is actively seeking industry feedback until December 18, 2023, on various aspects of the controls.
- Topics include controls on deemed exports, risks related to Infrastructure-as-a-Service (IaaS) solutions, refinement of controls on advanced chips, and defining key terms.
- Industry input is crucial for refining these controls and addressing emerging challenges.
In conclusion, these updates reflect the evolving landscape of advanced computing and semiconductor manufacturing. Supply chain stakeholders should assess the impact of these changes on their operations, while continued engagement with industry peers and regulators will contribute to the ongoing evolution of these regulations. For further inquiries or information, please do not hesitate to reach out to our team at The Supply Chain Report.
