U.S. Further Tightens Export Controls and Further Restricts China’s Access to Advanced Semiconductor and Chip Technology

The Bureau of Industry and Security (BIS), a U.S. governmental agency under the Department of Commerce, announced additional restrictions on the sales of advanced semiconductors. The interim final rule, first released on October 17, 2023, will become effective on November 16, 2023. The rule supplements the export controls regulations issued in October of 2022 and seek to further restrict China’s access to advanced AI and computing technologies, and semiconductor manufacturing equipment. The interim rule relates to advanced computing chips, semiconductor manufacturing items, and additions to the entity list.

Advanced Computing Chips Rule

The interim rule removes the “interconnect bandwidth” as a parameter used to identify restricted chips under ECCN 3A090. Category 3 of ECCNs is generally directed to electronics, with ECCN 3A090 directed to integrated circuits. The new interim rule restricts the export of chips falling under this category if they meet the performance threshold previously delineated in the October 7, 2022 rules or if they exceed a new “performance density threshold” to preempt future workarounds, for example purchasing a larger number of smaller datacenter AI chips that could be combined to be as powerful as the currently restricted chips.

The rule also expands license requirements for advanced integrated circuits and imposes a licensing requirement for the export of controlled chips through the Foreign Direct Product Rule.

Semiconductor Manufacturing Items

The interim rule expands the license requirements for semiconductor manufacturing items to apply to twenty-one countries beyond China and Macau, namely those listed in Country Group D:5, identified as “U.S. Arms Embargoed Countries.” The rule also imposes controls on additional, broader categories of semiconductor manufacturing equipment. The previous rules related to the involvement of U.S. persons with semiconductor manufacturing equipment are modified to include additional restrictions to ensure that U.S. companies and persons cannot support the restricted semiconductor equipment manufacturing.

Additions to the Entity List

The interim rule also adds thirteen new entities to the Entity List, with all entities designated under footnote 4. Footnote 4 restricts the exports, reexports, or transfers to these entities or when these entities are a party to a transaction under the Foreign Direct Product Rule previously implemented in the October 7, 2022 regulations.

According to Secretary of Commerce Gina Raimondo, “Today’s updated rules will increase effectiveness of our controls and further shut off pathways to evade our restrictions. These controls maintain our clear focus on military applications and confront the threats to our national security posed by the PRC Government’s military-civil fusion strategy.” The goal is to limit China’s “access to advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers.”

The Semiconductor Industry Association, in response to the new rules, stated that “We recognize the need to protect national security and believe maintaining a healthy U.S. semiconductor industry is an essential component to achieving that goal. Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere.”

The rules will go into effect on November 16, 2023, 30 days from the date the rule is made available for public inspection on the Federal Register website. It will be critical for companies to update their export policies and requirements to address these new rules and to apply for temporary general licenses when appropriate. The interim rules also include a request for public comments.

The full text of the rules is available here.