BIS Updates, Expands Semiconductor Export Control Rules

BIS Updates, Expands Semiconductor Export Control Rules

On October 25, 2023, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) officially published two interim final rules (IFRs) on advanced semiconductors and related advanced computing items and semiconductor manufacturing equipment. The IFRs—which were released under the Export Administration Regulations (EAR)—clarify a package of rules announced October 17 enhancing controls on semiconductors and artificial intelligence (AI) and placed 13 more entities on the BIS Entity List. These IFRs come over a year after BIS released export control rules on October 7, 2022, which addressed the Chinese government’s ongoing efforts to obtain advanced integrated circuits (ICs) for the development of AI and other related technologies, as well as manufacturing equipment needed to produce advanced ICs for military applications. 

The October 25 measures became effective on November 17 and the additions to the BIS Entity List became effective on October 17.

The updated controls indicate a strategic approach by BIS to regulate advanced semiconductor technology, focusing on both performance characteristics and end-use applications.


Controls on Advanced Semiconductors

The October 25 refinements include the following changes:

  1. For Export Control Classification Number (ECCN) 3A090 (certain high performance integrated circuits), BIS adjusted the parameters for control, removing any interconnect speed requirement but adding a “performance density” threshold in relation to Total Processing Performance. These controls are primarily focused on items marketed or capable of being used as “datacenter chips,” which are computing chips usually found in the service area within a data center to create energy efficiencies and flexibility and prevent redundancy, while enhancing operations and productivity. 
  2. A license exception was added for Notified Advanced Computing (NAC), which authorizes shipments of ICs controlled under ECCN 3A090, 4A090 (computers, components, and electronic assemblies containing ECCN 3A090 integrated circuits) computers and related items - provided the exception terms are met. For example, to rely on the NAC license exception, the company must notify BIS 25 days in advance of the proposed export date to allow BIS to determine whether or not the transaction may proceed under the license exception.

    BIS provided this chart, which shows the control criteria and NAC eligibility, at a briefing held on November 6. 
  3. Nine items were added under ECCNs 3A090and 4A090 to controlled items found elsewhere on the Commerce Control List (CCL) that meet or exceed performance parameters of the above-mentioned ECCNs. 
  4. To prevent circumvention of the rules, the license requirements for ECCN 3A090 semiconductors, 4A090 computers and related products are expanded beyond China to about 40 countries that are denoted in the EAR as Country Groups D:1, D:4 and D:5. An export license requirement also applies to companies headquartered in one of the 22 countries (and Macau due to its status as a Special Administrative Region of China) subject to U.S. arms embargoes. 
  5. The scope of restrictions on U.S. persons was significantly broadened to prevent U.S. individuals and companies from providing support for Chinese advanced semiconductor activities. The rule now includes giving “support” to items that would not otherwise subject to U.S. export controls to any prohibited country where there is knowledge that the item supported by the U.S. person will be used in the development or production of semiconductors at a facility of a prohibited entity. (Support for these purposes encompasses conducting the delivery, by shipment, transmittal or transfer in-country, of items not subject to the EAR and servicing, including maintaining, repairing, overhauling or refurbishing items not subject to the EAR.)  This will further limit the type of activities U.S. persons and companies can provide to prohibited entities. 
  6. The Foreign Direct Product Rule was expanded to include advanced computing, restricting any transaction of foreign-produced goods using covered advanced computing technology or software when a prohibited entity is a party to the transaction. 
  7. A temporary general license (TGL), a provisional exception made for certain exports that meet certain criteria described in the license was created. This exception temporarily authorizes the integration, assembly (mounting), inspection, testing, quality assurance and distribution of certain advanced computing items when the end use of such items is outside the expanded destinations now subject to license requirements and by entities other than prohibited entities. The license is valid through December 31, 2025.
  8. New due diligence requirements are introduced, with red flags identified to assist parties with their due diligence assessments and to help determine whether foreign parties are attempting to circumvent the above controls. 


Expansion of the Rule Controlling Semiconductor Manufacturing Equipment

The second IFR concerns restrictions on the export of semiconductor manufacturing equipment, including the following:

  • Introducing additional controls for semiconductor manufacturing equipment, removing ECCN 3B090, then replacing and expanding its provisions in ECCNs 3B001 (equipment for manufacturing certain semiconductors devices) and 3B002 (testing equipment specifically designed for testing certain finished or unfinished semiconductor devices). 
  • Expanding the existing controls against China for semiconductor manufacturing equipment to a total of 23 prohibited counties. 
  • Expanding previous restrictions on support activities by U.S. persons related to semiconductor manufacturing. 
  • Creating a TGL to give semiconductor manufacturers additional time to identify alternative sources of supply outside Control Group D:5 countries. The license is valid through December 31, 2025.

Additions to BIS Entity List

Thirteen Chinese entities involved in the development of advanced computing chips have been added to the BIS Entity List. Inclusion on this list means that the foreign entity may not be a party to any export, reexport and/or transfer (in-country) of nearly any U.S.-product, even if the product is included on the CCL. Listed entities are also subject to restrictions under the Foreign Direct Product Rule covering foreign-produced items made using U.S. technology. As a result, foundries producing chips for such listed entities will need a BIS license before they can send chips to these entities or parties acting on their behalf.


How BDO can help

BDO’s customs and international trade team can assist companies with 

  1. assessing existing programs for improvement and risk mitigation; 
  2. developing tailored export compliance and training programs; 
  3. preparing voluntary self-disclosures to correct any reporting errors and mitigate exposure; and 
  4. helping clients anticipate the direction of export control regulations. 

For services specific to semiconductors and advanced computing, BDO can aid companies in assessing whether their products, software or technology would fall within the scope of the latest controls and whether companies will be able to take advantage of the TGLs.