Over the past two years, the United States has issued the most sweeping, complex export controls in history with respect to advanced computing items — including artificial intelligence chips — and semiconductor manufacturing equipment, as a signature aspect of U.S.-China strategic competition. These rules present significant challenges for companies that may not realize their items are subject to export controls at the apex of U.S. national security focus. Furthermore, the rules apply expansively to downstream use of U.S. items in support of chipmaking in China and other countries, making due diligence particularly challenging for companies.
As a new presidential administration prepares to take the reins in Washington, these challenges could become even more pressing for companies caught up in the U.S.-China relationship.
Export administration regulations
The U.S. Export Administration Regulations (EAR), administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), control the flow of some dual-use items to certain countries and in support of certain end-uses and end-users. Specifically, the EAR apply to goods, software and technology that are (1) located in the United States; (2) U.S.-origin, wherever located; (3) non-U.S.-origin but incorporating more than a “de minimis” level of “controlled” U.S. content; and (4) non-U.S.-origin but the “direct product” of certain technology or software that is subject to the EAR. Additionally, the EAR govern certain activities by U.S. individuals, wherever located worldwide.
Overview of semiconductor industry export controls
Across three rounds of rulemaking in October 2022 and 2023 and April 2024, the BIS has issued controls under the EAR covering (1) advanced-node semiconductors that power AI development, (2) semiconductor manufacturing equipment (SME) and (3) support for development or production of advanced computing items and SME. The BIS measures restrict a broad range of dealings with or involving China directly or indirectly and also cover transactions with other countries, including in the Middle East. The rules are breathtaking in scope, covering practically the entire semiconductor value chain worldwide.
Why the focus on semiconductors? In recent years, U.S. executive branch authorities, lawmakers in both parties and national security thought leaders have come to view advanced semiconductors and related SME as the sine qua non, or utterly essential, in the development of AI with possible military applications. In particular, the focus of these concerns has been China and its drive for technological and military parity with the United States, which has significant implications for Indo-Pacific security and the global geopolitical order.
Accordingly, U.S. authorities intend for the BIS rules to be a paradigm-shifting, generational change in export controls that secures the flow of U.S. critical technology and preserves U.S. military superiority, a core U.S. national security concern with broad bipartisan support.
How do the rules work, and how do they achieve these goals? In particular:
Specifically controlled items/destinations
The rules specifically identify, on the commerce control list (CCL) under the EAR, the types of chips, computing items and SME that are restricted for export to China and dozens of other destinations that present risk of diversion to China or data center usage by China, including in Asia and the Middle East.
- Notably, this includes export control classification number (ECCN) 3A090, which covers certain integrated circuits based on their “total processing performance” (a measure of computer computations relative to processing units on a chip) and performance density (TPP divided by the area of silicon on a single integrated circuit).
- Regarding SME, the rules control certain equipment designed for epitaxial growth, etch equipment, deposition equipment, and inspection equipment.
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"The Silicon Curtain: Sweeping US Export Controls Complicate Compliance Across the Semiconductor Value Chain," by Anthony Rapa was published in Corporate Compliance Insights on December 4, 2024.
