On October 17, 2023, the Department of Commerce’s Bureau of Industry and Security (“BIS”) published two interim final rules (“IFR’s”) covering advanced computing items, semiconductor manufacturing equipment, and items that support supercomputing applications and end-uses. BIS also published one final rule making additions to the Entity List, including entities involved in the development of advanced computing chips contrary to U.S. national security and foreign policy interests.

The new rules focus on deterring China’s ability to both purchase and manufacture certain high-end chips critical for military use by updating previous controls implemented by BIS in October 2022. The prior rules will remain in effect until superseded by the IFR’s on November 17, 2023. Public comments on the IFR’s are due no later than December 18, 2023. Although the rules contain a significant number of changes to the EAR and should be closely reviewed, a brief summary of key provisions is below.

Semiconductor Manufacturing Items Interim Final Rule

The new semiconductor manufacturing IFR implements the following:

• Adds new controls on additional types of semiconductor manufacturing equipment by removing Export Control Classification Number (“ECCN”) 3B090 and replacing and expanding the items controlled in ECCNs 3B001 and 3B002;
• Refines restrictions on U.S. persons to ensure U.S. companies cannot provide support to advanced Chinese semiconductor manufacturing, which includes codifying previously existing BIS guidance; and
• Expands license requirements for semiconductor manufacturing equipment to apply to additional countries beyond China and Macau to 21 other countries where the U.S. maintains arms embargoes (countries located in Country Group D:5).

The full text of the semiconductor manufacturing IFR can be found here.

Advanced Computing Interim Final Rule

In addition to retaining the stringent China-wide licensing requirements imposed in the October 2022 rule, the advanced computing IFR adjusts the parameters that determine whether an advanced computing chip requires a license and imposes new measures to address risks of circumvention of the controls, including by expanding controls to additional countries.

Specifically, this IFR removes ​“interconnect bandwidth” as a parameter for identifying restricted chips and restricts the export of chips if they exceed either (1) the performance threshold set in the October 7 rule; or (2) the new ​“performance density threshold,” which is designed to preempt future workarounds. It also replaces prior catch-all language with new ECCNs in “.z paragraphs” throughout the Commerce Control List to provide more clarity on covered items.

Additionally, this IFR contains provisions to combat the circumvention of U.S. export controls by issuing new ​“red flags” for exporters to reference, creating worldwide licensing requirements for any company that is headquartered in Macau or a destination subject to the U.S. arms embargo (including China), and adding additional license requirements to countries that present a heightened risk for diversion to China. This includes countries in Country Groups D:1, D:4, and D:5 of supplement no. 1 to part 740 of the EAR, if not also specific in Groups A:5 or A:6. As an example, the United Arab Emirates (“UAE”) is contained on Country Group D:4 and is not listed in Country Groups A:5 or A:6. Exporters should exercise greater scrutiny when contemplating transactions involving countries that fit into this new criteria. Lastly, in addition to expanding the export controls, the IFR issued a new Temporary General License and a new license exception (License Exception NAC) that exporters may be able to use for specific transactions.

The full text of the advanced computing IFR can be found here.

As with the October 2022 regulations, the two new IFRs are highly complex and contain many changes that are not fully summarized above. Please contact our sanctions and export team if you need assistance navigating these latest developments.

[View source.]