On 17 October 2023, the Department of Commerce’s Bureau of Industry and Security (BIS) issued two interim final rules (IFRs) amending the Export Administration Regulations (EAR) to impose significant new restrictions on the export, reexport or transfer (in-country) of certain semiconductor and advanced computing items to China and Macau as well as to destinations in Country Groups D:1, D:4 and D:5, as set forth in Part 740 of the EAR.  Among other changes, the new IFRs collectively: (i) expand the range of advanced chips and semiconductor manufacturing equipment subject to licensing requirements; (ii) significantly expand the countries that are subject to licensing requirements beyond China; (iii) correspondingly expand the scope of foreign-made advanced chips, and items incorporating such chips, that may be subject to U.S. jurisdiction pursuant to the foreign direct product rule, including based on an expanded scope of end-destinations outside China or parties to the transaction that are headquartered in a D:5 country or Macau; and (iv) impose licensing requirements in certain instances on entities located worldwide that are headquartered in a D:5 country or Macau.

In addition to implementing significant changes to the EAR, the IFRs also provide BIS responses to comments received in relation to the changes issued on 7 October 2022 (the “October 7 Rule”) (87 FR 62186).  These responses cover 141 different topics and provide important guidance regarding interpretation, implementation and enforcement of the October 7 Rule and IFRs.

The effective date for the IFRs is 17 November 2023. Simultaneous with these rules, the Bureau of Industry and Security also added 13 Chinese entities to the Entity List, subject to the expanded Entity List foreign direct product rule (see, Annex A). 

Practical Considerations and Priorities

The IFRs make significant changes to the EAR and include detailed and technical information throughout, covering more than 400 pages.  We have provided below a summary of the key changes described in the IFR.  While companies will need to conduct a detailed review of the full impact of these changes on their business operations, certain practical considerations and priority issues for companies include the following:

• Classification Reviews:  Companies active at any stage of the semiconductor or supercomputing supply chain will need to carefully review the technical changes to a number of different Export Control Classification Numbers (ECCNs), including ECCNs 3A090, 3A001.z; 4A003.z; 4A004.z; 4A005.z; 4A090, 5A002.z; 5A004.z; 5A992.z; 5D002.z; 5D992.z to confirm the classification of their items, including items that previously might have been classified as EAR99 or subject to only anti-terrorism (AT) controls.  Similarly, given revisions to de minimis rules and a new Foreign Direct Product Rule, non-US companies also will need to further assess whether their foreign made items are subject to the EAR.

• Expanded Licensing Requirements:  Companies will need to quickly determine whether a license is required to send their items to not only China and Macau but now also, in certain cases, countries listed in Country Groups D:1, D:4 and D:5, as well as companies headquartered in (or with parent companies headquartered in) these countries.  Similarly, companies operating in these countries that rely on semiconductors and related items for use in their manufacturing operations should also consider whether new licensing requirements will eliminate or delay their ability to obtain certain critical items subject to the EAR.  While we expect that certain of these countries would have limited manufacturing capabilities relevant to the semiconductor and supercomputer industries, other countries (e.g., UAE, Vietnam) may have some activities relevant to these industries, including as global companies seek to diversify the location of manufacturing and other operations.

• Headquartered in:  As noted above, license requirements now apply in certain cases to activities involving companies headquartered in (or with parent companies headquartered in) countries listed in Country Groups D:1, D:4 and D:5, even if located elsewhere.  While the concept of “headquartered in” is used elsewhere in the EAR (e.g., License Exception ENC), this term has not been defined in the EAR and a definition was not included in the IFRs (BIS asked for public comments on this issue).  Until BIS provides guidance in this regard, companies will need to develop reasonable approaches to this issue, corresponding due diligence procedures and careful documentation that shows the results of their review.  This can be particularly complex for private companies when detailed ownership information may not be available or for companies owned by private equity funds, structured as variable interest entities or other complex structures where the headquarters location of parent companies is not easily identified.

• License Exception and Temporary General Licenses (TGLs):  The IFRs include a new license exception (License Exception NAC) and two new TGLs.  While these authorizations are likely to prove useful to industry, companies will need to develop new procedures to assess the applicability of the authorizations and to confirm compliance through all stages of a transaction.  Unlike most license exceptions that companies can self-qualify for without submissions to BIS, License Exception NAC in certain cases will require prior notification to and authorization from BIS.

• U.S. Person Support:  The IFRs expand the scope of the U.S. person restrictions implemented in the October 7 Rule, and also publish in the EAR certain guidance previously issued by BIS in the form of FAQs.  Perhaps most notably, however, BIS makes clear in its responses to certain comments that it will broadly interpret the scope of “facilitating” in the context of Section 744.6, which defines U.S. person “support” to include “facilitating” a shipment, transmission or transfer (in country).  In particular, BIS states that “facilitating” means “to make easier by helping to bring about.”  While the agency clarifies that facilitation does not include administrative, clerical, legal advice, or regulatory advice activities, it does include “any other activity that is directly responsible for bringing about such a prohibited activity.”  BIS further suggests that “management oversight by U.S. persons located in China or abroad” could be considered “facilitation” if the oversight involves decisions to export, reexport or transfer (in-country) items that require a license under the EAR.  We recommend that industry carefully review its U.S. person involvement in semiconductor and supercomputer-related activities, including those of senior management, to confirm compliance with the scope of the October 7 Rule and IFRs.

Summary of Key Changes to the EAR

The IFRs implement a number of key changes to the October 7 Rule and other aspects of the EAR, including:

• Revision of ECCN 3A090 to lower the performance threshold for items captured therein and revise the applicable performance threshold calculation.  ECCN 3A090 is restructured to include a paragraph (a) and (b), where the lowest applicable processing performance threshold in paragraph (b) is now 1600 or more, depending on the corresponding ‘performance density,’ of the integrated circuit. This is in contrast to the October 7 Rule where the performance threshold, measured in TOPS, had to meet or exceed 4800 for the item to potentially be classified in 3A090.  Further, the method for calculating the performance threshold has been revised to utilize ‘total processing performance’ with five technical notes to clarify the specific aspects of the calculation.  The lowering of the performance threshold for 3A090 items correspondingly lowers the threshold for items captured in the other Advanced Computing Item ECCNs. As a result, this change imposes licensing requirements on a range of additional advanced chips and the items incorporating such chips.

• Addition of new sub-paragraph .z to certain ECCNs to clarify application of 3A090/4A090 related Regional Stability (RS) controls.  To clarify the scope of items subject to the RS controls in Section 742.6(a)(6) of the EAR based on meeting or exceeding the performance parameters of ECCNs 3A090 and 4A090, and thus subject to licensing requirements to D:1, D:4, D:5 countries and Macau, .z paragraphs were added to nine specific ECCNs (i.e., 3A001.z; 4A003.z; 4A004.z; 4A005.z; 5A002.z; 5A004.z; 5A992.z; 5D002.z; 5D992.z) (collectively, “Advanced Computing Items”).

• Expansion of unilateral item-based controls for RS reasons to D:1, D:4 and D:5 Countries.  Whereas the October 7 Rule imposed license requirements on applicable items destined to China (and later Macau) only, the IFRs impose an expanded scope of destination-based license requirements:

  • Items controlled under 3A090, 4A090 and the new .z subparagraphs under applicable ECCNs require a license for export, reexport or transfer (in-country) to D:1, D:4, D:5 countries or Macau, except for countries also specified in A:5/A:6 (e.g., Israel, South Africa and Cyprus). 

  • Certain semiconductor manufacturing equipment (SME) classified in 3B001 or 3B002 and related software and technology are also subject to licensing requirements for export, reexport or transfer (in-country) to Macau or a D:5 country.

  • Technology classified in 3E001 (for 3A090 ICs), which is subject to the EAR pursuant to the Advanced Computing FDP rule is subject to a worldwide license requirement, excluding D:1, D:4 or D:5 countries also specified in A:5/A:6, when originating from Macau or a D:5 country.

• Removal of ECCN 3B090 with a corresponding expansion of controls on SME in ECCNs 3B001, 3B002 and related software and technology ECCNs.  ECCN 3B090, which was implemented under the October 7 Rule, is removed and replaced by adding additional sub-paragraphs to 3B001 and 3B002 to control a wider scope of SME, as well as related software and technology in 3D001, 3D002, 3D003 and 3E001, respectively.  The result is a wider range of SME items that are controlled for RS reasons and now subject to a license requirement to Macau and D:5 countries.

• Expansion of supercomputer and semiconductor manufacturing end-use restrictions to D:5 countries.  The scope of the October 7 end-use restrictions related to “supercomputers,” semiconductor manufacturing and SME production end-uses in Section 744.23, which previously covered only China and Macau, is now expanded to prohibit exports, reexports or transfers (in-country) where there is “knowledge” the items are destined for a prohibited end-use in Macau or a D:5 country.

• Narrowing of EAR items and end-uses subject to SME production end-use restrictions. The IFR also revises Section 744.23 to clarify that the product scope of EAR items involved in the prohibited SME production end-uses must be items specified on the CCL (as compared to the October 7 Rule controlling EAR99 items). Further, the export, reexport or transfer of items subject to the EAR, and specified on the CCL, must be for the “development” or “production” of ‘front-end integrated circuit “production” equipment,’ “components,” “assemblies” and “accessories” in certain Category 3B ECCNs. The use of a newly defined term, ‘front-end integrated circuit “production” equipment’ narrows the scope of this end-use restriction as does the rules exclusion of certain ECCN subparagraphs in 3B001 and 3B991 relating to photomasks.

• Addition of new Advanced Computing end-use restrictions to control items destined for an entity headquartered in or whose ultimate parent is headquartered in Macau or a D:5 country.  An additional sub-paragraph is added to Section 744.23 to prohibit the export, reexport or transfer (in-country) of Advanced Computing Items where the party has “knowledge” the item is destined to a country outside of a D:1, D:4 or D:5 destination (excluding countries also in A:5/A6) but for an entity headquartered in, or whose ultimate parent company is headquartered in, Macau or a D:5 destination.  While the term “ultimate parent” is not defined, and BIS is seeking comments from industry on how this term should be defined, the impact is effectively a worldwide license requirement on Advanced Computing Items for companies headquartered in, or whose ultimate parent is headquartered in, Macau or a D:5 country.

• Expansion of “U.S. Person” restrictions to address exports, reexports or transfers to or within D:5 countries or to an entity headquartered in or whose ultimate parent is headquartered in Macau or a D:5 country.  The “U.S. person” restrictions are expanded to encompass exports, reexports or transfers to or within a D:5 country or Macau involving items not subject to the EAR where: (i) the “U.S. person” has “knowledge” the items are intended for use at a facility of an entity that is headquartered in, or whose ultimate parent is headquartered in, a D:5 country or Macau, and engaged in advanced-node IC production end-uses; or (ii) in the case of items classified in any Category 3 ECCN, the “U.S. person” does not know whether the items will be used at a facility of an entity that is headquartered in, or whose ultimate parent is headquartered in, a D:5 country or Macau, and engaged in advanced-node IC production end-uses. The IFRs also, consistent with prior FAQs, provide additional clarity on the type of “U.S. person” activities within the scope of the restrictions (e.g., authorizing shipments; conducting deliveries; and servicing of relevant items) and due diligence expectations for companies in assessing whether the transactions: (i) involve facilities engaged in advanced-node IC production activities; and (ii) involves an entity headquartered in, or whose ultimate parent company is headquartered in, either Macau or a D:5 country.

At the same time the IFR provides an exclusion from the restrictions for natural “U.S. persons” who are employees of, or acting on behalf of, a company headquartered in the U.S. or a A:5/A:6 country, provided the company is not majority owned by an entity headquartered in Macau or a D:5 country. 

• Expansion of Advanced Computing foreign direct product (FDP) rule. The Advanced Computing FDP Rule is expanded to: (i) include D:1, D:4 or D:5 countries in the destination or end-use scope (excluding A:5 and A:6 countries); and (ii) include any entity that is a party to the transaction who is headquartered in or whose ultimate parent company is headquartered in Macau or a D:5 destination. The inclusion of the “party to the transaction” language in (ii) means that the Advanced Computing FDP Rule may be implicated if a purchaser, intermediate consignee, ultimate consignee or end-user in the transaction chain meets the applicable criteria.  The combination of this expansion of the end-destination scope with the lowering of the technical threshold for Advanced Computing Items, and additional SME subject to control, will increase the likelihood that foreign made items meeting the parameters in one of the Advanced Computing Item ECCNs will be subject to the EAR and thus the corresponding license requirements.

• Revision of de minimis provisions to clarify that SME classified under 3B001.f.1.b.2.b (specified lithography equipment) is subject to a 0% de minimis threshold.  SME meeting the parameters of new subparagraph 3B001.f.1.b.2.b will be subject to the EAR, to the extent it contains any controlled U.S. content, when destined for use in the “development” or “production” of “advanced-node integrated circuits.”  Increasing the instances where foreign-made SME, like this lithography equipment, is subject to the EAR will in turn increase the likelihood that foreign-made Advanced Computing Items produced with such SME are themselves subject to the EAR under the Advanced Computing FDP rule.

• Addition of License Exception Notified Advanced Computing (NAC). A new license exception is added to Section 740.8 of the EAR which authorizes, subject to specific criteria, the export, reexport or transfer (in-country) of Advanced Computing Items to D:1, D:4 or D:5 destinations, or Macau, provided that, as a threshold matter the item is not designed or marketed for use in a datacenter and meeting the parameters of 3A090.a.  Exports or reexports to Macau, or a D:5 country, or an entity headquartered in, or with an ultimate parent headquartered in, Macau or D:5 country are subject to additional restrictions, including that none of the end-uses in Section 744.23 are applicable, other than for Section 744.23(a)(3), and that prior notification must be submitted to BIS twenty-five calendar days prior to the export or reexport.

• Establishes two TGLs to reduce the immediate supply chain impact to U.S. and A:5/A:6 headquartered companies.  The IFRs implement one TGL to authorize the export, reexport or transfer of Advanced Computing Items to D:1, D:4 or D:5 countries to enable continued integration, assembly, inspection testing, quality assurance and distribution provided: (i) the ultimate end-use is outside of D:1, D:4 or D:5 country; and (ii) does not involve entities headquartered in, or whose ultimate parent company is headquartered in, Macau or a D:5 country (Advanced Computing TGL). The second TGL authorizes companies headquartered in the U.S. or an A:5/A:6 country to export, reexport or transfer items subject to the EAR to manufacturing facilities in a Country Group D:5 country or Macau for the “development” or “production” of “parts,” “components,” or “equipment” of certain Category 3B ECCNs subject to specific criteria (SME TGL).

Both TGLs are valid through 31 December 2025.

• Requirement to include ECCNs of advanced computing items on electronic export information (EEI) filings as well as commercial invoices.  The EAR is updated in Part 758 to specifically require that exports of items classified in one of the Advance Computing Item ECCNs include the classification details, down to the .z subparagraph, where applicable on the EEI filing in AES and on the commercial invoices associated with these shipments must include these ECCNs.

• Adds two ECCNs subject to October 7 Rule to License Exception CCD.  Commodities classified in 3A991.p or 4A994.I are added to License Exception Consumer Communication Devices (CCD), which authorizes exports, reexports or transfers to Cuba, Russia or Belarus.

Additional Information Regarding Key Changes

Additional information regarding certain of these updates, as well as considerations for Companies regarding next steps, are provided below.

Revision of ECCN 3A090

ECCN 3A090 was revised into two subparagraphs, as follows:

1. Integrated circuits having one or more digital processing units having either of the following:

   1. a ‘total processing performance’ of 4800 or more, or

2. a ‘total processing performance’ of 1600 or more and a ‘performance density’ of 5.92; OR

2. Integrated circuits having one or more digital processing units having either of the following:

   1. a ‘total processing performance’ of 2400 or more and less than 4800 and a ‘performance density’ of 1.6 or more and less than 5.92, or

2. a ‘total processing performance’ of 1600 or more and a ‘performance density’ of 3.2 or more and less than 5.92.

Note 2 to the revised 3A090 provides that 3A090 does not apply to items that are not designed or marketed for use in datacenters and do not have a ‘total processing performance’ of 4800 or more.  In other words, if the IC does not meet the performance specifications of 3A090(a)(1) then it is not subject to the controls in 3A090 if “not designed or marketed for use in datacenters.”

The Technical Notes to 3A090 provide, in relevant part that:

• ‘Total processing performance’ (‘TPP’) is 2 x ‘MacTOPS’ x ‘bit length of the operation’, aggregated over all processing units on the integrated circuit. Additional notes are provided to clarify the method for performing this calculation.

• ‘Performance density’ is ‘TPP’ divided by ‘applicable die area’. For purposes of 3A090, ‘applicable die area’ is measured in millimeters squared and includes all die area of logic dies manufactured with a process node that uses a non-planar transistor architecture.

Removal of ECCN 3B090

ECCN 3B090 was removed. The items previously described under ECCN 3B090 and newly added types of SME are now controlled under ECCNs 3B001 and 3B002.  ECCNs 3D001, 3D002, 3D003, and 3E001 were also revised to make conforming changes for the license requirements for the software and technology related to the new items in 3B001 and 3B002.

The newly added items under ECCNs 3B001 and 3B002, and associated software and technology are, with limited exceptions, only used for fabricating logic ICs with non-planar transistor architecture or with a “production” ‘technology node’ of 16/14 nanometers or less. Each of the items added with the SME IFR are key to production of “advanced-node integrated circuits,” which is further defined in revisions to Part 722, as discussed below.

Revision to Scope of SME Production End-Use Restrictions in Section 744.23

In addition to the product scope change (i.e., only items specified on the CCL, not EAR99 items) the end-use restrictions related to SME production equipment in new Section 744.23(a)(4) also: (i) limit the scope to where the end-use is for “production” or development” of “front-end integrated circuit “production” equipment”; and (ii) excludes certain sub-paragraphs in 3B001 and 3B991.

• Pursuant to Note 1 to Section 744.23(a)(4), ‘front-end integrated circuit “production” equipment,’ “includes equipment used in the production stages from a blank wafer or substrate to a completed wafer or substrate (i.e., the integrated circuits are processed but they are still on the wafer or substrate).”

• The excluded paragraphs in 3B001 and 3B991 relate to:

  • 3B001.g - Masks and reticles, designed for integrated circuits controlled by 3A001;

  • 3B001.h - Multi-layer masks with a phase shift layer not specified by 3B001.g and designed to be used by lithography equipment having a light source wavelength less than 245 nm;

  • 3B001.j - Certain mask “substrate blanks” with multilayer reflector structure consisting of molybdenum and silicon; and

  • 3B991.b.2 - Masks, mask “substrates,” mask-making equipment and image transfer equipment for the manufacture of devices, “parts” and “components” as specified in the heading of 3B991

New Section 772 Definitions

Two new defined terms were added to Section 772.1 as follows:

• “Extreme Ultraviolet” (EUV) means electromagnetic spectrum wavelengths greater than 5 nm and less than 124 nm, which are used in revised ECCNs 3B001, 3B002 and 3D003.

• “Advanced-node integrated circuits” is added to simplify the regulatory text in several places in Sections 744.6 and 744.23 that previously described the criteria for “advanced” ICs. This definition specifies the calculation methodology for determining whether a DRAM IC uses a “production technology node of 18 nanometer half-pitch or less.” This definition also includes notes clarifying the meaning of “production technology node” for two types of “advanced-node integrated circuits.” In summary, advanced-node integrated circuits include integrated circuits that meet any of the following criteria:

• (1) Logic integrated circuits using a non-planar transistor architecture or with a “production” ‘technology node’ of 16/14 nanometers or less;

• (2) NOT AND (NAND) memory integrated circuits with 128 layers or more; or

• (3) Dynamic random-access memory (DRAM) integrated circuits using a “production” ‘technology node’ of 18 nanometer half-pitch or less.

Revision of the de minimis provision related to 3B001

There is now no de minimis level for lithography equipment and “specially designed” items therefor meeting the parameters in ECCN 3B001.f.1.b.2.b when destined for use in the “development” or “production” of “advanced-node integrated circuits.”  This will likely also impact the scope of items captured under the Advanced Computing FDP Rule based on being produced by the SME.

This rule does not apply when the country from which the foreign-made item was originally exported or reexported maintains an equivalent export control for equipment meeting the parameters of 3B001.f.1.b.2.b.

License Exception NAC

License Exception NAC authorizes, pursuant to specific criteria and restrictions, the export, reexport and transfer (in-country) to D:1, D4 and D:5 destinations, including Macau, of the Advanced Computing Item ECCNs (i.e., 3A090, 4A090, 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z) except for items designed or marketed for use in a datacenter and meeting or exceeding the parameters of 3A090.a. 

Specifically, License Exception NAC:

• Authorizes the export, reexport, and transfer (in-country) of Advanced Computing Items, without a notification requirement, to or within any destination specified in Country Groups D:1 or D:4, and transfers (in-country) within Macau or any destination specified in Country Group D:5, provided the criteria in paragraph (b) of the license exception are met.

• Authorizes, subject to a notification requirement, the export and reexport of Advanced Computing Items to Macau or a destination specified in Country Group D:5, or to an entity headquartered in, or with an ultimate parent headquartered in, Macau or a destination specified in Country Group D:5, provided all of the criteria in both paragraphs (b) and (c) of the license exception are met.

Apart from the criteria in paragraphs (b) and (c) of the license exception exports, reexports or transfers (in-country) must be made subject to a written purchase order. Samples are not subject to the written purchase order requirement but must comply with the notification requirement.

Restrictions: Paragraph (b) of License Exception NAC prohibits its use in certain circumstances:

• Part 744 and 746 Restrictions: Exports, reexport or transfers (in-country) that are otherwise subject to a license requirement in Part 744 or 746 of the EAR except for items subject to a license requirement under Section 744.23(a)(3) (i.e., exports or reexports to any destination other than those specified in Country Groups D:1, D:4, or D:5 (excluding countries also in A:5/A:6) for an entity that is headquartered in, or whose ultimate parent company is headquartered in, either Macau or a destination specified in Country Group D:5).

• Military End-Use/End-User Restrictions: Exports, reexports or transfers (in-country) for a “military end-use” or a “military end-user” as defined in the EAR.

Notification Requirement: Paragraph (c) of License Exception NAC sets forth the prior notification requirements for exports or reexports to Macau or destinations in D:5 countries (or samples that don’t meet the purchase order requirement).  The notification requirement provides that:

• Twenty-five calendar days prior to exports or reexports to or within Macau or a destination specified in Country Group D:5, the party must submit a completed application in BIS’ SNAP-R system, notifying BIS of the proposed License Exception NAC export or reexport.

• BIS will inform the party, within twenty-five calendar days, if it may use License Exception NAC for the proposed export or reexport.  During this time, the application will be reviewed by BIS and other agencies. Notifications will be provided via BIS’ System for Tracking Export License Applications (STELA). BIS may also inform parties by email, telephone, fax, courier service, or other means.  If use of License Exception NAC is approved, the company will receive an NAC confirmation number.  While BIS appears to be committing to providing responses within 25 days, exporters would not be authorized to proceed under License Exception NAC if no response is received by the 25^th day.

Licensing Review Policies

License review policies were revised, as follows:

• The RS licensing policy was updated to adopt a presumption of approval for license applications involving Advanced Computing Items for destinations outside of Macau and D:5 unless the items are destined to an entity headquartered in, or whose ultimate parent company is headquartered in, either Macau or a D:5 country.

• License applications for Advanced Computing items destined to Macau or a D:5 country will be reviewed with a presumption of denial.

• License applications for items specified in Category 3B, and related software and technology, destined for Macau or a D:5 country  will be reviewed consistent with license review policies in Section 744.23(d) of the EAR (i.e., presumption of denial unless destined for a U.S. or A:5/A:6 Country Group headquartered entity), unless a license would not be required by Section 744, in which case the application will be reviewed on a case-by-case basis.

New TGLs

The IFRs include two new TGLs which are valid through 31 December 2025.

Advanced Computing TGL:   The Advanced Computing TGL has a different product scope and destination scope than the TGL issued in the October 7 Rule but is intended to minimize the impact on supply changes as companies adjust to the new restrictions. This TGL authorizes the export, reexport or transfer (in-country) of specified items to destinations in Country Groups D:1, D:4 or D:5 (other than those also in A:5/A:6) provided that both the product scope and end-use scope are met:

• Product Scope: The items subject to the EAR are specified in one of the Advanced Computing Item ECCNs, or in related software or technology provisions of the CCL (i.e., 3A001.z; 3A090; 3D001 (for “software” for commodities controlled by 3A001.z, 3A090); 3E001 (for “technology” for commodities controlled by 3A001.z, 3A090); 4A003.z; 4A004.z; 4A005.z; 4A090; 4D001 (for “software” for commodities controlled by 4A003.z, 4A004.z, and 4A005.z); 4D090; 4E001 (for “technology” for commodities controlled by 4A003.z, 4A004.z, 4A005.z, 4A090 or “software” specified by 4D001 (for 4A003.z, 4A004.z, and 4A005.z), 4D090); 5A002.z; 5A004.z; 5A992.z; 5D002.z; 5D992.z; 5E002 (for “technology” for commodities controlled by 5A002.z or 5A004.z or “software” specified by 5D002 (for 5A002.z or 5A004.z commodities)); or 5E992 (for “technology” for commodities controlled by 5A992.z or “software” controlled by 5D992.z));

• End-use Scope: To continue or engage in integration, assembly (mounting), inspection, testing, quality assurance, and distribution of items specified in the Product Scope for the ultimate end use of these items outside of destinations specified in Country Groups D:1, D:4, or D:5 (other than those also in A:5/A:6) so long as:

  • The recipient is located in a D:5 country but is not headquartered in, and whose ultimate parent company is not headquartered in, Macau or a D:5 country; and

  • The end-user is not an entity who is headquartered in, or whose ultimate parent company is headquartered in, Macau or a destination specified in a D:5 country.

SME TGL:  In order to provide SME producers in the United States and Country Groups A:5 and A:6 countries additional time to identify alternative sources of supply outside of arms-embargoed  countries, or to acquire individually validated licenses, this TGL authorizes the export, reexport or transfer (in-country) of CCL items to manufacturing facilities in a D:5 country or Macau for the “development” or “production” of “parts,” “components,” or “equipment” of certain Category 3B ECCNs specified in Section 744.23(a)(4). The SME TGL only applies when:

• the items exported, reexported, or transferred (in-country) are subject to the EAR, specified on the CCL, and controlled only for AT reasons, and

• the items are exported, reexported, or transferred (in-country) at the direction of a company that is headquartered in the United States or a destination specified in Country Groups A:5 or A:6, and not majority-owned by a company headquartered in either Macau or a destination specified in Country Group D:5.

Revision of “Supercomputer,” “advanced-node integrated circuits,” and semiconductor manufacturing equipment end use controls

BIS reorganized Section 744.23 by combining the product scope paragraphs with the end-use scope paragraphs, revised certain terms, and added several exclusions. Below is a summary of the new provisions.  For ease of comparison to the prior October 7 Rule, the summary is formatted to continue using the (i) product scope; and (ii) destination/end-use scope.

• Supercomputers
• Product scope:
  • (1) An IC subject to the EAR and specified in ECCN 3A001, 3A991, 4A994, 5A002, 5A004, or 5A992; or
  • (2) A computer, “electronic assembly,” or “component” subject to the EAR and specified in ECCN 4A003, 4A004, 4A994, 5A002, 5A004, or 5A992
• Destination and end-use scope:
  • (1) The “development,” “production,” operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of a “supercomputer” located in or destined in Macau or a destination specified in Country Group D:5; or
  • (2) The incorporation into, or the “development” or “production” of any “component” or “equipment” that will be used in a “supercomputer” located in or destined to Macau or a destination specified in Country Group D:5
• Advanced-node ICs
  • Any item destined to a “production” “facility” of “advanced-node ICs” rule
    • Product scope: Any items subject to the EAR
    • Destination and end-use scope: The “development” or “production” of ICs destined to “facility” located in Macau or a destination specified in Country Group D:5 where “production” of “advanced-node ICs” occurs
      • The term “production”, for purposes of this sub-section, does not apply to back-end steps such as assembly, test, or packaging that do not alter the integrated circuit technology level.
• Category 3 items destined to a “facility” where the technology node is unknown rule
• Product scope: Any item subject to the EAR specified in an ECCN in Product Groups B, C, D, or E in Category 3 of the CCL
  • Destination and end-use scope: The item will be used in the “development” or “production” of ICs destined to a “facility” located in Macau or a destination specified in Country Group D:5 where “production” of integrated circuits occurs, but you do not know whether “production” of “advanced-node ICs” occurs at such “facility.”
• Advanced Computing Items
  • Product scope:  Any item subject to the EAR and specified in an Advanced Computing Item ECCN
  • Destination and end-use scope:  Destined to any destination other than those specified in Country Groups D:1, D:4, or D:5 (excluding an A:5 or A:6 country) for an entity that is headquartered in, or whose ultimate parent company is headquartered in, either Macau or a destination specified in Country Group D:5.
• Semiconductor manufacturing equipment (SME)
  • Product scope: Any item subject to the EAR and specified on the CCL
  • Destination and end-use scope: when destined to either Macau or a destination specified in Country Group D:5 for the “development” or “production” of ‘front-end integrated circuit “production” equipment’ and “components,” “assemblies,” and “accessories” therefor specified in ECCN 3B001 (except 3B001.g, .h, and .j), 3B002, 3B611, 3B991 (except 3B991.b.2), or 3B992.  This revised language carves out certain equipment from the end use scope, including masks, mask “substrates,” mask-making equipment and certain mask “substrate blanks.”

Request for Comments

The IFRs also request comments from industry on certain topics, including:

a. Access to “development” at an infrastructure as a service provider (IaaS) provider by customer developing or intending to develop large dual-use AI foundation models.  As has been expected by industry, this suggests that BIS is still strongly considering imposing controls on the provision of these types of services even though such controls were not included in the IFRs.

b. Technical solutions to identify items otherwise classified under 3A090 and 4A090 that, based on certain restrictions in their ability to be used in training large dual-use AI foundation models with capabilities of concerns, such that the items should be exempt from the scope of the restrictions.

c. The applicability of deemed exports and deemed reexports to control the release of technology or software related to advanced computing items controlled for RS reasons.  As noted above, the IFRs excluded deemed exports and deemed reexports from the scope of the additional controls, but BIS appears to be further assessing whether this exclusion services BIS’ foreign policy and national security objectives.

d. The appropriate definition of headquartered companies when considering the scope of the new controls.  Until guidance on this topic is issued, companies will need to develop risk-based due diligence procedures to identify companies located outside of Macau, D:1, D:4 or D:5 countries that might be headquartered in these countries or whose parent companies might be headquartered in these countries.

These requests for comment suggest that it is likely that BIS will, in the future, issue additional revisions to the EAR to further expand and clarify the scope of these restrictions.  We would be pleased to work with you to prepare and submit comments to BIS as appropriate.

Comments are due by 18 December 2023.

Next steps

Companies in the semiconductor, artificial intelligence and supercomputing industries, including those that use semiconductors in their manufacturing process, should assess the impact of the IFR on their own organization and their broader supply chain, particularly: (i) the extent to which the changes to 3A090 impact the classification of their ICs and equipment incorporating these ICs; (ii) the scope of the Company’s transactions involving D:1, D:4 and D:5 country destinations, as well as internal operations in these countries; (iii) the scope of the Company’s transactions outside of D:1, D:4 and D:5 countries (excluding A:5/A:6 countries) which may involve entities headquartered in, or whose ultimate parent is headquartered in, Macau or a D:5 country; and (iv)  the impact the of the expanded Advanced Computing FDP on foreign-made items which may now be subject to the EAR given the lower Advanced Computing Item performance thresholds and broader scope of end-destinations. Further, downstream customers of OEMs that utilize these semiconductors will want to work with the OEMs and their vendors to understand the impact of these expanded restrictions on their existing equipment (e.g., what items include these Advanced Computing ICs such that an export license or application of License Exception NAC may be required for the reexport of the equipment) as well as with respect to equipment that it procures going forward.

Annex A

The 13 Entities Designated on the Entity List

• Beijing Biren Technology Development Co., Ltd.;

• Guangzhou Biren Integrated Circuit Co., Ltd.;

• Hangzhou Biren Technology Development Co., Ltd.;

• Light Cloud (Hangzhou) Technology Co., Ltd.;

• Moore Thread Intelligent Technology (Beijing) Co., Ltd.;

• Moore Thread Intelligent Technology (Chengdu) Co., Ltd.;

• Moore Thread Intelligent Technology (Shanghai) Co., Ltd.;

• Shanghai Biren Information Technology Co., Ltd.;

• Shanghai Biren Integrated Circuit Co., Ltd.;

• Shanghai Biren Intelligent Technology Co., Ltd.;

• Superburning Semiconductor (Nanjing) Co., Ltd.;

• Suzhou Xinyan Holdings Co., Ltd.; and

• Zhuhai Biren Integrated Circuit Co., Ltd.