Introduction
The Bureau of Industry and Security (BIS) has released updated guidance to prevent the illegal diversion of advanced computing integrated circuits (ICs) to China and other nations of concern [6]. This guidance specifically targets Huawei’s Ascend chips, which are suspected of violating US export controls. The document outlines the need for vigilance against export control evasion and provides detailed instructions for compliance.
Description
The Bureau of Industry and Security (BIS) has issued updated guidance aimed at preventing the illegal diversion of advanced computing integrated circuits (ICs) to China and other nations of concern [6], specifically targeting Huawei’s Ascend chips (910B, 910C [4] [9], and 910D) [4] [9] [10]. These chips are believed to have been developed or produced in violation of US export controls [9], posing a risk of breaching General Prohibition 10 (GP 10) under the Export Administration Regulations (EAR) [9]. This guidance emphasizes the need for companies to be vigilant against export control evasion [6], particularly through third countries [6], in light of increasing evidence of such activities [6]. All ICs classified under Export Control Classification Number (ECCN) 3A090 [4] [9], designed by companies based in the People’s Republic of China (PRC) [4], are presumed to require prior BIS authorization for any activities [10]. Engaging with these ICs without such authorization constitutes a violation of the EAR [10], particularly GP 10 [7], which prohibits a wide range of activities related to items subject to the EAR if there is knowledge of a potential violation [1] [4].
BIS clarifies that it will not pursue enforcement against parties acquiring PRC 3A090 ICs solely for technical analysis or evaluation purposes [4] [8] [9]. However, exporting or transferring advanced computing ICs to foreign Infrastructure as a Service (IaaS) providers is restricted if there is knowledge that these items will be used to train AI models for parties in Country Group D:5 [4] [9], including the PRC and Macau. US persons are prohibited from knowingly supporting activities that involve unauthorized diversion of controlled items [7], and those providing support for activities that may assist in training AI models for these parties also face potential enforcement actions if they do not obtain BIS authorization [4]. Foreign companies training AI models that could support weapons of mass destruction (WMD) or military-intelligence applications for Chinese entities may face inclusion on the Entity List [2], even without a direct EAR violation [1] [2], as such actions contradict US national security interests [1] [2].
BIS has updated its guidance on diversion schemes involving advanced ICs [4] [9], which have been under export restrictions since October 2022 [4] [9]. The agency has identified that these ICs are being diverted for military and WMD purposes by the PRC and provides a list of red flags and due diligence actions for companies to assess potential export control evasion [4]. New red flags include unusual ordering patterns [7], customers with no prior exports of advanced computing ICs [4] [9], atypical technical specifications requests [7], customers with minimal online presence [6], unknown delivery addresses [4] [9], and data centers unable to confirm their infrastructure capabilities [4] [9], particularly those that cannot operate servers with advanced ICs exceeding 10 megawatts [3]. Key diligence actions include identifying transactional and behavioral red flags [10], conducting thorough evaluations of new customers and infrastructure [10], and ensuring awareness of the end use of advanced computing ICs [10], particularly in relation to AI model training for entities in embargoed countries [10]. Companies are advised to obtain written attestations regarding infrastructure capabilities and conduct on-site inspections to mitigate risks.
To further mitigate the risk of unauthorized diversion of advanced computing items [2], exporters are encouraged to review and potentially enhance their existing compliance practices with additional information and assurances [2]. Exporters are advised to implement risk-based due diligence measures [2], incorporating BIS’s diversion indicators to strengthen compliance programs and rigorously vet counterparties [2], particularly for transactions involving advanced computing ICs [2]. This guidance may reflect a strategic effort to influence international negotiations regarding AI data center chips [2], signaling that using or servicing certain integrated circuits could lead to export control violations and compel compliance with US security agreements [2]. Chinese hyper-scalers utilizing Huawei’s Ascend ICs may face increased scrutiny and risk of being added to the Entity List due to potential violations of EAR section 764.2(e) [2].
In addition, BIS has rescinded the AI Diffusion Rule and introduced a new framework for AI-related exports and services, mandating a worldwide license requirement for the export [5], reexport [1] [2] [3] [4] [5] [6] [7] [8] [9] [10], or in-country transfer of advanced computing ICs and model weights of closed-weight AI models that have been trained on more than 10^26 computation operations [5]. The updated guidance specifies that activities requiring an export license include knowledge that an AI model will be used for WMD or military-intelligence purposes [3], affecting exports [3] [4], reexports [1] [2] [3] [4] [5] [6] [7] [8] [9] [10], or transfers of advanced computing ICs and related commodities [3] [8].
Licensing policies vary by country tier [5], with applications to Tier 3 countries facing a presumption of denial [5], while those to Tier 1 countries are presumed approved [5]. For Tier 2 countries [2] [5], the review policy is contingent on their total processing performance (TPP) quota [5]. A new license exception [5], Artificial Intelligence Authorization (AIA) [5], allows exports to Tier 1 countries under specific conditions [5]. Additional requirements for foundries and OSAT companies ensure that only items designed by approved IC designers can utilize certain exceptions [5]. License exceptions such as Advanced Compute Manufacturing (ACM) and Low Processing Performance (LPP) are also introduced [5], aiming to mitigate the IFR’s impact on supply chains for advanced ICs and authorize limited exports of low compute amounts to consignees outside of Tier 3 [5].
Failure to comply with these regulations may result in civil or criminal enforcement actions [4], and foreign parties that contravene US national security interests may be added to BIS’s Entity List [4] [8], facing export bans [4]. Companies are urged to reassess their export control policies and procedures [7], focusing on end-use and end-user screening in light of these developments [7]. Public comments on the updated guidance are being solicited until May 15, 2025 [5], prompting companies to evaluate the implications for their operations and consider submitting feedback to BIS [5].
Conclusion
The updated BIS guidance underscores the critical importance of compliance with US export controls, particularly concerning advanced computing ICs [7]. Companies must enhance their due diligence and compliance measures to prevent unauthorized diversions, which could lead to significant legal and operational consequences. The guidance also reflects broader strategic efforts to safeguard US national security interests and influence international negotiations on AI and computing technologies. As the regulatory landscape evolves, companies are encouraged to stay informed and proactive in their compliance efforts.
References
[1] https://www.steptoe.com/en/news-publications/international-compliance-blog/trump-administration-charts-new-path-on-ai-export-controls-with-significant-new-guidance-and-rescission-of-diffusion-rule.html
[2] https://www.akingump.com/en/insights/alerts/bis-rescinds-its-ai-diffusion-rule-and-issues-compliance-guidance-regarding-advanced-computing-items
[3] https://www.wilmerhale.com/en/insights/client-alerts/20250515-us-export-controls-on-ai-diffusion-officially-paused-but-new-guidance-elevates-risk-for-ai-related-exports
[4] https://www.jdsupra.com/legalnews/bis-rescinds-ai-diffusion-rule-and-9566663/
[5] https://perkinscoie.com/insights/article/bis-publishes-bold-new-artificial-intelligence-diffusion-framework
[6] https://www.worldecr.com/news/us-issues-guidance-on-advanced-chip-diversion-amid-crackdown-on-third-country-shipments/
[7] https://natlawreview.com/article/bis-issues-four-key-updates-advanced-computing-and-ai-export-controls
[8] https://www.akingump.com/en/insights/ai-law-and-regulation-tracker/bis-rescinds-ai-diffusion-rule-and-issues-new-guidance
[9] https://www.wiley.law/alert-BIS-Rescinds-AI-Diffusion-Rule
[10] https://www.crowell.com/en/insights/client-alerts/us-department-of-commerce-rescinds-biden-administrations-ai-diffusion-export-control-rule-and-issues-new-guidance-on-huawei-chips-for-ai-purposes-and-diligence-expectations
