Introduction
On May 13, 2025 [2] [5], the US Department of Commerce’s Bureau of Industry and Security (BIS) rescinded the Artificial Intelligence Diffusion Framework [3], a regulation that would have imposed global licensing requirements on advanced semiconductors and computing commodities [3]. This decision reflects concerns about potential impacts on US innovation and international relations, particularly with China. In its place, BIS has issued new guidance documents addressing national security risks associated with AI technologies.
Description
On May 13, 2025 [2] [5], the US Department of Commerce’s Bureau of Industry and Security (BIS) officially rescinded the Artificial Intelligence Diffusion Framework [3], a regulation that would have imposed the first-ever global licensing requirements on advanced semiconductors and computing commodities [3], including integrated circuits (ICs) and AI model weights [4]. This decision [3] [4] [5], influenced by significant debate within the industry, was driven by concerns that the regulation could hinder US innovation and damage diplomatic relations, particularly with China. While a replacement regulation is being developed, BIS will not enforce the existing rule [2].
In conjunction with the rescission [2], BIS issued three new guidance documents that address national security risks associated with AI technologies, particularly those involving Chinese technology firms [2]. This marks a strategic shift in AI export controls [2], emphasizing the protection of national security interests while maintaining existing export control measures. The new guidance suggests a broad interpretation and aggressive enforcement of current regulations [2], particularly concerning transactions involving advanced ICs from China.
The guidance highlights strict compliance and due diligence requirements under the Export Administration Regulations (EAR) [4], particularly for companies in the advanced IC sector. Entities must update their compliance procedures to address new red flags and expectations [4], especially regarding transactions involving certain Huawei Ascend ICs and other advanced ICs developed in China [4]. BIS has indicated that it will closely scrutinize all transactions involving advanced integrated circuits and commodities [3], regardless of the parties’ nationalities or roles in the supply chain [3].
Particularly concerning are the end-use licensing requirements for transactions involving ICs that may be utilized by parties in sensitive countries [4], including China [3] [4] [5]. Companies intending to engage with PRC 3A090 integrated circuits must confirm with suppliers that necessary authorizations exist for the transfer of production technology and the shipment of ICs [1]. In the absence of such authorization [1], parties must obtain a waiver under EAR § 764.5(g) to avoid violations [1]. Engaging in activities related to these ICs without proper authorization from BIS can lead to significant legal risks [4], including enforcement actions and penalties [4]. However, BIS will not enforce actions against those acquiring PRC 3A090 ICs solely for technical analysis or evaluation purposes [1].
Companies are advised to assess the implications of the rescission on their operations [4], particularly regarding the use of PRC 3A090 ICs and compliance with General Prohibition 10 (GP 10) [4]. The guidance also emphasizes that while providing advanced computing items to Infrastructure as a Service (IaaS) providers for training AI models on behalf of entities in China or other arms embargoed countries is not inherently a violation [1], it raises concerns about potential prohibited end uses related to weapons of mass destruction (WMD) or military-intelligence applications [1]. Therefore, additional due diligence is necessary.
Foreign companies training AI models that could support WMD or military-intelligence end uses for Chinese entities risk being added to the Entity List [1], even without a direct EAR violation [1], as such actions contradict US national security interests [1]. To ensure compliance [1] [4], companies should implement risk-based due diligence measures [1], maintain thorough recordkeeping [4], and rigorously vet counterparties [1], especially for future sales and transfers of ICs [4]. The guidance signals BIS’s enforcement priorities and expectations for compliance programs [4], encouraging exporters to integrate these practices into their existing compliance frameworks.
Entities involved with PRC-designed or produced advanced computing ICs should assess supply chain risks and confirm necessary authorizations with suppliers [1]. Companies procuring advanced computing items or engaging with closed AI model weights should reassess licensing requirements following the rescission of the AI Diffusion Framework [1], particularly regarding potential involvement of Chinese entities [1]. The guidance outlines information and assurances to mitigate the risk of unauthorized diversion of advanced computing items [1], highlighting the need for companies to act swiftly in adapting to the regulatory changes affecting the export and use of advanced computing technologies [4].
Conclusion
The rescission of the AI Diffusion Framework and the issuance of new guidance documents by BIS underscore a strategic shift in US export controls, focusing on national security while balancing innovation and international relations. Companies must adapt to these changes by enhancing compliance measures, conducting thorough due diligence, and reassessing their operations to mitigate risks associated with advanced computing technologies and their potential misuse.
References
[1] https://www.akingump.com/en/insights/alerts/bis-rescinds-its-ai-diffusion-rule-and-issues-compliance-guidance-regarding-advanced-computing-items
[2] 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
[3] https://www.aoshearman.com/en/insights/ai-diffusion-rule-rescinded-policy-guidance-for-advanced-integrated-circuits-and-commodities-issued
[4] https://www.jdsupra.com/legalnews/bis-announces-rescission-of-biden-era-4236317/
[5] https://www.jdsupra.com/legalnews/us-export-controls-on-ai-diffusion-2932674/
