Introduction
On May 13, 2025 [1] [2], the Bureau of Industry and Security (BIS) announced the rescission of the interim final rule on the AI Diffusion Rule. Initially issued in January 2025, this rule aimed to regulate AI model exports and semiconductors essential for AI training. However, due to concerns about its complexity and potential negative impact on American innovation and international relations, BIS decided not to enforce it. Instead, a new approach focusing on direct negotiations is planned. This decision reflects ongoing debates about maintaining US leadership in AI innovation and global competitiveness.
Description
On May 13, 2025 [1] [2], the Bureau of Industry and Security (BIS) announced the rescission of the interim final rule on the AI Diffusion Rule, which was initially issued in January 2025 and set to take effect shortly thereafter. This rule aimed to impose compliance requirements on certain AI model exports and semiconductors necessary for AI training [2], categorizing countries into three tiers with varying levels of restrictions on chip exports [3]. However, it faced criticism for being overly complex and potentially hindering American innovation while negatively impacting diplomatic relations with various countries. In light of these concerns, BIS indicated it would not enforce the rule and plans to issue a replacement focused on direct negotiations rather than blanket restrictions in the future. This decision follows significant debate within the industry regarding the potential impact of the AI Diffusion Rule on US competitiveness and security [2], as the Department seeks to ensure that the United States maintains its leadership in AI innovation and global dominance in the field [4].
Despite the rescission [2] [4], the Trump Administration continues to prioritize preventing US adversaries from accessing critical AI technologies [2], as evidenced by recent actions to restrict exports of advanced chips to China [2]. BIS officials have expressed intentions to increase penalties for companies violating export controls [2], particularly concerning exports to China [2]. Exporters [1] [2] [5], whether US or non-US persons [1], must be aware that transferring advanced computing integrated circuits (ICs) and related commodities to foreign Infrastructure as a Service (IaaS) providers is subject to the Export Administration Regulations (EAR) if there is knowledge that these items will be used for AI model training for parties in D:5 countries [1], including China and Macau [1]. Support activities [1], such as shipping or facilitating transactions [1], are also regulated under similar conditions.
On the same day [2], BIS released new nonregulatory guidance that may impose export licensing requirements for AI-related transactions [2]. This guidance emphasizes compliance with existing export rules [3], particularly regarding the use of Huawei’s AI chips [3], and highlights the risks associated with allowing US AI models to be used for training Chinese models [2]. Companies are advised to implement due diligence measures when exporting advanced computing ICs, as specific activities may require an export license [2], especially those involving knowledge that AI models will be used for military or weapons of mass destruction purposes [2]. BIS has categorized illegal diversion schemes involving advanced computing ICs into New Transactional and Behavioral Red Flags and Due Diligence Actions [1], indicating that increased enforcement actions are anticipated [1], particularly against non-US companies involved in activities that may support China’s Military-Civil Fusion Development Strategy [1].
BIS has specifically warned that Huawei Ascend ICs were improperly manufactured in violation of US export controls [2] [5], making any purchase or use of these ICs a violation of the EAR under General Prohibition 10 (GP 10) [5]. This prohibition extends to any actions related to items subject to the EAR when there is knowledge of a potential violation [5], including support from entities such as financial institutions that may indirectly facilitate prohibited exports. The guidance clarifies that the Huawei Ascend chip is classified under Export Control Classification Number (ECCN) 3A090 and falls under GP 10 [5], which extends to entities indirectly supporting prohibited exports [2].
Before engaging in transactions [1], it is essential for companies to obtain end-user certifications that detail all parties involved and their intended use of the products [1]. Customers must certify that they will not export or transfer advanced computing ICs for military-intelligence end uses or users [1], particularly in relation to activities that may support weapons of mass destruction or military-intelligence operations in D:5 countries [1]. An exception exists for items obtained solely for technical analysis or evaluation purposes [5], which will not attract enforcement actions [5]. In the coming weeks [2], regulatory developments will be closely monitored [2], particularly regarding potential reimposition of controls on closed model weights and any new restrictions on open model weights [2] [5]. The guidance suggests that enforcement of AI-related exports will likely increase under existing authorities [2], especially concerning activities that may assist in training AI models for parties in China or other countries of concern [2].
Conclusion
The rescission of the AI Diffusion Rule marks a significant shift in US policy towards AI export controls, emphasizing a more nuanced approach through direct negotiations. While the rule’s withdrawal aims to foster innovation and maintain international relations, the US remains vigilant in preventing adversaries from accessing critical AI technologies. The BIS’s new guidance and potential increased enforcement actions underscore the importance of compliance with export regulations, particularly concerning transactions involving China and other countries of concern. As regulatory developments unfold [2], companies must remain diligent in adhering to export controls to avoid penalties and support US national security objectives.
References
[1] 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
[2] https://www.jdsupra.com/legalnews/us-export-controls-on-ai-diffusion-2932674/
[3] https://techcrunch.com/2025/05/13/trump-administration-officially-rescinds-bidens-ai-diffusion-rules/
[4] https://media.bis.gov/press-release/department-commerce-rescinds-biden-era-artificial-intelligence-diffusion-rule-strengthens-chip-related
[5] 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
