Regulatory intelligence for US exporters

BIS Seeing Less Unintended Effects From Chip Controls, Working to Name Restricted Entities

The Bureau of Industry and Security is seeing fewer unintended impacts from its most recent October 2023 chip controls compared with the initial set of rules released in 2022, a BIS official said this week. The official also said BIS is working to identify certain companies, including potentially Chinese chip making facilities, that are restricted from receiving sensitive U.S. chip manufacturing equipment, which could help exporters more easily do due diligence on their customers and supply chain partners.

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Tim Mooney, who works in the BIS Regulatory Policy Division, said the agency “definitely scrambled” to write company-specific authorizations to businesses two years ago after receiving complaints that the October 2022 chip controls (see 2210070049) were having unintentional impacts on their exports. But he said that hasn’t been the case since BIS updated the controls last year (see 2310170055).

“It doesn't sound like that we're getting as many of those issues this time around,” Mooney said during a Jan. 30 Sensors and Instrumentation Technical Advisory Committee meeting. “So that's definitely a good thing to see.”

He specifically pointed to a case in 2022 in which a chip company told BIS that it was preparing to shut down and fire its employees as a result of the new rules unless it received an export license from the agency. Mooney didn’t name the company, but Export Compliance Daily reported in 2022 that chip firm Nexcel Electronic Technology told BIS it was prepared to go out of business before it was granted a four-year license to continue its operations (see 2212190017).

“We don't want you in that type of a situation,” Mooney said, urging exporters to reach out to BIS if the rules are affecting a company’s exports in a way the agency likely didn’t intend.

“Don't just sit there helplessly and think, ‘well, there's nothing that I can do.’ Reach out to us, make sure that we're aware of this potential issue,” he said. “If it's something that we didn't intend in terms of the impact or the rule, we can look to see what kind of ways we can potentially address that, because we do understand the importance of supply chains.”

Mooney also said BIS continues to receive requests from exporters to publicly list companies subject to the end-user and end-use controls outlined in the chip restrictions. The Semiconductor Industry Association has told BIS that a list of restricted Chinese fabs could help companies conduct due diligence and better comply with the U.S. rules (see 2212140038 and 2301260052).

Mooney said that was one of the “most common comments” BIS received after it released its 2022 controls. He said companies asked the agency: “Don't make us jump through all these hoops to do this” analysis.

BIS realizes that “identifying the specific entities of concern, putting them on the Entity List, that definitely is a much more effective way and the easier way to ease the burden,” Mooney said. And even though the agency “probably never will get to an exhaustive list of all the facilities that are of concern,” it wants to “try to continue down that road,” he said.

“We are currently working on those to try to identify the entities that should be identified on the Entity List to help enhance the controls,” he said, “and also at the same time, ease the burden as much as we can on parties.”