China Select Committee Chair Calls for Closing ‘Loopholes’ in New Chip Controls
House Select Committee on China Chairman John Moolenaar, R-Mich., urged the Bureau of Industry and Security Dec. 4 to close several “loopholes” in its new export controls on advanced computing chips and chipmaking equipment (see 2412020016).
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In a letter to Commerce Secretary Gina Raimondo, Moolenaar said the loopholes will continue to allow Chinese “bad actors” to access U.S. technology. Among the specific problems, he said, is the creation of a new License Exception Restricted Fabrication Facility, which will allow certain exports to semiconductor manufacturing facilities, or fabs, that are subject to end user-based license requirements but that aren’t currently producing advanced node chips.
“It is deeply confusing that, at a time when the U.S. government’s entity-by-entity approach is already facing challenges from [Chinese] circumvention, BIS would try a fab-by-fab approach,” Moolenaar wrote. “For example, BIS’s licensing policy towards SMIC Beijing is ‘presumption of denial,’ but SMIC Shanghai has a special carve-out for ‘items designed for production of 200mm wafers,’ while SMIC Shenzhen has yet another, different licensing policy.”
Moolenaar said the new controls also created loopholes for Huawei’s fab network. While BIS added Si’En Qingdao to the Entity List, “other Huawei firms such as SwaySure Technology and Shenzhen Pengxinxu Technology got special carve-outs to continue to access certain types of U.S. technology,” he wrote. “Meanwhile, BIS has taken no action against ChangXin Memory Technologies (CXMT) which is poised to become a leader in the very same [high-bandwidth memory] technology BIS just export-controlled.”
Moolenaar said he’s also concerned that Semiconductor Manufacturing International Corp. (SMIC) will continue to be able to access U.S. technology despite being on the Entity List. He said the new controls will allow SMIC to continue using a "wafer bridge" to connect a heavily restricted fab with a lightly restricted one.
"BIS needs to establish stronger, not weaker, counter-diversion restrictions for facilities near each other," Moolenaar said.
New red flag guidance that BIS inserted in the export control rule warns U.S. suppliers that a chip fab on the Entity List may build a physical “bridge” or tunnel to another building or facility that isn’t on the Entity List, and it may use that connected building to buy export-controlled U.S. items.
The letter asks Commerce to preserve documents and communications on the new restrictions so the Trump transition team can determine if other new loopholes were created.
While Commerce declined to comment on Moolenaar’s letter, Rep. Raja Krishnamoorthi, D-Ill., the ranking member of the House Select Committee, praised the new controls, saying they “will not only impair the [Chinese Communist Party’s] ability to produce advanced-node semiconductors that could be used in a range of military technologies, but also hinder their development of other advanced technologies, including artificial intelligence, that could be used for nefarious purposes.”
Moolenaar’s three-page letter came a day after House Foreign Affairs Committee Chairman Michael McCaul, R-Texas, issued a brief statement asserting that the new controls contain too many loopholes (see 2412030059). Technology policy analysts praised portions of the rule but were critical of others, saying they will continue to lead to workarounds by chip companies and lawyers (see 2412030041).