Lawyer: 'Don't Close The Books Yet' on Biden's Chip Export Control Plans

Semiconductor companies should expect more export control rules from the Bureau of Industry and Security before the Trump administration takes office, including possibly new licensing rules and record-keeping requirements for certain chip exports to destinations outside of China, trade lawyer Charles Capito said.

“Don't close the books yet on the Biden administration,” Capito said during a Dec. 17 webinar hosted by his firm, Morrison Foerster. “There's at least one more rule, potentially two, to look out for before Jan. 20.”

BIS recently sent a rule for interagency review that could lead to new AI-related chip controls (see 2412100012). It’s reportedly preparing new restrictions on certain advanced chips destined to nations in Southeast Asia and the Middle East, a move designed to further limit China’s ability to access them (see 2412160036).

Capito said there are “rumors” a possible new BIS rule would expand export licensing requirements for chips destined to those countries and put in place “more complex recordkeeping obligations” on parties shipping those items. He added that it’s a “rulemaking that we likely will see in the next couple days.”

He also said he expects BIS to continue publishing new semiconductor-related export control rules under the Trump administration, with a particular focus on tightening restrictions on exports of advanced chips to China. “It'll be a similar trajectory,” Capito said, calling BIS a “highly professionalized, staff-driven organization with very experienced, technical” employees, including in leadership roles

“So from a rulemaking perspective, I think we'll continue to see growing strictness on transactions in advanced [integrated circuits] and related areas to China,” he said, along with other countries “that are deemed to be a risk of diversion to China for advancing their AI and advanced IC capabilities.”

The most recent BIS rulemaking expanded certain U.S. export licensing requirements to cover any foreign-made chip equipment that includes any amount of controlled U.S.-origin components, among other new controls (see 2412020016 and 2412030041). Beijing immediately retaliated with restrictions of its own, including by signaling it was preparing to implement its own version of controls over foreign-made items (see 2412110052 and 2412120052).

Although Capito said China has “other levers they can pull in this sector” to respond to more U.S. restrictions, he noted Beijing has so far been measured. “I think they've shown a resistance or a discipline not to overreact to upset their economic interests,” he said, “and I think they'll continue to behave that way.”

He also said the threat of Chinese retaliation won’t stop the U.S., including the incoming Trump administration, from imposing new controls. “I don't think that the [People’s Republic of China] countermeasures will act as a deterrent to the U.S. continuing to regulate the semiconductor space, in particular.”

Asked whether the Trump administration could step up restrictions against Chinese telecommunications company Huawei, Capito said it’s possible the U.S. will expand the scope of items subject to foreign direct product rule restrictions when destined to Huawei. “I think we might see that continue,” he said, especially if the company continues to “develop advanced chips for their telecommunication devices.”

But he said he doesn’t expect incoming President Donald Trump to take broader steps to restrain Huawei -- including by sanctioning it through the Office of Foreign Assets Control’s Specially Designated Nationals List -- as some House Republicans have urged (see 2310100023 and 2309150020). Policy researchers have said that would cause major issues for a range of countries, including some U.S. allies, that use Huawei equipment in their telecommunications infrastructure (see 2410150063 and 2404120005).

“That would be a very drastic escalation that we don't foresee,” Capito said.