Upcoming BIS AI Export Control Rule ‘Completely Misses the Reality,’ Oracle Says
An upcoming Bureau of Industry and Security rule that’s expected to place new export controls on advanced AI-related chips will “go down as one of the most destructive to ever hit the U.S. technology industry,” major cloud services provider Oracle said this week.
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The interim final rule, which hasn’t yet been publicly released but is expected to be issued before President Joe Biden leaves office (see 2412100012 and 2412160036), is complex and “wildly overbroad,” Oracle Executive Vice President Ken Glueck said in a blog post on the company’s website. He wrote that BIS should have crafted controls to target specific, restricted end-users and other high-risk end-uses, but instead the rule “misses this mark by a wide margin and chooses instead to disrupt U.S. leadership in cloud, chips, and AI.”
Glueck said the rule’s more than 200 pages include provisions that would place a global license requirement for certain AI technology and U.S.-origin graphics processing units (GPUs) instead of pinpointing specific countries, such as China and other arms-embargoed regions listed in Country Group D:5. He also said the rule will list a group of 20 Artificial Intelligence Authorization (AIA) countries that will benefit from “modestly better regulatory treatment than the rest of the world,” as long as exports to those countries abide by certain certification and semi-annual reporting requirements.
Placing a global license requirement for certain advanced items is a “substantial deviation” from how the Office of the Director of National Intelligence assessed AI risks in its 2024 annual threat assessment, Glueck said. The report didn’t reference “Portugal as a country of concern, for example,” he wrote. “Nor did they cite Saudi Arabia or the UAE in the context of AI at all,” although all appear to face new restrictions under the rule.
He also said the rule will create a group of new “Universal Validated End Users” (UVEUs), which will be “trusted ultimate consignees” that could benefit from “faster access to provide GPUs worldwide.” But Glueck said there are “strings attached” -- those consignees must comply with certain audit and data localization requirements, among other conditions.
“The problem is that outside of the U.S. (and even for the overwhelming majority of data centers inside the U.S.), there is no reason for the thousands of existing commercial data centers to meet these requirements, and they currently do not,” he wrote. “The UVEU process would fundamentally change the economics of data center deployment around the world.”
Glueck noted, however, that the rule also includes a new License Exception Low Processing Performance (LPP), which would allow most countries outside the 20 AIA nations to access low levels of GPUs within country-specific caps. But he also said the exception would introduce caps “aggregated for all exporters and re-exporters for countries under LPP that are well below what would be needed for even the most non-concerning cloud GPU workloads, rendering” the license exception “almost meaningless.”
Glueck said his main concern is that other countries will simply turn away from U.S.-origin technologies rather than try to abide by any potentially burdensome license requirements introduced by this rule. It “likely pushes the rest of the world to Chinese technology, which the [Chinese Communist Party] will be only too happy to leverage to catch up with the U.S," he said.
The rule also “completely misses the reality” that the very large data centers BIS is seeking to regulate “draw so much power you can see them from Mars. There’s no hiding in plain sight,” he wrote. “GPUs cannot be secretly aggregated or diverted from U.S. cloud providers in such large quantities to be concerning without being caught.”
The new controls are scheduled to be released as an interim final rule with a 60-day delayed effective date. Glueck said that isn’t enough time. “Let’s be clear,” he said. “A rule of this consequence on that timetable will turn the U.S. cloud industry upside down.”
He also criticized the U.S. government for not doing enough to consult with industry as it crafted the rule, and said it shouldn't release it days before the Trump administration takes over.
“To retroactively and surreptitiously issue a final rule of this magnitude without industry consultation and only days before the change in Administration is highly consequential. For the first time, we are applying draconian new regulations to largely unregulated public, commercial cloud,” Glueck said. “We are stifling innovation and strangling emerging business models. Worse, without fully contemplating the rule’s effects, we are likely handing most of the global AI and GPU market to our Chinese competitors.”
A BIS spokesperson declined to comment.