New BIS Chip Rule Includes Lists of Approved Designers, Service Providers

The nearly 100-page interim final rule, which has an effective date of Jan. 16 and a compliance date of Jan. 31, was released two days after the Biden administration unveiled sweeping global controls on advanced computing chips and certain closed artificial intelligence model weights (see 250113002). The latest rule is meant to make it easier for companies to carry out due diligence, BIS said, and it builds on the Biden administration's series of chip-related rules released since October 2022, including by closing “loopholes” in those restrictions and ensuring they “remain durable.”

It will “further target and strengthen our controls to help ensure that the [People’s Republic of China] and others who seek to circumvent our laws and undermine U.S. national security fail in their efforts,” said Commerce Secretary Gina Raimondo.

One change will impose a broader, worldwide license requirement for chip foundries and packaging companies shipping certain advanced chips captured by Export Control Classification Number 3A090. That license requirement will apply unless those exports are destined to companies named in two new lists of trusted chip designers and chip assembly and test services firms, or other companies -- outside of China and other U.S.-embargoed countries -- that meet certain reporting criteria.

BIS said the lists will help foundries and other entities carry out due diligence on both their customers and their chip products, saying existing red flags and technical guidance issued by the agency haven’t done enough. That guidance hasn’t “fully ensured that foundries producing [integrated circuits] for IC designers and other related companies in the IC supply chain are able to definitively determine whether those ICs meet or exceed the ECCN 3A090 control parameters,” the rule said.

Although BIS has issued a series of red flag “indicators” to help foundries “assess an IC’s performance level,” the agency said companies looking to evade U.S. export controls have been able to work around those red flags and divert controlled chips for “unauthorized end uses.” They have done this by misrepresenting to foundries details about the performance capabilities of their chips, including in ways that make it “difficult for a foundry to adequately verify the performance of such items.”

BIS said this risk “is not hypothetical,” adding that it has “observed persistent efforts” to evade U.S. export controls on both advanced chips and Entity Listed firms, including through Chinese firms using shell companies. “Open-source reporting described PRC companies using foreign subsidiaries or other means to purchase ICs subject to” the Export Administration Regulations, BIS said.

BIS has reportedly been investigating whether Taiwan Semiconductor Manufacturing Company violated U.S. export controls against Huawei after one of TSMC’s sensitive chips was found in a Huawei product (see 2411150017 and 2410240011). TSMC said in October that it spoke with BIS about the issue (see 2410230019).

“Although BIS’s controls have been effective, they have not entirely prevented the diversion of advanced computing ICs to” China, the agency said, adding that it has “determined that further restrictions on these ICs are warranted to ensure that advanced computing ICs are only exported to customers with low risk of diversion to restricted entities.”

While it said certain chip designers and assembly vendors “have a long history of compliance with export controls, more safeguards are needed to ensure that the PRC and other entities cannot access advanced computing ICs through diversion from third parties.”

The new, expanded license requirement will look to prevent those diversion attempts. Under the rule, the agency will restrict exports to entities that it hasn't vetted and will carve out a “substantial number of low-risk transactions”for certain pre-approved companies. A shipment will be excluded from the new license requirement if:

• The advanced chip is destined to a company on a new BIS list of “approved” semiconductor designers;
• The advanced chip is packaged by a company on a new, separate list of “approved” outsourced semiconductor assembly and test (OSAT) companies; or
• A company can meet certain conditions and criteria that BIS is using to verify other “authorized” chip designers.

The rule includes two initial lists of more than 30 approved chip designers and more than 20 OSAT providers, and BIS said others can apply to be added. They must meet certain criteria and be approved by the interagency End-user Review Committee.

BIS said it decided on which companies to add to the two lists after taking into account their record of “appropriate end-use activities,” their export licensing history and their track record of export compliance. It also analyzed where the companies are based, their ownership and the volume of their semiconductor industry business, among other factors. The new lists include major semiconductor and technology firms Nvidia, Microsoft, TSMC, Qualcomm, Advanced Micro Devices and others.

Other non-listed chip designers can be carved out of the new license requirement if they meet criteria under new Note 1 to 3A090.a., which says they must be headquartered in Taiwan or a Country Group A:1 or A:5 country and must not have a parent headquartered in a Country Group D:5 nation, including China and Macau. They must also agree to submit certain information, including the “transistor count of the final chip,” to the front-end fabricator, and that fab must report that information to BIS.

The front-end fab must also collect and report to BIS a range of information about the “authorized” designer, including the name, address and point of contact for the designer, and a description of each category of chip “specified or presumed to be specified” under ECCN 3A090.a and sold during the reporting quarter, along with other information about those chips.

Fabs must also complete a specific know-your-customer vetting form that BIS included in the rule. The form requires the fab to answer a range of questions meant to verify the “legitimacy” of the designer -- including information about their email and physical address -- along with whether the designer’s name matches any names on a U.S. government restricted party list. It also requires the fab to verify that the designer didn’t raise red flags, including that the company answered all questions about the end users and end uses of the product, that the company isn’t overpaying for a product, and more.

“By enhancing due diligence requirements, we are holding foundries accountable for verifying that their chips are not being diverted to restricted entities," said BIS Undersecretary Alan Estevez.

The rule makes a range of other notable revisions and clarifications to the EAR, including technical corrections to a Dec. 2 export control rule that placed new foreign direct product rule restrictions over certain foreign-made chip tools, among other things (see 2412020016). This new rule updates the December rule's definition of “advanced-node integrated circuit” for Dynamic Random-Access Memory (DRAM) chips, and it extends the public comment period for the December rule to March 14. Comments were previously due Jan. 31.

All exports that now require a license as a result of this rule but were aboard a carrier to a port as of Jan. 31 may proceed to their destinations under the previous eligibility as long as the items are exported no later than March 3, BIS said. Any items not exported before midnight Jan. 8 will require a license.

If BIS informed a company in the 12 months before “the effective date of this regulatory action” that they were exempt from certain chip-related license requirements, “then exports, reexports, or transfers (in-country) of that item are exempt from any licensing requirement imposed by this regulatory action absent additional action taken by BIS,” the rule said.