US Allies Should Expand Chip Controls, Impose Harsher Penalties, Think Tank Says
American allies, including the EU, should introduce their own versions of the U.S. foreign direct product rule and the October 2022 U.S. persons controls that restricted additional sensitive semiconductor exports (see 2212210059), the Center for Strategic and International Studies said in a new report.
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CSIS said allies are “still lagging behind” the U.S.’s broad FDP rules, which place export license requirements on certain foreign-made technology and software. “In fact, all allies surveyed in this paper lack meaningful equivalents to the FDPR, limiting the effectiveness of their restrictions on AI chips and related technologies,” the think tank said.
It added that China introduced its equivalent of the U.S. foreign direct product rule last year, which could subject foreign firms to Chinese export licensing requirements if those firms deal in certain goods and technologies made in China or with Chinese-origin technology (see 2410210042). “If allies must pass new legislation to create these capabilities,” CSIS said, “then they should do so.”
But CSIS noted that imposing new chip-related controls on the activities of persons, including if those activities are in support of the development or production of advanced semiconductors in China, wouldn’t require any legislative changes to the export control rules of most allied nations. It specifically said the EU and its member states already have the authority to control services related to weapons of mass destruction.
Although EU member states haven’t “traditionally” considered the development of advanced chips to fall under those WMD restrictions, CSIS said it may still be possible. It would be a “political choice rather than a result of insufficient legal authorities,” the think tank said. “It is up to the Trump administration’s national security officials to make the case to allies that a different interpretation is in their best interests.”
U.S. allies should also consider imposing larger fines on companies to deter export control violations, including possible prison time. CSIS noted that the Bureau of Industry and Security under the Biden administration issued a record amount of export control-related fines, including a $300 million fine on Seagate Technology in 2023 (see 2304190071) and a $500,000 fine on multinational chipmaker GlobalFoundries in November (see 2411010043).
“This fine only amounted to around 3 percent of the value of GlobalFoundries’ shipment,” CSIS said. “Given semiconductor firms’ massive financial resources, U.S. and allied policymakers should also consider jail time or personal fines for the perpetrators rather than just corporate fines.”
The 34-page CSIS report, which analyzes the existing authorities that U.S. partner countries can use to place export controls on advanced chip and artificial intelligence-related technology, also said allied countries should create their own China-specific restrictions for AI chips. CSIS noted that many countries don’t have “publicly-stated” restrictions against China, including the Netherlands, which has called its chip tooling controls “country-neutral.”
“If allied countries are serious about restricting Chinese military end-users’ access to advanced node semiconductors and related technologies,” CSIS said, “they will have to do so on a China-wide basis.”