AI Diffusion Rule Had 'Major Problems,' Chilled Commerce, White House AI Chief Says
David Sacks, the president's AI policy adviser, said the Biden-era AI diffusion export control rule was an “overreach” of U.S. export control authority and alienated American allies. The Bureau of Industry and Security’s plan to rescind the rule (see 2505070039 and 2505080026) was an “excellent decision,” he said last week.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The rule “bogs American tech companies down in red tape, while slowing the global adoption of U.S. technologies at a time when we should be encouraging the world to build on our tech stack,” he said in a post on social media. Although the U.S. should take “aggressive steps” to stop advanced chips from being illegally exported to China, Sacks said “that goal should not preclude legitimate sales to the rest of the world as long as partners comply with reasonable security conditions.”
One of the “major problems” of the rule was that it represented a potentially “unlawful” expansion of export control authority, Sacks said. Although the Export Control Reform Act allows the U.S. to restrict sales of dual-use exports, including advanced semiconductors to China, he said the diffusion rule “went significantly further” by subjecting nearly all exports of advanced chips to export licensing requirements or forcing them to “fit into a narrow set of license exemptions.”
“This forced much of the global data center and AI infrastructure industry to seek approval from Washington,” Sacks said, “creating a bottleneck that chilled legitimate, non-sensitive commerce.”
He said the rule’s plan to place caps on the number of chips that can be imported by certain countries “was a radical departure from market-based allocation principles,” adding that it would give the U.S. the responsibility of rationing compute power across the world. “It effectively turned Washington into a central planner for the global AI industry.”
The rule also “strained relationships” with close allies, he said. The EU and other trading partners have criticized it, saying it would place unfair restrictions on some nations listed in Tier 2, the mid-tier group of countries subject to caps on AI chips and other restrictions (see 2502200051). “This kind of regulatory hierarchy undermines trust and risks pushing allies toward non-American technology alternatives,” Sacks said.
He also pointed out that the Biden administration published the rule days before President Donald Trump took over, “without a meaningful public comment or review period.” BIS issued the restrictions as an interim final rule with a comment deadline of May 15, the date the rule was originally scheduled to take effect.
“Given its sweeping scope, its retroactive elements, and the global compliance burden it imposed,” Sacks said, “this rollout was deeply flawed from both a procedural and practical standpoint.”
He cautioned against any restrictions that hurt the competitiveness of American chip suppliers, saying the U.S. technological lead over China is narrowing.
“If U.S. companies are hamstrung by excessive regulation, and foreign customers are blocked from buying our technology, we risk ceding global markets and influence to Chinese competitors,” he said. “Right now, we have the opportunity to entrench the American tech stack worldwide while we still have a commanding lead. Let’s seize it.”