BIS Still 'Discussing' Replacement for AI Diffusion, Seeing Lengthy Licensing Times, Official Says

Tim Mooney, acting director of the BIS Regulatory Policy Division, said the agency hasn’t published many rules since the start of the Trump administration because senior leadership was assessing “what lines up with their priorities.” But now that Undersecretary Jeffrey Kessler has been in place since March, BIS is “starting to get guidance in terms of what his priorities will be going forward, so there is actually a lot of regulatory activity going on,” Mooney said during a Regulations and Procedures Technical Advisory Committee meeting this week.

He said the “big question” is how the new administration will change the AI diffusion rule after announcing in May that it wouldn't enforce those restrictions (see 2505130018). BIS is currently in the second round of interagency clearance for the rule that would officially rescind the AI diffusion regulation, Mooney said. “So hopefully it will be [published] fairly soon.”

But he also stressed that BIS is still discussing what “comes next” after the rescission rule. “Do we need to add some specific provisions to kind of fill that void?”

He said the “underlying national security and foreign policy concerns with the rule we're trying to address, those are generally not going to go away,” but “what is the right way to address that?"

“They are looking at that,” Mooney said. “But the exact scope of that rule is still -- there's a lot of people discussing it.”

Mooney said there’s a “lot of other regulatory activity that's going on,” mentioning that BIS hopes to soon finalize two space-related rules from October, including an interim final rule that reduced license requirements on certain less sensitive space-related items to more than 40 countries and a proposed rule that suggested transferring the export control jurisdiction of certain space-related defense items from the State Department’s U.S. Munitions List to the BIS Commerce Control List (see 2410180027 and 2411070024).

The State Department last year simultaneously issued a proposed rule to add and remove space-related items from the USML. Mooney said State is “also moving forward with their draft rule.”

In addition, BIS is working to finalize a 2023 proposed rule on License Exception STA, which authorizes certain exports to trusted U.S. allies if the foreign importer certifies that they won’t reexport the item outside a list of STA countries (see 2312070041). The changes were meant to improve and simplify the license exception, BIS said at the time (see 2403280013).

The agency hopes to finalize the STA rule “sometime later this summer, if all goes according to plan,” Mooney said.

Speaking generally about the policy direction of BIS senior leadership under the new administration, Mooney said “there's definitely a focus on trying to make things simpler.” There's a “perspective that maybe some of the controls are getting a little bit” complex, he told the RPTAC members. “So that's definitely one of the directions we’ve gotten from our new people, is that you really need to try to make things simpler wherever possible.”

He also said industry should expect the new administration to continue to focus on adding new parties to the Entity List and “identifying certain areas where we may have to increase licenses.” But there’s “an interest and a need to also identify areas where we can remove licenses,” Mooney said. “Either remove license requirements altogether, or come up with new license exceptions or expanded license exceptions to make things more efficient.”

Some RPTAC members asked Mooney during the meeting for an update on BIS licensing, with one saying that “licenses are not being processed.” BIS began pausing new export license applications earlier this year as part of a Trump administration policy review, and the pause has been lifted and put back in place multiple times (see 2502130068, 2502280006, 2502190018, 2503060013 and 2504020051).

“Licenses are being reviewed,” Mooney said. “When a new administration comes in, they do look at different rules and the rulemaking process, and they’re looking at licenses. But to say that licenses are not moving through the system -- they are. It is taking a little bit longer for some of the licenses. That's definitely true.”

An RPTAC member replied: “To be fair, that’s not how industry feels when we cannot process exports.” The person said they “haven't seen a license come out since January.”

Another RPTAC member also said they’re experiencing licensing issues. “It’s difficult when you put a license requirement in place, and then we apply for the license because the Department of Commerce wants to know about the activity, and then you can't get the license,” they said. “So that makes it really difficult for industry to operate.”

Later in the meeting, Katherine Moy, a trade lawyer with Microsoft, also said she's seeing delays. "In the last six months," she said, "the licensing process has basically ground to a halt."

Another RPTAC member said they’re seeing delays with advisory opinion requests, which exporters and other companies can submit to BIS to ask for guidance about whether a particular transaction or activity is subject to U.S. export controls. Mooney said "there has been no suspension in the issuance of advisory opinions,” although he acknowledged that there have been delays.

“We definitely do have a lot of advisory opinions that are working their way through the process,” especially opinions related to controls on advanced computing items, he said, which “tend to be fairly difficult questions sometimes to answer.”

Those opinions “really do touch on policy-related issues, so that, I think, is kind of taking a little bit longer for some of those,” Mooney said, adding that BIS is moving as “quickly” as it can.

“With new people in, we’ve seen a lot more new processes going through to getting things cleared. But hopefully now that we do have an undersecretary in place,” Mooney said, the “advisory opinions will start to speed up.”