BIS Says VEU Program Is 'Loophole'; Plans to Delist Samsung, SK Hynix Factories
The Bureau of Industry and Security is removing Chinese affiliates of Samsung and SK hynix from its Validated End-User List, making them ineligible for a general authorization that had allowed them to receive certain controlled technology for their Chinese factories.
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The change, outlined in a final rule released Aug. 29 and effective Dec. 31, will remove Samsung China Semiconductor Co., SK hynix Semiconductor (China) and a third SK hynix-owned semiconductor facility in Dalian from the VEU program.
Parties on the VEU List can apply for and obtain a general export authorization from BIS to acquire certain items, rather than seeking multiple individual licenses from the agency. BIS called the VEU program a "loophole" that has allowed a "select group of foreign semiconductor manufacturers to export most U.S.-origin goods, software, and technology license-free to manufacture semiconductors in China. No U.S.-owned fab has this privilege -- and now, following today’s decision, no foreign-owned fab will have it either." Closing this "Biden-era loophole" will put the firms "on par with their competitors," the agency said.
BIS said it plans to approve export license applications to allow former VEU participants to operate their existing fabs in China, but it “does not intend to grant licenses to expand capacity or upgrade technology at fabs in China.”
BIS Undersecretary Jeffrey Kessler said the VEU List has placed "U.S. companies at a competitive disadvantage. Today’s decision is an important step towards fulfilling" the administration's commitment toward closing what he said are export control loopholes.
The announcement came nearly three years after BIS issued a waiver for Samsung and SK hynix to continue supplying certain controlled chip equipment to their Chinese factories despite the agency's set of sweeping chip export license requirements, published in October 2022 (see 2210310044 and 2210120002). BIS extended those authorizations the following year by updating the VEU listings for Samsung and SK hynix so they could continue exporting certain technology to their Chinese factories. BIS said at the time that it had worked closely with the South Korean government to avoid what could be harmful disruptions to semiconductor supply chains (see 2310130016).
The agency’s Federal Register notice said one of the factories being removed from the VEU List is Intel Semiconductor (Dalian), but SK hynix bought that factory from Intel earlier this year, according to Intel’s March SEC filing. BIS didn’t respond to a request for comment about whether it plans to issue a clarification.
Samsung, SK hynix and Intel didn't comment.