Regulatory intelligence for US exporters

Disclosure of Is-Informed Letters to US Tech Companies in 'National Interest,' BIS Official Says

A Bureau of Industry and Security official last week confirmed the agency sent letters to specific companies restricting their ability to export certain artificial intelligence-related chips to China, and said more restrictions may be coming. In the agency’s first public comments on the matter, Thea Kendler, BIS’s assistant secretary for export administration, said the agency hopes the letters help inform industry about the types of exports the agency is scrutinizing.

“We’re normally restricted in the kinds of information that we can provide about company-specific actions,” Kendler said during a Sept. 16 call with reporters, “but given the importance of this, we determined it was in the national interest to confirm that we sent letters to specific companies, and the companies must come to us for approval of transactions now involving those kinds of items and activities.”

Kendler’s comments came less than a month after U.S. technology companies NVIDIA and AMD said BIS informed them about specific licensing requirements for some of their products, including certain semiconductors (see 2209010059). The requirements “restrict trade and servicing of specific advanced semiconductors essential for highly capable AI applications,” Kendler said, adding that they aim to stop exports of items that support certain “military activities” in China. The new licensing requirements also apply to certain activities, she said, including “performing a service or contract that may benefit a Chinese military intelligence end-user.”

“We issued a directive that certain companies must come to the BIS for approval of transactions involving those kinds of items and activities," Kendler said. She added that BIS will review those license applications with other agencies, including the Defense, State and Energy departments, “in accordance with national security and foreign policy considerations.”

The requirements come amid a BIS review of the types of U.S. semiconductors and chipmaking equipment that can be exported to China (see 2207150023). While Kendler declined to comment specifically on the review, she said BIS is continually assessing whether to strengthen or relax dual-use export restrictions to “match the national security and foreign policy landscape.”

“Fortunately, many of our controls are written as floors, so a lot of emerging technologies are already captured in our list of technologies,” Kendler said. “But we are always striving to improve our list and make them more relevant to today's environment.” While she said she is “not in a position to outline any specific policy changes right now,” BIS is “taking a comprehensive approach to implement actions related to technologies, as I noted, and also end uses and end users.”

The agency is reportedly planning to expand its chip export controls next month, including for semiconductors used for AI-related tools (see 2209120007). Some in the semiconductor industry expect updates to BIS end-user policies and the Entity List as well as new restrictions on sensitive technologies, especially semiconductor manufacturing equipment, a semiconductor industry executive said in a recent interview. The person hopes BIS issues the new restrictions “through regular order with a rulemaking” to “avoid poorly written rules that don't achieve the objective and that have significant unintended consequences.”

As it prepares to issue new controls, BIS is also pouring resources into its enforcement efforts, particularly surrounding chip exports to Russia. Matthew Axelrod, the agency’s top export enforcement official, said during the call that BIS isn't seeing “broad-based efforts” by countries in the Asia-Pacific region to send advanced semiconductors to Russia in violation of U.S. export controls. Axelrod said BIS has been conducting outreach with both U.S. industry and “key” overseas semiconductor suppliers to make sure they’re aware of its licensing requirements.

BIS has also been “searching” for companies to perform end-use checks in the Asia-Pacific region and elsewhere, especially “places that might be diversion points for things, including semiconductors, to go to Russia.”

“We've been trying to take a multifaceted approach to make sure that semiconductors aren't going to Russia in violation of the controls,” Axelrod said. “That doesn't mean that there won't be a one-off here and there, but so far we haven't seen a systematic, widespread evasion when it comes to semiconductors.”