BIS Updates: New Rules on Export of ICs and AI

Introduction

The Bureau of Industry and Security (BIS) is the U.S. Department of Commerce agency responsible for regulating the export of sensitive technologies. Recently, BIS announced important updates regarding controls on advanced integrated circuits (ICs) and artificial intelligence (AI) technologies. These changes are particularly relevant for those operating in the technology sector and for anyone concerned with international security.

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1. Revocation of the AI Diffusion Rule

The rule requiring global licenses for AI technologies will soon be revoked. Until this is official, its enforcement is suspended.

2. Existing Controls

Previous controls remain in effect: exporting advanced products to countries such as China and the Middle East still requires a license.

3. Caution with Chinese ICs

Using integrated circuits designed or produced in China, such as those from Huawei, may violate U.S. export regulations.

4. Risks for Supplying AI to China

Providing advanced technologies to train AI models for Chinese entities or embargoed countries may be considered a security risk and could result in being added to the BIS Entity List.

5. Compliance Recommendations

BIS recommends adopting strict internal controls and carefully vetting customers to prevent unauthorized use of these technologies.

6. Licenses and Exceptions

New controls and certain license exceptions are in place, depending on the type of technology and the destination country.

7. High-Risk Countries

License requirements vary by country: China, Russia, and other “Tier 3” countries are subject to stricter regulations.

8. Preventing Diversion

BIS provides guidelines and warning signs to help prevent advanced technologies from falling into the wrong hands.

Commentary

From a policy perspective, this guidance may be part of the Trump administration’s strategy to exert leverage over other countries in bilateral negotiations over AI data center chips.  In addition, by signaling that using or servicing Ascend integrated circuits risks violating U.S. export controls, the Trump administration may be seeking to compel countries to accept the U.S. Government’s security agreements to receive such integrated circuits because pivoting to Huawei-designed ICs would violate the EAR.  In addition, the BIS guidance may be a precursor to further action by the U.S. Government to target Chinese hyper-scalers that have purchased and are using Huawei’s Ascend ICs.  Chinese hyper-scalers that deploy Huawei Ascend ICs now appear to face greater risk of being added to BIS’s Entity List because they may be engaging in violations of EAR section 764.2(e).

Conclusion

These updates reflect the growing international focus on technological security and export controls. It is essential for companies and industry professionals to stay informed and implement rigorous compliance practices. For further insights and analysis on the geopolitical implications of these measures, continue following the Extrema Ratio blog.