Washington, D.C. (October 24, 2023) - On October 17, 2023, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced further limitations on the sale of advanced semiconductors from the United States to China. This is the Biden administration's latest effort to limit the capacity of U.S. technologies to aid in the development of China's supercomputing and artificial intelligence sectors. These updates also expand the export controls to include all 22 countries with which the U.S. has an arms embargo. These countries include Russia, Afghanistan, Cuba, Iran, Iraq, Syria, and many more. Companies and individuals in the U.S. need to take note.

BIS released three rules updating the export controls previously announced in October 2022. Those controls require U.S. companies and persons to obtain a license to export an array of materials destined for supercomputer or semiconductor development or end use in China. A previous alert by Lewis Brisbois provides further information on those restrictions. More recently on August 9, 2023, President Biden issued Executive Order 14105, an outbound investment regulation limiting U.S. persons' investment in certain Chinese industries, including semiconductors and artificial intelligence. For more information on the August 9 regulations, please see Lewis Brisbois' previous alert.

These newest regulations are meant to close loopholes and ensure the effectiveness of the controls, which are designed to prevent China from producing advanced weapons systems and artificial intelligence (AI). As the BIS announcement explains, China's use of advanced semiconductors to further its AI capabilities presents a national security concern for the U.S., particularly where AI is used in military applications.

The first update is intended to make the controls on advanced computing chips more effective and less burdensome. Specifically, the update adjusts the parameters that determine whether an advanced computing chip is restricted by removing "interconnect bandwidth" as a parameter, among other parameter changes. The update also imposes new measures to address risks of circumvention of the controls, such as establishing a worldwide licensing requirement for the export of controlled chips to any company headquartered in any of the 22 countries subject to a U.S. arms embargo, including China. It also imposes a new requirement that U.S. persons and companies must provide notification for the export of certain consumer-grade chips with AI capabilities. This rule becomes effective on November 16, 2023.

The second update expands the controls on semiconductor manufacturing items. To that end, the update imposes controls on additional types of semiconductor manufacturing equipment and expands licensing requirements for such equipment to the 21 additional countries beyond China for which the U.S. maintains an arms embargo. This rule becomes effective on November 17, 2023.

Finally, the third update adds 13 Chinese entities to the Entity List for their involvement in the development of advanced computing chips. The Entity List identifies entities that are believed to be involved, or pose a risk of becoming involved, in activities contrary to the national security or foreign policy of the U.S.. Once added to the list, these entities, and those who do business with them, are subject to licensing requirements and supplemental regulations. This rule is effective as of October 17, 2023.
As the announcement warns, BIS will continue to update its export controls to ensure that U.S. technology is not used to threaten global peace and security.

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