The U.S. Department of Commerce's Bureau of Industry and Security ("BIS") recently released two rules to update export controls on advanced semiconductors, semiconductor development and production, and items that support supercomputing applications and end-uses.

These rules clarify, revise, and expand upon regulations issued in October 2022, which fundamentally changed the export controls relating to semiconductors, supercomputers, and related equipment, components, and parts. The first rule, Expansion of Export Controls on Semiconductor Manufacturing Items Interim Final Rule, focuses on semiconductor manufacturing equipment. The second rule, Advanced Computing Chips Rule, concerns advanced semiconductors, supercomputers, and related assemblies, components, and parts. The new rules, which amend the Export Administration Regulations, are intended to address China's continued efforts to obtain advanced semiconductors for the development of artificial intelligence and to acquire equipment essential to producing semiconductors for advanced weapons systems. The rules go into effect on November 17, 2023.

The new rules change, and in some cases expand, export control classifications that broaden the scope of items controlled. In addition, BIS adds to the destinations subject to the controls and revises related end-use restrictions. The new rules also revise existing license exceptions and add a new license exception that is intended to establish a gating mechanism combined with prior notification to mitigate some of the expansion of the controls in limited scenarios. Finally, the new rules clarify, and in some circumstances narrow, the restrictions on the activities of U.S. persons that were first introduced in the October 2022 rules.

BIS announced that the changes are necessary to prevent circumvention of controls and to account for industry developments. It further explained that it is expanding country-based restrictions in order to address diversion risks and changing end-use restrictions to obtain greater visibility into, and control over, the flow of sensitive items outside the United States.

Companies with business operations involving semiconductors and advanced computing should closely examine these updates and expanded controls to determine whether steps are necessary to ensure compliance with U.S. export controls.

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