BIS Unveils Major Export Control Overhauls for Advanced Computing and AI

BIS Initiates Rescission of the "AI Diffusion Rule"

In a significant move, BIS has announced its intention to rescind the "AI Diffusion Rule." While the exact contours of the replacement control regime remain to be seen, this signals a potential shift in how advanced computing and AI-related exports will be regulated. Companies should closely monitor forthcoming announcements from BIS regarding the formal rescission and the new control framework. It is crucial to note that all existing IC-related export controls that predated the AI Diffusion Rule will remain in effect during this transition period. This necessitates continued vigilance and adherence to the established regulations until new policies are officially implemented.

New End-Use Controls for Advanced Computing Items

BIS is introducing new end-use controls specifically targeting advanced computing items. This development emphasizes the critical need for businesses engaged in the export, reexport, or in-country transfer of these technologies to implement rigorous due diligence and end-use screening processes. The focus on end-use is particularly relevant for companies operating within the Infrastructure as a Service (IaaS) sector, highlighting the potential for these computing resources to be utilized in ways that could pose national security risks. Companies must ensure they have robust systems in place to verify the intended use of advanced computing items and to identify any potentially concerning end-users or applications.

Guidance to Prevent Diversion: Newly Specified Red Flags

To further bolster export control enforcement and prevent the diversion of sensitive technologies, BIS has issued guidance outlining newly specified "red flags." These indicators are designed to help businesses identify and report suspicious transactions or activities that may indicate an attempt to circumvent export controls. Companies involved in the trade of advanced computing and AI-related items are strongly advised to familiarize themselves with these red flags and integrate them into their compliance training and screening procedures. Proactive identification and reporting of such activities are essential for maintaining compliance and safeguarding against potential violations of the Export Administration Regulations (EAR).

Prohibition of Transactions Involving Certain Huawei “Ascend” Chips Under “General Prohibition Ten”

As part of these updated controls, BIS has explicitly prohibited certain transactions involving specific Huawei "Ascend" chips. This prohibition is being enforced under "General Prohibition Ten" (GP10) of the EAR. This action directly targets specific components that may be utilized in ways contrary to U.S. national security and foreign policy interests. For parties intending to engage in any action concerning a PRC 3A090 IC, BIS has provided critical guidance on due diligence. Prior to undertaking any activities identified in GP10, companies must confirm with their supplier that BIS authorization exists for both the production technology of the PRC 3A090 IC from its designer to its fabricator, and for the PRC 3A090 IC itself from the fabricator to its designer or other supplier. Failure to secure such authorization could result in significant penalties.

Key Takeaways for Industry

The recent actions by BIS underscore a dynamic and evolving regulatory landscape for advanced computing and AI technologies. Companies operating within these sectors must remain vigilant and proactive in managing their compliance risks. Key recommendations for industry include:

• Review and Update Compliance Programs: Impacted companies should promptly assess their existing export control policies and procedures. Particular attention should be paid to end-use and end-user screening mechanisms to ensure they align with the latest regulatory requirements.
• Monitor Regulatory Changes: The rescission of the AI Diffusion Rule and the introduction of new end-use controls and GP10 prohibitions necessitate continuous monitoring of regulatory updates. Companies may need to adjust their licensing strategies accordingly.
• Enhance Employee Training: It is crucial to incorporate the newly specified red flags and guidance into employee training materials. Ensuring that relevant personnel are well-informed about these changes is vital for effective compliance.

BIS’s latest actions reflect a strategic effort to balance national security concerns with the rapid advancement of AI and computing technologies. The agency