For more insights and analysis from Cleary lawyers on policy and regulatory developments from a legal perspective, visit What to Expect From a Second Trump Administration.

In the final weeks of the Biden Administration and early days of the second Trump Administration, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) issued a series of new rules amending the Export Administration Regulations (“EAR”) to further expand and refine export controls on advanced computing items, semiconductor manufacturing equipment (“SME”), artificial intelligence (“AI”) items, and related technology destined to the People’s Republic of China (including Hong Kong) (“China”) and Macau.

In December 2024, BIS released an interim final rule, Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items, which introduced new and expanded export controls with respect to advanced integrated circuit (“IC”) products, as well as SME, including new foreign-produced direct product rules (“FDP Rules”) (the “Semiconductor IFR”).  The Semiconductor IFR was followed by two interim final rules issued in January 2025: (1) Framework for Artificial Intelligence Diffusion (the “AI Diffusion IFR”), which established new advanced IC controls, as well as controls on AI model weights, and (2) Implementation of Additional Due Diligence Measures for Advanced Computing Integrated Circuits; Amendments and Clarifications; and Extension of Comment Period (the “Due Diligence IFR”), which provided guidance to exporters regarding due diligence procedures to ensure compliance with the advanced IC and AI-related rules, and further amended the Semiconductor IFR.

The second Trump Administration has continued to press forward on targeting entities in China operating in the advanced IC, quantum computing, and AI sectors, including through the designation of a number of entities to the Entity List on March 25, 2025.

The Semiconductor IFR, AI Diffusion IFR, and Due Diligence IFR (collectively, the “Rules”) each build on and, in many ways, strengthen and update the advanced computing and SME-related rules first issued by BIS targeting China on October 7, 2022, and October 17, 2023.  Collectively, the Rules will further curtail the shipment of advanced ICs and advanced IC SME to China and introduce restrictions for the first time on AI model weights for training AI models in China.  Because the Rules are highly complex and make a substantial number of changes to previously issued controls, this alert memorandum is intended to provide an overview of key developments of the Rules and is not intended to be an exhaustive guide to the Rules or the current status of export controls on advanced ICs, SME, or AI relating to China.

I. New and Revised Advanced IC and AI Export Controls

In response to the evolving landscape of IC and AI technologies, the Rules introduce a series of sweeping new export controls and related measures, including several new and modified export control classification numbers (“ECCNs”) on the Commerce Control List (“CCL”) under the EAR (e.g., a new ECCN to control high-bandwidth memory (“HBM”) chips and new ECCNs to address emerging technologies, such as AI model weights), worldwide license requirements for certain advanced ICs, new definitions to clarify the scope of the advanced IC, SME and AI export controls, and clarity regarding the control status of software keys.  This section provides a detailed examination of these regulatory changes, highlighting their implications for stakeholders engaged in the export of advanced IC and AI technologies.

a. High-Bandwidth Memory (HBM) Chip Controls

In the Semiconductor IFR, BIS expanded the types of ICs classified under ECCN 3A090.  Due to their critical role in AI applications, including for military, intelligence, and surveillance uses, BIS introduced new ECCN paragraph 3A090.c to control HBM stacks that meet certain memory bandwidth density criteria.  Any HBM IC having a memory bandwidth density greater than 2 GB per second per square millimeter will be classified under ECCN 3A090.c and subject to a license requirement for exports, reexports, and transfers (in-country) to or within China or Macau, or other destinations specified in Country Group D:5.  Given that, according to BIS, all HBM stacks currently in production surpass this threshold, they will all be classified under ECCN 3A090.c and controlled for export. 

BIS also made corresponding changes to other provisions of the EAR to implement new ECCN 3A090.c, including establishing license requirements and defining the applicability of exceptions, FDP Rules, and end-use restrictions.

b. Worldwide License Requirements for Advanced ICs under 3A090.a and Items Containing Advanced ICs, as well as Advanced ICs under the Advanced Computing FDP Rule

In the AI Diffusion IFR, BIS introduced a new, worldwide regional stability (“RS”) control on advanced ICs classified under ECCN 3A090.a, as well as on items containing such advanced ICs and classified under ECCNs 4A090.a or any of the corresponding “.z” paragraphs (for items classified under other ECCNs that contain 3A090 chips).  ECCN 3A090.a controls ICs having one or more digital processing units that have either: (1) a ‘total processing performance’ (“TPP”) of 4800 or more; or (2) a TPP of 1600 or more and a ‘performance density’ of 5.92 or more.  ECCN 4A090.a controls computers, electronic assemblies, and components containing ICs meeting or exceeding the limits specified in 3A090.a.

BIS also made corresponding changes to the advanced computing FDP Rule (the “Advanced Computing FDP Rule”).  Previously, the Advanced Computing FDP Rule made certain foreign-produced advanced ICs or advanced computing items and their related technology subject to the EAR and a license requirement when destined to any destination specified in Country Groups D:1, D:4, and D:5, except for destinations specified in Country Groups A:5 and A:6.  Now, as revised, foreign-produced items will fall within the destination scope whenever there is “knowledge” that the item will be destined “worldwide” or incorporated into any “part,” “component,” “computer,” or “equipment” not classified as EAR99 and destined worldwide.

c. New Definitions and Revisions to Clarify Scope of Advanced IC Controls

The Rules also include changes to definitions under the EAR that will impact the scope of items captured by the advanced IC controls.

For example, in the Semiconductor IFR, BIS revised the criteria for calculating whether a DRAM IC meets the definition of “advanced-node integrated circuit.”  Previously, DRAM ICs were defined based on use of a production technology node of 18 nanometer half pitch or less.  The new definition uses two separate criteria, focusing on memory cell area or memory density.  As revised in the Semiconductor IFR, DRAM ICs will meet the definition of “advanced-node integrated circuit” if they have either a memory cell area of less than 0.0019 square micrometers or a memory density greater than 0.288 gigabits per square millimeter.  According to BIS, the changes address improvements in semiconductor fabrication that allow increased memory density through more compact memory cell architectures and three-dimensional stacking of DRAM. 

Subsequently, BIS further revised the criteria, changing the memory cell area from less than 0.0019 micrometers to less than 0.0026 micrometers and reducing the memory density from greater than 0.288 gigabits per square millimeter to greater than 0.20 gigabits per square millimeter.  In connection with those revisions, BIS also added a new alternative parameter of “more than 3000 through-silicon vias per die” to ensure that all targeted DRAM ICs are captured by the definition under one of these three alternative criteria.

d. New ECCN 4E091 for AI Model Weights

BIS introduced a new ECCN, 4E091, that controls certain AI model weights.  These weights are defined as “numerical parameters within an AI model . . . [that] help determine the model’s output in response to inputs” as defined in Executive Order 14110 on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.[1]  

A license will be required to export, reexport, or transfer (in-country) model weights classified under ECCN 4E091 for any closed-weight AI model (i.e., a model with weights that are not published) that has been trained on more than 1026 computational operations to any destination worldwide.  The controls will not extend to model weights of open-weight models.  (According to BIS, there currently are no known open-weight models known to have been trained on more than 1026 computational operations).

License applications for the export, reexport, or transfer of such model weights will be reviewed under a presumption of denial for all destinations except those listed in paragraph (a) of supplement no. 5 to Part 740 of the EAR, which include the following destinations (“Paragraph (a) Destinations”):

  • Australia
  • Belgium
  • Canada
  • Denmark
  • Finland
  • France
  • Germany
  • Ireland
  • Italy
  • Japan
  • Netherlands
  • New Zealand
  • Norway
  • Republic of Korea
  • Spain
  • Sweden
  • Taiwan
  • United Kingdom
  • United States

For Paragraph (a) Destinations, applications will be reviewed under a presumption of approval.  In addition, the license requirements for model weights will not apply to deemed exports or deemed reexports for persons employed by entities headquartered in, or with an ultimate parent headquartered in, the United States or another Paragraph (a) Destination.

As set out further below, certain transactions involving such closed model weights will be eligible for a new license exception Artificial Intelligence Authorization (“AIA”).  In addition, ECCN 4E091 will be subject to a new FDP Rule, the AI Model Weight FDP Rule, which will extend the license requirements beyond only U.S.-origin AI model weights to capture certain foreign-produced model weights of closed-weight models by making them “subject to the EAR.”

e. Clarification of Controls on Software Keys

The Semiconductor IFR also clarifies that software keys (i.e., software license keys) that enable users to use software or hardware, or renew existing licenses, are controlled under the same ECCNs on the CCL as the corresponding software or hardware.  This change is implemented through the addition of new paragraph (b) to 15 C.F.R. § 734.19, which specifies how these types of keys are treated under the EAR. 

II. New and Revised SME Export Controls

BIS also revised certain ECCNs to further target and refine the export controls applicable to SME.  In particular, as described in further detail below, the Semiconductor IFR added eight new ECCNs to the CCL and revised eight existing ECCNs to impose new controls on 24 types of SME and three types of software tools. 

The Semiconductor IFR added new ECCNs 3A090.c, 3B993, 3B994, 3D992, 3D993, 3D994, 3E992, 3E993, and 3E994 and modifies ECCNs 3B001, 3B002, 3B992, 3D001, and 3D002.  The Due Diligence IFR further modified ECCNs 3A090, 3B001.f, 3B993.f, 3D992, 3D993, 3E992, and 3E993.  Items classified under the new and amended ECCNs are controlled for national security (NS) and RS reasons.  As a result, a license generally will be required to export, reexport, or transfer such items to Macau or any destination specified in Country Group D:5 under the EAR, including China.

Items controlled under the new and revised ECCNs include:

  • Items for ion implementation
  • Equipment that performs plasma doping
  • Certain equipment designed or modified for anisotropic dry etching
  • Etch equipment used in the fabrication of dynamic random access memory (DRAM chips)
  • Equipment for depositing films in features with certain geometry and a specified dielectric constant
  • Deposition for silicon-and-carbon-containing films meeting certain temperature requirements, equipment for chemical vapor deposition (CVD) of carbon hard masks
  • Equipment designed for depositing insulators used in advanced DRAM production
  • Certain less-advanced DUV photolithography equipment
  • Certain nanoimprint lithography equipment
  • Certain annealing equipment for reflow of copper, cobalt, and tungsten
  • Certain equipment for annealing semiconductors
  • Certain removal and cleaning equipment for removing polymeric residue and copper oxide film and enabling deposition of copper metal in a vacuum
  • Metrology and inspection equipment for use with patterned 300 mm semiconductor wafers
  • Metrology equipment to improve the overlay accuracy of photolithography equipment
  • Equipment using optical measurement techniques and advanced software to determine the three-dimensional structure of patterns on a semiconductor wafer
  • Software for certain SME, including software for the production or development of certain advanced IC SME
  • Certain electronic computer-aided design software (ECAD) for advanced IC packaging involving multiple chips or chiplets co-packaged in a single device
  • Software for the production or development of certain SME in 3B993, including ECAD software for certain ICs using multipatterning, and computational lithography software

III. New FDP Rules and De Minimis Provisions

The FDP Rules under the EAR extend U.S. export control jurisdiction to certain foreign-produced items that are the direct product of U.S. technology or software or that are produced by a plant or major component of a plant that is itself a direct product of U.S. technology or software.  FDP Rules are designed to prevent the use of foreign manufacturing to circumvent U.S. export controls.  Similarly, the EAR’s de minimis rules are used to determine when a foreign-made product becomes subject to U.S. export controls because it contains more than a specified percentage (i.e., more than a de minimis amount) of controlled U.S.-origin content.  The Rules introduce significant changes to the FDP Rules, specifically targeting overseas SME production, advanced-node IC production, and entities on the Entity List with a new “footnote 5” designation.  The corresponding revised de minimis rules also expand the scope of foreign-produced SME, ICs, and AI model weights by making them subject to the EAR on the basis that they contain a specified threshold (or, in some cases, any) amount of U.S.-origin controlled content.  This section provides an overview of these new FDP Rules and de minimis provisions. 

a. New SME and Footnote 5 Entity List FDP Rules

The Rules added, expanded, and clarified two new FDP Rules relating to advanced-node IC production (the “SME FDP Rule”) and certain entities designated on the Entity List with a new “footnote 5” (the “Footnote 5 Entity List FDP Rule”).  In connection with these revisions, the Semiconductor IFR and Due Diligence IFR further refined and clarified the controls, including refining the de minimis provisions to control additional items not controlled by the new FDP Rules.  Concurrently with the Semiconductor IFR, BIS issued a final rule designating a significant number of parties on the Entity List and adding footnote 5 designations to those entities to impose the requirements of the Footnote 5 Entity List FDP Rule and corresponding de minimis rules on transactions involving such parties.

The Due Diligence IFR expanded the Footnote 5 Entity List FDP Rule to include certain foreign-produced items whenever there is “knowledge” that the item is destined for certain entities at facilities of concern, including locations that produce advanced-node logic and DRAM advanced-node ICs, regardless of whether the entity is designated on the Entity List, designated with a footnote 5 on the Entity List, or not designated at all. As with prior FDP Rules, each of the new FDP Rules has both a product scope and a destination scope, both of which must be met for a license requirement to apply.  However, there are certain exceptions from the license requirements applicable to items becoming subject to the EAR pursuant to the new FDP Rules.  The FDP Rules, as modified by the Due Diligence IFR, are set out below.

FDP RuleProduct ScopeDestination ScopeLicense Requirement
Footnote 5 Entity List FDP RuleFirst, item is described by ECCN 3B001 (except 3B001.a.4, c, d, f.1, f.5, f.6, g, h, k to n, p.2, p.4, r), 3B002 (except 3B002.c), 3B903, 3B991 (except 3B991.b.2.a through 3B991.b.2.b), 3B992, 3B993, or 3B994 (whether it is equipment, or specially designed parts, components, or accessories therefor).
 
Second, the item must either:
– be a direct product of (meaning that it is the immediate product produced directly by the use of) technology or software subject to the EAR and specified in ECCNs 3D001 (for 3B commodities), 3D901 (for 3B903), 3D991 (for 3B991 and 3B992), 3D993, 3D994, 3E001 (for 3B commodities), 3E901 (for 3B903), 3E991 (for 3B991 and 3B992), 3E993, or 3E994;
– be produced by a complete plant or major component of a plant (located outside the United States), when the complete plant or major component is itself a direct product of U.S.-origin technology or software specified in ECCNs 3D001 (for 3B commodities), 3D901, 3D991 (for 3B991 and 3B992), 3D992, 3D993, 3D994, 3E001 (for 3B commodities), 3E901 (for 3B903), 3E991 (for 3B991 and 3B992), 3E992, 3E993, or 3E994; or
– contain a commodity that is produced by a complete plant or major component of a plant (located outside the United States) when the complete plant or major component of a plant is itself a direct product of U.S.-origin technology or software specified in ECCNs 3D001 (for 3B commodities), 3D901, 3D991 (for 3B991 and 3B992), 3D992, 3D993, 3D994, 3E001 (for 3B commodities), 3E901 (for 3B903), 3E991 (for 3B991 and 3B992), 3E992, 3E993, or 3E994.		A foreign-produced item will meet the end-user scope of the Footnote 5 Entity List FDP Rule if the exporter, reexporter, or transferor has “knowledge” (as defined in the EAR to include reason to know), that the item will be either:
– incorporated into a part, component, or equipment produced, purchased, or ordered by an entity with a Footnote 5 designation on the Entity List (a “Footnote 5 Entity”), or by any entity located at a facility in Macau or a destination in Country Group D:5 where the production of logic or DRAM advanced ICs occurs;
– a Footnote 5 Entity or entity located at a facility in Macau or a destination in Country Group D:5 where the production of logic or DRAM advanced ICs occurs is a party to a transaction involving the item.		License is required under the EAR if the item will be incorporated into a part, component, or equipment produced, purchased, or ordered by a Footnote 5 Entity, or a Footnote 5 Entity is a party to a transaction involving the item.
 
However, the application of the licensing requirement varies depending on the specific transaction type and where the export, reexport, or transfer is from.  Specifically, 15 C.F.R. § 744.11(a)(2)(v) imposes a license requirement in the following scenarios:
1. License required for commodities in ECCNs 3B001 (except 3B001.a.4, c, d, f.1, f.5, f.6, g, h, k to n, p.2, p.4, or r), 3B002 (except 3B002.c), 3B611, 3B903, 3B991 (except 3B991.b.2.a through 3B991.b.2.b), 3B992, 3B993, or 3B994 when exported from abroad or reexported by an entity headquartered in, or whose ultimate parent is headquartered in, Macau or a destination in Country Group D:5.
2. License required for 3B993 commodities for exports from abroad or reexports from countries in Country Group A:5 that are not in supplement no. 4 to part 742, and for which the 3B993 commodities are not already subject to controls by the country of export or reexport.
3. License required for commodities specified in ECCN 3B001 (except 3B001.a.4, c, d, f.1, f.5, k to n, p.2, p.4, r), 3B002 (except 3B002.c), 3B611, 3B903, 3B991 (except 3B991.b.2.a through 3B991.b.2.b), 3B992, 3B993, or 3B994 that are exported from abroad or reexported from all countries not listed in Country Group A:5 by an entity that is headquartered or whose ultimate parent company is headquartered in a country not specified in supplement no. 4 to part 742.
4. License required for commodities specified in ECCN 3B993 that are exported from abroad or reexported from all countries not listed in Country Group A:5 by an entity that is headquartered in or whose ultimate parent company is headquartered in a country in supplement no. 4 to part 742.
5. For any transfers (in-country) to the entity, a license is required to transfer a commodity specified in ECCN 3B001 (except 3B001.a.4, c, d, f.1, f.5, g, h, k to n, p.2, p.4, or r), 3B002 (except 3B002.c), 3B611, 3B903, 3B991 (except 3B991.b.2.a through 3B991.b.2.b), 3B992, 3B993, or 3B994 by an entity whose ultimate parent company is headquartered in a country not listed in supplement no. 4 to part 742
6. For any transfers (in-country) to the entity, a license is required to transfer a 3B993 commodity by an entity whose ultimate parent company is listed in supplement no. 4 to part 742.
SME FDP RuleItem meets one of the following criteria:
1. The foreign-produced item is specified in 3B001.a.4, c, d, f.1, f.5, k to n, p.2, p.4, r, or 3B002.c and is the direct product, as defined above, of technology or software subject to the EAR and specified in 3D992 or 3E992 of the CCL; or
2. The foreign-produced item is produced by, or contains a commodity produced by, a complete plant or major component of a plant that is located outside the United States, when the plant or major component of the plant itself is a direct product of U.S.-origin technology or software that is specified in 3D001 (for 3B commodities), 3D901, 3D991 (for 3B991 and 3B992), 3D992, 3D993, 3D994, 3E001 (for 3B commodities), 3E901 (for 3B903), 3E991 (for 3B991 or 3B992), 3E992, 3E993, or 3E994 of the CCL.		The destination scope of the SME FDP Rule is met whenever there is knowledge (again, including reason to know) that the foreign-produced item is destined to Macau or a country in Country Group D:5, which includes China.A license is required for exports, reexports, and transfers (in-country) to or within either Macau or a destination specified in Country Group D:5.
 
However, there is an exclusion from the license requirements for commodities reexported or exported from abroad by an entity located in a country specified in
supplement no. 4 to part 742, provided that the entity is not headquartered and does not have an ultimate parent headquartered in Macau or a destination in Country Group D:5.
 
Furthermore, a license is not required if the commodity is reexported or exported from abroad by an entity located in a country that has implemented equivalent controls on such items, provided the entity is not headquartered and does not have an ultimate parent company headquartered in Macau or a destination in Country Group D:5.

Pursuant to guidance provided by BIS in the Semiconductor IFR, any item containing an IC can be automatically considered to meet the “product scope” of the Footnote 5 Entity List FDP Rule if the IC was produced using a tool that was itself a “direct product” of U.S.-origin technology or software specified in the relevant ECCNs.  Separately, under a new “Red Flag” added to the EAR by the Semiconductor IFR (as detailed further below), parties should presume “that any [IC] has been produced using at least one U.S. tool qualifying as a ‘major component.’”  This implies that the product scope of the Footnote 5 Entity List FDP Rule is met anytime a foreign-produced item contains at least one IC.

Corresponding Updates to De Minimis Provisions

BIS also added two new corresponding de minimis provisions to the EAR.  Under these provisions, which are described below, certain SME that incorporates any U.S.-origin content will be “subject to the EAR.”

  • Under 15 C.F.R. § 734.4(a)(8), a foreign produced commodity specified in ECCNs 3B001.a.4, c, d, f.1, f.5, k to n, p.2, p.4, r, or 3B002.c has no de minimis level when the commodity contains a U.S.-origin IC specified under Categories 3, 4, or 5 of the CCL, and the commodity is destined for Macau or a destination specified in Country Group D:5, which includes China, subject to certain exclusions. 
  • Under 15 C.F.R. § 734.4(a)(9), a foreign produced commodity specified in any Category 3B ECCNs, except 3B001.a.4, c, d, f.1, f.5, k to n, p.2, p.4, r, or 3B002.c, will not have a de minimis level whenever the commodity contains a U.S.-origin IC specified under Categories 3, 4, or 5 of the CCL, and the commodity is destined for a Footnote 5 Entity.

In practice, therefore, foreign-produced items that incorporate these items are subject to the EAR regardless of the percentage of the value of the foreign-produced item attributable to such content.  The new de minimis provisions will ensure that any foreign-produced SME incorporating a U.S.-origin IC (or other components) will be controlled to the same extent as items subject to the EAR pursuant to the two new FDP Rules set out in 15 C.F.R. § 744.11.  Accordingly, the same license requirements would apply as detailed in the table above.

b. New AI Model Weight FDP Rule

The AI Diffusion IFR also introduced a new AI Model Weight FDP Rule, which is set out in 15 C.F.R. § 734.9(l), to extend EAR jurisdiction over the most advanced model weights used to train AI models. 

The AI Model Weights FDP Rule provides that an item meeting the specifications of ECCN 4E091 is subject to the EAR when it is produced by a complete plant or ‘major component’ of a plant located outside the United States, provided that the complete plant or major component of the plant is subject to the EAR and specified in ECCN 3A001.z, 3A090, 4A003.z, 4A004.z, 4A005.z, 4A090, 5A002.z, 5A004.z, or 5A992.z.

The AI Model Weights FDP Rule will impose the same license requirements as ECCN 4E091.  Accordingly, a license requirement will be imposed worldwide, but it will be subject to the same exemptions as set out in ECCN 4E091, depending on the destination country.

IV. License Exception Revisions and Authorizations

License exceptions under the EAR allow certain exports, reexports, or transfers (in-country) without a specific license if the exports meet certain criteria outlined in a particular exception.  The Rules introduce six new license exceptions aimed at allowing certain controlled semiconductor and AI items to be exported, reexported, or (in some cases) transferred (in-country) without a license. 

a. License Exception RFF

The October 2022 and October 2023 rules impose certain end-user and U.S. person restrictions on semiconductor fabrication facilities that manufacture advanced node ICs.  Under new License Exception Restricted Fabrication Facility (“RFF”), certain items may be exported, reexported, or transferred (in-country) to certain of those facilities captured by those restrictions due to their capability to produce advanced node ICs, provided they are not currently producing advanced node ICs.  License Exception RFF is only available in limited circumstances for entities on the Entity List; the citation “15 C.F.R. § 740.26” must be specifically listed in the license requirements column of the Entity List at Supplement No. 4 to Part 744 of the EAR for the specific entity for License Exception RFF to apply.

The use of License Exception RFF will be subject to additional limitations and requirements.  For example, it may not be used for the operation, installation, maintenance, repair, overhaul, or refurbishing of certain commodities, and a notification must be sent to BIS 45 days prior to using the license exception.  The notification must include the end user’s name and address, a description of the item, the purchase price, and the anticipated shipping date.  In addition, a notification must be sent to BIS within one business day of obtaining “knowledge” that the end use has changed to advanced node IC production.  The installation of SME at these facilities under the license exception also will require a report to BIS within 30 days of installation.  Further, an annual end-use confirmation must be submitted to BIS on February 1 of each year that the exporter, reexporter, or transferor continues to provide service (or for at least five years from the date of last service) to confirm that the installed SME is not being used to produce advanced ICs.  Accordingly, parties making use of License Exception RFF will be required to engage in both initial and ongoing due diligence on their end users and will have lengthy reporting obligations.

b. License Exception High Bandwidth Memory (HBM)

Following the imposition of new ECCN 3A090.c to control HBM ICs, BIS also introduced new License Exception HBM under 15 C.F.R. § 740.25 to authorize certain exports, reexports, and transfers (in-country) for some HBM commodities under certain circumstances.  License Exception HBM is available only to exporters, reexporters, or transferors headquartered in the United States or a destination set out in Country Group A:5, provided it does not have an ultimate parent headquartered in Macau or a destination in Country Group D:5, and covers only 3A090.c items having a memory bandwidth density less than 3.3 GB/s/mm2, subject to certain additional conditions.  In addition, License Exception HBM cannot be used for exports, reexports, or transfers (in-country) to distributors, intermediate consignees (except for freight forwarding or customs clearance), or for co-packaging at any facilities located in Macau or a destination in Country Group D:5, including China, where production of advanced node ICs occurs.  This license exception also has certain reporting requirements.

c. License Exception Artificial Intelligence Authorization (AIA)

License Exception Artificial Intelligence Authorization (“AIA”) authorizes the export, reexport, or transfer (in-country) of specified advanced ICs, as well as associated software and technology, to entities located in Paragraph (a) Destinations, unless the entity or its ultimate parent company is headquartered outside such destinations.

The license exception applies to certain items classified under ECCNs 3A090.a, 4A090.a, corresponding .z paragraph items, and 4E091, subject to certain conditions and exceptions, as well as related software and technology in categories D and E of relevant ECCNs.  To use this exception, the exporter, reexporter, or transferor must furnish the ECCN to the ultimate consignee and obtain a certification from the ultimate consignee stating that, without BIS authorization:

  1. the items received will not be used to provide Infrastructure-as-a-Service (IaaS) access sufficient to train an AI model classified under ECCN 4E091 to entities headquartered or located outside of, or whose ultimate parent company is headquartered outside of, Paragraph (a) Destinations;
  2. the ultimate consignee will not export, reexport, or transfer the items to any end use or end user prohibited pursuant to Part 744 of the EAR; and
  3. the ultimate consignee will not export, reexport, or transfer (in country) the items to an entity headquartered or located outside of, or whose ultimate parent company is headquartered outside of, Paragraph (a) Destinations. 

For each shipment under License Exception AIA, the exporter, reexporter, or transferor will be required to notify the ultimate consignee:

  1. that the shipment is being made under License Exception AIA;
  2. which items are covered by License Exception AIA; and
  3. that it has completed the necessary certification.

Additionally, items falling within ECCNs 3A090.a, 5A002.z.1.a, z.2.a, z.3.a, z.4.a, and z.5.a, and 5A992.z.1 qualify for License Exception AIA only if they are designed by an approved or authorized IC designer, as set out in supplement no. 6 to Part 740 and Note 1 to ECCN 3A090.a, and described further below in Section VI of this alert. 

d. License Exception Advanced Compute Manufacturing (ACM)

The AI Diffusion IFR also introduced new License Exception Advanced Compute Manufacturing (“ACM”), which authorizes the export, reexport, and transfer (in-country) of items specified in ECCNs 3A090, 4A090, and related .z commodities, software, and technology to private sector end users in destinations not listed in Country Group D:5 or Macau.  License Exception ACM may only be used if the end user or its ultimate parent company is not headquartered in Country Group D:5 or Macau, and the purpose of the export, reexport, or transfer (in-country) is the development, production, or storage of such items.  Items used to train an AI model or any other activity will not qualify for License Exception ACM.

In addition, License Exception ACM will only apply to commodities specified in ECCNs 3A090.a, 5A002.z.1.a, z.2.a, z.3.a, z.4.a, and z.5.a, and 5A992.z.1 if they are designed by an approved or authorized IC designer as described in supplement no. 6 to part 740 of the EAR and Note 1 to ECCN 3A090.a.  The implementation process for new approved and authorized IC designers and similar authorized parties is explained further in Section VI of this alert.  

e. License Exception Low Processing Performance (LPP)

The AI Diffusion IFR also established new License Exception Low Processing Performance (“LPP”) to authorize the export and reexport (but not in-country transfer or shipments through distributors) of up to 26,900,000 cumulative TPP of advanced computing ICs per calendar year to any individual ultimate consignee (by all exporters and reexporters).  License Exception LPP applies to items specified in ECCNs 3A001.z.1.a, z.2.a, z.3.a, z.4.a;  3A090.a;  4A003.z.1.a, z.2.a; 4A004.z.1; 4A005.z.1; 4A090.a; 5A004.z.1.a, z.2.a; and 5A992.z.1 when sold directly, not through any distributors, to ultimate consignees in locations outside of Country Group D:5 or Macau.  To use License Exception LPP, the ultimate consignee and its ultimate parent company must not be headquartered in Country Group D:5 or Macau, and the items must not be used for any prohibited end uses or end users under part 744 of the EAR.

As with certification requirements for License Exception AIA, the exporter or reexporter must obtain a certification from the ultimate consignee confirming that the ultimate consignee has not received a cumulative total of 26,900,000 TPP during the relevant calendar year (and that the requested transaction would not exceed such limit).  This certificate must be provided to BIS within 30 days of the export or reexport.  The exporter must also notify BIS of all shipments containing an aggregate TPP of more than 3,200,000.

Ultimate consignees also are required to notify BIS if they are using License Exception LPP once they have met the cumulative TPP threshold.

f. License Exception Notified Advanced Computing (NAC) and Advanced Computing Authorized (ACA)

BIS also imposed several limitations on the ability to use existing License Exception ACA and License Exception NAC.

License Exception ACA previously authorized the export and reexport of specified items in ECCNs 3A090, 4A090, 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z (except for items designed or marketed for use in a datacenter that meet the parameters of 3A090.a) to any destination in Country Groups D:1 and D:4 (except Macau or Country Group D:5 destinations, or entities headquartered in, or with an ultimate parent headquartered in, Macau or Country Group D:5), as well as transfers (in-country) within Macau or Country Group D:5.  In line with the expansive worldwide license requirement introduced above, BIS modified License Exception ACA to apply to shipments to or within any destination worldwide (again, except Macau or Country Group D:5 destinations, or entities headquartered in, or with an ultimate parent headquartered in, Macau or Country Group D:5).

BIS also amended the License Exception NAC notification procedures to require additional information.  License Exception NAC authorizes, subject to notification, the export or reexport of items classified in ECCNs 3A090, 4A090, 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z to parties in Macau or destinations specified in Country Group D:5, as well as entities headquartered in, or with an ultimate parent company headquartered in, such destinations.  The additional information that must be submitted for BIS review will include information regarding all License Exception NAC and license approvals to the specified end user in the past 12 months under the relevant ECCNs, the memory bandwidth of the items, and whether the items will be aggregated into a datacenter or computing cluster (and, if so, further information regarding that usage). 

V. Data Center Validated End User Authorization Revisions

The BIS Validated End-User (“VEU”) program allows approved companies in eligible countries to receive certain controlled items without individual export licenses.  In the AI Diffusion IFR, BIS expanded the VEU authorization by expanding the “Data Center” specific VEU authorization into two distinct types: universal VEU (“UVEU”) and national VEU (“NVEU”).  Exporters may apply for these using a Data Center VEU Authorization application under 15 C.F.R. § 748.15.  If approved, the program would authorize the exporter to export, reexport, or transfer (in-country) advanced ICs that otherwise would require a license for use in data centers, subject to certain conditions and limitations.

The NVEU Authorization may be available to certain companies headquartered in, or whose ultimate parent is headquartered in, any destination except Macau or those in Country Group D:5.  A UVEU Authorization, on the other hand, may be available to companies headquartered in, or whose ultimate parent is headquartered in, Paragraph (a) Destinations.

In each case, the Data Center VEU authorizations will allow eligible data center operators that undergo the rigorous application process to be designated a VEU and identified by BIS as a party that can receive exports and reexports under the authorization. 

UVEU authorizations will be subject to geographic allocations based on the aggregate TPP of chips that meet or exceed the specifications of ECCN 3A090.a.  Specifically, a UVEU headquartered in a Paragraph (a) Destination may not transfer or install more than 25% of its AI computing power to or in any single country outside of those Paragraph (a) Destinations.  A UVEU headquartered in the United States may not transfer or install more than 50% of its total AI computing power outside the United States.  NVEUs, on the other hand, will be subject to per-company, per-country installed base allocation of TPP.

VI. Due Diligence, Red Flag Guidance, and KYC

In addition to the various regulatory changes introduced by the Rules, BIS also provided new guidance relating to application of the Rules.  BIS has described the Due Diligence IFR as responsive to requests from the public for BIS to provide additional guidance relating to due diligence procedures associated with advanced ICs.  BIS also introduced certain due diligence recommendations, as well as red flags guidance, in the Semiconductor IFR and AI Diffusion IFR.

a. Semiconductor IFR New Red Flags

In December 2024, BIS introduced eight new red flags, set out in supplement no. 3 to part 732 of the EAR, at paragraphs (b)(20) through (27), to assist exporters with their compliance programs.  The new red flags primarily focus on unique scenarios that may arise during export transactions.  For example, certain red flags address circumstances in which a potential new customer has certain senior management or leadership that overlaps with an entity on the Entity List, requests servicing for an item designed for an existing or former customer now designated on the Entity List, or requests servicing, installation, or similar services for an item altered after export for a more advanced end use that would normally require a license. 

BIS also issued red flags that are critical for the new FDP Rules set out in the Semiconductor IFR.  In particular, as described above, new red flag 26 indicates that if a foreign-produced item is described in the relevant Category 3B ECCN in §§ 734.9(e)(3)(i) or 734.9(k)(1) and contains at least one IC, the foreign-produced item meets the product scope of the applicable FDP Rule and the exporter, reexporter, or transferor must resolve the red flag (i.e., disprove that the item meets the product scope) before proceeding with the transaction.

b. AI Diffusion Model Weights Red Flag

The AI Diffusion IFR also includes a new red flag, red flag 28, to help U.S. Infrastructure-as-a-Service (“IaaS”) cloud computing providers identify potential diversion concerns related to the new AI model weight export controls. 

Red flag 28 identifies a concern when a U.S. subsidiary of an entity headquartered in a Paragraph (a) Destinations uses a U.S. IaaS provider’s products or services to train an AI model classified under ECCN 4E091.  BIS considers this a red flag due to the risk that the model weights may be exported to the affiliated entity.

c. Presumption That Certain Advanced Logic ICs Are Classified Under ECCN 3A090.a

In addition to implementing a worldwide license requirement for chips controlled under ECCN 3A090.a, BIS further revised ECCN 3A090.a by adding Note 1 to ECCN 3A090.a to clarify that when a “front-end fabricator” or Outsourced Semiconductor Assembly and Test (“OSAT”) company, as defined in new EAR definitions, seeks to export, reexport, or transfer (in-country) an applicable advanced logic IC, the item is presumed to be classified under ECCN 3A090.a and designed or marketed for use in datacenters.  This presumption applies to logic ICs produced using the 16/14 nanometer node or below or using a non-planar transistor architecture. 

The presumption is intended to address the difficulties of evaluating the performance criteria of ICs based on information from front-end fabricators and OSAT companies. 

However, BIS established a variety of methods to overcome the presumption, including:

  1. Approved IC Designers: New supplement no. 6 to Part 740 of the EAR includes specific entities reviewed and approved by BIS as approved IC designers.  Additional entities may apply to become approved IC designers by submitting an advisory opinion request accompanied by the required information in new supplement no. 4 to Part 748.
  2. Authorized IC Designers: Prior to April 13, 2026, these include all IC designers headquartered in Taiwan or a destination in Country Group A:1 or A:5, that are neither located in, nor have an ultimate parent headquartered in, Macau or a destination in Country Group D:5.  These also include IC designers for whom transactions are subject to reporting requirements under 15 C.F.R. § 743.9 (certain front-end fabricators producing applicable advanced logic ICs, as specified further below).  After April 13, 2026, a company will only be considered an authorized IC designer for a period of 180 days if it meets both of the specified criteria and submits an application to become an approved IC designer.
  3. Attestation by Certain Front-End Fabricators Outside of Macau or Country Group D:5: If the IC die is packaged by a front-end fabricator outside of Macau or Country Group D:5, an attestation from such fabricator will be sufficient to overcome the presumption that the IC is specified in ECCN 3A090.a if it states that: (1) the “aggregated approximated transistor count” of the final packaged IC is below 30 billion transistors or (2) the final packaged IC does not contain HBM and that the “aggregated approximated transistor count” of the final packaged IC is below 35 billion or 40 billion transistors, depending on the date of the export, reexport, or transfer.
  4. Attestation of Certain Approved “OSAT” Companies: If the IC was packaged by an approved “OSAT” company set out in new supplement no. 7 to Part 740, an attestation from such OSAT company will overcome the presumption that an IC is specified in ECCN 3A090.a if it states that: (1) the “aggregated approximated transistor count” of the final packaged IC is below 30 billion transistors or (2) the final packaged IC does not contain HBM and that the “aggregated approximated transistor count” of the final packaged IC is below 35 billion or 40 billion transistors, depending on the date of the export, reexport, or transfer.  As with approved IC designers, the initial approved OSAT companies were reviewed and determined by BIS.  However, parties may apply to become approved OSAT companies by submitting an application in the form of an advisory opinion request to BIS.

d. Reporting Requirements for Front-End Fabricators Producing Applicable Advanced Logic ICs

As noted above, under 15 C.F.R. § 743.9, certain front-end fabricators will also be subject to new reporting requirements when producing applicable advanced logic ICs for authorized IC designers.  The requirement will apply to front-end fabricators producing ICs specified in ECCN 3A090.a for any authorized IC designers.  The reports must include:

  • The name, address, and point of contact for an authorized IC designer;
  • The new Know Your Customer (“KYC”) end-user vetting form included in supplement no. 2 to Part 743, described further below; and
  • A description of each category of IC specified or presumed to be specified in ECCN 3A090.a and sold during the relevant quarter. 

Additionally, information regarding the IC also must be provided, including the designer, product name, model number, and quantity sold during the relevant quarter.  The first reports are due by May 31, 2025.

e. KYC Vetting Form

In the Due Diligence IFR, BIS also introduced a new, Authorized IC Designer KYC Vetting Form, now included as supplement no. 2 to Part 743 of the EAR.  BIS described the form as “KYC best practices” that are “critical in this context where there is a risk of companies seeking advanced foundry services in circumvention of controls on advanced computing items.”  The form is primarily designed to be completed by front-end fabricators producing applicable advanced logic ICs to comply with the reporting requirements described above.  However, the topics and questions in the KYC Vetting Form also serve as a helpful guidepost for the type of diligence that BIS expects regarding end uses and end users, particularly when it comes to advanced ICs and AI uses.

VII. Targeting of Additional Chinese Entities

In addition to the above-described revisions to IC and AI-related export controls, the Biden Administration and, on March 25, 2025, the second Trump Administration have continued to designate entities in China on the Entity List or other restricted party lists for their involvement in certain activities related to AI and ICs.

Further, despite the change in administrations, BIS has stated that it is continuing to evaluate comments on the October 2023 rule and extended the various comment periods on the rules, allowing the administration more time to receive and review comments.  The AI Diffusion IFR remains open for public comment until May 15, 2025.  BIS has indicated on multiple occasions that it intends to address additional comments in a future rulemaking, suggesting that further refinements to each of these various rules are possible.  

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The Rules are highly complex and include a number of areas of uncertainty, potentially leading parties to adopt a cautious approach.  Moreover, as noted above, we expect these Rules to continue to change, particularly given the second Trump Administration’s ongoing review of comments regarding the existing rules. 

The Cleary Foreign Investment & National Security team is continuing to monitor these developments.

[1] We note that the Trump administration rescinded E.O. 14110 on January 20, 2025.  See E.O. 14148.  However, BIS cited E.O. 14110 only for the definition AI model weights and not as an authority underlying the Rules.