Starting in 2022, the US Bureau of Industry and Security (BIS) implemented complex new export regulations that have a widespread impact on businesses. The first BIS update to include the Advanced Semiconductor Controls regulations was originally published on October 7th, 2022. The update just celebrated its first birthday and was recently updated to refine controls. Processing units for artificial intelligence workloads were a notable target of the update, setting tighter restrictions on AI chips and semiconductor manufacturing equipment and introducing new BIS entity lists restricting transfers with hundreds of foreign companies.

The introduction of Export Control Classification Number (ECCN) 3A090 to the Commerce Control List (CCL) and the many changes that referenced its specifications were a source of interest and concern for companies trying to ship electronics internationally. Since the regulations required the evaluation of mass market encryption commodities, it was a concern to almost any company with international employees where laptops cross borders.

Although in force at the time of publication, these regulations were considered interim final rules, while BIS collected comments and drafted revisions that were subsequently published on October 17th, 2023. Mercifully, BIS made some clarifying changes and rewrote parts of the previous rules to remain consistent with the ordinary structure of the CCL. However, the update also increases the scope of control and surveillance of advanced integrated circuits (IC) and semiconductor manufacturing equipment (SME). US Secretary of Commerce Gina Raimondo promises yearly updates to the regs due to the fast pace of innovation in the semiconductor industry. Given the increased complexity of the regulations, combined with increased enforcement and frequent changes, complacency towards these regulations carries a greater weight of punitive actions in the future.

All this talk of change, but what are some specific revisions international organizations need to be looking for?

1. Expansion of Controlled destinations for advance semiconductors
   The original October 7th, 2022 regulations only controlled shipments to The People’s Republic of China (including Hong Kong) and were later amended to include Macau after reports of diversion. The new regulations control activities related to all Arms-Embargoed destinations, an addition of nearly two dozen destination countries being controlled in addition to China, Hong Kong, and Macau.
   
   
2. Introduction of a new license exception: Notified Advanced Computing (NAC)
   NAC applies to two item classes that had been troubling to ship over the prior year: high-power consumer graphics cards and datacenter computing units under the controlled specifications. In both cases, NAC reports shipments of these items to BIS and reviews them within 25 days, whereupon they either approve the shipment or prompt the shipper to apply for a license. This is expected to provide BIS with the means to monitor shipment circumvention without burdening shippers with license applications.
   
   
3. News for US persons working abroad
   US Persons working abroad in the semiconductor industry also have some new concerns. In addition to their activities being controlled in the expanded arms-embargoed destinations, the scope of those activities has been revised to include certain engineering activities related to fabrication.
   
   
4. Simplifying ECCNs with .z
   The headaches caused by the “RS-controlled mass market encryption” subparagraph has been updated to the traditional ECCN structure. Mass market encryption commodities that are AI-capable are now plainly identified by ECCN 5A992.z, for example. Even better, the convention of using “.z” subparagraphs is consistent throughout the CCL for items meeting the AI performance thresholds.
   
   
5. No more interconnect speeds
   Confusing controls primarily identifying IC interconnect speeds have been scuttled in favor of a new standard for performance aggregation: performance density. Performance density is the ratio between the performance of an IC and its physical die area. This is another sign that BIS is tightening controls: BIS has reported that this standard captures the notorious A800/H800 GPUs, engineered to circumvent the original interconnect specifications.

The US Government believes that the export of advanced computational hardware poses a serious risk to national security, and they intend to adapt sensibly to workarounds, loopholes, and circumvention. Complacency towards export compliance is likely to be riskier than in the past. Still, BIS is also motivated to make compliance with the rules sensible and impose as few administrative burdens as possible. As a leading advisor on the evolving regulatory landscape, we are uniquely positioned to partner with organizations, leveraging our deep understanding of the new regulations to implement effective compliance strategies and unlock the full potential of BIS's initiatives. If your organization is having trouble keeping up with the quickly shifting landscape of export regulations, Tradewin is dedicated to supporting your firm and is happy to assist with your compliance challenges.