Industry Officials: Better BIS Cooperation With Industry Could’ve Limited Unintended Effects of Chip Controls

The Bureau of Industry and Security should have given its technical advisory committees more time to review its new chip controls before they were published in October (see 2210070049), which would have helped BIS mitigate unintended consequences for a dense and complex set of restrictions, a chip industry official and an advisory committee member said this week. The semiconductor industry also wished BIS had first proposed some of the restrictions for public comment before making them final, the official said, or delayed the effective date to give companies more time to decipher the rules, especially surrounding the new U.S.-persons restrictions.

The technical advisory committees were given a “brief opportunity” to review the rule before it was published, said Jimmy Goodrich, Semiconductor Industry Association vice president of global policy. But he said the committees could’ve provided BIS with a “lot more constructive feedback” if they had more than a week to review the controls, which lawyers and industry officials have called some of the most complicated regulations ever released by BIS (see 2211010042).

“More than a week's time to look would have been better than perhaps more than 48 hours,” Goodrich said during a Dec. 13 Regulations and Procedures Technical Advisory Committee meeting. He said more time for the TACs to review the rules might have limited a “number of unintended consequences.”

RPTAC member Dennis Farrell agreed, adding that industry would prefer if BIS more evenly balanced its output of final rules versus proposed ones. “It seems like we've gotten away from proposed regs, and everything now is either a final or an interim final,” Farrell, president of Grand Slam Export Consulting, said during the meeting. “That’s kind of crazy.”

He said there are “questions continually” on the rule, pointing out BIS extended the comment period deadline from Dec. 12 to Jan. 31 (see 2212050068). “I wonder why?” Farrell said. “Because people can't figure it out.” Goodrich added that “we do hope that the BIS can return to a bit more of a normal, regular order in the rulemaking process.”

A BIS spokesperson didn’t respond to a request for comment. Hillary Hess, BIS’ regulatory policy director, said the agency eventually plans to issue a final version of the new China chip restrictions, which were issued in October as an interim final rule. She also said it was “becoming clear” that the agency needed to extend the public comment period.

“When you hit about November, it’s difficult for people to pull things together,” Hess said during the meeting. An extension is “helpful to people who need to comply with the rules, but it’s also very helpful to us, since we are looking for public comments for us to make the rule better.”

Goodrich said several unintended consequences of the rule have hit the semiconductor industry, including issues surrounding the new U.S.-persons restrictions, which introduced new license requirements that took effect within days of their release. “Many of our allied partners who had facilities in China had a crisis for a couple of days before that was resolved,” he said, adding that he wishes the technical advisory committees had “a little bit more advanced engagement" or that the restrictions were first proposed for public comment -- or had a lengthier delay -- before they took effect. BIS issued guidance on the U.S. persons restrictions a few weeks after they were released (see 2210310044).

Goodrich also said BIS can take steps to give a “little bit more predictability and stability” to multinational companies with semiconductor fabs in China. He specifically said BIS should give them two-year general licenses to continue certain operations in China rather than the one-year license the agency gave to some companies (see 2210260014 and 2211070045).

There is “no certainty on what may happen when that 12-month period is up,” Goodrich said. “Those are significant operations from friendly, allied nations that are producing commodity chips that go into the global supply chain. They’re export oriented. And stability around those facilities, we believe, would be helpful for the health of the global industry.”

John Cooney, vice president of public policy at SEMI, said he hopes BIS soon convinces other countries to impose similar controls and more narrowly tailors the restrictions after the public comment period closes next month. BIS Undersecretary Alan Estevez said the agency plans to make minor clarifications to the rule but isn’t expecting any major revisions (see 2212060059).

Even so, SEMI, SIA and others are lobbying for changes. Cooney said the “broad nature of the controls” led to industry “being thrown into limbo waiting for more refined guidance.” Goodrich said SIA’s “export control committee,” which includes more than 100 people, has faced challenges grasping all the restrictions.

“Frankly, no one person or even group of people were able to understand it,” he said. SIA’s committee has been “crowd-surfing knowledge [to] figure out all the different intricacies and complexities of the rule, and it's still evolving.”

Goodrich said SIA is preparing to submit a set of public comments for BIS, which will in part ask the agency to publish a list of semiconductor fabrication facilities in China that are subject to the October restrictions. The group also will ask BIS to confirm that certain non-production activities, including back-office services, do not qualify as facilitation or support, and suggest the agency provide more clarity for the standards that would allow companies and exporters to overcome some of the presumption of denial licensing policies mentioned in the rule.

Both Goodrich and Cooney also stressed that the Biden administration needs to impose the restrictions multilaterally, or else they risk hurting U.S. chip companies’ ability to compete with foreign firms. BIS' Estevez said this month that he remains confident allies will eventually impose the controls, and Japan and the Netherlands have reportedly agreed in principle to join the U.S. in implementing at least some of the restrictions, although a deal hasn't yet been announced (see 2212120008).

“We know that the U.S. government understands this. We know they made efforts over the past couple of months, perhaps longer, to try and achieve a multilateral deal,” Goodrich said. “We still want to stress and underscore just how important that is to ensure that there's a level playing field and also that the rule is effective. Ultimately, if the end-users in the country of concern are able to access the technology, then it's not an effective rule.”