New BIS Chip Corrections Rule Updates Controls, Offers Guidance

A Bureau of Industry and Security rule released last week (see 2403290060) that updated and corrected portions of the agency’s October semiconductor export controls (see 2310170055) also added a new license exception and offered clarifications to export guidance issued by BIS over the last year. The changes take effect April 4, and comments are due by April 29.

The 166-page interim final rule will also make a host of corrections and revisions to various parts of the controls, including new language for certain license exceptions; changes to restrictions on the specific activities of U.S. persons; revisions to licensing requirements for encryption-related items; and updates to the language for Export Control Classification Numbers covering advanced semiconductors.

The rule will notably add new License Exception Advanced Computing Authorized (ACA) to pair with License Exception Notified Advanced Computing (NAC), the exception created by BIS last year for certain exports of semiconductors that fall just below the agency’s control parameters. Companies using the license exception and exporting certain chips must submit notifications to BIS with data about the chip, including its total processing performance, the name of the exporter and other parties to the transactions, and the volume and value of the shipment (see 2401030053).

BIS said NAC will still authorize certain exports to Macau, a country in Country Group D:5 of the Commerce Country Chart, or an entity with a parent that is headquartered in those destinations when those shipments require that the exporter submit a notification to BIS. But new License Exception ACA will authorize certain exports to nations in Country Group D:1 and D:4, and for in-country transfers to Macau and destinations in Country Group D:5, “that do not require a notification to BIS,” the rule said. The Census Bureau in March said it had updated the Automated Export System to reflect the new license exception (see 2403250016).

BIS also will make other changes involving the two license exceptions, including updates to the scope of shipments they cover and to clarify how they can be used for “commercial sample shipments” to certain countries. BIS also said exporters may need to submit only one NAC notification for multiple exports, including when that export is destined to the same end user and for the same item, “and as long as the total dollar value and quantity of the shipments do not exceed the amounts stated on the notification.”

The agency also clarified the information exporters must submit to BIS when looking to use License Exception NAC. That should include the chip’s “technical specs for performance capacity, such as Total Processing Performance (TPP), performance density,” along with a data sheet or other documents “showing the intended design goal and how it is marketed.” This will allow BIS to “determine if the item in question otherwise meets the criteria for an item eligible for License Exception NAC.”

BIS also will revise portions of its U.S. persons controls, including by adding certain “EUV masks” listed under ECCN 3B001.j -- and their “associated software and technology” -- to the scope of technology covered by the agency’s restrictions on exports of semiconductor manufacturing equipment. BIS said the masks were “unintentionally excluded” from the restrictions last year. “EUV masks are required for lithography and lithography is a critical technology for advanced node IC production,” BIS said.

Also under its “744.6 restrictions” covering specific activities of U.S. persons, BIS will add a new exception from its presumption of denial license review policy for certain items listed in ECCNs 3A090, 4A090, 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z. “These items are less sensitive integrated circuits and computers” that don’t “warrant a presumption of denial license review policy,” the agency said.

Another change will restore certain export controls for ECCNs that contain .z paragraphs -- the language used by BIS to identify the advanced semiconductors controlled by the chip rules. The agency said it’s removing “exceptions” in the language of those ECCNs that mistakenly led to a “decontrol for these computers to many destinations, including those specified in Country Group A:5 and A:6,” BIS said. “Therefore, this rule restores the other reasons for control for items that meet the specifications in .z paragraphs of these ECCNs.”

The rule also will make several changes to chips controlled under ECCN 3A001, including by adding certain “Monolithic Microwave Integrated Circuit” amplifiers, certain items used in missiles and certain “pulse discharge capacitors.” BIS made other corrections and revisions, many of them technical changes, to ECCNs 3B001, 3B991, 3D001, 3E001, 4A090.b., 4E001, 5D002 and 5D992, 5E992, 5E002 and more.

BIS also clarified its responses to public comments it addressed as part of its October chip rules, including one that asked whether an exporter needs a license when shipping certain items subject to the Export Administration Regulations to a third-party original equipment manufacturer in a third country. In that scenario, the exporter has “knowledge” that the item would be incorporated into a foreign-made 3B991 item, not subject to the EAR, by the OEM in the third country, “and that the OEM would then send the 3B991 item to a manufacturer of Category 3 items in China.” A detailed response by the agency said a license may be required.

BIS also said exporters “may not self-blind or disregard ‘knowledge’ that the transaction is structured to avoid a license requirement,” adding that the exporter can’t “ignore readily available information that the customer will integrate the exported item into an item destined for Macau or a Country Group D:5 destination for the production of equipment and items specified in § 744.23(a)(4)(i).”

Another commenter asked BIS to “confirm how far back up the supply chain the licensing obligation extends” for exports to a third party that will use the item to make a “whole new foreign-made item that will only later be used in the development or production of [integrated circuits] at a covered facility.” In this scenario, the exporter hypothetically sent an item “to produce a foreign-made item, which will be used to produce another foreign-made item, which will later be used at a covered fabrication facility,” BIS said, and the person asked whether the original export is “caught by the new licensing obligations if there is knowledge that this supply chain will ultimately result in the creation of an item used to produce ICs at a covered fabrication facility.”

BIS said Section 744.23(a)(2) of the EAR doesn't place restrictions “involving the incorporation, as it pertains to de minimis rules, or integration of items subject to the EAR into foreign-made items, assuming such incorporation does not separately trigger a license requirement.” But it also said the exporter “must separately assess whether a license would be required to reexport or transfer (in-country) the foreign-made item under § 734.4 (De Minimis Rule), including for items ineligible for de minimis under § 734.4(a), or other provisions of the EAR.”

But if an OEM restructures its supply chain to avoid the license requirement, “then a license would still be required under § 744.23(a)(2), without which such restructuring indicates an attempt to evade or otherwise violate the EAR.”

The agency also addressed other scenarios in which a license requirement may apply if an exporter has “knowledge” the item will be used to make certain advanced chips; answered a question about end-user certifications, and more.

All exports that now require a license as a result of this rule but were aboard a carrier to a port as of April 4 may proceed to their destinations under the previous eligibility as long as the items are exported before May 6, BIS said. Any items not exported before midnight May 6 will require a license.