On December 2, the Bureau of Industry and Security (BIS) announced two companion rules to impede China’s ability to procure and produce advanced-node semiconductors that can be used in advanced weapons systems, artificial intelligence (AI), and advanced computing.

In response, China announced that it will in principle ban exports of gallium, germanium, antimony, and superhard materials to the United States. China also plans to conduct stricter reviews of graphite exports to the U.S. and ban the export of dual-use items for U.S. military end uses.

BIS’s first rule will add 140 entities to the Entity List. These additions primarily target entities involved in advanced-node integrated circuit and semiconductor manufacturing. The majority of the additions are in China.

The second rule makes the following changes to Export Administration Regulations (EAR):

  • Adds a new semiconductor manufacturing equipment (SME) foreign direct product (FDP) rule that will expand the EAR’s jurisdiction to certain foreign-produced commodities if there is knowledge that the commodity is destined to Macau or a destination in Country Group D:5, which includes China.[1]
  • Adds a new Footnote 5 designation to the Entity List, which imposes license requirements on foreign-produced commodities to or within any destination or to any end user or party when any of the following conditions are met:
    • Exports from abroad or reexports of commodities specified in ECCN 3B993 by an entity whose ultimate parent is headquartered in Macau or a destination in Country Group D:5.
    • Exports from abroad or reexports of items specified in ECCN 3B993 from countries in Country Group A:5[2] that are not subject to equivalent controls by the relevant country.
    • Exports from abroad or reexports of certain Category 3 commodities from any country not listed in Country Group A:5.
    • Certain transfers (in-country) involving Category 3 commodities.
  • Adds new controls on advanced memory chips—known as high bandwidth memory (HBM)—used in advanced AI and supercomputing.
  • Revises certain Category 3 ECCNs.
  • Adds License Exception Restricted Fabrication Facility (RFF) that will allow certain items, including SME, to be exported, reexported or transferred (in-country) to certain fabrication facilities on the Entity List that are not currently producing advanced node integrated circuits. The Entity List entry for eligible fabrication facilities will specifically reference the section of the EAR that contains License Exception RFF (Section 740.226).
  • Adds License Exception HBM to authorize the export, reexport, or transfer (in-country) of some HBM items affected by the new controls. License Exception HBM is limited to circumstances where:
    • The export, reexport, or transfer (in-country) is completed by and to packaging sites owned or operated by U.S.- or allied-headquartered companies; and
    • The U.S.- or allied-headquartered company carefully tracks the HBM items sent and returned to that site and either resolves any discrepancies or reports them to BIS.
  • Revises Section 734.19 (transfer of access information) to clarify that software keys (i.e., keys that allows users to use software or hardware or renew existing licenses) are classified and controlled under the same ECCNs as the corresponding software or hardware to which they provide access.
  • Adds eight new “red flags” to the BIS Know Your Customer guidance in Supplement No. 3 to Part 732, including:
    • Technology mismatch at non-advanced fabrication facilities: A non-advanced fabrication facility orders equipment designed for advanced-node integrated circuit production that it would not need given its technology level.
    • Uncertain ultimate owner or user: An exporter, reexporter, or transferor receives an order for which the ultimate owner or user of the items is uncertain, such as a request to ship equipment for developing or producing integrated circuits to a distributor without a manufacturing operation, when the item is ordinarily customized for the end user or installed by the supplier.
    • Uncertain license history: An exporter, reexporter, or transferor receives an order or request related to an item that would require an export, reexport, or in-country transfer license from BIS or another jurisdiction that maintains controls on the item, and there is uncertainty about the license history for the item.
    • Altered items for advanced end use: An exporter, reexporter, or transferor receives a request to service, install, upgrade, or otherwise maintain an item that was altered after export, reexport, or transfer by a third party for a more advanced end use that would normally require a license for the destination.
    • Overlapping management with Entity List entities: An exporter, reexporter, or transferor receives a request for an item or service from a new customer. The new customer’s senior management or technical leadership (e.g., process engineers who are team leaders or otherwise leading development or production activities) overlaps with an entity on the Entity List, particularly if the supplier previously provided the same or substantially similar item or service to the Entity List entity, most likely prior to the listed entity being added to the Entity List.
    • Request for items designed for Entity List entities: An exporter, reexporter, or transferor receives a request from a new customer for an item or service that was designed or modified for an existing or former customer that is now designated on the Entity List.
    • Integrated circuits in certain foreign-produced items: For purposes of analyzing the scope of the Entity List FDP rule for Footnote 5 entities and the SME FDP rule, if a foreign-produced item is described in the relevant Category 3B ECCN and contains at least one integrated circuit, then there is a red flag that the foreign-produced item meets the product scope of the applicable FDP rule. The exporter, reexporter, or transferor must resolve this red flag before proceeding.
    • Physically connected facilities: The end user is a facility that is physically connected to a facility where production of advanced-node integrated circuits occurs. Unless the red flag is resolved through an Advisory Opinion, the two buildings are treated as a single “facility” for purposes of Section 744.23 of the EAR.

BIS is accepting public comments on these changes to the EAR. Comments must be received by January 31, 2025.

[1] Country Group D:5 consists of countries subject to a U.S. arms embargo: Afghanistan, Belarus, Burma, Cambodia, the Central African Republic, China, Cuba, the Democratic Republic of Congo, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, Nicaragua, North Korea, the Republic of South Sudan, Russia, Somalia, Sudan, Syria, Venezuela, and Zimbabwe.

[2] Country Group A:5 includes Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden Switzerland, Turkey, and the United Kingdom.