On May 13, 2025, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) initiated a rescission of the Biden Administration’s AI Diffusion Rule, which was issued on January 15, 2025 and had been set to take effect on May 15, 2025. The AI Diffusion Rule had introduced additional expansive and complex export controls on certain advanced computing integrated circuits (“IC”) and on model weights for certain advanced closed-weight artificial intelligence (“AI”) models. Our prior blog post on the AI Diffusion Rule is available here.
BIS’s press release indicates that it plans to publish a Federal Register notice formalizing the rescission and intends to issue a replacement rule in the future, but it does not provide a timeline or the intended content for the replacement rule. Since that Federal Register notice has still not been published as of the date of this blog post, the relevant provisions of the Export Administration Regulations (the “EAR”) still remain unchanged. However, the BIS press release also indicates that enforcement officials have been instructed “not to enforce the Biden Administration’s AI Diffusion Rule.”
As such, for compliance purposes, this announcement appears to restore the relevant portions of the EAR to their state before the AI Diffusion Rule was issued. Our understanding is that the following is therefore likely the case as of now:
- ECCNs 3A090.a, 4A090.a and related .z commodities are not subject to the AI Diffusion Rule’s expanded worldwide licensing requirements and license exceptions. Such items remain subject to the pre-existing licensing requirements for Country Groups D:1, D:4, and D:5 and, pursuant to 15 CFR § 744.23(a)(3), worldwide licensing requirements only for entities headquartered in, or whose ultimate parent company is headquartered in, either Macau or Country Group D:5.
- ECCN 4E091, which would have controlled certain advanced closed-weight AI models, has effectively been removed.
In addition, BIS published three guidance documents that apply a presumption that certain advanced computing ICs developed or produced in China in violation of the EAR, discuss ways that providing ICs and commodities used to train AI models could violate the EAR, and provide guidance on preventing diversion of ICs. That guidance is summarized below.
- Guidance on Application of General Prohibition 10 to PRC Advanced Computing ICs
BIS issued guidance focused on the application of the EAR’s General Prohibition 10 (“GP 10”) to advanced computing ICs developed or produced in China, with a focus on specific Huawei Ascend ICs. GP 10 prohibits the sale, transfer, export, reexport, financing, ordering, buying, removing, concealing, storing, using, loaning, disposing of, transporting, forwarding, or otherwise servicing, in whole or in part, any item subject to the EAR and exported or reexported with knowledge that a violation of the EAR has occurred or is about to occur.
The guidance focuses on ICs classified under ECCN 3A090 that are designed or produced by companies headquartered in China (“PRC 3A090 ICs”) and indicates that such ICs were likely developed or produced in violation of the EAR. As such, BIS advises that engaging in other GP 10 activities involving PRC 3A090 ICs (e.g., using, buying, or selling them) could violate the EAR. In particular, BIS indicates that several specific Huawei Ascend IC models are subject to a presumption that GP 10 restrictions apply and notes that a range of transaction involving PRC 3A090 ICs could implicate GP 10.
BIS advises companies to exercise heightened due diligence and confirm the proper underlying authorizations have been obtained, before engaging in transactions involving PRC 3A090 ICs, to avoid potential criminal and administrative penalties. However, BIS notes that will not pursue enforcement actions against parties that obtain PRC 3A090 ICs solely for the purpose of technical analysis or evaluation (i.e., destructive testing) to understand the capabilities of an individual IC.
- Policy Statement on Controls that May Apply to Advanced Computing ICs and Other Commodities Used to Train AI Models
BIS issued a policy statement focusing on the provision of access to advanced computing ICs and commodities for training AI models as having the potential to enable military-intelligence and weapons of mass destruction (“WMD”) end-uses in Country Group D:5 countries, including China, and trigger licensing requirements under the EAR Part 744 catch-all controls. Specifically, BIS identifies specific scenarios that could trigger a license requirement when there is “knowledge” that the AI model will be used for a WMD or military-intelligence end use or end user, thereby signaling that in those scenarios further due diligence is advisable to confirm – affirmatively — the absence of such end uses or end users:
- Providing such items to Infrastructure as a Service (“IaaS”) providers when there is “knowledge” that the providers will use the items to train AI models for or on behalf of parties headquartered in China, Macau, or others in Country Group D:5.
- Transferring such items in-country when there is “knowledge” that the transferees will use the items to train AI models for or on behalf of parties headquartered in China, Macau, or others in Country Group D:5.
- US Person provision of any support or service when there is “knowledge” that such activities will assist in the training of AI models for or on behalf of parties headquartered in China, Macau, or others in Country Group D:5.
Additionally, the statement notes that foreign parties involved in prohibited AI training activities may be added to the Entity List, even where no violation of the EAR occurs. BIS also highlights the importance of due diligence and awareness of “knowledge” standards, and warns against ignoring red flags or “self-blinding” to avoid license requirements.
- Guidance to Prevent Diversion of Advanced Computing ICs
BIS issued guidance to industry on identifying and preventing illegal diversion of advanced computing ICs subject to the EAR. The guidance expresses BIS’s concern about China’s use of such ICs to support military modernization efforts, including in connection with autonomous military systems, military-intelligence end uses, and weapons design and testing of nuclear weapons, hypersonics and other advanced missile systems.
In addition to its existing “Know Your Customer” and Red Flag Guidance, the guidance provides new transactional and behavioral red flags, such as unusual purchase patterns after October 2022, inconsistent or suspicious addresses, unknown or undisclosed delivery or installation addresses, new or unusual transaction parties, proximity to sanctioned parties, end-users that are not unique storefronts for that organization (e.g., legal office, virtual office), or lack of transparency from data centers or IaaS recipients.
BIS also outlines best practices for due diligence, including verification of customer incorporation dates, ownership structures, end-use certifications, and infrastructure capabilities of data centers where these ICs will be deployed. BIS stresses the importance of obtaining written attestations from customers and conducting on-site or third-party audits to confirm compliance, in order to mitigate risks of unintentional involvement in export violations and harden supply chains to prevent diversion and violations of the EAR.
