In parallel with the new advanced computing, semiconductor, and supercomputing rules issued on October 17, 2023 (here), the US Commerce Department’s Bureau of Industry and Security (“BIS“) issued a final rule (“Rule“) amending the Export Administration Regulations (“EAR“) to revise the existing Validated End-User (“VEU“) list of items that are eligible to be supplied to Samsung China Semiconductor Co. Ltd. and SK Hynix Semiconductor (China) Ltd., companies headquartered in the Republic of Korea, for their semiconductor fabrication facilities in the People’s Republic of China (“PRC“). As a result of the Rule, the relevant items, including the items now generally controlled under new advanced computing, semiconductor, and supercomputing rules (here), may be exported to these companies under the VEU authorization without individual licenses, as further detailed below.
Background on the VEU Program
The VEU program provides a general authorization for certain items subject to the EAR to be exported, reexported, or transferred (in-country) to pre-approved entities located in eligible destinations rather than under individual export licenses. Entities that are approved for the VEU program must pass a rigorous interagency review and agree to ongoing compliance obligations, such as certification, recordkeeping, reporting, and other review obligations. Items shipped under the VEU authorization are for civil end-uses only. The purpose of the VEU program is to reduce the related licensing burden for the VEUs. The regulations pertaining to the VEU program are set forth in Section 748.15 of the EAR and in Supplements Nos. 7, 8, and 9 to Part 748 of the EAR. BIS added Samsung China Semiconductor Co. Ltd. to the list of VEUs on July 10, 2013 (see here) and added SK Hynix Semiconductor (China) Ltd. on October 12, 2010 (see here). The Rule expanded the list of eligible items for these two VEUs.
Revision to the List of Eligible Items
In the Rule, BIS amended Supplement No. 7 to Part 748 to revise the list of eligible items that may be exported, reexported, or transferred (in-country) to the PRC-located semiconductor fabrication facilities of Samsung China Semiconductor Co. Ltd. and SK Hynix Semiconductor (China) Ltd. under the VEU authorization, as follows:
- Samsung China Semiconductor Co. Ltd.: all items subject to the EAR, except extreme ultraviolet equipment and their specially designed parts, components, software, and technology, necessary for the development or production of NAND memory.
- SK hynix Semiconductor (China) Ltd.: all items subject to the EAR, except extreme ultraviolet equipment and their specially designed parts, components, software, and technology, necessary for the development or production of dynamic random-access memory (DRAM).
The Rule allows these companies to obtain the eligible items under the VEU program, provided they continue to meet their ongoing compliance obligations and other requirements under the VEU program.
