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BIS Revises Export Controls on Semiconductor Manufacturing and Advanced Computing Items

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On March 29, 2024, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) released an interim final rule, effective April 4, 2024 (“April 2024 IFR”) to correct inadvertent errors made in prior semiconductor-related rules in the Export Administration Regulations (“EAR”) and further clarify such rules. 

The April 2024 IFR clarifies the (1) “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections” (88 FR 73458, October 25, 2023) and (2) “Export Controls on Semiconductor Manufacturing Items” (“SME IFR”) (88 FR 73424, October 25, 2023) (collectively, the “October 2023 IFRs”).  The October 2023 IFRs updated, expanded, and clarified similar rules BIS issued on October 7, 2022 (“October 2022 IFR”).  Our prior blog posts on the October 2023 IFRs is available here and the October 7, 2022 IFR is available here.

In summary, the April 2024 IFR:

  • Separates License Exception Notified Advanced Computing (“NAC”) into two separate license exceptions that will reside in the same section of the EAR, § 740.8, and provides related clarifications:
    • License Exception NAC continues to authorize exports and reexports of specified items to Macau and destinations in Country Group D:5 and entities headquartered in, or with an ultimate parent headquartered in, Macau or a destination specified in Country Group D:5, wherever located, that require a notification to BIS.  The April 2024 IFR clarifies some of the License Exception NAC requirements, including the NAC notification requirements. 
    • The new License Exception Advanced Computing Authorized (“ACA”) authorizes exports, reexports, and transfers (in-country) of specified items to destinations in Country Group D:1 or D:4 (except Macau and destinations specified in Country Group D:5) that do not require a notification to BIS, as well as transfers (in-country) to Macau and destinations in Country Group D:5, and entities headquartered in, or with an ultimate parent headquartered in, Macau or a destination specified in Country Group D:5, that do not require a notification to BIS.
  • Aligns end use controls for “supercomputer,” “advanced-node integrated circuits,” and semiconductor manufacturing equipment in § 744.23 with license exception revisions in § 740.2 (License Exception Strategic Trade Authorization (STA)).
  • Adds EUV masks (ECCN 3B001.j) and associated software and technology to the restrictions on specific activities of “US persons” in § 744.6 because EUV masks are required for lithography (i.e., a critical technology for advance-node IC production).
  • Corrects the Model Certification for Purposes of the Foreign Direct Product (“FDP”) Rule (Supplement No. 1 to Part 734) to align with the country scope identified in the FDP Rule.
  • Restores controls in the license requirement table of ECCNs 3A001, 3D001, 3E001, 4A003, 4A004, 4A005, 4D001, 4E001, 5A002, 5A004, 5D002, and 5E002 to eliminate a decontrol from the October 2023 IFRs by removing the exceptions for .z paragraphs from the national security, missile technology, nuclear proliferation, and/or crime control license requirement paragraphs, and clarifies license exception restrictions for such .z ECCNs.    
  • Revises specific ECCNs (i.e., 3A001, 3B001, 3B991, 3D001, 3E001, 4A090.b, 4E001, 5D002, 5D992, 5E992, and 5E002) and Supplement No. 6 to Part 774—Sensitive List.
  • Clarifies semiconductor manufacturing equipment end use controls in § 744.23(a)(4) and narrows the exceptions to include 3B001.h, and 3B991.b.2.a through .b (rather than the SME IFR’s unintentional exception of EUV masks in 3B001.j and equipment in 3B991.b.2).  The controls in § 744.23(a)(4) now distinguish between (i) direct exports, reexports, and transfers (in-country) in § 744.23(a)(4)(i) and (ii) indirect exports, reexports, transfers (in-country) in § 744.23(a)(4)(ii) for the “development” or “production,” by an entity headquartered in, or with an ultimate parent headquartered in, Macau or a destination specified in Country Group D:5.  BIS stated that this distinction is being made to “address concerns about continued support for indigenous ‘development’ and ‘production’ of front-end integrated circuit ‘production’ equipment in Macau and destinations in Country Group D:5 countries – and by companies headquartered in those countries.”
  • Responds to certain public comment topics related to the SME IFR, including end use controls on semiconductor manufacturing equipment; “knowledge” requirements of the export, reexporter, or transferor; and end user controls related to specific activities of US persons.  These responses, among other things, provide further helpful guidance related to the due diligence expectations associated with the relevant rules.

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Despite some simplifications, the new corrections and restrictions remain extensive, highly complex and technical.  Companies in the advanced computing, semiconductor manufacturing equipment, and supercomputer sectors should carefully review the April 2024 IFR to assess the impact on their operations.  We will continue to monitor developments and are available to answer questions.   

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Mr. McMillan's practice involves compliance counseling; compliance programs; licensing; compliance reviews; internal investigations; voluntary disclosures; administrative enforcement actions; criminal investigations; customs inquiries, audits, detentions, and seizures; and trade-compliance due diligence and post-acquisition integration in mergers and acquisitions. His practice includes matters that implicate the US International Traffic in Arms Regulations (ITAR), US Export Administration Regulations (EAR), US National Industrial Security Program (NISP), the US Committee on Foreign Investment in the United States (CFIUS), and equivalent non-US laws. Mr. McMillan regularly advises on and represents clients in matters involving technology, including its control, protection, accidental disclosure, diversion, or unauthorized collection. Mr. McMillan has extensive experience working with companies in the aerospace and defense industry, as well as companies in the Middle East and other parts of Asia.

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Eunkyung advices clients on various regulatory compliance and trade issues, concentrating on the US export controls such as the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR), economic and trade sanctions, US customs and import laws, the US Foreign Corrupt Practices Act (FCPA), and foreign anti-bribery laws.

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Iris's practice involves assisting multinational companies with a wide range of trade matters including export controls, sanctions, internal investigations and risk assessments. She also assists companies with respect to customs laws and other trade regulation issues in the US and abroad. Iris's practice extends to assistance in internal compliance reviews as well as enforcement actions and disclosures necessitated by US government action.

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Alex is an associate in the Washington, DC office where she is a member of the International Commercial Practice Group. Her practice is focused on international trade, particularly compliance with US export controls, trade and economic sanctions, and antiboycott controls. Admitted in New York and Washington, DC.

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