The US Department of Commerce’s Bureau of Industry and Security released an interim final rule (IFR) on October 7 imposing new export controls on certain advanced computing and semiconductor manufacturing destined for the People’s Republic of China (PRC). In their LawFlash, partners Giovanna Cinelli, Kenneth Nunnenkamp, and Carl Valenstein; of counsel Heather Sears; and associates Katelyn Hilferty, Christian Kozlowski, Patricia Cave, and Jiazhen Guo discuss the scope of the new export controls, open issues and questions regarding the regulation, and potential courses of action to consider.
The IFR imposes export controls on certain advanced computing integrated circuits, computer commodities that contain such integrated circuits, and certain semiconductor manufacturing items. The IFR also expands controls on transactions involving items for supercomputer and semiconductor manufacturing end uses. The IFR will result in licensing requirements for a large contingent of items destined for the PRC, and limits exceptions that previously could have been used for transactions involving PRC or Chinese entities.
The LawFlash calls attention to certain open issues with the IFR. The IFR leaves some terms undefined, which could affect the scope of the new restrictions and the ability of companies to timely and appropriately update their compliance measures. Since the publication of the LawFlash, BIS has created a public information page with information on the IFR, including the first round of frequently asked questions.
The LawFlash also provides courses of actions for affected companies to consider in order to begin addressing compliance under the IFR. Such actions include verifying export classifications; identifying other business touchpoints that may come into contract with the IFR; enhancing existing end user and end use diligence processes; developing a clear message and communicating that message to internal and external stakeholders; and considering whether to submit license applications.
BIS is accepting comments on the IFR through December 12, 2022.