As part of its ongoing efforts to thwart China's development of advanced computing technologies, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) issued an interim final rule (the IFR) last month that both broadens the export licensing requirements for certain advanced computing integrated circuits (ICs) and imposes new due diligence requirements on front-end fabricators and outsourced semiconductor assembly and test companies (OSATs). While the IFR has been in effect since its publication date on January 16, 2025, compliance with the rule was required as of January 31, 2025.
BIS issued the IFR after determining that "more safeguards are needed to ensure that the PRC and other entities cannot access advanced computing ICs through diversion from third parties." BIS noted that foundries, OSATs, and other semiconductor manufacturing companies faced significant challenges in complying with advanced computing IC controls. In particular, these companies have difficulty assessing the ultimate use and performance capabilities of the ICs produced for their customers and whether those ICs meet or exceed the parameters in Export Control Classification Number (ECCN) 3A090.
Under the new rule, front-end fabricators and OSATs1 are required to presume that any logic integrated circuits produced using the "16/14 nanometer node" or below or using a non-planar transistor architecture meets the parameters of ECCN 3A090.a and are therefore subject to a worldwide licensing requirement (i.e., a license is required for export to all countries).
This presumption can be overcome in three ways, each of which is intended to "exclude the substantial number of low-risk transactions potentially captured within this expanded scope" of ECCN 3A090.a under the IFR.
The first way that the presumption can be overcome is if the IC designer has been approved or authorized by the U.S. government. Approved IC designers are companies that have submitted applications to BIS, which are subsequently reviewed by the End-user Review Committee (charged with making determinations based various factors, such as the applicants' compliance with export controls, their ability to prevent the misuse of computing resources, and their relationships with U.S. and foreign companies). The list of approved designers that have been
approved through this process is included in a new supplement no. 6 to part 740 of the EAR. In addition, until April 13, 2026, an IC designer is authorized if it meets the following two criteria:
- the designer is "headquartered in Taiwan or a destination specified in Country Group A:1 or A:5, that are neither located in nor have an ultimate parent headquartered in Macau or a destination specified in Country Group D:5 of supplement no. 1 to part 740 of the EAR;" and
- the designer must agree to submit certain information (including an end-user vetting form) to the front-end fabricator, which must relay the information to BIS based on reporting requirements in§ 743.9(b).
After April 13, 2026, a company will be considered an authorized IC designer for a period of 180 days if it both meets those criteria and submits an application to become an approved IC designer.
The second mechanism for overcoming the presumption relates to the location in which the IC die is packaged by the front-end fabricator. If that activity occurs outside Macau or a Country Group D:5 destination, then the presumption can be overcome if the front-end fabricator is able to attest to both of the following two facts:
- either "the 'aggregated approximated transistor count' of the final packaged IC is below 30 billion transistors" or "the final packaged IC does not contain high bandwidth memory (HBM);" and
- the "'aggregated approximated transistor count' of the final packaged IC" falls under certain thresholds.
The aggregated approximated transistor count thresholds are dependent on the year in which the export, reexport, or in-country transfer is completed. The threshold for 2027 is 35 billion transistors. For 2029 and later, the threshold is 40 billion transistors.
The third and final way to overcome the presumption is limited to the ICs that are packaged by an OSAT company that has been approved by the U.S. government. The presumption will be overcome if the approved OSAT company can attest to the same two facts that are listed above for the attestation by front-end fabricators. The list of such approved OSAT companies is contained in supplement no. 7 to part 740 of the EAR.
Notably, BIS explains that the reason it permits these latter two methods for overcoming the presumption—which permit certain front-end fabricators and OSAT companies to attest to key facts—is that the companies are positioned such that they should be able to make a "reliable assessment" of the item's technical parameters.
Additionally, the IFR includes two savings clauses. The first is for certain shipments that were already en route on or before January 31, 2025. A second savings clause pertains to transactions previously authorized by BIS: "If, in the twelve months prior to the effective date of this regulatory action, BIS exempted exports, reexports, or transfers (in-country) of an item from a licensing requirement imposed by notice issued pursuant to §§ 744.11(c) or 744.23(b), then exports, reexports, or transfers (in-country) of that item are exempt from any licensing requirement imposed by this regulatory action absent additional action taken by BIS."
The IFR makes several other noteworthy changes to the EAR: The IFR alters certain license exceptions such that they can only be used for items designed by approved IC designers. The IFR implements new reporting requirements for front-end fabricators that produce advanced computing ICS for authorized ICs. The IFR describes the process for modifying the approved IC designer and approved "OSAT" company lists. The IFR adds five definitions to section 772.1 of the EAR. The terms defined by the IFR are: "16/14 nanometer node," "Aggregated approximated transistor count," "Applicable advanced logic integrated circuits," "Front-end fabricator," and "Outsourced Semiconductor Assembly and Test (OSAT)." In addition, the IFR revises the existing definition of "Advanced-node integrated circuits."
The IFR also includes revisions to a different interim final rule, released on December 2, 2024, related to "Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items," as well as an extending the comment period for that rule. (That rule, along with other recently issued national security regulations, is described in depth here.)
Companies that have concerns about the impact of these rules, including potential unintended consequences, can submit comments on the IFR prior to its publication as a final rule. Comments must be submitted by March 14, 2025.
For more information, assistance with submission of comments, or any questions about the compliance obligations associated with the rule, please contact Josephine Aiello LeBeau, Anne Seymour, Jahna Hartwig, or any member of the export control and sanctions practice at Wilson Sonsini Goodrich & Rosati.
[1] A "front-end fabricator" is a "company that provides front-end fabrication services to produce an integrated circuit, creating circuits on the surface of a wafer through processes such as photolithography, etch, and deposition." An OSAT is "a company that provides third-party manufacturing and testing services to semiconductor businesses." The OSAT definition adds that "OSAT companies are responsible for assembling, packaging, and testing integrated circuits and other semiconductor devices."
