On November 2, 2022, Assistant Secretary of the U.S. Department of Commerce Thea Rozman Kendler answered questions on the Bureau of Industry and Security's (BIS) October 13 interim final rule ("the Rule") regarding restrictions on certain advanced computing integrated circuits and semiconducting manufacturing items exported to the People's Republic of China (PRC). Pillsbury has described the Rule here. Comments will be accepted on the Rule until December 12, 2022.
Assistant Secretary Kendler noted that the Rule is crafted "based on U.S. national security and foreign policy interests, not economic considerations." She further emphasized that additional FAQs will be published on a rolling basis and directed interested parties to the first set of FAQS, published on October 28 and explored by Pillsbury here.
Assistant Secretary Rozman Kendler clarified the following elements of the FAQs:
If there is "knowledge" an item is destined for a prohibited end use in the PRC or to a fab located out of the PRC for producing an item ultimately destined for the PRC, the Rule will capture exports to a fabless designer.
Semiconductor Fab Facilities
The public should anticipate additional Entity List designations in the areas of semiconductor fab facilities with the specifically enumerated capabilities; semiconductor fab facilities with unknown capabilities; and Chinese supercomputer end users. However, at this time, the Rule does apply to all PRC entities exceeding the enumerated thresholds, regardless of whether they appear on the Entity List or not.
Due Diligence Guidelines
While BIS does not currently anticipate publishing due diligence standards guidance, interested parties should refer to the "Know Your Customer Guidance" in Supplement No. 3 to part 732 of the EAR and " Red Flag Indicators" already published in the EAR. Parties seeking additional guidance should include their requests in their written comment submission.
Semiconductor Manufacturing Equipment
The Rule currently applies to all SME companies operating in the PRC, not only domestic Chinese companies. The license review policy will be applied on a case-by-case basis, and the scope remains open to comment at this time.
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