The Department of Commerce’s Bureau of Industry and Security (BIS) recently published new Frequently Asked Questions (FAQs) on its interim final rules (IFRs) concerning semiconductor manufacturing equipment and advanced computing items.
These FAQs provide additional insight into BIS’s interpretation of various technical and regulatory requirements under the updated regulations. The FAQs reflect BIS’s efforts to balance national security concerns with the cooperation from private sectors in key technological areas.
BIS and other US government agencies have used FAQs to outline the government’s regulatory and enforcement priorities and to clarify or confirm interpretations when questions arise. With these FAQs, BIS addressed specific questions about licensing, the control criteria of the export control classification numbers (ECCNs), and the role and scope of US persons when complying with the new regulations.
FAQs are informative, but not binding, and therefore provide guidance that should be confirmed with BIS if companies intend to rely on the responses to conduct business. Companies can confirm these interpretations either through the submission of export licenses or advisory opinion requests—the latter of which are also not binding per se but reflect an official position from the agency that BIS publishes for the community.
This LawFlash summarizes key highlights of BIS’s FAQs. For a detailed review of the IFRs, refer to our previous report.
GENERAL RESPONSES
BIS explained that in promulgating the IFRs, it considered the impact of export controls on cross-border technology collaboration, particularly in healthcare and environmental technology, and adjusted the scope of the controls by, for example, implementing the semiconductor manufacturing equipment end-use control in § 744.23(a)(4), expanding license exception eligibility, and added exclusions to the §§ 744.6 and 744.23 controls. BIS also confirmed that Cyprus is no longer included in Country Group D:5 in Supplement No. 1 to part 740 because it has been removed from 22 CFR 126.1 of the State Department’s International Traffic in Arms Regulations.
PERFORMANCE PARAMETERS
BIS provided additional details regarding technical specifications and measurements related to export controls associated with semiconductor manufacturing equipment and advanced computing items, including how to calculate “performance density” and “die size” for semiconductor manufacturing:
- To calculate the “performance density,” Technical Note 4 of ECCN 3A090 explains that it is measured by “TPP” divided by “applicable die area,” which is measured in millimeters squared and includes all die area of logic dies manufactured with a process node that uses a non-planar transistor architecture. In the context of this technical note, BIS explained that “logic dies” refers to the area of the whole non-separable logic die, and area for static random-access memory (SRAM) should not be excluded from the area calculation.
- For “chiplets,” only the area of area of each logic chiplet within the package using a non-planar architecture—the area of chiplets with a planar transistor architecture—should be excluded from the calculation. The FAQs defines “chiplet” as a tiny integrated circuit that contains a well-defined subset of functionality.
- For high bandwidth memory (HBM), a computer memory interface for 3D-stacked synchronous dynamic random-access memory (SDRAM), BIS explained that all areas should be excluded from calculating the performance density because HBM is memory, not logic. However, for 3D packaging of logic on logic, the area of all levels should be counted.
LICENSE EXCEPTION NAC
BIS also provides details regarding the conditions under which License Exception Notified Advanced Computing (NAC) applies, including notification requirements, applicable items, and filing processes.
- Notification Requirements: Exports and reexports under NAC to Macau or Country Group D:5 destinations, or to entities in these locations, require notification to BIS prior to any exports or use of NAC. This does not apply to destinations in Country Groups D:1 or D:4 (except Macau or destinations in D:5) or for in-country transfers. Different exporters may submit NAC notifications for the same product but only one ultimate consignee and one end user per NAC notification are allowed.
- NAC Notification Submission Requirements: The NAC notification submitted via SNAP-R must include the exporter's name, contact information, item description, processing performance, performance density, marketing information, parties involved, volume, value, and expected end use. NAC notifications are limited to six items, ideally one model number per notification.
- ECCN 4A090 Items: ECCN 4A090 items, such as computers and components with integrated circuits exceeding limits in 3A090.b, are subject to NAC despite ECCN 4A090.b being reserved. BIS plans to revise ECCN 4A090.b for clarity. If the performance density is unknown, the exporter can authorize BIS to contact the chip’s designer/manufacturer.
- Notification Approval Process: BIS will inform the submitter within 25 days of SNAP-R registration whether a license is required. If BIS does not contact the submitter, applicants should use the System for Tracking Export License Applications (STELA) to ensure that no issues exist. BIS explained that it will review NAC notifications for national security concerns, and a license may still be required despite NAC eligibility. BIS declined to publish a list of eligible chips due to varying factors such as end users, uses, and volume—an issue of concern, as it may be difficult, given the changing standards, to plan for future business without understanding exactly what chips may qualify for NAC eligibility or require licenses.
- Compliance with License Exception ENC: For certain encryption items controlled in Category 5 Part 2, BIS confirmed compliance with both NAC and ENC license exceptions is necessary.
‘SUPERCOMPUTER,’ ‘ADVANCED-NODE INTEGRATED CIRCUITS,’ AND SEMICONDUCTOR MANUFACTURING EQUIPMENT END USE CONTROLS
The FAQs address licensing requirements for various technologies and scenarios, particularly focusing on the development and production of advanced-node integrated circuits.
- Incorporation of EAR99 Items and Technologies: EAR99 items, such as screws, tubing, etc., are not controlled under paragraph 744.23(a)(4) for incorporation into Category 3B items. BIS has narrowed the product scope to items specified on the Commerce Control List (CCL), which would generally exclude EAR99 items (as they are not specifically identified on the CCL). The incorporation of EAR99 items is controlled under end-use controls in § 744.23(a)(2), which applies to all items subject to the EAR (which does include EAR99 items) when used in the development or production of integrated circuits at specific facilities. However, a license is required to transfer or release EAR99 technology under § 744.23(a)(2)(i) of the EAR for use in the development or production of integrated circuits at facilities involved in the production of advanced-node integrated circuits.
- Definition of “Facility”: The FAQs clarified that the term “facility” under §§ 744.6 and 744.23 includes locations where production occurs beyond fabrication facilities, places where late-stage engineering or early-stage manufacturing steps take place, and research and development (R&D) fabrication facilities engaged in development and product engineering activities, even if they do not engage in volume manufacturing.
- BIS also directly responded to two specific scenarios:
- Where a US or Country Group A:5/A:6 based company (Company A) supplies EAR subject commodities, software, or technology for equipment upgrade at a D:5 country facility, a license is required under § 744.23(a)(4). However, this transaction might be eligible for the Temporary General License (TGL) if it does not involve indigenous development or production of Category 3B tools.
- For in-country equipment transfer, BIS explained that if a US or Country Group A:5/A:6 headquartered company (Company A) in China instructs another Chinese company (Company B) to produce parts or equipment, Company B can transfer these in-country under the TGL.
ACTIVITIES OF ‘US PERSONS’
“Us Person” activities and potential facilitation are of heightened concern to companies that employ US persons in operations located in China or abroad. Understanding these sensitivities, the FAQs provide some clarification of excluded activities and covered activities. Given this FAQ, we anticipate that BIS will continue to clarify the scope and reach of the US Person activities’ requirements:
- Application to Natural US Persons: BIS clarified that the knowledge requirement in the context of Section 744.6(d)(4) exclusively applies to natural US persons, not to US entities. Therefore, this exclusion covers only individual US citizens or permanent residents, asylees, and refugees, not corporations or other legal entities. The purpose of excluding US entities from § 744.6(d)(4) is to prevent discrimination against US person employees of non-US entities headquartered in allied countries. This exclusion aims to protect individual US persons from personal liability while not extending the same protection to US entities. However, this response does not really address the foundational question asked: how can a corporation as a US Person act other than through its individual employees? In a sense, this response adds to the confusion and would benefit from additional updated guidance from BIS.
- Scope of Activities: BIS explained that the activities covered by § 744.6(c)(2)(iii) apply not only to servicing but also to authorizing or conducting activities. In contrast, the exclusion in § 744.6(d)(5) only applies to servicing activities, including installation. Furthermore, Section 744.6(c)(2)(iii) applies “regardless of end use or end user,” indicating that the type of facility (whether producing advanced-node ICs or not) is irrelevant for the application of this paragraph.
- Definition of “Facility” in End Use Control: The FAQs also highlighted a request for clarification on whether an R&D facility engaged only in manufacturing prototypes not intended for sale, and not capable of serial production, falls under the “production” definition and hence, the end use control in Section 744.23(a)(2). BIS explained that the EAR defines “development” as stages prior to serial production, including prototype assembly and testing. BIS suggests submitting an Advisory Opinion request for further assessment to determine if such an R&D facility qualifies as “development” rather than “production.”
REGIONAL STABILITY (RS) CONTROLS AND .Z SUBCATEGORY
Lastly, the FAQs outline the requirements for filing and licensing for .z category items in the Automated Export System (AES) Electronic Export Information (EEI). Additionally, the FAQs explain that .z items do require licenses for countries outside of Country Groups D:1, D:4, and D:5 as the .z entries are designed to control items that meet the criteria of both a specific ECCN and the parameters set in 3A090/4A090. These entries retain the original license requirements of the item and add new RS-related license requirements.
For instance, 4A003.z controls items that meet the criteria of both 4A003.b and 4A090, requiring a license for the same destinations as 4A003.b items plus additional restrictions on 4A090 items. Outside of Country Groups D:1, D:4, and D:5, these items are eligible for the same license exceptions as a 4A003.b item.