Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items

<RULE> DEPARTMENT OF COMMERCE <SUBAGY>Bureau of Industry and Security</SUBAGY> <CFR>15 CFR Parts 732, 734, 736, 740, 742, 744, 746, 758, 762, 772, and 774</CFR> <DEPDOC>[Docket No. 241126-0302]</DEPDOC> <RIN>RIN 0694-AJ74</RIN> <SUBJECT>Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Bureau of Industry and Security, Commerce. <HD SOURCE="HED">ACTION:</HD> Interim final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> In this interim final rule (IFR), the Bureau of Industry and Security (BIS) makes changes to the Export Administration Regulations (EAR) controls for certain advanced computing items, supercomputers, and semiconductor manufacturing equipment, which includes adding new controls for certain semiconductor manufacturing equipment and related items, creating new Foreign Direct Product (FDP) rules for certain commodities to impair the capability to produce “advanced-node integrated circuits” (“advanced-node ICs”) by certain destinations or entities of concern, adding new controls for certain high bandwidth memory important for advanced computing, and clarifying controls on certain software keys that allow for the use of items such as software tools. This IFR publishes concurrently with another BIS final rule entitled, “Additions and Modifications to the Entity List; and Removals from the Validated End-User (VEU) Program” (Entity List rule) that adds to and modifies the Entity List to ensure appropriate EAR controls are in place for certain critical technologies and to minimize the risk of diversion to entities of concern. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> This rule is effective December 2, 2024. <E T="03">Compliance dates:</E> Although this rule is effective December 2, 2024, exporters, reexporters, and transferors are not required to comply with the changes made in the following amendatory instructions until the compliance dates specified below for the respective amendatory instructions. If no compliance date is provided, the parties must comply with those requirements as of the effective date of this IFR. • The changes made in this IFR in amendatory instructions 2 ( <E T="03">Red Flags</E> ) and 6 (§ 734.19) have a compliance date of December 2, 2024. • The changes made in this IFR in amendatory instructions 4, 5, 15, 16, 17, 19, 20, 21, 23, 25, 29, and 31 (ECCNs 3B001, 3B002, 3B991, 3B992, 3B993, 3B994, 3A090, 3D001 (related to 3A090.c and 3B commodities), 3D002, 3D992, 3D993, 3D994, 3E001 (related to 3A090.c and 3B commodities) (HBM controls and related changes), 3E992, 3E993, and 3E994) FN5, and FDP rules, and related changes, and DRAM definition changes) have a compliance date of December 31, 2024. <E T="03">Comments due date:</E> Comments must be received by BIS no later than January 31, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Comments on this IFR may be submitted to the Federal rulemaking portal at: <E T="03">www.regulations.gov.</E> The <E T="03">regulations.gov</E> ID for this IFR is BIS-2024-0028. Please refer to RIN 0694-AJ74 in all comments. All filers using the portal should use the name of the person or entity submitting the comments as the name of their files, in accordance with the instructions below. Anyone submitting business confidential information should clearly identify the business confidential portion at the time of submission, file a statement justifying nondisclosure and referring to the specific legal authority claimed, and provide a non-confidential version of the submission. For comments submitted electronically containing business confidential information, the file name of the business confidential version should begin with the characters “BC.” Any page containing business confidential information must be clearly marked “BUSINESS CONFIDENTIAL” on the top of that page. The corresponding non-confidential version of those comments must be clearly marked “PUBLIC.” The file name of the non-confidential version should begin with the character “P.” Any submissions with file names that do not begin with either a “BC” or a “P” will be assumed to be public and will be made publicly available at: <E T="03">https://www.regulations.gov.</E> Commenters submitting business confidential information are encouraged to scan a hard copy of the non-confidential version to create an image of the file, rather than submitting a digital copy with redactions applied, to avoid inadvertent redaction errors which could enable the public to read business confidential information. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> • For general questions, contact Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, U.S. Department of Commerce at 202-482-2440 or by email: <E T="03">RPD2@bis.doc.gov.</E> • For Category 3 technical questions, contact Carlos Monroy at 202-482-3246 or by email: <E T="03">Carlos.Monroy@bis.doc.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> <HD SOURCE="HD2">A. BIS's Implementation of Export Controls To Address National Security Risks and Foreign Policy Objectives Associated With the People's Republic of China (PRC)'s Use of Advanced Computing, Supercomputer, and Semiconductor Manufacturing</HD> PRC leadership at the highest levels has stressed the importance of building an indigenous and self-sufficient semiconductor ecosystem, referring to ICs in particular as critical to PRC national security strategy. Reporting from PRC state-owned media outlets has even referred to integrated circuits (ICs) as the “main battlefield” of the PRC's Military-Civil Fusion (MCF) National Strategy to eliminate barriers between the PRC's civilian research and commercial sectors and its military and defense industrial sectors to ensure that innovations in the civilian sector simultaneously advance the PRC's military capabilities. The Chinese Communist Party (CCP) aims to achieve a world class military by 2049 through MCF. Due to the significance of semiconductors to that strategy and the PRC's technology ambitions, PRC political and scientific leaders have sought to develop an “independent and controllable” semiconductor industry for decades—one that is fully within the government's control and not reliant on foreign suppliers. The PRC has also mandated and incentivized relevant domestic firms to dedicate significant resources to realizing these strategic objectives, demonstrating the top-down, hands-on approach that the PRC is taking to shape this ecosystem to benefit itself, with a related detriment to the technology leadership of the United States and its allies. Export controls on semiconductor manufacturing equipment (SME) and related parts and components are central to countering the PRC's goal of furthering its “advanced-node ICs” production capacity in support of its military modernization and weapons of mass destruction (WMD) programs. Since October 2022, BIS has published a series of IFRs imposing controls on advanced computing and supercomputing items and SME, starting with an IFR that was issued on October 7, 2022, “Implementation of Additional Export Controls: Certain Advanced Computing and Semiconductor Manufacturing Items; Supercomputer and Semiconductor End Use; Entity List Modification” (October 7 IFR) (87 FR 62186, October 13, 2022). The October 7 IFR amended the EAR to implement controls on advanced computing ICs, computer commodities that contain such ICs, and certain SME and parts and components needed to produce those and other advanced ICs, and to make other EAR changes to implement appropriate related controls, including on certain “U.S. person” activities that `support' (as defined in § 744.6 of the EAR) the “development” or “production” of certain ICs in the PRC. The October 7 IFR explained that these controls were aimed at limiting the PRC's ability to engage in activities that would pose significant threats to U.S. national security and foreign policy. Specifically, BIS determined that certain advanced computing ICs and related computing items—many of which originated in the United States or were produced with U.S. technology, software, or tools—could enable the PRC to develop certain enhanced data processing and analysis capabilities, including through AI applications because of the high processing power of the advanced ICs and related computing items. Additionally, BIS determined that the capability to produce advanced computing ICs for advanced computing systems, such as AI systems, through the use of certain SME, presented significant national security and foreign policy concerns because indigenous production is another means to obtain “advanced computing ICs” and other advanced computing systems. These capabilities could be used by the PRC to further its military modernization efforts, improve calculations in weapons design and testing (including for WMD), and violate basic human rights through comprehensive surveillance programs. As previously stated, these activities are contrary to U.S. national security and foreign policy as set forth in the Export Control Reform Act of 2018 (ECRA) (codified, as amended, at 50 U.S.C. 4801-4852), which directs BIS to control items subject to the jurisdiction of the United States when those items could be used in “military programs that pose a threat to the security of the United States or its allies,” could lead to “the proliferation of weapons of mass destruction or of conventional weapons,” or could undermine the “foreign policy of the United States, including the protection of human rights and the promotion of democracy” (50 U.S.C. 4811(2)). To effectuate its controls under the October 7 IFR—and, consequently, to h ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 317k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━