U.S. Export Controls: October 7th Rule: 13 Entity List Additions
- Arne Mielken
- Oct 26, 2023
- 7 min read
Discover the latest U.S. export controls updates and how they impact advanced computer and semiconductor manufacturing items by placing 13 companies on the U.S. EAR Entity List.
On October 17, 2023, BIS updated the controls on semiconductor manufacturing items to China. We explore what the change means.
Background
In 2022, the Department of Commerce's Bureau of Industry and Security (BIS) implemented new export controls on advanced computing and semiconductor manufacturing items to the People's Republic of China (PRC). This includes use of the EAR Entitiy List
What has changed with this update?
Since October 17, 2023, the Bureau of Industry and Security (BIS) will add 13 entities to the Entity List. These entities include two companies from China that make advanced computer chips. They have been found to engage in activities that could harm the interests of U.S. national security and foreign policy. Therefore, they will be restricted from using U.S. technology to make items outside the U.S.
Context and Objective of the Entity List
As part of its efforts to alert the public about entities that may raise the risk of exported, reexported, and transferred (in-country) items being diverted to weapons of mass destruction (WMD) programmes, BIS first published the Entity List in February 1997. Since its original release, the State Department's approved actions and those at odds with American foreign policy and/or national security objectives have been included as new reasons for inclusion on the Entity List.
The names of listed foreign individuals, businesses, research institutions, government and private organisations, and other types of legal persons are subject to particular licence requirements for the export, reexport, and/or transfer (in-country) of specific items. These individuals make up the Entity List, which may be seen in Part 744 of the EAR's Supplement No. 4. The individuals included on the Entity List are subject to additional licencing rules and procedures on an individual basis, in addition to those contained elsewhere in the EAR.
Entity List-Imposed Licence Requirements
The licence requirements that are placed on each listed individual are detailed in the Entity List. These licence requirements are separate from and additional to those found elsewhere in the EAR. For instance, even though the EAR99 item could otherwise be sent to the country of destination without a licence, you would still need to obtain one before exporting, reexporting, or transferring (in-country) it to a listed entity if the licence requirements for that person as stated in the “License Requirement” column of the Entity List state “all items subject to the EAR.” This is provided the proposed end-use does not trigger another licence requirement under Part 744 of the EAR.
It should be noted that exports, reexports, and transfers (in-country) of goods covered by the EAR need a licence, unless they fall under one of the other two EAR provisions included in the Entity List and the Commerce Control List (Supplement No. 1 to Part 774 of the EAR). For instance, refer to Part 744's end-use criteria or Part 746's embargo and special destination requirements. Keep in mind that if any of these sections need a licence, you must get one before you may export, reexport, or transfer the item (within the nation).
88 FR 71991: Who is on the list?
Effective Date:10/17/2023
The Export Administration Regulations (EAR) are amended by the Bureau of Industry and Security (BIS) in this regulation by adding 13 firms to the Entity List with China as their destination. These organisations work on creating integrated circuits (ICs) for advanced computing:
Advanced computing integrated circuits (ICs) can be used to provide artificial intelligence capabilities to further development of weapons of mass destruction, advanced weapons systems, and high-tech surveillance applications that raise national security concerns, as detailed in an upcoming amendment to regulations regarding advanced computing items and supercomputer and semiconductor end use.
As a result, the American government has concluded that these organisations are behaving against the country's interests in foreign policy or national security.
Detailed Analysis
The Federal Register announcement states that these organisations were included because they are "involved in the development of advanced computing integrated circuits." With immediate effect, a licence will now be required for all exports, reexports, and in-country transfers of any item covered by the EAR to the parties on this list. Licence applications will be reviewed to reject them. Furthermore, every single one of these organisations has been assigned the designation "footnote 4," indicating that they are all subject to the Entity List FDP rule found in EAR Section 734.9(e)(2). If sent by November 16, 2023, anything sent on October 17 at midnight could still be preserved.
Frequently Asked Questions (FAQs)
BIS’s first round of FAQs, published on October 28, 2022 are available here:
FAQs for October 7 Advanced Computing and Semiconductor Manufacturing Equipment Rule (Updated 1/25/2023) here
More information & links
BIS’s October 7, 2022 press release on the rule is available online here.
The written presentation of Assistant Secretary Thea D. Rozman Kendler for BIS’s October 13, 2022 Public Briefing on the rule is available online here
A webcast of Under Secretary Alan F. Estevez’s October 27, 2022 fireside chat at the Center for a New American Security (CNAS) discussing the rule is available online here.
The written presentation of Assistant Secretary Thea D. Rozman Kendler to an Open Session of BIS’s Information Systems Technical Advisory Committee on November 2, 2022.here.
Rule Text and Public Comment Information:
The text of the published rule on the Federal Register’s website is available here. To submit a public comment on the rule via Regulations.gov please follow this link.
Read Press Release
Legal Text
Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections
On October 7, 2022, the Bureau of Industry and Security (BIS) released the interim final rule (IFR), “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), which amended the Export Administration Regulations (EAR) to implement controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items, and to make other EAR changes to implement appropriate related controls, including on certain “U.S. person” activities.
Today’s Advanced Computing/Supercomputing IFR (AC/S IFR) addresses comments received in response to only the part of the October 7 IFR that controls advanced computing ICs and computer commodities that contain such ICs.
This rule also makes other changes to make the controls more effective and less burdensome, including by correcting and clarifying the controls to more effectively achieve the policy objectives identified in the October 7 IFR. Today’s AC/S IFR is released concurrently with a second BIS IFR, “Export Controls on Semiconductor Manufacturing Items,” which addresses public comments received in response to other portions of the October 7 IFR.
Together, these IFRs revise the October 7 IFR controls to achieve BIS’s focused national security policy objectives more effectively. These revisions protect U.S. national security interests by further restricting China’s ability to obtain critical technologies to modernize its military capabilities in ways that threaten the national security interests of the United States and its allies.
All BIS changes of the Federal Register
Download Official Statements by BIS
1) Alan F. Estevez - Under Secretary of Commerce for Industry and Security, Before the House Foreign Affairs Committee, Hearing Entitled, “Combatting the Generational Challenge of CCP Aggression”
2) Statement of Thea D. Rozman Kendler, Assistant Secretary of Commerce for
Export Administration, Before the Senate Banking, Housing, and Urban Affairs Committee
Hearing Entitled, “Countering China: Advancing U.S. National Security, Economic Security,
and Foreign Policy”
3) Statement of Matthew S. Axelrod Assistant Secretary of Commerce for Export Enforcement Before the Senate Banking, Housing, and Urban Affairs Committee Hearing Entitled, “Countering China: Advancing U.S. National Security, Economic Security, and Foreign Policy
4) Assistant Secretary for Export Administration Kendler’s testimony before the Select
Committee on the Strategic Competition between the United States and the Chinese
Communist Party on July 20, 2023.
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