BIS Offers Guidance on US Persons, Chip Facilities in First FAQs on New China Controls

One FAQ tackles BIS’s new U.S. persons control under 744.6(c)(2) of the Export Administration Regulations, which the agency said sets restrictions on activities related to the “‘development’ or ‘production’ of [integrated circuits] that could involve `support'” to weapons and missile end-uses. The control applies to people who authorize the shipment, transmittal or in-country transfer of items not subject to the EAR and that are used to develop or produce the circuits “to fabrication facilities in [China] that fabricate integrated circuits meeting the criteria specified in § 744.6(c)(2)(i)(A)-(C) of the EAR,” BIS said. The requirements also apply to people who “conduct the delivery, by shipment,” of those items, and people who provide services for those items, including “maintaining, repairing, overhauling, or refurbishing” services.

The restrictions apply even when the U.S. person doesn't know “whether the activity is for a facility that fabricates integrated circuits that meets the criteria,” BIS said. U.S. people should “conduct appropriate due diligence to assess whether a fabrication ‘facility’” in China “fabricates integrated circuits meeting any of the criteria” in the U.S. persons restrictions, the agency said. BIS said “appropriate” due diligence should include a review of public information, the “capability of items to be provided or serviced,” proprietary market data and end-use statements. U.S. people should also follow the “Know Your Customer” guidance in Supplement No. 3 to part 732 of the EAR, the agency said. BIS also encouraged exporters to submit questions through advisory opinion requests.

Notably, BIS said the 744.6(c)(2) restrictions don’t apply to U.S. persons conducting certain “administrative or clerical activities,” such as arranging for the shipment, preparing financial documents or “otherwise implementing a decision to approve a restricted shipment, transmittal or in-country transfer." In those cases, the restrictions don’t apply only “absent evidence of knowledge of a violation by those persons,” BIS said.

This particular guidance only applies to the restrictions outlined under 744.6(c)(2) and “does not limit the scope of § 744.6(b) or apply to other uses of the term facilitate or facilitation found elsewhere in the EAR,” the agency said. BIS added that it’s considering revising the new advanced computing rule to “ensure that the rule provides maximum clarity to achieve its policy objective.”

In a related FAQ, BIS said it defines a “U.S. person” as “any person in the United States.” A U.S. person is also defined as any U.S. citizen or any “juridical person organized under the laws of the United States or any jurisdiction within the United States, including foreign branches.”

In another FAQ related to semiconductor fabrication facilities, BIS said it defines a “facility” as “a building or outdoor area in which people use an item that is built, installed, produced, or developed for a particular purpose.” A semiconductor fabrication facility is a “building where the production at the restricted technology level occurs,” the agency said. “Subsequent steps at facilities, such as assembly, test, and/or packaging facilities, that do not alter the technology levels are not covered.”

In cases where a chip company’s campus has multiple buildings, each building is considered to be a separate facility, BIS added. “If an entity has a restricted and unrestricted line in the same building, that building/facility is subject to the new control,” the agency said. “If an entity has multiple buildings located on the same campus with the same address and/or are part of the same legal entity, parties should exercise sufficient due diligence to ensure their item or activity is only for an unrestricted fabrication.”

In another FAQ, BIS confirmed that it has issued specific one-year authorizations for certain companies to continue their operations in China. South Korean chipmaker SK Hynix said last month it received the authorization, and Samsung has reportedly received a similar waiver (see 2210120002).

BIS said the authorizations are for “limited” circumstances to “allow continued operations.” The companies that received the authorizations should share a copy directly with their suppliers and customers so all parties can conduct due diligence, BIS said. “You and the holder of the authorization should jointly determine if the transactions you wish to undertake meet the terms and conditions of the authorization,” the agency said.

BIS also said exports to Hong Kong are subject to the same license requirements as exports to mainland China, but Macau is a “distinct destination” and isn’t subject to China-specific license requirements. “However, exporters and reexporters are encouraged to conduct due diligence and be aware of red flags when shipping to Macau,” BIS said. Other FAQs address deemed exports under the advanced computing restrictions and offer guidance for items with “encryption functionality.”