Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

15 CFR Parts 732, 734, 736, 740, 742, 744, 746, 748, 758, 770, 772, and 774

[Docket No. 231013-0248]

RIN 0694-AI94

Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections

AGENCY:

Bureau of Industry and Security, Department of Commerce.

ACTION:

Interim final rule; request for comments.

SUMMARY:

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), 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. This 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. This AC/S IFR is published 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 more effectively achieve BIS's focused national security policy objectives. 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.

DATES:

This rule is effective November 17, 2023, except for amendatory instruction 11 amending supplement no. 1 to part 736 of the EAR, which is effective from November 17, 2023, to January 1, 2026.

Comments must be received by BIS no later than December 18, 2023.

ADDRESSES:

Comments on this rule may be submitted to the Federal rulemaking portal (

www.regulations.gov

). The

regulations.gov

ID for this rule is: BIS-2022-0025. Please refer to RIN 0694-AI94 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 through

https://www.regulations.gov.

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.

FOR FURTHER INFORMATION CONTACT:

For questions on the license requirements in the October 7 IFR or the revisions included in this AC/S IFR, contact Aaron Amundson, Director, Information Technology Controls Division, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5299, Email:

rpd2@bis.doc.gov.

For emails, include “Advanced computing controls” in the subject line.

SUPPLEMENTARY INFORMATION:

Background

A. Introduction

On October 7, 2022, 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,” which made critical changes to the Export Administration Regulations (15 CFR parts 730-774) (EAR) in two areas to address U.S. national security concerns and requested public comments on the newly imposed measures. This IFR was published in the

Federal Register

on October 13, 2022 (October 7 IFR) (87 FR 62186). BIS imposed these new controls to protect U.S. national security interests by restricting certain exports to China that would advance China's military modernization and surveillance efforts. With a calibrated approach, focused on key, cutting-edge technologies, BIS also sought not to undercut U.S. technology leadership or unduly interfere with commercial trade. As noted in the Export Control Reform Act of 2018 (50 U.S.C. 4801-4852, ECRA), the national security of the United States requires that the United States maintain its leadership in the science, technology, engineering, and manufacturing sectors, including technology that is essential to innovation.

The advanced computing ICs and supercomputing capacity controlled through the October 7 IFR are critical for preventing or limiting the further development of weapons of mass destruction, advanced weapons systems, and high-tech surveillance applications that create national security concerns, including through their use in exascale supercomputing, and artificial intelligence (AI) capabilities. Advanced AI models, trained on advanced computing ICs, can be used to improve the design and use of the items listed above. The PRC seeks to use advanced computing ICs and supercomputing capacity in the development and deployment of these AI models to further its goal of surpassing the military capabilities of the United States and its allies.

The October 7 IFR imposed controls on two sets of items and activities. First, the rule established new Export Control Classification Numbers (ECCNs) and end-use controls on certain advanced computing ICs, computer commodities that contain such ICs, and supercomputers. Second, it established a new ECCN for certain semiconductor manufacturing equipment (SME) and

end-use controls related to the “development” and “production” of three types of “advanced-node ICs,” as well as end-use controls on the “development” and “production” of SME.

Today, BIS addresses these two issues separately through publication of this AC/S IFR and a second BIS IFR, “Export Controls on Semiconductor Manufacturing Items” (SME IFR). Together, these IFRs further advance the U.S. national security objectives identified above and further discussed in section C of this rule. This AC/S IFR focuses on the advanced computing controls and related end use provisions of the October 7 IFR and amends the EAR to expand the scope of the October 7 IFR while responding to comments from stakeholders about the advanced computing controls and related end use controls adopted in the October 7 IFR. This AC/S IFR: (1) revises ECCN 3A090 to remove paragraph a, including paragraphs a.1 through a.4, and adds in its place simplified control paragraphs .a and .b, along with a conforming change to ECCN 3A991.p; (2) replaces the criterion “any other item on CCL that meet or exceed the performance parameters of 3A090 or 4A090” by positively identifying those ECCNs in new .z paragraphs in nine ECCNs, along with various conforming changes related to the new .z paragraphs in other parts of the EAR; (3) clarifies the scope of “U.S. person” and end-use controls related to supercomputers and advanced computing items; (4) makes ECCNs 3A991.p and 4A994.l eligible for License Exception Consumer Communication Devices (CCD, 15 CFR 740.19); (5) expands the Regional Stability (RS) license requirements and amends the RS licensing policy to adopt an additional case-by-case license review policy for certain RS items and adopts a presumption of approval for license applications for destinations other than Macau and Country Group D:5, except for items destined to an entity headquartered in or whose ultimate parent company is headquartered in, either Macau or a destination specified in Country Group D:5 and with licenses for items destined to Macau and Country Group D:5 being reviewed under a presumption of denial license review policy; (6) broadens the country scope for these controls, with respect to the items controlled for RS reasons as well as the advanced computing Foreign Direct Product (FDP) rule and advanced computing provisions in § 744.23, to destinations specified in Country Groups D:1, D:4, and D:5 in supplement no. 1 to part 740 that are not also specified in Country Groups A:5 or A:6, and with respect to the supercomputer and advanced-node integrated circuit § 744.23 provisions, broadens the country scope from China and Macau to Macau and destinations in Country Group D:5; (7) clarifies that the model certificate published in the October 7 IFR may be used for all FDP rules; (8) adds five new red flags to assist with compliance, including for recognizing “direct products” under the FDP rules; (9) adds one new Temporary General License (TGL); (10) creates a new license exception for Notified Advanced Computing (NAC); and (11) makes other corrections and clarifications.

B. Public Comments and BIS's Responses

BIS received 43 responsive public comments, covering 78 specific topics, in response to the October 7 IFR. This rule summarizes and addresses comments on the advanced computing provisions, as well as general comments applicable to all aspects of the October 7 IFR that are not otherwise addressed in this SME IFR. BIS appreciates the many public comments it received, and encourages continued engagement and feedback, including comments on the SME and AC/S IFRs which allow for a 60-day comment period and, for most provisions, a 30-day delayed effective date.

Complexity and Compliance Burden

Topic 1:

A commenter noted that the October 7 IFR is so complex that only a small group of people with significant expertise in the EAR and semiconductors can fully understand the rulemaking. This commenter noted that many small and medium enterprises, or even large foreign multinationals, not highly versed in these details will either not know if they are following the rule, or out of an abundance of caution, “over-comply” by restricting legitimate exports and trade not otherwise subject to these rules. Another commenter noted that ensuring compliance will result in dramatic increases in compliance-related costs and associated burdens. This commenter noted that the number of specific components, other commodities, software, and technology affected by the new rules is in the tens of millions, and each item requires marking, analysis, or other handling to ensure compliance. Another commenter noted that this complexity may result in misunderstandings and non-compliance, so simpler controls are more effective in furthering BIS's objectives.

BIS response:

BIS does not agree that the rules are so complex that only a handful of people with expertise will be able to understand the controls. Nevertheless, BIS is revising the October 7 IFR to facilitate the public's understanding of the IFR and to simplify the provisions,

e.g.,

changing the text of ECCN 3A090 to simplify the calculations required. BIS has taken into account the commenters' concerns over increases in compliance-related controls and associated burdens and made changes in this AC/S IFR to make the controls more focused, which should help reduce these burdens and compliance costs where possible. In addition, Section C.10 discusses changes to enhance compliance, including the addition of five new red flags to assist with compliance. BIS has conducted a robust outreach program and posted FAQs on the October 7 IFR to assist public understanding. Reducing complexity and improving clarity are also two key objectives of this AC/S IFR and the SME IFR.

Topic 2:

A member of Congress noted that they had been told by one of their constituents that the October 7 IFR is overly broad in its current form and will damage and disrupt both American industry and global semiconductor supply chains by excluding basic U.S. products that are not subject to specific export controls. This commenter has also been assured by their constituent that the resulting vacuum will be filled by foreign-produced products, including those made in China. This member of Congress shares BIS's stated goal of protecting “critical U.S. national security and foreign policy interests.” However, this member of Congress believes that we must ensure these regulations are focused and do not extend beyond their intended national security objectives.

BIS response:

BIS shares concerns about imposing unilateral controls that create an unlevel playing field for U.S. products and companies. BIS intends the controls to be as focused as possible, while at the same time achieving U.S. national security and foreign policy objectives. One example is adding .z paragraphs to nine ECCNs in order to replace the broad regional stability control for all items that contain “advanced-node ICs,” see discussion in Section C.3.A. BIS is adopting additional changes to better achieve these objectives in this AC/S IFR and in the SME IFR.

Dialogue With Industry for the October 7 IFR, Taking Into Account Potential Burden to Industry, Unintended Consequences, and Economic Impacts

Topic 3:

Some commenters noted that taking time to have meaningful engagement with industry will help head off unintended consequences. These commenters noted that while there will be emergencies that require swift action without time for industry consultation, the U.S. government, and particularly BIS, should endeavor to conduct meaningful engagement with industry and relevant Technical Advisory Committees (TACs) whenever possible. These commenters emphasized it is critical that BIS prioritize and meaningfully leverage this engagement when a rule of this breadth and complexity is under consideration, including prior to publishing a final rule for the October 7 IFR. These commenters noted that given the complexity of the October 7 IFR and the global supply chain, BIS should conduct in-depth consultations with industry experts—both in semiconductor companies and more broadly in industries that incorporate semiconductors—in advance of releasing a final rule. Another commenter noted that the economic analysis that needs to be done for the impact of this October 7 IFR and similar rules requires industry input.

BIS response:

BIS agrees that having meaningful engagement with industry through the BIS TACs and soliciting public comments prior to implementing controls is beneficial for the agency as well as the private sector and can reduce unintended consequences. BIS also agrees that it is important to obtain input on the economic impact of export controls. BIS's primary objective is protecting U.S. national security and foreign policy interests, so at times the agency must act quickly and decisively to ensure those national security and foreign policy interests are protected. For the October 7 IFR, BIS did consult with its TACs, but the national security and foreign policy concerns at stake required that controls be put in place expeditiously. Because BIS was aware that there may be some unintended impacts from the October 7 IFR, BIS published the October 7 IFR as an interim final rule with a request for comments, which allowed for BIS in this AC/S IFR and SME IFR to make additional changes to the control structure and address some of those unintended consequences. Since the rule was published, BIS has engaged extensively with its TACs to revise the control parameters of ECCN 3A090.

Topic 4:

A commenter noted that longer delayed effective dates would ease company confusion and help improve compliance. This commenter suggested that BIS consider implementing such rules in the future with a delayed implementation period to allow for industry to study the rules and implement effective compliance programs. This approach would have significantly avoided the unintended confusion that this new complex rule created. One commenter noted that BIS would have benefitted from having more time to consider the October 7 IFR prior to publication and noted that based on this commenter's interactions with BIS shortly after the October 7 IFR was published, BIS did not seem ready to advise the public on its own rule.

BIS response:

In this AC/S IFR and SME IFR, BIS is adopting a 30-day delayed effective date, except as noted in the AC/S IFR and SME IFR where a sooner effective date is warranted. BIS agrees that longer delayed effective dates can ease confusion by companies and help improve compliance, but BIS also needs to account for the national security and foreign policy concerns it is addressing. An extended delayed effective date can undermine those national security and foreign policy concerns. For example, a six-month delayed effective date for the October 7 IFR would have provided additional time for outreach and for companies to adjust to the controls, but that six month delay would have also allowed end users in China substantial time to acquire key pieces of SME needed to help them achieve advanced nodes of semiconductor fabrication and to stockpile various “parts” and “components” needed for future development of supercomputers. BIS acted expeditiously in imposing controls because of national security and foreign policy concerns. In addition, to better enable compliance and understanding of the rule, the agency provided FAQs to the public (which were updated as needed), conducted a public hour-long briefing on the rule by BIS leadership the day of publication, and extended the public comment period for the October 7 IFR to enable industry to raise concerns for the agency's consideration. To ensure BIS was providing fulsome public guidance, the agency also held internal training for staff responsible for primary public interactions. BIS takes this type of deliberative approach to ensure, as much as possible, that there is consistency and accuracy in the responses being given to the public.

Topic 5:

A commenter noted that in the past, BIS had sought industry input prior to publishing rules and should return to that practice. This commenter noted that until recent years, it had been the long-standing practice for BIS to obtain technical and other inputs from both the public and the TACs before publishing rules (other than those implementing new controls agreed to with the multilateral regimes) given that there is much about commercial supply chains, technologies, and economics that the U.S. Government does not fully understand.

BIS response:

This commenter may be referring to agency practice during Export Control Reform (ECR), during which the Departments of Commerce and State generally published related rules on a proposed basis. At that time, the items that were being proposed to be moved to the EAR were already controlled under the ITAR, so there was not the same urgent national security imperative as was present with the October 7 IFR. Before that time, the vast majority of BIS's rules were published

as direct

final or interim final rules. Accordingly, the commenter is not correct that recently BIS has deviated from past precedent. Since ECR, BIS has continued to publish notices and proposed rules, such as with the Section 1758 rules (other than those implementing multilateral agreements). When BIS has needed to quickly implement controls for national security or foreign policy reasons, BIS has published interim final rules with requests for public comment to gain public input while simultaneously allowing the agency to impose needed controls, and if necessary, amend those controls in response to public comment, as BIS is doing in this AC/S IFR. The imposition of controls without first issuing a proposed rule is consistent with BIS's statutory authority in ECRA, enacted in 2018, and is thus another distinction from rules promulgated before 2018.

Other Ways That BIS Can Consult With Industry To Better Improve the Effectiveness of Policies in This Area

Topic 6:

A commenter requested that BIS should publish, or at least make available for TAC review, the policy justifications for current Category 3 and 4 controls. BIS is increasingly asking industry for input on significant new controls related to semiconductors and associated technology in Categories 3 and 4 and to provide effective feedback and assessment, and it would be helpful to understand the specific policy rationale for new and existing control classifications. Another commenter requested if required by Congress or other parties to publicly release

licensing data surrounding the October 7 IFR, that BIS should strive to provide the most complete data possible, while still protecting confidential business information. This commenter requested that the data should include statistics on licenses that (i) are still pending review, (ii) received an “intent to deny” response, (iii) were “returned without action,” and (iv) issued with restrictive conditions. The data on approvals and denials should also be connected to what the licensing policy is for such items and when those licensing policies were created.

BIS response:

This comment is somewhat outside the scope of the October 7 IFR, but BIS is addressing it given its relevance to overall controls. BIS understands the commenter's intent by asking for this type of engagement with the TACs. BIS does attempt to share background information on how controls developed over the years as well as the basis and policy goals of those controls with the BIS TACs, particularly during closed TAC sessions. BIS subject matter experts and its TACs are also encouraged to take a fresh look at the controls on a regular basis regardless of what the original rationale may have been for imposing controls. Similarly, whether in response to a proposed rule or IFR, the agency seeks the public's input on controls so that the public can help assess whether policy goals are being met. BIS has made every effort to share open source information related to its policy objectives for this rule and the SME IFR as part of this rulemaking.

In response to the comment that the agency should release specific information to the public or Congress, BIS notes that, with limited exceptions related to requests from Congressional committees of appropriate jurisdiction, the agency is required by statute to withhold from disclosure certain categories of information absent a determination that the release is in the U.S. national interest. That statutory restriction on release is intended to protect the business confidential information noted by the commenter. BIS agrees that when such licensing data is released, it will provide an accurate account of the relevant licensing information.

Topic 7:

A commenter noted that ECRA section 1765 (50 U.S.C. 4824) requires BIS to submit to Congress by the end of the year a report on the implementation of ECRA during the previous year. Subsection (a)(2) requires that the annual report include a description of “the impact of [all that year's] controls on the scientific and technological leadership of the United States.” In addition, ECRA section 1752(1) (50 U.S.C. 4811(1)) states that the United States should “use export controls only after full consideration of the impact on the economy of the United States.” Similarly, ECRA section 1752(3) states that the impact of the implementation of new controls on U.S. leadership and competitiveness “must be evaluated on an ongoing basis and applied in imposing controls . . . to avoid negatively affecting such leadership.” This commenter believes that it is important for BIS to obtain formal industry input on this specific topic so that its report to Congress is accurate and complete.

BIS response:

BIS agrees that it may be beneficial to allow for public input to assist BIS in preparing this annual report. BIS intends in the next annual cycle for this report to publish a notice to solicit comments in the area. BIS will then evaluate the amount and type of public input provided to the agency to determine if continuing to publish this type of notice is worthwhile in the future.

Free Trade, Addressing U.S. Relationship With China, and Benefits From Trade With China

Topic 8:

A commenter requested that especially at a time when U.S.-China relations are fraught, we should aim to strengthen ties and increase cooperation to reduce the risk of military conflict and to allow the United States and the whole world to benefit from the fruits of our shared innovations.

BIS response:

The U.S. Government works with China in multiple ways to reduce tensions and find areas in which the two governments can work together. Where the policies of the Chinese Communist Party (CCP) run counter to U.S. national security and foreign policy interests, the U.S. Government takes appropriate actions to address its concerns, including by ensuring that items subject to the EAR are not used to assist CCP military advancement.

Topic 9:

A commenter noted that trade with China brings many important benefits to the U.S. economy and American workers. This commenter noted that advanced U.S. manufacturers of all sizes and their American business partners and consumers have benefitted from globally integrated supply chains that have improved efficiency and lowered production costs for U.S. firms. Revenues generated in China are often reinvested in global and U.S. research and development (R&D) activities, which in turn allows U.S. companies to maintain their competitive edge over PRC and foreign competition. Another commenter noted a belief that the October 7 IFR is counter to U.S. free trade advocacy and could boomerang negatively on the United States if China retaliates with similar trade restrictions.

BIS response:

BIS agrees with the importance of continued trade with China. China's military-civil fusion policy has made it much more challenging for the U.S. Government, as well as exporters, reexporters, and transferors, to be able to clearly identify items and transactions that will be only for civil end uses. BIS has tried to address this circumstance by imposing focused controls. Focused controls can be more complex than the imposition of broad controls (such as on an entire country), but BIS has adopted focused controls to restrict trade as necessary for national security or foreign policy reasons while not impairing trade for civil applications.

Regarding the comment that the October 7 IFR is counter to U.S. free trade advocacy and could lead to the imposition of trade controls by China, BIS notes the national security and foreign policy reasons described in that rule as the reasons for the imposition of those controls. See 87 FR 62186-88 (noting, among other things, China's use of advanced computers for its military modernization efforts, military decision making, planning, and logistics, cognitive electronic warfare, radar, signals intelligence, and jamming, as well as China's use of supercomputers to improve calculations in weapons design and testing including for WMD such as nuclear weapons and hypersonics and other advanced missile systems). These controls were not implemented as protective trade measures, but rather were imposed to protect U.S. national security. BIS is aware of and takes into account concerns about the implications of imposing controls, but those concerns cannot deter BIS from taking actions to protect U.S. national security and foreign policy interests.

Importance of Regular Review of These Controls To Achieve the National Security and Foreign Policy Objectives Outlined in the October 7 IFR, and for Consistency With ECRA

Topic 10:

A commenter noted that ECRA requires that any controls imposed under section 4812, which include end-use controls, “must be evaluated on an ongoing basis . . . to avoid negatively affecting U.S. leadership in the science, technology, engineering, and manufacturing sectors, including foundational technology that is essential to innovation.” ECRA section 4811(3). The commenter noted that the October 7 IFR needs to be

reviewed regularly. Another commenter noted that the October 7 IFR demonstrates a significant U.S. policy shift, as articulated by U.S. National Security Advisor Jake Sullivan, that the previous U.S. “sliding scale approach . . . to stay only a couple of generations ahead . . . is not the strategic environment we are in today.” Yet, the United States will struggle to maintain “as large a lead as possible” if the government pursues a unilateral approach that alienates allies and trading partners and restricts companies from selling consumer technologies worldwide.

BIS response:

BIS intends, consistent with all export controls administered under the EAR, to review the controls from the October 7 IFR on a regular basis to determine if any updates are needed to make those controls more effective. Since the October 7 IFR was announced, BIS has been reviewing these controls, not just in response to the public comments received, but also based on BIS's experience in administering and enforcing the controls, as well as discussions with allies. These considerations have resulted in the changes made to the October 7 IFR included in this AC/S IFR and SME IFR. BIS will continue to review these controls on an ongoing basis and make changes as warranted, including to controls that use specified control parameters that over time may need to be reevaluated. BIS notes that National Security Advisor Sullivan's remarks provide an example of the Administration previewing policy and related controls and are responsive to other comments requesting this type of guidance. Consistent with the policy described by National Security Adviser Sullivan, the October 7 IFR controls resulted from the speed of the technological advancements that could be leveraged for the most sensitive national security activities, as well as furthering human rights violations. The controls established in the October 7 IFR and these rules are needed to address the current national security threats presented by China.

Agrees With the National Security and Foreign Policy Concerns Identified in the October 7 IFR for Why These Changes Were Needed

Topic 11:

A commenter noted that monitoring the production of more supercomputers and AI will benefit the world at large. The commenter sees the October 7 IFR as the best option for national security and regional stability purposes because it addresses the military use of these computers. If these AI and supercomputers are left unmonitored, they may fall into the wrong hands and become a threat to the world at large.

BIS response:

BIS agrees.

Topic 12:

A commenter noted that given the likely importance of AI capabilities to national security and economic prosperity, the commenter expects significant pressure for China to stay at the frontier of AI. The commenter noted that all viable paths for doing so may be explored. This pressure will mount over time, as the importance of AI technology grows and as the AI-relevant ICs produced outside of China outpace the technology to which AI-developers in China, including the People's Liberation Army (PLA), have access. Another commenter noted that the October 7 IFR chip controls were implemented to prevent human rights abuses and protect international security interests by making it more difficult for the government of China to attain advanced AI capabilities. This commenter noted that the use of these supercomputers to monitor the activities of PRC citizens is inappropriate and this is why the October 7 IFR is the best option.

BIS response:

BIS acknowledges both comments and takes PRC human rights abuses seriously. China has been transparent about its military-civil fusion (MCF) strategy and the importance it places on advanced AI as part of MCF. China has already demonstrated on numerous occasions how it has been leveraging advanced technologies against its own people. See,

e.g.,

84 FR 54002 (Oct. 2, 2019) (adding Xinjiang Uighur Autonomous Region (XUAR) People's Government Public Security Bureau, eighteen of its subordinate municipal and county bureaus, and several other entities in China to the Entity List because they were implicated in human rights violations and abuses in the implementation of China's campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups in the XUAR).

U.S. CHIPS Act and Sufficiency of Existing Company Compliance Programs

Topic 13:

A commenter noted that the U.S. CHIPS Act will help keep the United States in the lead for semiconductors. The U.S. CHIPS Act, which appropriated over $52 billion to shore up the semiconductor ecosystem in the United States, will enable continued U.S. leadership in leading-edge semiconductors and SME, and help preserve the large technological differential vis-à-vis China.

BIS response:

The October 7 IFR was designed to address the U.S. national security and foreign policy concerns with China over acquiring these capabilities and their use in WMD-related applications. BIS agrees that the U.S. CHIPS Act is important for helping to promote U.S. to maintain its leadership in semiconductors. The most comprehensive and effective policy both restricts key technologies from China where needed to address national security and foreign policy concerns and promotes U.S. and allied country technology leadership.

Topic 14:

A commenter noted that companies' sophisticated export compliance programs should mitigate the need for additional controls. This commenter noted that many U.S. companies—as well as multinational companies from U.S. allied countries and partners with a U.S. presence—have longstanding, sophisticated export control compliance programs to acquire export licenses and ensure that their products and processes are not facilitating the technological development of items by a sanctioned entity, military end user, or military end use.

BIS response:

BIS notes that compliance programs are designed to follow the rules as they are written. While BIS applauds efforts by companies to conduct extensive due diligence, this does not replace the need for regulations addressing national security and foreign policy concerns.

China Will Obtain the Items it Needs Regardless of U.S. Controls

Topic 15:

A commenter noted that research indicates that China's military systems primarily rely on older and less sophisticated chips made in China, on which U.S. export controls will have limited effect. The commenter noted should China require more advanced chips for AI-driven systems, they will likely be able to develop and produce them—at significant cost and on a slower timeline.

BIS response:

Certain PRC weapons systems may not rely on the most advanced ICs. However, for the most advanced weapons systems such as hypersonic missiles or for super computers that are used to make more advanced WMD or design and produce more advanced weapons systems, advanced ICs are critical to PRC efforts.

Topic 16:

A commenter noted that restricting U.S. persons in assisting China's advanced semiconductor manufacturing is not going to be enough. This commenter noted that

some U.S. persons working in financial institutions (

e.g.,

venture capital and private equity) help China to invest in the semiconductor industry and help PRC companies obtain semiconductor talent, intellectual property, and equipment from all over the world.

BIS response:

BIS shares these concerns that certain actors will try to evade the regulations imposed through the October 7 IFR and these rules. These concerns underpinned the October 7 IFR controls such as the expanded “U.S. persons” control under § 744.6, two new end use controls under § 744.23, and the two new foreign direct product rules and expanded Entity List FDP rule under § 734.9. To address concerns around U.S. investment, the Administration issued Executive Order 14105 that will address outbound investment from the United States.

China and Macau Retaliation To Gain Greater Market Share for PRC Indigenous Companies Worldwide and PRC Companies Filling the Void Left by U.S. Companies

Topic 17:

A commenter's association members expressed concern that one unintended consequence of the October 7 IFR may be that China will increase its production of legacy node semiconductors and flood global markets with those products at significantly reduced prices.

BIS response:

While the October 7 IFR was not intended to impact legacy node semiconductors in China, BIS acknowledges the possibility that these controls may generate spillover effects. The type of concern described in the comment relate to issues to be addressed through other authorities and forums and are outside of BIS's authorities.

Topic 18:

A commenter noted that the October 7 IFR has given a significant boost to China's own materials suppliers.

BIS response:

BIS is aware that the restrictions imposed under the October 7 IFR may give PRC indigenous providers an opportunity to try to fill potential new voids in the market. The October 7 controls, in particular the CCL controls, were intended to impose license requirements on key gateway items that PRC entities would need but which are not indigenously manufactured in China. BIS intends to continue to monitor such developments and adjust its controls as warranted. BIS encourages the public to provide specific information on PRC indigenous capabilities in comments responding to this AC/S IFR and SME IFR. See section D question 5.

ECCN 3A090

Topic 19:

A commenter noted that there needs to be guidance on the circumstances in which controls extend to components controlled under ECCNs 4A003.b and 3A090.a. The commenter noted that ECCN 4A003.b already controls ICs with the 4A003.b characteristics of 29 Weighted TeraFLOPS (WT), soon to be 70 WT. In addition, 4A090 controls devices with ICs exceeding 4800 bits x TOPS. The commenter noted that there is no guidance as to which of these two limits is to apply to license applications for export to China. This commenter also noted that ECCN 4A003.b (Adjusted Peak Performance (APP) exceeding 29 WT) already covers the much higher, by an order of magnitude, 4A090.a license requirement limit, with no guidance as to which of these limits is to apply to license applications for export to China. The commenter notes that these differences present inconsistencies in the EAR.

BIS response:

The APP formula in ECCN 4A003 and the bits x TOPS metric (now modified to a TPP metric) in ECCN 3A090 apply to different commodities. ECCNs 3A090 and 4A090 control items based on the performance of a single chip, while the APP formula in ECCN 4A003 describes aggregate performance across multiple chips. However, BIS acknowledges that a computer or component could exceed the performance parameters of both ECCNs 4A003.b and 4A090 or 3A090. The October 7 IFR accounted for this possibility by applying controls to items classified on the Commerce Control List (CCL) other than under ECCNs 4A090/3A090 that meet or exceed the 4A090/3A090 performance thresholds. This AC/S IFR clarifies this issue by adding a .z “items” paragraph to ECCN 4A003 to control items that meet or exceed ECCN 4A090 specifications. This change is intended to provide clear guidance regarding the relationship between ECCNs 4A090 and 4A003.b and .z.

Topic 20:

A commenter had a question on interpreting Technical Note 2 under ECCN 3A090. The commenter noted that the term “bit-manipulation operations, and/or bitwise operations” seems susceptible of a broad interpretation including any kind of data processing, and questioned whether this was the intent. The commenter asked how exporters should think about classifying a component for a router or a switch that meets or exceeds the technical control parameters under ECCN 3A090 but which would otherwise be classified under an ECCN in Category 5, Part 1 or Part 2.

BIS response:

The October 7 controls were not intended to apply to telecommunications equipment or parts and components designed for telecommunications equipment. For example, 4A090 is in Category 4, which applies to computers. BIS would not classify a router or switch in Category 4. Therefore, a router or switch that meets the control parameters of 4A090 would not be subject to these controls. Category 5 Part 2 could capture some of these items, because that category also applies to general purpose computing equipment with encryption functionality.

Topic 21:

A commenter noted that with respect to the “aggregate bidirectional transfer rate” provision of 3A090, BIS should incorporate either an additional technical note in the CCL under 3A090, or a definition of “aggregate bidirectional transfer rate” with a specific explanation of how this rate is calculated over all inputs and outputs in part 772.

BIS response:

BIS retains this parameter in the revised ECCN 3A090 included in this AC/S IFR. For greater clarity, including for providing greater clarity on how to apply the criterion of “aggregate bidirectional transfer rate,” the AC/S IFR revises the Technical Notes to 3A090 by removing the five technical notes and replacing those with four technical notes. Most importantly, this AC/S IFR replaces bits x TOPS with `Total processing performance' (`TPP') values and defines objective criteria that can be used to calculate the TPP value. See section C.1. below for additional information on the revision to these technical notes.

Topic 22:

A commenter noted that for ECCN 3A090 and programmable ICs, there is no inherent communications or calculations capability. The commenter requested that BIS issue guidance on how to (1) address this complex calculation/interpretation theoretical performance situation, perhaps via a practical manual, and (2) leverage metrics from other programmable device ECCNs that are already on the CCL, such as under 3A001.a.7, 3A991.d, or others.

BIS response:

The rewrite of ECCN 3A090 included in this rule addresses this comment. BIS, in consultation with its Information Systems Technical Advisory Committee (ISTAC), considered compiling a practitioner's guide but ultimately decided that changing the text of ECCN 3A090 to simplify the calculation was a better approach.

Topic 23:

A commenter noted that performance parameter calculations

stated in ECCN 3A090 are unclear and requested further guidance, such as a formula or additional details regarding the types of performance parameters that need to be included in the calculations.

BIS response:

BIS agrees. This AC/S IFR includes a revision to ECCN 3A090 to adopt alternative control parameters to address the concerns identified by the commenters.

Topic 24:

A commenter noted that guidance needs to be provided on how to calculate the 3A090 TOPS Performance Metric. ECCN 3A090 introduces a new performance metric, TOPS (trillions of operations per second). The commenter noted that undertaking a TOPS determination is difficult because the definition of TOPS relies on the term “operations.” The word “operations” is not defined in the October 7 IFR and does not have a consistent industry definition.

BIS response:

BIS agrees that there is ambiguity in the TOPS calculation. For this reason, BIS has amended the text of ECCN 3A090. This AC/S IFR replaces bits x TOPS with `Total processing performance' (`TPP') values and defines objective criteria that can be used to calculate the TPP value in ECCN 3A090. BIS worked closely with its ISTAC in developing this updated technical note.

ECCN 4A090

Topic 25:

A commenter noted that ECCN 4A090 creates a “see through” rule similar to something found in the State Department's International Traffic in Arms Regulations (ITAR) that is too broad for a civilian end item that happens to include even a single IC classified as 3A090. This commenter noted that consistent with § 770.2(b)(1), computers and electronic assemblies that incorporate a single IC classified as 3A090 should be excluded from the 4A090 control if the physical incorporation is not used to evade the requirement for a license.

BIS response:

BIS does not agree. The structure of ECCN 4A090.a is needed to ensure that incorporation of ECCN 3A090 items into higher level items is not conducted to circumvent the intent of the 3A090 controls. BIS also notes that this is not a “see through” rule because the high level computer, “electronic assembly” or “component” is still classified under 4A090. The incorporation of the 3A090 commodity changes the technical characteristics of those referenced items, which leads to control under 4A090 instead of other CCL entries. This structure is not new to Category 4. To calculate the APP value for a 4A994 computer, an exporter has to determine the APP value of the CPU. Exporters must apply the same analysis to 4A090.

Topic 26:

A commenter requested BIS should confirm that an appliance would not be considered a “computer” for purposes of ECCN 4A090. BIS also should confirm that a printed circuit board specially designed for such appliance would not be considered an “electronic assembly” for purposes of ECCN 4A090.

BIS response:

For control under ECCN 4A090, an item must be a general purpose computer. For example, BIS does not classify network security appliances or DNA sequencing appliances in Category 4. When evaluating such systems, exporters should determine the classification of the item without regard to whether it contains a 3A090 IC or has encryption functionality. If the appliance would be controlled in Category 4, then 4A090 controls would likely apply.

Topic 27:

A commenter noted the ECCN 4E001 has an NS control that is likely not intended and should be corrected. This technology in ECCN 4E001 is now subject to both RS and NS1 controls, even though the discussion in the October 7 IFR focuses only on RS controls. The application of NS1 controls creates new authorization requirements (including deemed export requirements) for all countries except Canada. The commenter requests that BIS revise ECCN 4E001 to exclude technology for commodities controlled by 4A090 or software specified by 4D090 from the NS1 controls.

BIS response:

BIS agrees the NS control was not intended. This AC/S IFR makes this correction.

Topic 28:

A commenter requested BIS revise ECCN 4E001 to remove control of “use” technology for 4A090. The commenter noted that this appears to be over-controlled and beyond the intent of the October 7 IFR. The October 7 IFR imposes controls on the technology for the “development,” “production,” and “use” of 4A090 items controlled under 4E001, but only imposes controls on the “development” or “production” of 3A090 items controlled under 3E001—but not the “use” technology of 3A090. This results in the technology to “use” a 4A090 computer part (which happens to have a 3A090 IC onboard) having higher controls than the “use” technology of the 3A090 IC itself. The commenter noted that this approach appears to be inconsistent as applied to other, more-controlled items.

BIS response:

BIS agrees. This AC/S IFR revises ECCN 4E001.a to add an exclusion for technology for the “use” of a 4A003 computer.

Topic 29:

A commenter requests that BIS issue a FAQ or regulatory clarification on the classification of ECCN 4E001 technology when 3A090 or 4A090 are applicable. The commenter noted what it believes is a growing body of ambiguity that stems from the “see through” nature of 3A090 items incorporated into the higher-level 4A090 items and the impacts that has on associated technology. Exporters are in a quandary reading 4E001, which controls the technology for the “development,” “production,” or “use” of 4A090.

BIS response:

Under ECCN 4E001 for 4A090 commodities, BIS controls technology that is “required” for the computer achieving or exceeding the 3A090 parameters. In some cases, this may occur through a relatively unsophisticated step, such as inserting a card in a slot in the computer, which BIS would consider to be “development” or “production” and as noted in the BIS response to Topic 28, this AC/S IFR adds an exclusion to 4E001 for “use” Technology for 4A090. Other instances may require more technical know-how that may rise to the level of controlled 4E001 technology. The application ultimately turns on an analysis of what is

“

required” for exceeding the control level. BIS intends to issue a new FAQ to address this topic more broadly.

Relationship of New Controls to Category 5—Part 2, as it Relates to “or Identified Elsewhere on the CCL That Meet or Exceed the Performance Parameters of ECCNs 3A090 or 4A090, Consistent With § 734.9(h)(1)(i)(B)(1) and (h)(2)(ii) of the EAR” Under § 742.6(a)(6)

Topic 30:

Several commenters raised concerns with the October 7 IFR under § 742.6(a)(6), along with other provisions in the October 7 IFR,

e.g.,

§ 734.9(h)(1)(i)(B)(

1

) and (h)(2)(ii), using the criteria “or identified elsewhere on the CCL that meet or exceed the performance parameters of ECCNs 3A090 or 4A090.” These commenters had concerns that this approach was unprecedented under the EAR in several respects and created ambiguity regarding the correct classification, such as whether an item should be classified under 3A090 or 4A090 or under an encryption ECCN,

e.g.,

5A002 or 5A992. These commenters emphasized that company compliance systems were not set up to address this type of dual classification complexity and that mistakes in classification would likely occur and significant questions would be raised for managing export clearance. These commenters requested BIS to

adopt an alternative approach that would be more in line with how items are typically classified on the CCL by either creating additional ECCNs to control these items that would otherwise meet or exceed the performance parameters of ECCN 3A090 or 4A090 or to add under the relevant additional ECCNs an “items” level paragraph to identify the items that would meet or exceed the performance parameters of ECCN 3A090 or 4A090.

BIS response:

BIS is changing this aspect of the October 7 IFR. BIS recognizes that certain aspects of the criteria used in the October 7 IFR deviated from standard EAR practices,

e.g.,

imposing an RS license requirement on certain ECCNs that did not contain an RS control. However, BIS did not intend to change underlying classifications. For example, an ECCN 5A002 commodity that met or exceeded the control parameters in 3A090 or 4A090, would have still been classified under ECCN 5A002, but would require a license under § 742.6(a)(6). BIS agrees with the commenters that because of the special RS license requirements, that effectively would mean exporters, reexporters, and transferors would have to identify and treat that 5A002 commodity that met or exceeded the control parameters in 3A090 or 4A090 differently. BIS also agrees with the concerns raised by these commenters that it would create significant burdens and possibly confusion for exporters, reexporters, or transferors.

To address this issue, this AC/S IFR removes the criteria of concern and instead identifies the nine ECCNs on the CCL that BIS determined meet or exceed the control parameters in ECCNs 3A090 or 4A090. As a result, when classifying an item, review can focus on these nine ECCNs, which addresses the commenter's concerns. In addition, BIS agrees that creating a distinct classification for “items” in each of these ECCNs under a new .z “items” paragraph is warranted. This AC/S IFR also adds an RS control for these nine ECCNs, as well as adding Related Controls to cross reference 3A090, 4A090, 3A991.p, and 4A994.l. This rule provides additional guidance for export clearance of these .z items, as well as 3A090 and 4A090 to make it easier for exporters and recipients outside the United States to identify these items, and for the U.S. Government to have greater transparency into what items are being exported. This AC/S IFR also revises §§ 734.9(h)(1)(i)(B)(

1

) and (h)(2)(ii) and 742.6(a)(6) to remove the criterion and add in their place the .z ECCNs.

Additional discussion about the addition of the .z paragraphs can be found in section C.3 of this rule.

Additional Changes for ECCNs in the October 7 IFR

Topic 31:

A commenter requested BIS change new ECCNs from 000 series to 900 series. This commenter noted that because they are U.S. unilateral controls, BIS should change the ECCN numbers from 3A090, 3B090, 4A090, 4D990 to 3A990, 3B990, 4A990, 4D990. This same commenter requested deleting the term “specially designed” in various places as used in the ECCNs included in the October 7 IFR and replacing the use of the term with other technical control parameters. This commenter referenced documents from the Coordinating Committee for Multilateral Export Controls (COCOM), including COCOM 1951 Administrative Principle 4, in supporting their position on the removal of “specially designed” from these ECCNs.

BIS response:

BIS does not agree. These items will be submitted to the Wassenaar Arrangement for adoption as multilateral controls, so it is appropriate that they are placed in the “000” series. BIS also does not agree on the removal of “specially designed.” The term “specially designed” is needed in these ECCNs to define the intended scope of the control. In addition, BIS notes COCOM has been defunct since March 31, 1994.

Topic 32:

A commenter noted that the WTOPs parameters need further study in ECCNs 3A991.p, 4A003, and 4A994.b and .l.

BIS response:

BIS does not see an inconsistency between ECCN 4A994.b and 4A994.l. ECCN 4A994.b captures computers using 64-bit or greater processors, and 4A994.l captures processors with lower bit rates. BIS agrees that some items could be captured under both 4A994.b and 4A994.l but notes that there are computers that fall under 4A994.l but not 4A994.b.

License Exception Eligibility for New Advanced Computing and Semiconductor Manufacturing Items Under § 740.2(a)(9)

Topic 33:

A commenter noted the October 7 IFR's limitations on the use of License Exception ENC are difficult to implement. The commenter noted that many of the items affected were already eligible for License Exception ENC, so removing license exception eligibility will be a challenge for items “listed elsewhere in the CCL which meet or exceed the performance parameters of ECCN 3A090 or 4A090.” This commenter requested that BIS consider amending the rule to create ECCNs 5x090 and 5x092 or additional items paragraphs in existing ECCNs for 5x002 and 5x992 items that meet or exceed the performance parameters of ECCN 3A090 or 4A090. This would allow industry to set up more manageable rules for their electronic inventory control and shipping systems.

BIS response:

BIS agrees and addressed this with the addition of .z “items” paragraphs in nine ECCNs on the CCL, as described under the BIS response to Topic 30.

Topic 34:

A commenter requested confirmation that License Exception Servicing and Replacement of parts and equipment (RPL) covers transfers (in-country), or in the alternative that § 740.2(a)(9) be expanded to authorize License Exception Temporary imports, exports, reexports, and transfers (in-country) (TMP). This commenter noted that the exclusion of “transfer (in-country)” from the scope of § 740.10 suggests that License Exception RPL would not cover in-country movements that constitute a transfer (in-country) as defined in § 734.16. Alternatively, this commenter requested that BIS expand the scope of license exceptions available for § 740.2(a)(9) to include License Exception TMP, specifically § 740.9(a)(6) which authorizes exports, reexports, and transfers (in-country) for inspection, test, calibration, and repair.

BIS response:

Section 740.1(a) already specifies that any license exception authorizing reexports also authorizes in-country transfers, provided the terms and conditions for reexports under that license exception are met. This includes License Exception RPL. This SME IFR expands the number of license exceptions available for advanced compute items in § 740.2(a)(9)(ii) by adding License Exception TMP under § 740.9(a)(6) because this authorization is intended to work with License Exception RPL.

Level of Complexity of New FDP Rules

Topic 35:

A commenter noted that the new FDP rules create significant complexity when manufacturing products outside the United States using U.S.-origin technology, software, tools, or equipment. The commenter noted that with the three new FDP rules, a non-U.S. manufacturer using U.S. technology or software must now know or have additional information about a number of things, including whether the item: (1) involves one of thirty-eight new “Footnote 4” companies on the Entity List; (2) is or contains an advanced IC that meets ECCN 3A090 or 4A090, or is their related software or

technology, and is ultimately destined for Macau or a destination specified in Country Group D:5; (3) will ultimately be used in a “supercomputer” in Macau or a destination specified in Country Group D:5; or (4) will be used in the development or production of an item that will ultimately be used in a “supercomputer” in Macau or a destination specified in Country Group D:5. Another commenter noted that because of the complexity there will likely be some non-compliance simply because foreign companies cannot understand or do not have enough information to make proper determinations. This commenter noted that this complexity will make compliance with the EAR difficult for non-U.S. manufacturers, many of whom will not comply, not out of maliciousness, but simple ignorance or misunderstanding.

BIS response:

BIS agrees that with the addition of new FDP rules to the EAR, foreign manufacturers have increased compliance burdens. In adding new FDP rules, including the two new FDP rules and expanded Entity List FDP rule added in the October 7 IFR, BIS has tried to be as focused as possible. Accordingly, each FDP rule has its own criteria that needs to be reviewed. Each FDP rule essentially poses a series of questions or criteria; if one of the required questions or criteria is determined to be inapplicable, that FDP rule can be ruled out as governing the transaction. By taking this approach, many of the FDP rules can be ruled out fairly quickly. However, if the questions as to whether the criteria apply are answered in the affirmative, additional questions need to be asked based on the criteria of the respective FDP rule being reviewed to ultimately determine whether the foreign made direct product is subject to the EAR. BIS included a model certificate in the October 7 IFR to assist people in applying the FDP rules included in the October 7 IFR. In this AC/S IFR, the model certificate is broadened for use with all the FDP rules to ease the compliance burden on foreign manufacturers. BIS has been conducting a robust outreach program and updating its outreach materials on the BIS website to address these types of issues. As noted above, the basic approach to applying the FDP rules has been in the EAR for many years and has not changed with respect to the need to answer a series of questions. What is new is some of the additional criteria for the new FDP rules, in particular the end user and end use-based criteria included in some of the FDP rules. Once these additional criteria become familiar to foreign manufacturers and incorporated into compliance programs, these concerns should be reduced. BIS will conduct outreach on this rulemaking to assist exporters as they develop experience with the new controls.

Topic 36:

A commenter noted that the FDP rules capturing least sensitive items will lead to designing out U.S.-origin content. Expanding the U.S. export control jurisdiction to less sensitive items also drives foreign partners away from U.S. technology, software, and tool suppliers, as those are the basis on which BIS hangs its expanded jurisdiction. The commenter requested that the China-focused FDP rules be narrowed to apply only to specific products that are listed on the CCL with a license requirement to China, and should never apply to EAR99 items or Anti-Terrorism (AT)-only controlled items.

BIS response:

BIS does not agree that the scope of these FDP rules should be further narrowed. BIS calibrated the scope of the commodities controlled based on the current national security and foreign policy concerns. Because many of these lower-level items may be technology level agnostic, it is still warranted to keep them within the product scope of the FDP rules.

Clarify Relationship Between FDP Rules and Other EAR License Requirements

Topic 37:

A commenter requested BIS clarify whether reexports or exports from abroad of FDP items also must consider other EAR license requirements in parts 742, 744, and 746.

BIS response:

For a foreign-made product that is located outside of the United States to be subject to the EAR, the foreign made product would need to meet the criteria under one or more of the FDP rules under § 734.9 or be subject to the EAR because it exceeds the applicable

de minimis

threshold. If the foreign-made item is not subject to the EAR, then none of the other EAR license requirements would be applicable. However, if the export from abroad or reexport of the foreign-made item was subject to the EAR, then the other EAR license requirements would need to also be taken into account. Because the export from abroad or reexport would already require a license, the impact of those other license requirements would primarily be additional license review policies that may be applicable.

Need To Continuously Monitor the FDP Rules and revise license review Policies as Needed

Topic 38:

A commenter noted that BIS needs to continuously monitor the effectiveness of the FDP rules, which are unilateral. The commenter noted that if BIS cannot succeed at getting allies and partners to agree to substantively similar controls, BIS should adopt a temporary licensing policy that would authorize the provision of such services and exports by U.S. persons for civil applications and if not otherwise prohibited by the EAR and readily available from non-U.S. providers, in both quantity and quality, as substitutes.

BIS response:

BIS is continuously reviewing the FDP rules and will make any appropriate changes as warranted based on activity involving the adoption of multilateral and/or effective plurilateral controls, as well as trends BIS may be seeing or hearing about the designing out of U.S.-origin content.

Topic 39:

One commenter raised issues related to the legality of the amendments made in the FDP rule provisions.

BIS response:

BIS has determined that these changes are consistent with ECRA.

Topic 40:

A commenter asked if a foreign-made item not otherwise subject to the EAR is nonetheless subject to the EAR under the Entity List FDP rule (§ 734.9(e)(2)) if it is shipped by an unlisted entity to another unlisted entity for incorporation into a commodity when the shipper knows all other components for the commodity had been shipped by a Footnote 4 entity, but the foreign-made item will not be incorporated into, or used to produce or develop, any commodity produced, purchased or ordered by a listed entity. This same commenter asked whether the answer would change if a Footnote 4 entity is a shareholder, or if a Footnote 4 entity is a shareholder in the third-party assembler/seller. Another commenter asked whether a Footnote 4 entity that profits from a transaction by and among unlisted entities, but has no other role or involvement, is a party to the transaction under § 734.9(e)(2)(ii)(B).

BIS response:

The answer to these types of scenarios would be fact-specific. While the Footnote 4 entity described in these scenarios does not necessarily fall under one of the illustrative examples of parties to the transaction under § 734.9(e)(2)(ii)(B), additional analysis would be needed to determine whether the Footnote 4 entity was actually a party to the transaction. For example, if the items will ultimately be going to the Footnote 4 entity or ultimately for the Footnote 4 entity's use or if profits were obtained by the Footnote 4 entity acting as a purchaser, or intermediate or ultimate consignee, then the Footnote 4 entity would be considered a party to the transaction. In scenarios where a person is not sure

whether the Footnote 4 entity would be considered a party to a transaction, they may contact BIS to request additional guidance by identifying all of the relevant information that they have regarding the involvement of that party in the transaction.

Topic 41:

A commenter asked whether BIS will consider providing guidance as to what other activities may constitute a Footnote 4 entity's being a “party” to the transaction for purposes of the Entity List FDP rule. We understand that the phrase “

e.g.,

as a `purchaser,' `intermediate consignee,' `ultimate consignee,' or `end-user,' ” as used in § 734.9(e)(2)(ii)(B), signals that the list of referenced parties is not exhaustive. However, the use of “

e.g.

” creates significant compliance uncertainty.

BIS response:

BIS confirms that this commenter is correct that the `

e.g.

' signifies that what follows is merely an illustrative list of parties to the transaction. If an exporter, reexporter, or transferor is determining whether an additional party that does not fill the role of one of the illustrative parties identified, but otherwise appears to be a party to the transaction, is a party to the transaction, they may submit an advisory opinion request to BIS in which they describe the role of that other party. BIS will advise if that party is considered a party to the transaction.

Advanced Computing FDP Rule—§ 734.9(h)

Topic 42:

A commenter requested BIS clarify the relationship between § 734.9(h) and § 742.6 for ECCN 5A002 and License Exception ENC. This commenter noted that the EAR should in the Advanced Computing FDP, reference the license requirements under § 742.15 Encryption items (EI) controls because this is important for determining which additional EAR restrictions may be applicable. For example, § 740.2 restrictions may restrict the use of License Exception ENC.

BIS response:

This AC/S IFR adds .z `items' paragraphs to nine ECCNs, including to ECCN 5A002.z and makes conforming changes to add these .z ECCNs, such as 5A002.z, to § 734.9(h)(1)(i)(B)(

2

) or (h)(1)(ii)(B)(

2

), which is also responsive to this comment.

Topic 43:

A commenter noted that the new § 734.9(h) Advanced computing FDP rule is not needed because it is already covered by pre-existing § 734.9(b) National Security FDP rule.

BIS response:

BIS does not agree. There is some cross over between these two FDP rules, but the Advanced Computing FDP rule extends to certain items that the National Security FDP rule does not, so the Advanced Computing FDP rule is necessary to address the national security and foreign policy concerns included in the October 7 IFR.

Narrow the Scope of § 744.23 Fabrication Controls

Topic 44:

A commenter noted that § 744.23 should only apply to the direct end use of an item. This commenter noted as an example that networking equipment used for the enterprise network of a semiconductor or supercomputer manufacturer is not a direct use in the “development,” “production,” “use,” operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of a “supercomputer” or IC as opposed to design software, materials, or test equipment and should be excluded from the license requirement.

BIS response:

BIS agrees that if the item is not used in the “development,” “production,” operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of a “supercomputer,” IC, or SME, as applicable, the item would not be within the scope of § 744.23. However, the exporter would need to analyze the relationship between the activities involving the enterprise network and any prohibited end uses to confirm no license is required.

Topic 45:

A commenter noted that resellers of supercomputers should not meet the definition of a company that is involved in the “development,” “production,” “use,” operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of a “supercomputer” under § 744.23.

BIS response:

BIS agrees and confirms in this AC/S IFR that the mere act of selling a “supercomputer” is not within the prohibited scope of § 744.23, but selling a “supercomputer” with knowledge that a violation of § 744.23 has occurred, is about to occur, or is intended to occur in connection with an item subject to the EAR could be a violation of § 764.2(e) of the EAR.

As-a-Service (IaaS) Solutions and the October 7 Controls

Topic 46:

A commenter noted that PRC “supercomputer” controls may be bypassed by as-a-Service (IaaS) solutions. The commenter noted that the October 7 IFR limits engagements towards China “supercomputer” activity in China and may preclude some high-performance compute capability to China. With the availability of IaaS solutions, however, China compute workloads can be offloaded to computers located in other states, possibly including those in the United States. This commenter noted that without a multilateral end use/end user control, non-U.S. states, even Wassenaar Arrangement partners, may give China computational access to their equivalent “supercomputers” via an IaaS arrangement. The commenter noted that while § 744.6 provides controls on U.S. persons for various situations involving PRC semiconductor fabrication, there does not appear to be a parallel U.S. person control for supercomputing.

This comment requests that BIS clarify intent regarding supercomputing IaaS, particularly in light of previous Advisory Opinions on computing IaaS, including January 2009: Application of EAR to Grid and Cloud Computing Services, and January 2011: Cloud Computing and Deemed Exports.

BIS response:

BIS is also concerned regarding the potential for China to use IaaS solutions to undermine the effectiveness of the October 7 IFR controls and continues to evaluate how it may approach this through a regulatory response. See section D question 1 of this rule.

Information Needed From Other Parties To Comply With These Controls

Topic 47:

A commenter noted that the burden to detect upgrades of PRC computers into “supercomputers” is difficult because it is a fluid moving target and that a PRC computer installation that does not meet the threshold at one point may be quietly upgraded by the operator (using 3rd party items) to exceed the “supercomputer” threshold later. Exporters, reexporters, and transferors may not be able to rely on static End Use Statements or similar certifications, due to this “moving target” characteristic and this may require exporters to obtain End Use Statements to all PRC computer installations (regardless of size) for every transaction, which presents a high burden. The commenter notes this is a situation in which publishing a list of known § 744.23 supercomputer targets will result in compliance that is more effective, more consistent, and less burdensome.

BIS response:

BIS intends to continue to identify “supercomputer” related entities on the Entity List. BIS started this process in the October 7 IFR and will continue adding more “supercomputer” entities as they are

identified and approved for addition by the ERC to the Entity List. BIS emphasizes that § 744.23 and the expanded § 744.6 both contain “knowledge” provisions. The compliance expectation is that exporters, reexporters, and transferors will evaluate the information coming to them in the normal course of business. Obtaining end-user statements is a good compliance practice that BIS encourages, but BIS does not expect that exporters, reexporters, or transferors will obtain these from every computer user in China, so exporters, reexporters, and transferors should look at all information they have to determine when additional due diligence may be warranted.

Topic 48:

A commenter requested that BIS confirm that the due diligence specified in BIS FAQ, IV.A2,

“

Appropriate due diligence includes review of publicly available information, capability of items to be provided or serviced, proprietary market data, and end-use statements” constitutes a reasonable level of due diligence in this context, as well.

BIS response:

BIS confirms here that the same type of due diligence specified in BIS FAQ IV.A2 that applies for § 744.6 also applies to § 744.23.

Permit License Exception Eligibility

Topic 49:

A commenter requested BIS revise § 744.23(c) to permit the use of license exceptions specified in § 740.2(a)(9) for items lawfully exported or reexported prior to October 7, 2022.

BIS response:

BIS does not agree. Not including License Exceptions RPL and TMP in § 744.23(c) will make the controls more effective because of the importance of parts and components to continued operation of items, which may have been received by indigenous companies in China without a required license prior to the October 7 IFR. Based on the national security and foreign policy concerns identified in the October 7 IFR, BIS would no longer support the use of these EAR items in China.

Other Requested Clarifications to § 744.23

Topic 50:

A commenter requested BIS confirm that standalone data storage equipment would not be considered a “component” subject to § 744.23(a)(1)(ii), which has been redesignated as paragraph (a)(1)(ii)(B) in this SME IFR. This commenter noted that the data storage equipment is self-contained and not physically incorporated into a computer (

e.g.,

it consists of a storage controller and an array of storage drives in a separate enclosure).

BIS response:

BIS does not agree. BIS does not consider standalone data storage equipment classified as ECCN 5A002 to be controlled under § 744.23(a)(1)(ii), now redesignated as (a)(1)(ii)(B), because standalone storage equipment is not a computer or component of a computer. Standalone data storage equipment classified as ECCN 5A002 is considered a “component” for purposes of § 744.23(a)(1)(ii)(B). This SME IFR clarifies this point by adding “the incorporation into, or the “development” or “production” of any “component” or “equipment” that will be used in, a “supercomputer” ” to make it clear that § 744.23(a)(1)(ii)(B) is intended to cover “components” of a separate computer going into a supercomputer,

e.g.,

a chip going into a server which is going into a supercomputer.

Topic 51:

A commenter requested that BIS clarify how broadly exporters may interpret the term “used” in determining the product scope under § 744.23(a)(1), which has been redesignated as paragraph (a)(1)(i) in this SME IFR. This commenter seeks confirmation that their understanding is correct that any product that does not contribute to the “development” and “production” of the product would fall outside the scope of these controls. For example, storage devices and networking devices may be present in a facility, but they are not “used” for the specified end use, and therefore would not be subject to control under this provision and can be exported without a license. Other examples include so-called Facility Monitoring and Control Systems (

e.g.,

HVAC, clean room temperature, and chillers, pumps and boilers, as well as so-called voltage sag correctors, which provide protection for electric equipment from voltage variations).

BIS response:

Section 744.23(a) specifies that the license requirements apply when the item will be used in an end use described under paragraph (a)(2)(i) or (ii) of this section, which has been redesignated as paragraph (a)(1)(ii)(A) and (B) in this SME IFR. The terms “development” and “production” encompass all of the items used in those activities, so BIS takes an expansive view of what items would be caught under those terms.

Topic 52:

A commenter asked BIS to confirm whether the scope and reach of § 744.23(a)(2)(iii), which has been redesignated as paragraph (a)(2)(i) in this SME IFR, apply equally to application of the controls over the shipment from outside the United States of foreign-origin items not subject to the EAR under the requirements of § 744.6(c)(2)(i) and (ii).

BIS response:

For purposes of the “U.S. person” prohibition under § 744.6(c)(2)(i) and (ii), BIS will attempt to maintain consistent approaches in interpreting §§ 744.6(c)(2) and 744.23. BIS's response to Topic 61 on § 744.23, which lays out how BIS would interpret § 744.6(c)(2) for a similar fact pattern involving the U.S. person control.

Topic 53:

A commenter requested BIS clarify whether the controls extend to projected future activity not yet started under § 744.23(a)(2)(iii) and (iv), which have been redesignated as paragraphs (a)(2)(i) and (ii) in this SME IFR. The commenter noted that there is confusion regarding the proper tense of the rules and asks whether the language as written includes aspirational production and development in the future. BIS should clarify whether “fabricates” applies in the context of a fabrication facility that has plans for future advanced node production or whether the rule applies to current advanced node production only.

BIS response:

Aspirational development or production in the future would raise a red flag that would require additional due diligence to determine whether a license is required under § 744.23(a)(2)(iii) and (iv), which have been redesignated as paragraphs (a)(2)(i) and (ii) in this SME IFR. This AC/S IFR adds a new red flag to provide additional compliance guidance on these types of scenarios.

Entity List Changes for Footnote 4 Entities

Topic 54:

A commenter noted that it is not clear what specific activities involving expanded Entity List (Footnote 4) entities may be prohibited, assuming the product scope is met, especially if the activity does not involve providing any products to the Footnote 4 entity and the entity is not a party to the transaction between the parties buying and providing the foreign-made item.

BIS response:

The Entity List license requirements apply to exports, reexports, and transfers (in-country) that are subject to the EAR when a listed entity is a party to the transaction. This is also the scope of the license requirement for the entities on the Entity List with a footnote 4 designation, but because of the footnote 4 designation, the license requirement specified in § 744.11(a)(2)(ii) (Footnote 4 entities) is also applicable, which specifies a license is required for reexport, export from abroad, or transfer

(in-country) of any foreign-produced item subject to the EAR pursuant to § 734.9(e)(2) of the EAR when an entity designated with footnote 4 on the Entity List in supp. no. 4 to this part is a party to the transaction, or that will be used in the “development” or “production” of any “part,” “component,” or “equipment” produced, purchased, or ordered by any such entity. Section 744.11(a)(2)(ii) also includes a cross reference to § 744.23 for additional license requirements that may apply to these entities, so the § 744.23 license requirements also need to be taken into account.

Topic 55:

A commenter noted that § 744.11 states that a license is required for the incorporation of a foreign-made item into any “part,” “component,” or “equipment,” produced by a Footnote 4 entity. However, BIS does not specify if a license is needed for a scenario in which a third-party procures parts, components, or equipment made by a Footnote 4 entity and incorporates a foreign made item into Footnote 4's product, and the procedure is not done on behalf of the Footnote 4 entity, nor will the final product be destined for a Footnote 4 entity. The commenter requests BIS release additional clarification on whether license requirements apply to sales to third parties assembling a mixture of foreign-made and Footnote 4 entity components that are not destined for a footnote 4 entity.

BIS response:

The license requirement under § 744.11(a)(2)(ii) extends to items that will be used in the “development” or “production” of any “part,” “component,” or “equipment” produced by any such entity. Therefore, in a scenario in which a third-party procures items produced by a Footnote 4 entity and adds to it using a foreign-made item, the license requirements would still apply in that scenario to that foreign-made item because even if the Footnote 4 entity is not subsequently receiving the items or receiving compensation from the third-party that used its item, the further processing using the foreign-made item would be part of the larger “production” process of the Footnote 4 entity.

Topic 56:

A commenter requested BIS revise the 28 Entity List footnote entries to address an inconsistency in the license requirement by inserting “for additional license requirements for Foreign-Direct Product)” after “(See § 734.9(e) and 744.11 of the EAR).”

BIS response:

BIS does not agree that a change needs to be added to these entities. The Footnote 4 text provides additional context on the meaning and scope of this parenthetical phrase included in the 28 entities.

Requested Changes or Clarifications to “Supercomputers” Definition in § 772.1

Topic 57:

A commenter requested BIS clarify what is intended by closely coupled compute cores in Note 2 of the “supercomputers” definition. Specifically, the commenter asks BIS to clarify whether “closely coupled compute cores” refers to a system in which all hardware and software components are linked together and dependent on one another and whether the type of interconnect is relevant to this analysis.

BIS response:

Note 2 of the “supercomputer” definition is meant to provide a general statement of scope of a typical supercomputer. It is not intended to impose additional requirements beyond the main definition. By using the term “closely coupled compute cores,” BIS intended to note that supercomputers typically have thousands of cores working in parallel in the same location and connected by a high-speed interconnect such as Infiniband or Ethernet. BIS also intended to make clear that computers that are connected together through the internet over long distances are not the type of computer that would meet the definition of “supercomputer.”

Topic 58:

A commenter requested that BIS identify the items of real concern regarding the “supercomputer” end use. Hitting the threshold of “supercomputer” is not difficult, and when triggered under the October 7 IFR, even items included in 5A992 will be prohibited. The commenter noted that could prohibit even a standard laptop from being shipped if it is somehow being “used” in a supercomputer.

BIS response:

BIS does not agree that the area of concern for supercomputers was not adequately identified in the October 7 IFR and the definition of “supercomputer” in § 772.1. The definition includes clear technical parameters for the types of supercomputers that are of concern. Specifically, a computing “system” having a collective maximum theoretical compute capacity of 100 or more double-precision (64-bit) petaflops or 200 or more single-precision (32-bit) petaflops within a 41,600 ft

3

or smaller envelope. The definition includes Note 1 and 2 to further clarify the types of computers of concern. The preamble of the October 7 IFR identified the national security and foreign policy concerns associated with a computer system that can operate at these levels.

Requested Changes or Clarifications to Other Definitions

Topic 59:

A commenter noted that the definition of “transfer (in-country)” should not cover in-country movements to effectuate repair services. This commenter noted that in considering whether an in-country movement constitutes a change in end user, this commenter believes that an entity performing repairs or otherwise servicing an item is not an “end user” as defined in part 772 of the EAR. Specifically, the repair/service company is not the party that ultimately uses the item, but is instead taking an action on behalf of the user and specifically for the purpose of returning the repaired item to the user. As a service/repair company does not fall within the scope of an end user under the EAR, temporary in-country movements to or from repair/service companies should not constitute a change in end user.

BIS response:

This commenter's understanding of the scope of transfer (in-country) is not correct and is inconsistent with long-standing agency interpretation of the scope of transfer (in-country). The person that receives the item is changing the end use of the item by using the item for a repair or servicing of the item, or, in the case of destruction, for destroying the item. The definition of end user includes the phrase “ultimately uses the item,” but does not specify that the item needs to be used for its intended end use. Someone repairing or servicing an item is using the item for a different purpose. Someone that is destroying an item is using the item for a specific purpose—the destruction of the item. Even transferring the item to another party for storage (a type of end use) would be considered a change in end use and end user because that other party would be using the item by storing it for future use by another party. BIS notes that one exception to this would be if another party came to service or destroy an item at the location of the authorized end user, such as coming to repair or to destroy a machine tool that would not be considered a transfer (in-country), provided the authorized end user maintained possession and control of the item at their facility. For most transfers (in-country), such as when an item is received under a BIS license and needs to be transferred (in-country) to a repair center, paragraph (a)(6) of License Exception TMP is used to authorize the transfer (in-country) to a repair facility and License Exception RPL is used to authorize the transfer (in-country) back to the original party. However, for the part 744 end use and end user controls,

License Exceptions TMP and RPL are not available, so a license is required for that activity. Lastly, BIS adds that if the item had been received with no license requirement (

i.e.,

No License Required (NLR)) or under authorization of a license exception that did not have terms specific to end use or end user, such as License Exception GBS (not applicable for China, but included as an example), then a transfer (in-country) to a repair center would not require an authorization, provided there were no parts 744 or 746 license requirements applicable that applied to transfers (in-country). BIS also highlights that because the RS license requirement under § 744.6(a)(6) extends to transfers (in-country) for the items controlled for RS in this AC/S IFR and SME IFR that an EAR authorization is required for all transfers (in-country) of items subject to the EAR unless the original authorization also authorizes subsequent transfers (in-country),

e.g.,

if a 3A090.a item was received under a BIS license by an ultimate consignee listed on the license and was being transferred within China to authorized end users on the license.

Appropriateness of the Scope of U.S. Person Control

Topic 60:

A commenter noted that the October 7 IFR is overly broad, particularly with respect to the prohibitions on U.S. person “support” for certain semiconductor manufacturing activities in § 744.6(c)(2). In the absence of clear scoping restrictions, these broad controls create difficulty for U.S. companies and individuals trying to comply and make it almost impossible for them to understand what they can and cannot do.

BIS response:

This AC/S IFR has narrowed the scope of § 744.6 where warranted to better focus the controls on activities of national security concern. This rule has also clarified the scope of “U.S. person” activities that are caught, which incorporates FAQs previously published on the BIS website. Additional discussion of amendments to § 744.6 can be found in Section C.4 of this rule.

Topic 61:

A commenter noted that a “U.S. person” should not have to obtain a license under § 744.23(a)(2)(iv) because an item could potentially be used in an end use of concern. This commenter asked why a U.S. person with no knowledge of a proscribed activity, but with knowledge of a non-proscribed activity for a dual use computer or IC, should be required to seek a license involving a non-U.S.-origin item, simply because of a BIS theory, based on no knowledge, that the activity “could involve” WMD use.

BIS response:

The “U.S. person” would have a “knowledge” under § 744.6(c)(2)(iv), now redesignated as § 744.6(c)(2)(ii), that the CCL Category 3, B, C, D, or E item was for use for “development” or “production” of integrated circuits at a “facility,” which this SME IFR updates to “of an entity headquartered in either Macau or a destination specified in Country Group D:5.” When this SME IFR and AC/S IFR use the term “headquartered” in these two rules, it includes parent entities. China's use of ICs in WMD-related activities warrants imposition of a higher level of affirmative duty to “know” in order to not be subject to a license requirement.

“U.S. Person” Control Due Diligence Requirements, as Well as Certain Limitations on Foreign Companies Identifying People by Nationality

Topic 62:

Some commenters noted that requiring positive knowledge is a burden shift for an end use control. This commenter noted that the § 744.6(c)(2)(iv)-(vi) requirement represents an unprecedented burden shift. Whereas BIS has previously required that companies not engage in willful blindness or ignorance regarding the end use of their exports, this component of the rule effectively mandates diligence via a licensing requirement.

BIS response:

BIS does not agree with these commenters that the control requiring positive knowledge is unprecedented. For example, § 744.3(a)(3) (which has been in the EAR for about 19 years) imposes a license requirement for all items subject to the EAR when the exporter, reexporter, or transferor has “knowledge” that the item subject to the EAR “will be used in the design, “development,” “production,” operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of any rocket systems or unmanned aerial vehicles in or by a country listed in Country Group D:4, but you are unable to determine the characteristics (

i.e.,

range capabilities) of the rocket systems or unmanned aerial vehicles, or whether the rocket systems or unmanned aerial vehicles, regardless of range capabilities, will be used in a manner prohibited under paragraph (a)(2) of this section.” A more recent example that was added in 2014 to part 746 under § 746.5(a)(1)(i) specifies that a license is required to export, reexport, or transfer (in-country) any item subject to the EAR listed in supplement no. 2 to this part and items specified in ECCNs 0A998, 1C992, 3A229, 3A231, 3A232, 6A991, 8A992, and 8D999 when you “know” that the item will be used directly or indirectly in exploration for, or production of, oil or gas in Russian deepwater (greater than 500 feet) or Arctic offshore locations or shale formations in Russia or Belarus, or are unable to determine whether the item will be used in such projects.

Topic 63:

A commenter noted that for the first time, BIS has used the EAR to inform all U.S. persons around the globe that certain specific activities of U.S. persons are regulated because they could support prohibited WMD activities in China. This commenter noted that the regulated activities all involve shipping, transmitting, transferring (in-country), or servicing, or facilitating the shipment, transmission, or transfer (in-country), of certain items that are “not subject to the EAR” to or within China.

BIS response:

BIS does not agree. The regulated activities are consistent with other regulated activities under § 744.6 and the activities are being regulated because they could support prohibited WMD activities in China and Macau.

Topic 64:

A commenter noted that many foreign employers do not track whether persons are U.S. persons, which will make it harder to comply with these U.S. person controls. The application of these new controls will be complicated, as U.S. person status is not widely maintained by non-U.S. employers. These new controls raise certain specific practical implementation concerns.

BIS response:

BIS does not agree that a “U.S. person” restriction applies to a non-U.S. person entity (

e.g.,

a foreign corporation) that employs the U.S. person, unless the entity had knowledge of the individual's U.S. person status and that the individual was in violation of an applicable U.S. person control. While a corporation may not track the U.S. person status of its personnel, a natural person would be positioned to “know” whether they were a “U.S. person.”

U.S. Person Control Impact on U.S. Persons Working Outside the U.S. and on Innovation

Topic 65:

A commenter noted that without clarification as to the scope of what U.S. person activities constitute support for the development of certain advanced semiconductors and associated technologies in China, § 744.6(c)(2) will have a chilling effect on U.S. academic collaborations with universities in China as well as on U.S. university recruitment of highly

qualified students and researchers from China in the semiconductor field. This may detrimentally impact U.S. leadership and competitiveness in the advanced semiconductor sector. Another commenter noted that the U.S. person control may result in companies not hiring U.S. persons. This commenter noted that despite added clarifications from BIS regarding the scope of these restrictions, the relevant provisions continue to be mired in uncertainty. Companies, consequently, may choose to interpret the U.S. persons provisions broadly, and needlessly restrict their U.S. person employees and contractors from engaging in a number of business-critical functions, which prevents such persons from participating fully in company operations. In any event, U.S. person individuals can often be readily replaced by non-U.S. person individuals without impeding the shipment of non-EAR items to a covered fabrication facility.

BIS response:

The intent of the October 7 IFR and this AC/S IFR and SME IFR is to impose controls as focused as possible in addressing the ongoing U.S. national security and foreign policy concerns discussed in these rules. BIS does not intend the new controls to chill research by U.S. universities or undercut U.S. technological leadership where such activity does not present national security or foreign policy concerns. With its initial FAQs on the October 7 IFR, BIS clarified the intended scope of the “U.S. persons” controls. This AC/S IFR adds those clarifications to the EAR. In addition, this AC/S IFR clarifies that the scope of § 744.6 does not include information or software that would otherwise be excluded from the EAR based on the exclusion criteria under part 734,

e.g.,

under § 734.7 Published and § 734.8 “Technology” or “software” that arises during, or results from, fundamental research, as well as specifying this in § 744.6(d)(1)(ii). BIS does not intend for the October 7 IFR controls to result in foreign companies not wanting to hire “U.S. persons.” BIS believes the clarifications made to § 744.6 in this AC/S IFR and SME IFR should reduce these concerns. The U.S. person changes made in this rule are discussed in Section C.4.

Topic 66:

A commenter noted that the U.S. person control has broad applicability to many people outside the U.S. and could be discriminatory to them. It is important for BIS to take into account that many individuals located abroad fall within the definition of “U.S person” even if they have never lived in the United States or are currently permanently residing outside of the U.S. and these individuals should not be singled out due to their citizenship, which can lead to discrimination and other claims under the laws of certain countries.

BIS response:

The intent of the October 7 IFR was to be as focused as possible in addressing ongoing U.S. national security and foreign policy concerns. Being a “U.S. person” has many benefits, but also certain responsibilities that go along with being a “U.S. person,” such as not being involved in specified activities that are of concern for WMD reasons as specified under § 744.6. The U.S. Department of Treasury's Office of Foreign Assets Controls (OFAC) also has certain responsibilities and restrictions that go along with being a U.S. person, so BIS also directs commenters in this area to review the applicable OFAC controls on U.S. persons that may be applicable.

Whether To Use Export, Reexport, and Transfer (In-Country) Controls or a U.S. Person Control To Address This National Security Issue

Topic 67:

A commenter requested that the new restrictions on semiconductor manufacturing be implemented solely through BIS's traditional jurisdiction over exports, reexports, and transfers (in-country) of items subject to the EAR, rather than a new, untested, and overly broad restriction on U.S. person “support” activities.

BIS response:

The national security and foreign policy concerns addressed in the October 7 IFR required that BIS use its full set of regulatory tools under the EAR, which included using CCL-based controls, end-use controls, and end-user controls. For the end-use controls, BIS used both a standard end-use control and expanded the “U.S. person” control to appropriately address its concerns. This AC/S IFR and SME IFR have focused and clarified the scope of both §§ 744.6 and 744.23.

Provide More Information on Restricted U.S. Person Activities

Topic 68:

A commenter requested BIS amend the list of controlled activities to specify whether additional business processes are controlled or not. This commenter noted that doing so will decrease compliance delays arising from ambiguous language. For example, it is not clear if restrictions apply to a U.S. person that processes product payments but does not conduct physical transfer of subject items.

BIS response:

This AC/S IFR adds paragraph (c)(3) (Scope of activities of “U.S. persons” that require a license under § 744.6(c)(2) of the EAR), including sub-paragraph (c)(3)(i) that provides greater specificity on the “U.S. person” activities that are caught, consistent with the FAQs posted on the BIS website on January 25, 2023 on the scope of the “U.S. persons” control in § 744.6(c)(2). This AC/S IFR adds paragraph (c)(3)(ii) (

Due diligence

) to provide compliance guidance for this “U.S. person” control, and adds paragraph (d)(1) (

Exclusion of certain administrative and clerical activities

) to add greater specificity on the “U.S. person” activities that are excluded.

U.S. Persons Giving Up U.S. Citizenship or Permanent Residency in Order To Participate in PRC Innovation Efforts

Topic 69:

A commenter noted that some U.S. persons may give up their U.S. nationality to help China build advanced semiconductors, and they would be compensated by the PRC government to obtain a third country passport. This commenter noted in this scenario that the now-former U.S. persons' spouses may still be U.S. citizens, so these persons will be able to return to the United States when they retire after making money in China. This commenter believes this is a very clear loophole in the October 7 IFR.

BIS response:

The October 7 IFR and this AC/S IFR and SME IFR used the various export control tools that BIS has under its jurisdiction to address U.S. national security and foreign policy concerns. BIS included an expanded “U.S. person” control because of its concerns that these types of items that are being used by China are part of their WMD programs. BIS highly discourages any “U.S. person” from relinquishing U.S. nationality to help China engage in military advancement and human rights violations. BIS does not have regulatory authority over immigration matters, so BIS is not positioned to respond to that aspect of the comment. However, being a U.S. citizen or legal permanent resident of the U.S. has certain benefits and legal rights that are not afforded to foreign persons. BIS cautions anyone that is considering giving up their U.S. nationality for purposes of work in the advanced semiconductor industry in China to weigh those considerations carefully and not assume they would be able to return to the United States following participation in activities contrary to U.S. national security and foreign policy interests. BIS also notes that a person who relinquished their U.S. nationality would become a foreign person for purposes of ERC assessment.

Meaning and Scope of `Support' Under U.S. Person Control in § 744.6(b)(6)

Topic 70:

A commenter noted that the exact definition of “support” is not clear under the October 7 IFR. BIS should consider reconfiguring certain definitions to factor in business processes in the logistics sector. This commenter requested that BIS publish additional guidance on how logistics firms can understand and apply “support” requirements to their supply chains without inducing severe operational disruptions.

BIS response:

The term `support' is defined for purposes of § 744.6 under paragraph (b)(6). BIS also notes that the term `support' is not a new term added in the October 7 IFR. However, based on the comments received in response to the October 7 IFR, BIS agrees that additional clarifications should be made on what types of activities involving `support' are excluded, such as certain logistics activities. This AC/S IFR states here that for logistics companies, the prohibited act is the actual delivery, by shipment, transmittal, or transfer (in-country), of the item and the act of authorizing the same.

Topic 71:

A commenter noted that § 744.6 prohibits U.S. persons from providing “support” for WMD-related end uses and § 744.6(c) provides that certain specified activities by U.S. persons involving items not subject to the EAR used in semiconductor fabrication could involve “support” for a prohibited WMD-related end use, but it does not say that these specified activities are the only activities by U.S. persons related to semiconductor fabrication that are considered prohibited “support” for WMD-related end uses.

BIS response:

This commenter misses the intent of the phrase “which could involve `support' for the [WMD]-related end uses set forth in paragraph (b) of this section” in the introductory text of § 744.6(c)(2). The prohibition under § 744.6(c)(2) is limited to the exhaustive listing of `support' activities defined under § 744.6(b)(6). The phrase “which could involve” is an acknowledgement that in certain cases these activities described under § 744.6(c)(2) may not involve WMD-related activities, but BIS believes that there is a significant possibility that in Macau or a destination specified in Country Group D:5 such end-uses could involve WMD-related activities. In cases in which a “U.S. person” believes the prohibited activity does not involve a WMD-related activity, the “U.S. person” can set forth its reasoning in the license application.

Topic 72:

A commenter asked BIS to confirm whether expediting a part or component shipment with a supplier or vendor, by a “U.S. person,” is within the scope of the controls in § 744.6 or § 744.23 if there is knowledge that such a part or component will be exported, reexported, or transferred to a covered fabrication facility. Another commenter noted that it is unclear whether the reference to “support” in § 744.6(c)(2) incorporates all of the definitions of “support” under § 744.6(b)(6) in the activities that are prohibited under § 744.6(c)(2).

BIS response:

For the comment regarding expediting a part or component, whether that activity is captured would depend on whether the act was limited to a U.S. person conducting administrative or clerical activities or otherwise implementing a decision already approved by other persons, consistent with § 744.6(d)(1)(i), added in this rule. In addition, the reference to “support” in § 744.6(c)(2) incorporates all of the definitions of “support” under § 744.6(b)(6) in the activities that are prohibited under § 744.6(c)(2).

BIS Has Experience With Regulating Facilitating, but Should Adopt a Definition That Is Narrower Than That Used by OFAC

Topic 73:

A commenter noted that restrictions on exports of services by U.S. persons are traditionally administered by OFAC, which has accordingly developed a framework of guidance and authorizations over time to facilitate the implementation of these restrictions. Some commenters noted that the scope of “facilitate” should be narrower under EAR than under the OFAC sanctions. These commenters noted that while BIS and OFAC share some overlapping jurisdiction, the underlying statutory authorities for the EAR and the OFAC regulations are no longer aligned—the current EAR is legally framed by ECRA, not the International Emergency Economic Powers Act (IEEPA). These commenters noted that this distinction underscores that controls on “facilitation” or “facilitating” enacted by BIS under the authority of the EAR or ECRA must be more limited than controls imposed by OFAC under IEEPA's broad authority.

BIS response:

BIS has long experience with regulating activity using the term facilitating as Section 744.6 has been in the EAR since the early 1990s. Use of this term under the EAR is specific to BIS, and other interpretations from other agencies are not applicable under the EAR. Moreover, BIS interpretations should not be applied to the regulations of any other export control agencies, such as OFAC. Questions on the use of OFAC regulations terminology should be directed to OFAC.

Topic 74:

A commenter requested BIS adopt the definition of `facilitation' as, “Authorizing, servicing, and conducting support on the production of advanced nodes.” Another commenter requested that facilitating should be replaced with the term authorizing if that is what is really intended, noting that BIS guidance indicates that “facilitating” such activities means “authorizing” such activities. Without such an amendment, U.S. persons can be unnecessarily cut out from fully engaging in the business of their employer.

BIS response:

The term `facilitation' in the context of § 744.6(b)(6)(iii) has broader application than to just paragraph (c)(2), so it would not be appropriate to adopt the suggested definitions. Authorizing is an important part of the scope of facilitating, but there are additional activities that fall under facilitating that also need to be caught, so removing facilitating and adding in its place authorizing is not accepted.

Meaning and Scope of Definition of `Production'

Topic 75:

A commenter requested that BIS provide an exact definition of “production” because it is not clear under the October 7 IFR.

BIS response:

“Production” is a foundational EAR term that is already defined in § 772.1. The term is also defined and used in the multilateral export control regimes. As a result, there should be no ambiguity in how the term is used and no need for an additional definition for this term.

Meaning and Scope of Definition of `Servicing'

Topic 76:

A commenter requested that BIS provide an exact definition of “servicing” because it is not clear under the October 7 IFR.

BIS response:

The term servicing has been used in the EAR for many decades and in various EAR provisions, such as under License Exception RPL under §§ 740.10 and 764.2(e), and in General Prohibition 10 under § 736.2(b)(10). This term is intended to have an expansive meaning and BIS believes it is well understood in the context of the EAR. For example, in the context of License Exception RPL, servicing means inspection, testing, calibration or repair, including overhaul and reconditioning (see § 740.10(b)(2)(i)). BIS has also provided guidance through FAQs on the October 7 IFR on what U.S. person activities are captured by servicing for

purposes of § 744.6. BIS interprets the meaning of servicing in the context of § 744.6 consistent with the expansive definition provided under License Exception RPL.

Scope of Information Covered Under the “U.S. Person” Control

Topic 77:

Commenter requests that BIS clarify the scope of “any item not subject to the EAR” in § 744.6(c)(2) to specifically exclude technology and software that is published and/or that arises during or results from fundamental research. Another commenter is concerned that, without further clarification from BIS regarding the scope of “support” and “facilitating,” these terms could be interpreted to include core university activities such as training and teaching students and researchers from China in the United States. This commenter requests that BIS expand FAQ IV.A2 to further clarify that these terms do not include training and teaching of students and researchers from China in the United States.

BIS response:

BIS agrees. As noted above, this AC/S IFR in responding to these comments clarifies that the scope of § 744.6(c)(2) does not include information or software that would otherwise be excluded from the EAR based on the exclusion criteria under part 734,

e.g.,

under § 734.7 Published and § 734.8 “Technology” or “software” that arises during, or results from, fundamental research, which this AC/S IFR specifies in § 744.6(d)(1)(ii).

Exclude Certain Activities When Employer Has a BIS Authorization To Engage in Those Activities

Topic 78:

A commenter requested BIS issue guidance that activities of U.S. persons in support of licensed activities by their employer are excluded from the scope of the controls. It would be unfortunate for a U.S. person to unintentionally violate the EAR because the items subject to the EAR that they are exporting or reexporting subject to a BIS license happen to include an item that was not subject to the EAR, such as bundled software or a spare part.

BIS response:

BIS clarifies here in this AC/S IFR that existing BIS licenses would also cover such “U.S. person” activities as described in the commenter's scenario. BIS cautions that if the activity being provided goes outside the scope of the BIS license, then a separate analysis of that “U.S. person” activity must be conducted.

C. Expansion of Export Controls on Advanced Computing Items and Supercomputers

This section describes the specific EAR revisions adopted in this IFR, which expand and refine the October 7 IFR with respect to advanced computing items and supercomputers, and addresses the national security concerns that led to an expansion of the country scope for these commodities and related software and technology.

Overview of EAR Changes

This AC/S IFR revises ECCN 3A090 to remove paragraph a, including paragraphs a.1 through a.4, and adds in its place a simplified control paragraph. Those changes, as well as a conforming change to ECCN 3A991.p, are discussed below in section C.1 of this rule. This rule also introduces License Exception Notified Advanced Computing (NAC), which is discussed in section C.2. In response to public comments, the rule also replaces the criteria “any other item on CCL that meet or exceed the performance parameters of 3A090 or 4A090” by positively identifying those ECCNs in new .z paragraphs, along with various conforming changes related to the new .z paragraphs in other parts of the EAR. The public comments on this issue are described in section B under Topics 19-24; additional details about those changes, and the accompanying conforming changes including to the Automated Export System (AES), can be found in section C.3.

In addition, this rule broadens the country scope for the Regional Stability controls to destinations specified in Country Groups D:1, D:4, and D:5 in supplement no. 1 to part 740 that are not also specified in Country Groups A:5 or A:6 and amends the licensing policy, as described in section C.4. Section C.5 discusses clarifications to the scope of “U.S. person” and end-use controls related to supercomputers and advanced computing items. Section 744.23 is expanded to capture PRC operations outside of China in light of ongoing national security concerns related to diversion and misuse of items subject to the EAR; those changes are discussed in section C.6. As discussed in section C.7, this rule adds ECCNs 3A991.p and 4A994.l to License Exception Consumer Communication Device (CCD).

As discussed in section C.8, this rule also broadens the country scope with respect to the advanced computing FDP rule to destinations specified in Country Groups D:1, D:4, and D:5 that are not also specified in Country Groups A:5 or A:6. Section C.9 describes changes clarifying that the model certificate published in the October 7 IFR may be used for all FDP rules. Section C.10 discusses changes to enhance compliance, including the addition of five new red flags to assist with compliance, including adding a red flag for enhanced FDP guidance for recognizing “direct products.” The addition of one new TGL is described in section C.11. Additional corrections and clarifications made in this rule are described in section C.12.

Lastly, BIS requests specific comments on several issues, which are listed and described in section D.

National Security and Foreign Policy Considerations for Expanding Controls and Country Scope

As noted earlier in the rule, these advanced or frontier AI capabilities, such as large dual-use AI foundation models with capabilities of concern are particularly problematic because their use can lead to improved design and execution of WMD and advanced conventional weapons. Military decision-making aided by these AI models can improve speed, accuracy, planning, and logistics. The use of such items in development and deployment of these AI models would further China's goals of surpassing the military capability of the United States and its allies, a goal noted in the February 6, 2023 Annual Threat Assessment of the U.S. Intelligence Community. That same report indicated that “China is rapidly expanding and improving its artificial intelligence (AI) and big data analytics capabilities, which could expand beyond domestic use.” These national security concerns were paramount in the issuance of this AC/S IFR.

Consistent with the national security and foreign policy concerns described in the October 7 IFR, BIS is updating the EAR to enhance effectiveness of the controls in addressing these ongoing concerns. Following the implementation of the controls last year, BIS continued to study and assess their effectiveness. This rule strengthens and improves those controls by addressing the national security considerations that have come to light through open-source reporting, public comments, and the intelligence community. Through this process, BIS learned that certain additional ICs could provide nearly comparable AI model training capability as those controlled in the October 7 IFR BIS also seeks to further impair diversion channels through third countries, particularly those with AI commercial and research ties to the PRC.

In addition, credible open source reporting identified PRC companies using foreign subsidiaries to purchase chips subject to EAR controls, and accessing and operating datacenters located outside of the PRC with the ICs subject to EAR controls. Moreover, BIS is also concerned about certain additional ICs, which in turn can be used to train frontier AI models that have the most significant potential for advanced warfare applications, including unmanned intelligent combat systems, enhanced battlefield situational awareness and decision making, multidomain operations, automatic target recognition, autopiloting, missile fusion, precise guidance for hypersonic platforms, and cyber attacks. Accordingly, to address these issues, BIS is making several changes to the rule.

First, to prevent technical workarounds, BIS is adding a performance density parameter to the original control and including a new structure for the control. A performance density parameter prevents the workaround of simply purchasing a larger number of smaller datacenter AI chips which, if combined, would be equally powerful as restricted chips.

Second, to address PRC operations inside and outside of China and Macau seeking to acquire advanced ICs through transshipment and diversion, and accessing datacenters with advanced ICs, the rule expands controls to destinations in country groups D:1, D:4, and D:5 that are not also in Country Groups A:5 or A:6. Additionally, the rule also adds two new end use controls to prevent circumvention of the controls. Moreover, in section D, this rule is also soliciting comment from Infrastructure as a Service (IaaS) providers and other stakeholders on additional regulations in this area, including know your customer requirements that can be adopted to address uses that present a national security or foreign policy concern.

Third, because advanced-ICs have varying capabilities implicating national security concerns, with this rule, BIS is controlling a wider scope of advanced- ICs through adoption of a tiered approach. Thus, first, for the most powerful data-center ICs (as described in ECCN 3A090.a), which are of the greatest national security and foreign policy concern, BIS is imposing a license requirement to any destination specified in Country Groups D:1, D:4, or D:5 that are not also in Country Groups A:5 or A:6. Second, for advanced-ICs that are less powerful but could be used to train large-scale AI systems by a sufficiently well-resourced actor (as described in ECCN 3A090.b, as well as certain 3A090.a commodities) BIS is providing license exception NAC for destinations in Country Groups D:1, D:4, or D:5, but use of such license exception will require pre-notification of the export or reexport to Macau or a destination specified in Country Group D:5.

This AC/S IFR also adds a new red flag to assist semiconductor fabrication facilities' additional compliance with the advanced computing FDP rule as described under section C.10.A.

1. Revision of ECCN 3A090 and Conforming Change to 3A991.p

A. Revisions to 3A090 control parameters to ensure ICs for AI training are controlled.

In ECCN 3A090, this AC/S IFR revises the “items” paragraph in the List of Items Controlled section to remove paragraph a, including paragraphs a.1 through a.4, and adds in its place a simplified paragraph .a and .b. The revised 3A090.a control parameter will control ICs with one or more digital processing units having either: (1) a `total processing performance' of 4800 or more, or (2) a `total processing performance' of 1600 or more and a `performance density' of 5.92 or more. The new ECCN 3A090.b will control ICs with one or more digital processing units having either: (1) a `total processing performance' of 2400 or more and less than 4800 and a `performance density' of 1.6 or more and less than 5.92, or (2) a `total processing performance' of 1600 or more

and

a `performance density' of 3.2 or more and less than 5.92. See Technical Notes to ECCN 3A090 for calculating `total processing performance' and `performance density.' Together, these paragraphs expand the scope of control as compared to the October 7 IFR. This action is necessary to ensure that ICs below the October 7 ECCN 3A090 parameters that were still useful for training advanced AI with military applications would be controlled.

To more precisely control the types of ICs presenting the concerns described above in section C of this rule, ICs that meet certain performance thresholds described in Note 2 are not subject to 3A090 controls. Thus, no license is required for these ICs under 3A090; however, such ICs may require a license under another ECCN.

The scope of this control is calibrated through the addition of several Notes to ECCN 3A090 and a new license exception, the former discussed below in sections C.1.B, C.1.C, and C.1.F and the latter discussed in section C.2. BIS excludes from ECCN 3A090 ICs that (1) are not designed or marketed for use in datacenters, and (2) do not have a `total processing performance' of 4800 or more (see Note 2). As discussed in section C.2 of this rule, License Exception NAC provides a path for prior notification to BIS when exporting or reexporting eligible items to the PRC and Macau. The notification requirements do not apply for transfers (in-country) within the PRC and Macau. Eligible items for License Exception NAC are defined as those ICs under ECCN 3A090.b (including ICs that

are

designed or marketed for use in a data center) and specific ICs under 3A090.a (

not

designed or marketed for use in a data center).

B. Addition of exclusion for `non-datacenter integrated circuits' from the expanded 3A090 control parameter

.

In ECCN 3A090, this AC/S IFR adds a new Note 2 to 3A090 to specify that 3A090 does not apply to non-datacenter integrated circuits that are (a) not designed or marketed for use in datacenters; and (b) do not have a `total processing performance' of 4800 or more. In response to this AC/S IFR, BIS seeks comments on how to refine these parameters to more granularly cover additional ICs that would not raise concerns for use in training large-scale AI systems. See section D question 6 of this rule.

The purpose of this Note 2 is to ensure that as implementation occurs in the future, the expanded ECCN 3A090.a and .b control parameters do not increasingly control certain non-datacenter ICs.

C. Revisions to technical notes for clarity

.

This AC/S IFR also makes several revisions to the Technical Notes to address the various comments that BIS received noting that there are multiple ways to calculate the TOPS calculations and identifying that the criteria provided in the Technical Notes included in the October 7 IFR under ECCN 3A090 were not adequate for a consistent interpretation on how to calculate the TOPS calculation. BIS agreed that revisions were needed. This AC/S IFR revises the five technical notes for clarity. Most importantly, this AC/S IFR replaces bits x TOPS with `Total processing performance' (`TPP') values and defines clear, objective criteria that can be used to calculate the `TPP' value.

In ECCN 3A991, this AC/S IFR amends Technical Note for 3A991.p, paragraph 3, to conform with the changes to the Technical Notes to ECCN 3A090.

D. Expanded license requirement

.

This AC/S IFR also revises the License Requirements section for the RS license requirement that applies to the entire ECCN 3A090 to expand the scope of the destination-based license requirements by removing China and Macau and adding in its place any destination specified in Country Groups D:1, D:4, or D:5 that is not also specified in Country Groups A:5 or A:6. This expanded license requirement is warranted because of the potential diversion concern for these activities of concern in or with Macau or a destination specified in Country Group D:5. However, for destinations to or within destinations not specified in Country Group D:5 (except Macau), license applications will generally be reviewed under a presumption of approval license review policy under § 742.6(b)(10) paragraph (b)(10)(ii) (License review policy for paragraph (a)(6)(iii)). See section C.4 for fuller description of the license review policies that will be applicable to these destinations referenced in this paragraph.

This AC/S IFR also adds a cross reference in the RS control in ECCN 3A090 to

see

§ 742.6(a)(6)(iii) of the EAR.

E. Addition of Note 3 to 3A090 and adding Related Controls cross references from related ECCNs.

This AC/S IFR, as a conforming change for the addition of Note 3 to 3A090, adds a Related Controls reference to Note 3 to 3A090 in ECCNs 3A001.z, 3A090, 4A003.z, 4A004.z, 4A005.z, 4A090, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z.

2. Addition of License Exception Notified Advanced Computing (NAC) for Consumer-Grade ICs With AI Capabilities

In § 740.8, which prior to the effective date of this rule was reserved, this AC/S IFR adds new license exception NAC. This license exception is for ICs under ECCN 3A090.b (

i.e.,

ICs designed or marketed for use in datacenters) and non-datacenter ICs under 3A090.a (

i.e.,

ICs

not

designed or marketed for use in datacenters and that

do have

a `total processing performance' of 4800 or more). NAC is available for exports, reexports, and transfers in or within Country Groups D:1, D:4, or D:5 with different requirements applicable to Macau and destinations specified in Country Group D:5. The purpose of the notification process, which is only required for exports and reexports to Macau or destinations specified in Country Group D:5, is to provide BIS and its interagency export controls partners the opportunity to evaluate the national security risk posed by ICs that fall within this parameter.

This license exception as specified under the paragraph (a) (Eligibility requirements) will authorize export, reexport, and transfer (in-country) of any item classified in ECCNs 3A090, 4A090, 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z, except for items designed or marketed for use in a datacenter and meeting the parameters of 3A090.a. License Exception NAC authorizes exports, reexports, or transfers (in-country) to any destination specified in Country Groups D:1, D:4, or D:5, provided the applicable criteria specified under paragraphs (a) and (b) are met. For exports and reexports to Macau or destinations specified in Country Group D:5, in addition to meeting the criteria under paragraphs (a) and (b), the notification requirements under paragraph (c) of License Exception NAC must all be met. The notification requirement does not apply to exports or reexports to any destination specified in Country Groups D:1 or D:4 (other than Macau or destinations also specified in Country Group D:5) nor does it apply to transfers (in-country) to any destination.

Paragraph (a)(1) (Written purchase order) requires that any export or reexport authorized under License Exception NAC must be made pursuant to a written purchase order, except for commercial samples which are not subject to this purchase order requirement. Written purchase orders are not required for transfers (in-country). Exports, reexports, or transfers (in-country) to or within any other destination identified under Country Groups D:1, D:4, or D:5 are authorized under License Exception NAC, provided the applicable criteria under paragraphs (a) and (b) are met.

Paragraph (a)(2) (Notification to BIS) specifies that for exports or reexports to Macau or a destination specified in Country Group D:5, you must notify BIS prior to exporting or reexporting, according to the procedures set forth in paragraph (c) of License Exception NAC. Paragraph (a)(2) specifies that if you intend to engage in multiple exports or reexports after the signing of the purchase order, you need only notify BIS prior to the first export or reexport. Paragraph (a)(2) is not required for transfers (in-country) within Macau or a destination specified in Country Group D:5.

Paragraph (b) (Restrictions) apply to all exports, reexports, or transfers (in-country) authorized under License Exception NAC. Paragraph (b)(1) (Prohibited end uses and end users) specifies that License Exception NAC is not able to overcome any part 744 or 746 license requirements, except for a license required under § 744.23(a)(3) for reexports or exports to any destination other than those specified in Country Groups D:1, D:4, or D:5 (excluding any destination also specified in Country Groups A:5 or A:6) for an entity that is headquartered in, or whose ultimate parent company is headquartered in, either Macau or a destination specified in Country Group D:5. The restriction under paragraph (b)(2) (`Military end use' or `military end user') specifies that no exports, reexports, or transfers (in-country) may be made under License Exception NAC to or for a `military end use' as defined in § 744.21(f) or `military end user' as defined in defined in § 744.21(g). This `military end use' or `military end use' restriction applies to a broader country scope than those prohibited under §§ 744.17 and 744.21.

Paragraph (c) (Prior notification procedures) specifies the notification requirements that must be followed prior to making any export or reexport to Macau or a destination specified in Country Group D:5 under License Exception NAC. Paragraph (c)(1) (Procedures) specifies the requirement to make this notification prior to using License Exception NAC as well as what Blocks need to be completed in SNAP-R for submitting a notification request. You do not need to submit a commodity classification determination from BIS with your notification, but doing so will be helpful in limiting any concerns associated with the technical nature of the item because BIS will already be familiar with the item's performance characteristics if it has conducted a classification review.

Paragraph (c)(2) (Action by BIS) specifies that BIS intends during the 25-calendar day review period to review the notification together with the other export control agencies. Paragraph (c)(3) (Status of pending NAC notification requests) describes the process for entities to follow in BIS's System for Tracking Export License Applications (STELA) (

https://snapr.bis.doc.gov/stela

) to obtain the status of a pending NAC notification or verify the status in BIS's Simplified Network Applications Processing Redesign (SNAP-R) System. Paragraph (c)(3) also specifies that if no objection to a NAC notification is raised, STELA will, on the twenty-fifth calendar day following the date of registration, provide a confirmation of that fact and a NAC confirmation number to be submitted in AES. Paragraph (c)(3) also indicates that if the NAC notification is not approved, on the twenty-fifth calendar day following

the date of registration, STELA will provide you with confirmation if you cannot use License Exception NAC.

BIS intends to post an announcement on the BIS website once entities may submit License Exception NAC notifications with the goal that License Exception NAC requests may be submitted prior to the effective date of this rule.

This AC/S IFR, as a conforming change for the addition of License Exception NAC, adds a NAC paragraph to the List-Based License Exception section under ECCNs 3A001.z, 3A090, 4A003.z, 4A004.z, 4A005.z, 4A090, 5A002.z, 5A004.z, 5A992.z, 5D002.z, and 5D992.z.

3. Replacing Criteria for Any Other Item on CCL That Meet or Exceed the Performance Parameters of 3A090 or 4A090 by Positively Identifying Those ECCNs and Adopting .z Paragraphs

The October 7 IFR under § 742.6(a)(6), along with other provisions in the October 7 IFR, used the criteria “or identified elsewhere on the CCL that meet or exceed the performance parameters of ECCNs 3A090 or 4A090.” As described above, commenters on the October 7 IFR raised significant concerns that this type of catch-all text deviated from the common structure of the CCL under supplement no. 1 to part 774 of the EAR, would be burdensome and possibly unimplementable for many exporters, reexporters, and transferors, and would lead to confusion regarding the appropriate classification and control of items on the CCL. Commenters strongly encouraged BIS to adopt a more conventional approach to implementing these changes by either adding new ECCNs to control those additional items that would otherwise meet or exceed the performance parameters of ECCNs 3A090 or 4A090, or by identifying a positive list of additional ECCNs that may warrant this additional control on the CCL and then creating separate “items” level paragraphs in each of these respective ECCNs.

After reviewing the concerns raised by the commenters, BIS agrees that a more conventional structure is needed for imposing this aspect of the October 7 IFR. Accordingly, BIS is identifying a positive list of the nine additional ECCNs for which BIS has determined also have performance characteristics or functions that meet or exceed the performance parameters of ECCNs 3A090 or 4A090 and is adding a new “items” level paragraph in the List of Items Controlled section of each of these nine ECCNs by adding .z paragraphs to each. This AC/S IFR makes several changes to the EAR to implement this important change to the October 7 IFR. For ease of reference these changes are described here under four types of changes: (1) adding .z paragraphs to nine ECCNs; (2) revising Related Controls for 3A090, 3A991, 4A090, 4A994 and the nine ECCNs to cross reference each other to assist with classification; (3) making other EAR conforming changes needed because of the addition of .z paragraphs; and (4) changing export clearance requirements to increase transparency of .z, 3A090, and 4A090 shipments.

A. Adding .z paragraphs to nine ECCNs

.

This final rule revises nine ECCNs 3A001, 4A003, 4A004, 4A005, 5A002, 5A004, 5A992, 5D002, and 5D992 to address overlapping controls with ECCNs 3A090, 4A090, 3A991.p and 4A994.l by adding .z paragraphs to each of these nine ECCNs. These changes are intended to make it easier for exporters, reexporters, and transferors to identify these items subject to controls added in the October 7 IFR and to more easily distinguish these items from other items controlled under these same nine ECCNs. Each .z paragraph uses the same structure, but there are differences in the .z paragraphs because the overlapping controls with 3A090 and 4A090, as well as 3A991.p and 4A994.l, are not the same for each of the nine ECCNs. Despite the differences in the text used for each .z paragraph, the commonality in the paragraphs' structure should assist understanding. Some of the .z paragraphs are limited to one paragraph, but others such as ECCN 5A002 have several paragraphs under the .z paragraph. BIS is adopting the .z structure because no ECCN currently has a .z “items” level paragraph. Similar to the structure used with the .x and .y paragraphs for the “600 series,” 9x515, and 0x5zz ECCNs, using a common “items” paragraph designation will make it easier for exporters, reexporters, and transferors to identify these items, as well as for the U.S. Government to identify these items under these nine ECCNs.

For each ECCN this rule revises to add a .z paragraph, this rule reserves the items level paragraph from where the items paragraph ended prior to this AC/S IFR becoming effective up through paragraph .y. For example under ECCN 5A002, this rule revises 5A002 to reserve paragraphs .f through .y. This rule does the same in each of the other eight ECCNs that are being revised to add the .z paragraphs, but depending on how many items paragraphs each ECCN had before the effective date of this AC/S IFR, different paragraphs are reserved.

BIS includes as an illustrative example some of the .z paragraphs from ECCN 5A002 that this AC/S IFR adds. The introductory text of the 5A002.z paragraph identifies “Other commodities, as follows” and then includes additional control parameters to identify these .z commodities. ECCN 5A002, because of the complexity of the ECCN and the overlapping controls with 3A090 and 4A090, has several .z subparagraphs that are tied to the other “items” paragraphs in 5A002. For example, 5A002.z.1 controls commodities that are described in 5A002.a and that also meet or exceed the performance parameters in 3A090 or 4A090. Similarly, 5A002.z.2 controls commodities that are described in 5A002.b and that also meet or exceed the performance parameters in 3A090 or 4A090. Some of the other relevant ECCNs have a simpler and shorter structure and may be limited to a single .z paragraph. However, regardless of how many .z paragraphs are added, each .z paragraph functions the same way because it references an item that is described elsewhere in the same ECCN that also meets or exceeds the performance parameters in 3A090, 4A090, 3A991.p, or 4A994.l, as applicable and specified in the respective .z paragraph. By classifying these items in their own .z paragraph, it will be easier for exporters, reexporters, and transferors to identify these items and the additional controls and other restrictions that are applicable to them.

In ECCN 3A001, this AC/S IFR reserves paragraphs j. through y. and adds paragraphs z.1 through .4 to the “items” paragraph in the List of Items Controlled section and makes the following conforming changes by adding certain 3A001.z items to the NS1, RS1, MT1 and NP1 Controls paragraphs and adding a RS control that applies to items controlled by 3A001.z for destinations specified in Country Groups D:1, D:4, or D:5. This AC/S IFR adds 3A001.z to the exclusion on using License Exception LVS.

In ECCN 4A003, this AC/S IFR reserves paragraphs h. through y. and adds paragraphs .z.1 through .z.4 in the List of Items Controlled section and makes a corresponding change to the Reason for Control section by adding a RS control for items controlled by 4A003.z for destinations specified in Country Groups D:1, D:4, or D:5. This AC/S IFR adds 4A003.z to the exclusion on using License Exception LVS. This AC/S IFR also adds a new Note to List Based License Exception in ECCN 4A003 to specify that the related equipment specified under ECCN 4A003.g, z.2, or z.4 are eligible for

License Exception GBS if three conditions are met. The related equipment must be exported, reexported, or transferred (in-country) as part of a computer system, the computer system must either be designated as NLR or eligible for License Exception APP, and the related equipment must be eligible for License Exception APP.

In ECCN 4A004, this AC/S IFR reserves paragraphs d. through y. and adds paragraph .z in the List of Items Controlled section and makes a corresponding change to the Reasons for Control section by adding a RS control that applies to items controlled by 4A004.z (1) for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6 and (2) to or with any destination not specified in Country Groups D:1, D:4, or D:5 when the export, reexport or transfer (in-country) includes an ultimate consignee or end user headquartered in a destination in Country Groups D:1, D:4, or D:5 that is not also specified in Country Groups A:5 or A:6. This AC/S IFR adds 4A004.z to the exclusion on using License Exception LVS.

In ECCN 4A005, this AC/S IFR revises the heading to add the parenthetical phrase “(see List of Items Controlled).” This AC/S IFR revises the phrase that referenced “[T]he list of items controlled is contained in the ECCN heading” in the “Items” paragraph in the List of Items Controlled section to add the phrase “except for the commodities controlled under 4A005.z.” This rule reserves paragraphs a. through .y, adds paragraph .z, and makes a corresponding change to the Reasons for Control section to add a RS control that applies to items controlled by 4A005.z for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6. This AC/S IFR also adds 4A005.z to the exclusion on using License Exception ACE.

BIS notes that although the general restriction on the use of license exceptions under § 740.2(a)(9)(ii) and the terms and conditions of certain list-based license exceptions, such as LVS or GBS, or the terms of License Exception STA, would preclude the use of these EAR license exceptions for destinations specified in Country Groups D:1, D:4, or D:5, that are not also specified in Country Groups A:5 or A:6, that this AC/S IFR as an additional safeguard still adds exclusions for the new .z paragraphs for these ECCNs as an additional reminder to exporters, reexporters, and transferors that these license exceptions are not available for .z items for these destinations.

In ECCN 5A002, this AC/S IFR reserves paragraphs f. through y. and adds paragraphs .z.1 through .5 in the List of Items Controlled section and makes the following conforming changes by adding a RS control that applies to items controlled by 5A002.z for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6. This AC/S IFR also adds 5A002.z to the exclusion on using License Exceptions LVS and ENC.

In ECCN 5A992, this AC/S IFR reserves paragraphs d. through y. and adds paragraphs .z.1 and .2 in the List of Items Controlled section and makes a corresponding change to the Reasons for Control section by revising the RS control that applies for 5A992.z items destined to or within destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6.

In ECCN 5A004, this AC/S IFR reserves paragraphs c. through y. and adds paragraphs .z.1 and .2 in the List of Items Controlled section and makes the following conforming change by adding a RS control that applies to items controlled by 5A004.z for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6. This AC/S IFR also adds 5A004.z to the exclusion on using License Exceptions LVS and ENC.

In ECCN 5D002, this AC/S IFR reserves paragraphs e. through y. and adds paragraphs .z.1 through .9 in the List of Items Controlled section and makes the following conforming change by adding a RS control that applies to items controlled by 5D002.z for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6. This AC/S IFR also adds 5D002.z to the exclusion on using License Exception ENC.

In ECCN 5D992, this AC/S IFR reserves paragraphs d. through y. and adds paragraph .z in the List of Items Controlled section and makes a corresponding change to the Reasons for Control section by revising the RS control that applies for destinations specified in Country Groups D:1, D:4, or D:5 that are not also specified in Country Groups A:5 or A:6.

B. Revising Related Controls for 3A090, 4A090, 5E001, and the Nine ECCNs to cross reference each other to assist with classification.

BIS includes Related Controls paragraphs in the List of Items Controlled section of ECCNs to alert persons classifying items of related controls that may be applicable. This rule revises the Related Controls paragraphs in ECCNs 3A090 and 4A090 to add references to the nine ECCNs that this final rule adds .z paragraphs to, as applicable. Because the cross over that is being addressed is not identical for each of these nine ECCNs with .z paragraphs added, the revisions to the Related Controls paragraphs are not identical in all cases.

In ECCN 3A001, this AC/S IFR adds a reference to see also ECCN 3A090.

In ECCN 3A090, this AC/S IFR adds a reference to see also 3A001.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, and 5D992.z.

In ECCN 3A991, this AC/S IFR adds a reference to see also ECCNs 5A002.z, 5A004.z, and 5A992.z.

In ECCN 4A003, this AC/S IFR adds a reference to see also ECCN 4A090.

In ECCN 4A004, this AC/S IFR adds a reference to see also ECCN 4A090.

In ECCN 4A005, this AC/S IFR adds a reference to see also ECCN 4A090.

In ECCN 4A090, this AC/S IFR adds a reference to see also ECCNs 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, and 5D992.z.

In ECCN 4A994, this AC/S IFR adds a reference to see also ECCNs 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, and 5A992.z.

In ECCN 5A002, this AC/S IFR adds a reference to see also ECCNs 3A090 and 4A090.

In ECCN 5A004, this AC/S IFR adds a reference to see also ECCNs 3A090 and 4A090.

In ECCN 5A992, this AC/S IFR adds a reference to see also ECCNs 3A090 and 4A090.

In ECCN 5D002, this AC/S IFR adds a reference to see also ECCNs 3D001.z and 4D001.z.

In ECCN 5D992, this AC/S IFR adds a reference to see also ECCNs 3D001.z and 4D001.z.

In ECCN 5E001, this AC/S IFR adds a reference to see also ECCN 3A001.z.

C. Other EAR conforming changes needed because of addition of .z paragraphs

.

This AC/S IFR makes various changes to other ECCNs and other parts of the EAR to make conforming changes where needed as a result of the addition of the .z items paragraphs to the nine ECCNs 3A001, 4A003, 4A004, 4A005, 5A002, 5A004, 5A992, 5D002, and 5D992.

These changes are made to ensure that certain provisions that currently apply for other items controlled under these nine ECCNs are not narrowed or expanded as a result of the addition of the .z paragraphs. In other cases, specific “items” paragraphs from these

nine ECCNs are identified in other provisions where in certain cases, it was needed to also add in references to ensure the same provisions will apply to the .z paragraphs. Because some of the nine ECCNs include ECCNs, such as 5A002 and 5D002, which are referenced in various other provisions of the EAR, this AC/S IFR needed to make various conforming changes to these other ECCNs and parts of the EAR. Although this appears to be extensive revision, the intent in most cases is to ensure that the scope of the controls prior to this AC/S IFR generally does not change. The changes are described below in the order they appear in the EAR.

Conforming Changes in Part 734

In § 734.4(b)(2), this AC/S IFR removes ECCNs 5A992.c and 5D992.c and adds in their place ECCNs 5A992 and 5D992. These requirements are intended to apply to the entire ECCNs, so these changes are needed to account for the addition of .z to 5A992 and 5D992.

In § 734.9(h)(1)(i)(B)(

2

) and (h)(1)(ii)(B)(

2

), this AC/S IFR revises these two paragraphs to remove the phrase “elsewhere on the CCL and meets the performance parameters in 3A090 or 4A090” and adds a more specific reference to “meeting the performance parameters in ECCNs 3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, or 5A992.z.” By adding this more specific reference tied to the new .z paragraphs, this AC/S IFR will make it easier for foreign manufacturers to comply with this aspect of the Advanced Computing Foreign Direct Product (FDP) rule and to more easily apply the

de minimis

provisions.

Conforming Changes in Part 740

In § 740.2 Restrictions on all License Exceptions, this AC/S IFR revises the general restriction on the use of license exceptions under paragraph (a)(9)(ii), which will now be paragraph (a)(9)(ii)(B) because of the revisions made in this SME IFR, to remove the phrase “elsewhere on the CCL which meets or exceeds the performance parameters in ECCNs 3A090 or 4A090” and adds in its place the more specific reference to “specified in ECCNs 3A001.z; 3D001 (for “software” for commodities controlled by 3A001.z, 3A090), 3E001 (for “technology” for commodities controlled by 3A001.z); 4A003.z; 4A004.z; 4A005.z; 4D001 (for “software” for commodities controlled by 4A003.z, 4A004.z, and 4A005.z); 4E001 (for “technology” for commodities controlled by 4A003.z, 4A004.z, and 4A005.z); 5A002.z; 5A004.z; 5A992.z; 5D002.z; 5D992.z; 5E002 (for “technology” for commodities controlled by 5A002.z or 5A004.z); “software” specified by 5D002 (for 5A002.z or 5A004.z commodities); 5E992 (for “technology” for commodities controlled by 5A992.z or “software” controlled by 5D992.z).” By adding this more specific reference tied to the new .z paragraphs, this AC/S IFR will make it easier for exporters, reexporters, and transferors to know when this general restriction will apply on the use of license exceptions. In the introductory text of paragraph (a)(9)(ii), this AC/S IFR adds a reference to new License Exception NAC by adding the phrase “NAC, under the provisions of § 740.8.”

In addition to amending § 740.2(a)(9) to prohibit the use of license exceptions for certain ECCNs, including those with a .z paragraph, BIS also notes restrictions for certain license exceptions as a reminder for exporters. In § 740.7 Computers (APP), this AC/S IFR adds a reference to 4A003.z.2 or z.4 after the reference to 4A003.g in paragraph (b)(1) to remind exporters that this restriction on the use of License Exception APP will also apply when a commodity that is described in 4A003.g is controlled under 4A003.z.2 or .z.4.

In § 740.16 Additional permissive reexports (APR), this AC/S IFR revises paragraphs (a)(2) and (b)(2)(ii) to add a reference to 3A001.z to ensure that the restrictions under 3A001.b.2 or b.3 will continue to apply when a commodity described under one of those two “items” paragraphs is controlled under 3A001.z.

In § 740.17 Encryption Commodities, Software and Technology (ENC), this AC/S IFR makes several conforming changes to ensure the intended scope of this license exception is not changed as a result of the addition of the .z “items” paragraphs:

Under the fifth sentence of the introductory text to § 740.17, this AC/S IFR removes the reference to 5A992.c and 5D992.c and adds in its place a reference to 5A992 and 5D992.

Under paragraph (b)(1) to § 740.17, this AC/S IFR adds a reference after 5A002.a to 5A002.z.1 and removes the reference to 5A992.c and 5D992.c and adds in its place a reference to 5A992 and 5D992. BIS could have added a reference to 5D992.z, but because ECCN 5D992 only includes “items” paragraphs .c and .z, it was simpler to add a reference to 5D992.

Under paragraph (b)(2)(i)(D) to § 740.17, this AC/S IFR after 5A002.c adds a reference to 5A002.z.3 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Under the Note to paragraph (b)(2) to § 740.17, this AC/S IFR adds after ECCN 5A002.b a reference to 5A002.z.2 and after 5D002.b a reference to 5D002.z.5 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Under (b)(3) introductory text to § 740.17, this AC/S IFR removes 5A992.c and 5D992.c and adds in their place references to 5A992 and 5D992. BIS could have added a reference to 5D992.z, but because ECCN 5D992 only includes “items” paragraphs .c and .z, it was simpler to add a reference to 5D992.

Under (b)(3)(i) introductory text to § 740.17, this AC/S IFR after 5A002.a adds a reference to 5A002.z.1 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Under paragraph (b)(3)(iii)(B) to § 740.17, this AC/S IFR after 5D002.a.3.b adds a reference to 5D002.z.4, and after 5D002.c.3.b adds a reference to 5D002.z.9 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Under paragraph (b)(3)(iv) to § 740.17, this AC/S IFR after 5A002.b adds a reference to 5A002.z.2, and after 5D002.b adds a reference to 5D002.z.5 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Under paragraph (e)(3) second sentence to § 740.17, this AC/S IFR removes the reference to 5A992.c and 5D992.c and adds in its place a reference to 5A992 and 5D992. BIS could have added a reference to 5D992.z, but because ECCN 5D992 only includes “items” paragraphs .c and .z, it was simpler to add a reference to 5D992.

Under paragraph (f)(1) to § 740.17, this AC/S IFR adds after 5A004.a a reference to 5A004.z.1 and z.2, after 5D002.a.3.a a reference to 5D002.z.3 and z.8 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

Conforming Changes in Parts 742, 746, and 748

In § 742.6 Regional stability, this AC/S IFR revises paragraph (a)(6)(i), to remove the phrases beginning with “5A992 (that meet or exceed the performance parameters of ECCNs 3A090 or 4A090)” and “5D992 (that meet or exceed the performance parameters of ECCNs 3A090 or 4A090).” Also in paragraph (a)(6)(iii), this AC/S IFR removes the phrase “elsewhere on the CCL that meet or exceed the performance parameters of ECCNs

3A090 or 4A090” and in its place references the nine .z ECCNs “3A001.z, 4A003.z, 4A004.z, 4A005.z, 5A002.z, 5A004.z, 5A992.z, 5D002.z, or 5D992.z.” As noted and requested by several commenters, having a positive listing of relevant ECCNs will significantly ease the burden on exporters, reexporters, and transferors and the controls will be easier to implement.

In § 746.8 Sanctions against Russia and Belarus, this AC/S IFR adds .c after 5A992 and 5D992. This AC/S IFR makes this change to ensure that 5A992.z and 5D992.z commodities and software will not be within the scope of this exclusion.

In § 742.15 (Encryption items), this AC/S IFR revises the third sentence of paragraph (a)(1) to remove the .c after 5A992.c and 5D992.c to ensure the scope of requirement is not changed by the addition of 5A992.z and 5D992.z.

In § 746.10 `Luxury Goods' Sanctions Against Russia and Belarus and Russian and Belarusian Oligarchs and Malign Actors, this AC/S IFR adds .c after 5A992 and 5D992. This AC/S IFR makes this change to ensure that 5A992.z and 5D992.z commodities and software will not be within the scope of this exclusion.

In supplement no. 7 to part 748—Authorization Validated End-User (VEU): List of Validated End-Users, Respective Items Eligible For Export, Reexport And Transfer, And Eligible Destinations, this AC/S IFR revises the VEU entry for “Advanced Micro Devices China, Inc.” in China to remove the reference to 4A003 and add in its place the more specific reference to 4A003.b through .g to ensure that the currently approved scope of this VEU entry does not change because of the addition of 4A003.z. In addition, this AC/S IFR revises the entry for “Shanghai Huahong Grace Semiconductor Manufacturing Corporation” in China to remove the reference to 5A002 and add in its place the more specific reference to 5A002.a through .e; remove the reference to 5A004 and add in its place a more specific reference to 5A004.a through .b; and remove 5A992 and adds in its place a reference to 5A992.c. Also in supplement no. 7 to part 748, this AC/S IFR revises the heading of the supplement to add the parenthetical phrase “(in-country)” after the term “transfer” for clarity on the scope of the VEU authorizations under this supplement and for consistency with other EAR the provisions, such as the definition of “transfer (in-country).”

Conforming Changes to §§ 770.2 and 772.1

In § 770.2 Item interpretations, this AC/S IFR after 4A003.g adds a reference to 4A003.z.2 and .z.4 in paragraph (l)(2) to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In § 772.1 Definitions of terms as used in the Export Administration Regulations (EAR), this AC/S IFR revises Note 1 to the term “specially designed,” to add the parenthetical phrase “(except for .z)” after ECCNs 5A992 and 5D992 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In ECCNs 3D001, 3E001, 4D001, 4E001, 5D002 5E002, and 5E992, this AC/S IFR revises the License Requirement section of each of these nine ECCNs to add related “software” and “technology” controls for the new .z items added to the nine ECCNs 3A001, 4A003, 4A004, 4A005, 5A002, 5A004, 5A992, 5D002, and 5D992 to impose the same license requirements on the related “software” and “technology” as applies to the .z commodities this AC/S IFR adds.

Conforming Changes to the CCL

In ECCN 3D001, this AC/S IFR revises the TSR paragraph in the List Based License Exceptions section to add after ECCN 3A001.b.8 a reference to 3A001.z to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In ECCN 3E001, this AC/S IFR revises the TSR paragraph in the List Based License Exceptions section to add after ECCNs 3A001.b.8, 3A001.e.4, 3A001.b.2, and 3A001.b.3 references to 3A001.z after each of these items paragraphs to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph. Also in ECCN 3E001 under the Special Conditions for STA section, this AC/S IFR adds after ECCN 3A001.b.2 and .b.3 a reference to 3A001.z to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph. Also in Note 2 in the “items” paragraph in the List of Items Controlled section, this rule adds after 3A001.a.3 and .14 a reference to 3A001.z to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In Note 3 to Category 4—Computers, this AC/S IFR after 5A002.a adds a reference to 5A002.z.1 and z.6, and after 5A004.b adds a reference to 5A004.z; after 5D002.c.3 adds references to 5D002.z.6, 5D002.z.8, and z.9. These changes are made to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In the Technical Note paragraph 2 in the TECHNICAL NOTE ON “ADJUSTED PEAK PERFORMANCE” (“APP”) at the end Category 4—Computers, this AC/S IFR after 4A003.c adds a reference to 4A003.z.1 and z.3 to ensure the intended scope of this provision is not changed as a result of the addition of the .z “items” paragraph.

In Note 3 to Category 5—Telecommunications and “Information Security” Part 1—Telecommunications, this AC/S IFR after 5A002.a adds a reference to 5A002.z.1 and z.6; after 5A004.b adds a reference to 5A004.z; after 5D002.c.1 adds a reference to 5D002.z.6; and after 5D002.c.3 adds a reference to 5D002.z.8 and z.9 to ensure the intended scope of this note is not changed as a result of the addition of the .z “items” paragraph.

In Note 3 (Cryptography Note) to Category 5—Telecommunications and “Information Security” Part 2—“Information Security,” to ensure the intended scope of this note is not changed as a result of the addition of the .z “ite

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