Introduction
On May 13, 2025, the Bureau of Industry and Security (BIS) announced that the Framework for Artificial Intelligence Diffusion (AI Diffusion Rule) had been rescinded. BIS stated that the AI Diffusion Rule was rescinded because it was overly bureaucratic, undermined US diplomatic relations, and “stifled American innovation.” In the interim, in its place, BIS has issued general guidance, a policy statement, and a list of red flags and best practices that signal greater enforcement focus on AI and semiconductors. BIS said that it will issue a replacement rule “in the future.”
Key Takeaways
- BIS has rescinded the Biden Administration’s AI Diffusion Rule and has issued due diligence and enforcement guidance to limit diffusion of sensitive AI technologies until a replacement rule is promulgated.
- BIS guidance warns of presumptive violations of the Export Administration Regulations (EAR) for any dealings related to integrated circuits meeting the parameters of Export Control Classification Number (ECCN) 3A090 that are developed or produced by Chinese companies.
- BIS determined that access to US technology and advanced computing integrated circuits (ICs) used to train AI models in China and other D:5 countries (i.e. arms embargoed countries) or Macau could enable prohibited military-intelligence and weapons of mass destruction end uses.
- BIS advises companies to take extra due diligence steps when exporting advanced computing ICs to avoid assisting prohibited Chinese military end-uses.
- A replacement rule will be issued, reflecting a less burdensome approach and the current Administration’s policy priorities, according to BIS.
AI Diffusion Rule provisions will not go into effect
The AI Diffusion Rule’s stated purpose was to protect US national security by preventing malicious actors from accessing cutting-edge AI technology (see our previous blog post on the AI Diffusion Rule here). It aimed to accomplish this by:
- Introducing export controls (and a related license exception) on the most advanced AI closed-weight model weights;
- Expanding and refining export controls (and license exceptions) for advanced computing ICs; and
- New validated end user programs to authorize exports to approved data centers.
A central feature of the AI Diffusion rule was its tiered treatment of countries. The tiers consisted of US partners and allies, higher-risk jurisdictions, and other jurisdictions that do not belong to either category. This treatment was reflected in country-specific processing power caps, in addition to licensing policy.
The Trump Administration rescinded the rule two days before it was scheduled to go into effect on May 15, 2025.
New due diligence and enforcement guidelines on advanced computing ICs, red flags, and best practices
In lieu of a replacement rule for the time being, BIS has published guidance, a policy statement, and red flags and best practices for the industry. These materials generally focus on the risks surrounding exports of advanced computing ICs and commodities that contain them (including items classified under ECCNs 3A090.a, 4A090.a and .z items in Commerce Control List Categories 3, 4, and 5, such as ECCN 5A992.z servers).
Implied knowledge of AI-related prohibited end use
BIS’ policy statement is effectively notice that certain AI-related activities involving a Chinese (or another D:5 country, including Macau for purposes of this policy) party may result in a violation of the EAR because knowledge or reason to know of a prohibited end-use could be inferred by BIS. Such knowledge or reason to know of a prohibited end-use could result in a violation of the EAR’s General Prohibition 10 (GP10) and other provisions on prohibited end uses and end users.
BIS warns companies that it has “determined” that access to advanced computing ICs and commodities subject to the EAR for training AI models has the potential to enable prohibited end-uses in China and other D:5 countries. In particular, BIS warns that such activities may enable prohibited military-intelligence and weapons of mass destruction end uses in China and other D:5 countries. BIS guidance cautions companies against activities that could be used to support the training of AI models in China, including support by data centers outside of China.
Companies engaged in such activities can be subject to enforcement actions if a violation of the EAR occurs in connection with the activities. This is because the EAR’s definition of knowledge includes “awareness of a high probability” that a circumstance exists or will occur in the future, and BIS’ public determination arms BIS with the argument that any company engaged in such AI-related activities should have been aware of the potential for violations.
AI-related activities involving a Chinese (or D:5 country) company that could implicate an EAR violation include:
- Exports, reexports, or transfers (in-country) of advanced computing ICs or other commodities subject to the EAR to any party (such as a data center provider);
- Change in end use or end user of these items when they are already in the possession of a party other than the company; or
- Support by US persons, including performing any contract, service, or employment.
“High probability” enforcement targeting Chinese semiconductors
Additionally, BIS warns of a presumptive GP10 violation for advanced computing ICs meeting 3A090 specifications that are developed or produced by companies in (or with headquarters or ultimate parents in) China or other D:5 countries. GP 10 prohibits most transactions involving an item with knowledge or reason to know that a violation of the EAR has occurred, will occur, or is intended to occur in connection with the item. The guidance states that there is a “high probability” that a license was required but not obtained for the exportation, re-exportation, or transfer for the technology to develop such ICs.
Although the guidance applies to any 3A090 ICs that meet these conditions, BIS specifically names Huawei’s Ascend 910B, 910C, and 910D chips.
BIS mentions only one exception to its “high probability” enforcement scheme: it will not pursue enforcement actions against parties obtaining PRC 3A090 ICs “solely for … technical analysis or evaluation … to determine the technological capabilities of an individual [IC].”
Additional red flags and recommended due diligence action
BIS also published a list of 11 transactional and behavioral red flags, including customers whose “ultimate delivery or installation address is unknown” and customers providing Infrastructure as a Service that “cannot affirm that users of [their] services are not headquartered in the PRC.” These red flags are intended to help businesses identify potentially higher-risk transactions before they occur. This guidance also arms BIS with arguments that a company should have known of a high probability that a violation would occur, due to the presence of one or more red flags.
Relatedly, BIS published seven due diligence actions that companies should take, including evaluating the end user and end use of the item and evaluating whether or not the entities involved “have an ultimate parent headquartered in a destination specified in Country Group D:5 (including China) or Macau.”
An “America First” Plan for AI Export Controls
It is unclear what form new advanced computing IC and AI-related export control rules will take. US Commerce Secretary Howard Lutnick has, however, said that Commerce plans to allow US allies to purchase advanced computing ICs, “provided they’re run by an approved American data center operator and the cloud that touches that data center is an approved American operator.”
The Trump Administration’s guidance and other “America First” policies state an intention to take a “bold, inclusive” approach to AI regulation that allows for an expansion of research and development by US allies and partners. Given the Trump Administration’s penchant for bilateral negotiations, it has been reported that the new rule could allow the Administration to use advanced computing ICs as a negotiating tool in future trade discussions. In the meantime, BIS’s guidance signals more detailed enforcement priorities around AI and semiconductors until a new rule is in place.
