Recent Trade & Tariff Perspectives

October 26, 2022  |  Brooke Matthys  Senior Compliance Analyst

On October 7, 2022, the U.S. Bureau of Industry and Security (BIS) released new regulations intended to limit the Peoples’ Republic of China’s (PRC) ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. 

Effective October 7, 2022, the Advanced Computing and Semiconductor Manufacturing Rule  created new Export Control Classification Number (ECCN) 3B090, which controls certain semiconductor manufacturing equipment, components, and accessories for China-related regional stability (RS-China); as well as anti-terrorism (AT) reasons. In addition, existing ECCNs 3D001, 3E001 and 4E001, are now also controlled for RS-China and AT.

Effective October 21, 2022, the rule add three new ECCNs to the Commerce Control List (CCL), all of which will be controlled for RS-China and AT:

• ECCN 3A090 controls specific high-performance integrated Circuits (ICs)
• ECCN 4A090 controls computers, “electronic assemblies,” and “components,” not elsewhere specified (n.e.s.), containing ICs controlled under ECCN 3A090.
• ECCN 4D090 controls “software” “specially designed” or modified for the “development” or “production,” of computers and related equipment, “electronic assemblies,” and “components” specified in ECCN 4A090.

In addition to the new ECCNs, the following existing ECCNs will be controlled for RS-China and AT: 

• 3D001
• 3E001
• 4E001

ECCNs 5A992.c and 5D992.c will also be controlled for RS-China and AT for items that meet or exceed the performance parameters of ECCNs 3A090 or 4A090. Details regarding commodity specifications of each ECCN can be found in the Export Administration Regulations Commerce Control List. 

Typically, BIS regulations apply only to U.S. origin goods and foreign made goods meeting extremely specific criteria, however BIS has released new Foreign Direct Product Rules (FDPR), which greatly increase the number of “foreign origin” goods subject to the EAR.

These include the Advanced Semiconductor FDPR, which covers foreign produced items that are a direct product of technology or software classified under certain ECCNs when the items are destined for PRC or will be incorporated into any “part, component, computer or equipment that is not EAR99 and is destined for PRC”. (Affected ECCNs include but are not limited to:3DXXX, 3EXXX, 4DXXX, 4EXXX, 5DXXX, and 5EXXX meeting certain performance criteria set out in the EAR.)

The Supercomputer FDPR, which covers foreign-produced items that are the direct product of technology or software subject to the EAR in Categories 3, 4, and 5, Group D and E ECCNs (or the product of a plant or major component of a plant that is a direct product of such technology or software). The FDPR licensing requirement applies to items described above where there is knowledge that the foreign-produced item is used in the design, “development,” “production,” operation, installation, maintenance, repair, overhaul, or refurbishing of, a “supercomputer” located in or destined to the PRC; or incorporated into, or used in the “development,” or “production,” of any “part,” “component,” or “equipment” that will be used in a “supercomputer” located in or destined to the PRC.

Effective October 21, 2022, BIS has added a Footnote 4 designation to 28 Entities in PRC known as “The FN 4 FDP.” It covers foreign-produced (non-U.S.) items that are the direct product of technology or software subject to the EAR in Categories 3, 4, and 5, Group D and E ECCNs (or the product of a plant or major component of a plant that is a direct product of such technology or software), where there is knowledge that the item will be incorporated into, or used in the production or development of, any part, component, or equipment produced, purchased, or ordered by any FN 4 entity; or any FN 4 entity is party to any transaction involving the item. If both the product and end-user scopes are met, the foreign-made item is considered subject to the EAR and the relevant licensing requirements apply.

Effective October 12, 2022, the EAR restricts U.S. persons, without a license, from participating in the following activities, which “could involve ‘support’ for the weapons of mass destruction-related end uses” specified at Section 744.6(b):

• Shipping, transmitting, or transferring, or facilitating such movement, to or within China, or servicing, any item not subject to the EAR with knowledge that the item will be used in the development or production of Integrated Circuits (ICs) at a fabrication facility in China that produces ICs meeting any of the following criteria:
  • llogic ICs using a non-planar transistor architecture or with a “production” technology node of 16/14 nm or less
  • lNOT AND (NAND) memory ICs with 128 layers or more
  • ldynamic random-access memory (DRAM) ICs using a “production” technology node of 18 nm half-pitch or less.
• Shipping, transmitting, or transferring, or facilitating such movement, to or within China, or servicing, any item not subject to the EAR and meeting the parameters of any ECCN in Product Groups B, C, D, or E in Category 3 of the CCL with knowledge that the item will be used in the development or production of ICs at any fabrication facility in China where the U.S. person does not know whether the fab produces ICs meeting the criteria above.
• Shipping, transmitting, or transferring, or facilitating such movement, to or within China, or servicing, any item not subject to the EAR and meeting the parameters of ECCN 3B090, 3D001 (for 3B090), or 3E001 (for 3B090) regardless of the end use or end user.

Effective October 7, 2022, the Advanced Computing and Semiconductor Manufacturing Rule added new EAR Section 744.23, which includes end-use-based license restrictions on certain items subject to the EAR. Specifically, licensing is required for exports, re-exports, or transfers of:

• Any item subject to the EAR when there is knowledge that the item is destined for end use in the development or production of ICs at a fabrication facility in China that fabricates ICs meeting any of the following criteria:
  • llogic ICs using a non-planar transistor architecture or with a “production” technology node of 16/14 nm or less
  • lNOT AND (NAND) memory ICs with 128 layers or more
  • ldynamic random-access memory (DRAM) ICs using a “production” technology node of 18 nm half-pitch or less
• Items subject to the EAR and controlled under an ECCN in Product Groups B, C, D, or E in Category 3 of the CCL when there is knowledge that the item will be used in the development or production of ICs at any fabrication facility located in China, but where the exporter does not know whether such facility produces ICs that meet the above technical criteria
• Any item subject to the EAR when there is knowledge that the item is destined for end use in the development or production in China of any parts, components, or equipment specified under ECCNs 3B001, 3B002, 3B090, 3B611, 3B991, or 3B992.

Effective October 21, 2022, RS controls and restrictions on U.S. Persons also apply to exports from China to any destination worldwide of “technology”:

• For the design, development, or production of advanced computing chips (i.e., 3E001 for 3A090) that:
  • Has been developed by an entity headquartered in China
  • Is the “direct product” of certain software subject to the EAR
  • Is for the “production” of certain advanced computing ICs and computers or assemblies containing such ICs consistent with the new advanced computing items FDP Rule.

Effective October 7, 2022, exports, reexports, or transfers to or within China of items controlled under ECCNs 3B090, 3D001 (when software for 3B090 items), or 3E001 (when technology for 3B090 items) will be eligible only for License Exception GOV, restricted to the provisions of EAR Section 740.11(b)(2)(ii).

Effective October 21, 2022, exports, reexports, or transfers to or within China of items controlled under ECCNs 3A090, 4A090, 3D001 (when software for 3A090 items), 3E001 (when technology for 3A090 items), 4D090, and 4E001 (when technology for 4A090 items) will be eligible only for:

• License Exception RPL, under the provisions of EAR Section 740.10.
• License Exception GOV, restricted to the provisions of EAR Section 740.11(b)(2)(ii)
• License Exception TSU, under the provisions of EAR Sections 740.13(a) and (c).

No license exceptions overcome the End Use license requirements in 744.23 of the EAR.

Savings clause
Shipments of items no longer eligible for license exceptions or for export, re-export, or transfer (in-country) without a license as a result of these changes that were on dock for loading, on lighter, laden aboard an exporting carrier, or en-route and aboard a carrier to a port of export, on October 7, 2022, may continue to the destination under the previous license exception or without a license so long as they have been exported, re-exported, or transferred (in-country) before November 7, 2022.

Temporary general license
Effective October 21, 2022, and ending April 7, 2023, BIS, announced a Temporary General License (TGL) authorizing exports, reexports, transfers, and exports from abroad destined to or within China by companies not headquartered in countries in Country Groups D:1, D:5, E:1, or E:2 to continue or to engage in integration, assembly (mounting), inspection, testing, quality assurance, and distribution of items covered by ECCNs 3A090, 4A090, 3D001 (for 3A090 or 4A090 items), 3E001 (for 3A090 or 4A090 items), 4D090, or 4E001 (for 3A090 or 4A090 items), or items specified elsewhere on the CCL that meet or exceed the performance parameters of ECCNs 3A090 or 4A090.

Only companies that engage in the activities specifically authorized by the TGL may use the TGL. and the TGL does not authorize the export, reexport, transfer, or export from abroad to end-users or ultimate consignees in China. In addition, it does not overcome the license requirements for prohibited end uses or users, including those identified with footnote 4 designations on the Entity List. BIS states that the purpose of the TGL is to avoid disruption of supply chains for items covered by ECCNs that are ultimately destined to customers outside of China.

Certification of Compliance with New FDP Rule/Model Certificate 
A Certificate of Compliance will be available in § 734.9(h)(3) of the EAR to assist exporters, re-exporters, and transferors in determining whether the items being exported, re-exported, or transferred (in-country) are subject to the EAR based on the advanced computing FDP rule under § 734.9(h). The model certificate provided by BIS in new supplement no. 3 to part 734, is not required under the EAR, but is provided to assist exporters, re-exporters, and transferors with the process of resolving potential red flags regarding whether an item is subject to the EAR based on § 734.9(h). 

End Use Statements 
When the customer is a semiconductor manufacturing facility, review section 744.23 of the EAR to confirm a license is not required AND obtain an End Use statement from the customer.

If the intermediary party (e.g., reseller, distributor) cannot furnish these details at the time of the proposed export or re-export because it is a prospective order and no specific customer has yet been identified, attempt to obtain a written statement that the intermediary party understands the license requirements in § 744.23 and either: (a) inform the company of the actual end-use and end-user, once known, or (b) evaluate the end-use and end-user and apply for any required license for any proposed in-country transfer.

Have additional questions, or require further assistance with this or any other customs and trade matters? Connect with one of our trade policy experts to learn more.

Our information is compiled from a number of sources that to the best of our knowledge are accurate and correct. It is always the intent of our company to present accurate information. C.H. Robinson accepts no liability or responsibility for the information published herein.