Industry Response to Semiconductor Controls

The year’s final meeting of the BIS Regulations and Procedures Technical Advisory Committee (RAPTAC) afforded participants a high-level overview of what industry comments on October’s semiconductor export controls will look like. The comment period for the interim final rule published October 13, 2022, at [87 FR 62186] is extended until January 31, 2023.

Hillary Hess, Director Regulatory Policy at BIS opened the meeting acknowledging the challenges of the 2022: “It’s it’s been a difficult year, 2022. We started in Russia and recently have been interacting with China and it’s been a kind of a tense year. But one thing, one positive note of this year is that it really has encouraged what we had already started - that level of cooperation with our allies. We’re all export control people and know the importance of of multilateralism when it comes to export controls. So, I do think that’s been a bright spot in an otherwise turbulent year.

John Cooney, Vice President of Global Advocacy and Public Policy for SEMI, the semiconductor equipment and supply chain group emphasized the importance of a multilateral approach: “The regulations as released on October 7 are only going to be effective in meeting the state of national security objectives if allied countries adopt mirrored rules for end use and choke point controls.

“Regrettably, the new and expanded rules on advanced computing and manufacturing were announced by the administration with no agreement yet in place from Allied countries, also home to mature manufacturing ecosystems consisting of experienced exporters. As a result, SEMI member companies are concerned that currently there is not a level playing field between U.S. companies.”

Jimmy Goodrich, the vice president for global policy at the Semiconductor Industry Association led the RAPTAC through an overview of market size and structure, noting the interconnected nature of the industry: “You think about it as an upside-down pyramid — at the very top you have the $4 trillion electronics market and you have the half-trillion dollar semiconductor market, and the $100 billion plus semiconductor capital equipment market, all supporting each other. All the innovation that’s happening at the very narrow tip of this upside down pyramid supports all of the innovation that’s happening upstream.”

The October Rule had unintended consequences, “for example, the novel usage of the US persons rule, the fact that many of our allied partners who had facilities in China had a crisis for a couple of days before that was revolved.

“And we still want to stress just how important that is to ensure that there’s a level playing field and also that the rule is effective. Ultimately, if the end users in the country of concern are able to access the technology, then it’s not effective.

“We also raise a number of suggestions. For example, the end user compliance around the US persons rule requires significant amount of due diligence, and many companies are concerned that one company’s due diligence may differ from the others. One company may identify what they believe is a restricted end user, and another company may come up with a different assessment. So we will suggest or ask [for] some sort of list that might help guide the industry.

“We hope there could be more clarity regarding standards that will allow companies to apply for a license even though we understand that’s presumption of denial, and that is a high bar certainly. We would like to understand if there are situations for pure civilian usage, for nonsensitive end users, healthcare, those kinds of situations, where there may be possible. Stability of license exceptions provided.”