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3 New BIS Rules Require Export Compliance to go Beyond List-Based Screening

12/01/23 4 minute read

As advanced semiconductors remain critical to modern defense and intelligence systems, U.S. concerns over the evasion of export controls have grown. In an effort to identify and prevent circumvention, in October 2023 the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued three new rules to strengthen existing export controls.

Read on to learn more about the recent expansion of export controls and how to ensure that your company remains in compliance.

New implications for export compliance

When issuing its new rules, BIS stated the department aims to address national security concerns with China’s military-civil fusion strategy and the development of advanced AI capabilities that can lead to improved weapons of mass destruction and advanced weaponry. BIS hopes to accomplish this without any major impact on trade flows

The first two rules issued, found here and here, strengthen export controls on advanced computing items, semiconductor manufacturing equipment, and items that can support end uses related to the development and production of supercomputers, advanced-node integrated circuits, and semiconductor manufacturing equipment. 

One of the most significant updates in these rules is the expansion of the list of countries that require export licensing. Previously, licensing only applied to China and Macau, but that list has now grown to a total of 24 countries, 23 of which are subject to U.S. arms embargoes by the State Department and make up what is known as the D:5 Country Group. The full D:5 Country Group Includes Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China, Democratic Republic of Congo, Cuba, Cyprus, Eritrea, Haiti, Iran, Iraq, North Korea, Lebanon, Libya,, Russian Federation, Somalia, the Republic of South Sudan, Sudan, Syria, Venezuela, and Zimbabwe. 

While some of these countries aren’t major risks for advanced semiconductor development themselves, the rule is intended to prevent circumvention of export controls through these countries. 

Additionally, license applications seeking to export covered semiconductor manufacturing equipment to entities not on the D:5 country list (except Macau), but whose ultimate parent company is headquartered in Macau or any other D:5 country, “will be reviewed on a presumption of denial.” The update highlights the need for exporters of critical semiconductor manufacturing equipment to better understand the upstream ownership structure associated with their counterparties and the potential risks it poses. 

Finally, in their third rule, BIS added 13 Chinese entities involved in the development of AI-capable advanced computing chips to the Entity List. Entities on the list have been found to act contrary to the national security or foreign policy interests of the United States, and are therefore subject to export licensing requirements.

Compliance doesn’t end at list screening 

Previously, compliance teams could rely heavily on list-based screening processes to assess their counterparty risks. But with the enforcement of these new rules, companies that deal in semiconductors or semiconductor equipment must be able to trace the complete beneficial ownership of their receivers for ties to any of the 24 countries mentioned above.

With Sayari Graph, industry can more efficiently and effectively map the upstream ownership of their buyers and determine the risks they pose. By marrying global corporate and trade data together in a graph database – and overlaying that data with key risk indicators – Sayari Graph provides enhanced risk screening at scale. 

To learn more about how to use networked public records to mitigate these new regulatory risks, read our latest ebook.

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