In a press release published on May, 15, 2020, the Bureau of Industry and Security (BIS) announced plans to move forward with a long debated rule change that will extend US export jurisdiction over additional foreign-produced items. Though not yet published in the Federal Register, BIS announced a change to the foreign-produced direct product rule and the Entity List “to make the following foreign-produced items subject to the Export Administration Regulations (EAR):
(i) Items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and
(ii) Items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List (e.g., HiSilicon), that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States. Such foreign-produced items will only require a license when there is knowledge that they are destined for re-export, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.”
BIS described the changes as “narrowly and strategically target[ing] Huawei’s acquisition of semiconductors,” but the phrase “such as” suggests the precise wording of this new restriction will be important. In any event, to minimize the economic effect for foreign foundries using U.S. semiconductor manufacturing equipment, the rule will effectively provide a 120 day wind-down period to allow the reexport, export, or transfer of items newly “subject to the EAR” that were already under production at the time of the rule change.