On May 13, 2025, the Department of Commerce, Bureau of Industry and Security (BIS) officially rescinded the Framework for Artificial Intelligence Diffusion (“AI Diffusion Rule”), that was published during the last week of President Biden’s administration. The AI Diffusion Rule was scheduled to go into effect on May 15, 2025, but it provoked widespread industry backlash that resulted in many companies advocating for its revision or recission. BIS stated, “[t]hese new requirements would have stifled American innovation and saddled companies with burdensome new regulatory requirements. The AI Diffusion Rule also would have undermined U.S. diplomatic relations with dozens of countries by downgrading them to second-tier status.”
BIS signaled that it plans to issue a Federal Register Notice formalizing the rescission and will also issue a replacement rule in the future.
BIS also issued three guidance documents to “strengthen export controls for overseas AI chips”. These documents are as follows:
- Guidance on Application of General Prohibition 10 (GP10) to PRC Advanced Computing Integrated Circuits, such as Huawei Ascend chips. In this document, BIS is warning that, pursuant to GP10, the use of such PRC advanced computing ICs risks violating U.S. export controls and may subject companies to BIS enforcement action. In the guidance found here, BIS explains, “Because there is a high probability that a BIS authorization was required for the export, reexport, transfer (in-country), or export from abroad of any PRC 3A090 IC or related technology, unless such authorization was obtained, the design or production of the PRC 3A090 IC likely involved one or more violations of the EAR. Accordingly, BIS is notifying all persons and companies in the United States and abroad that engaging in GP10 activities, including use of PRC 3A090 ICs… could result in BIS enforcement actions which could include substantial criminal and administrative penalties.”
- Guidance warning the public about the potential consequences of allowing U.S. AI chips to be used for training and inference of Chinese AI models. In the guidance, which can be found here, BIS identifies as one of several activities that may require a license, U.S. persons providing support of performing any contract, service or employment, “when there is knowledge that such activity will be used for or may assist the training of AI models for or on behalf of parties headquartered in D:5 countries (including China) or Macau.”
- Guidance for U.S. companies on how to protect supply chains against diversion tactics, including new transactional and behavioral red flags and new recommended due diligence actions companies should take for new customers. The guidance can be found here.
See additional reporting on this action from the following press outlets:
- Wall Street Journal (subscription required)
- Bloomberg (subscription required)
- Reuters
- The Hill
