AI Models, Chips, and Data Centers Targeted by Expansive US Export Control Rule

Key Takeaways

1. BIS has imposed new global export licensing requirements on advanced computing integrated circuits and frontier AI model weights.  
2. Corresponding mechanisms have also been put in place to allow the use and development of items targeted by the new US export controls, including new and expanded license exceptions and new “validated end user” programs.  BIS’ licensing policy and the available license exceptions for these items accord tiered treatment to certain US partners and allies, recognized higher-risk jurisdictions, and other destinations that do not fall into either of the preceding categories.
3. Processing power caps on country- and company-wide bases feature throughout the rule, but it is unclear how they will be implemented.  It remains to be seen how processing power caps will be allocated across various authorized exports.
4. BIS will enforce these rules starting May 15, 2025, even as the rules technically took effect on January 15.  The Trump Administration will have an opportunity to intervene on when and how the rule takes effect.

Introduction

On January 13, 2025, the US Commerce Department’s Bureau of Industry and Security (BIS) issued an interim final rule (the Rule) updating Export Administration Regulations (EAR) controls relating to artificial intelligence (AI).  Foreshadowed by reported official discussions of capping AI chip sales to non-US countries, such as the United Arab Emirates and Saudi Arabia (see Bloomberg, Oct. 14, 2024), the Rule is intended to protect US national security and foreign policy interests by preventing the diversion of the most advanced AI technology to malicious actors while encouraging the continued use and development of that technology under secure conditions.  To that end, the Rule aims to “ensure that the model weights of the most advanced U.S. AI models are stored outside the United States only under stringent security conditions and the large clusters of advanced [integrated circuits] necessary to train those models are built in destinations that pose comparatively low risks of diversion or misuse.”

The Rule implements this vision by: (1) creating new controls on the most advanced AI model weights (new ECCN 4E091), (2) updating controls on advanced computing integrated circuits (ACICs, updated ECCNs 3A090.a, 4A090.a, and related .z commodities, software, and technology), and (3) updating security requirements for storing and building ACICs and covered AI model weights outside the United States.

Throughout the rule, different levels of authorization are accorded to persons located in or with headquarters or an ultimate parent in a specified US ally or partner country (Tier One Countries, listed in paragraph (a) of supplement no. 5 to Part 740[1]), US Arms Embargoed Countries or Macau (Tier Three Countries), or any other destination (Tier 2 Countries).

BIS will enforce the Rule starting May 15, 2025, except for certain security requirements, which kick in on January 15, 2026.  During this time, the public is invited to submit comments to BIS. 

Controls on Closed-Source AI Model Weights 

BIS will now require a license to export to any destination worldwide the model weights of the most advanced AI models (ECCN 4E091), which BIS considers to be closed-weight (i.e., unpublished) AI model weights trained on more than 10²⁶ computational operations.  The Rule does not control open-weight (i.e.,published) model weights and does not control closed-weight model weights that are less powerful than the most powerful open-weight model weights.  In effect, this should raise the floor on controlled model weight over time, as increasingly powerful open-weight model weights become available.  The Rule also does not control deemed exports or deemed reexports—the release of technology or source code to a foreign person—to “permanent regular employees” employed by entities in or with headquarters or an ultimate parent in a Tier One Country.  The Rule also establishes a corresponding new foreign direct product rule (FDPR) for 4E091 items produced outside of the United States using certain US-origin technology, extending EAR jurisdiction to these items.

The only license exception available for 4E091 controlled AI models is the new License Exception Artificial Intelligence Authorization (AIA).  AIA authorizes the export of 4E091 items to entities in, or with their headquarters or ultimate parent in, Tier One countries, subject to certain requirements.  In particular, the entities obtaining the items must be located outside of a Tier Three Country and the items must be stored in a facility that complies with certain security requirements.

All license applications for the export of items classified under 4E091 will be reviewed under a presumption of denial for end users headquartered or with an ultimate parent headquartered outside of a Tier One Country.

Notably, BIS issued a new “red flag” highlighting the “substantial risk” faced by certain Infrastructure-as-a-Service (IaaS) providers of aiding and abetting diversion in violation of the EAR.  These are IaaS providers that support AI model training captured by 4E091 for an entity headquartered or whose ultimate parent is headquartered outside of a Tier One Country. BIS recommends that such IaaS providers determine if their customer intends to export (and if needed, obtain a license to export) the relevant AI model.

Expanded Controls on Advanced Computing Integrated Circuits

The Rule imposes a global licensing requirement to export ACICs to any end user at any destination for regional stability reasons.[2] The Rule expands this licensing authority under a revised FDPR. 

BIS simultaneously introduced and updated license exceptions to this global control:   

1. Artificial Intelligence Authorization (AIA): authorizes the export of eligible ACICs to or in the US or Tier One Countries if the ultimate consignee completes a one-time certification of compliance with certain use and transfer limitations.  The exporter must generally report this certification to BIS. 
2. Advanced Compute Manufacturing (ACM): to minimize the Rule’s impact on supply chains, this exception authorizes the export of eligible items to a “private sector end user” for the development, production, or storage of those items prior to export to the ultimate end user of those items, except to Tier Three Countries or where the ultimate consignee (or its ultimate parent) is headquartered in a Tier Three Country.  ACM also requires that the ultimate end use of the items cannot be for training an AI model or any other activity not related to the development, production, or storage of the items.
3. Low Processing Performance (LPP): generally authorizes the export—but not transfer (in-country)—of eligible items directly to a single ultimate consignee in a Tier Two Country up to a certain total processing performance (TPP) volume limit per calendar year.  This authorization carries certain notice obligations to BIS. 
4. Advanced Computing Authorized (ACA): updated to generally authorize the export of eligible ACICs, other than to a Tier Three Country, or to an entity headquartered in or with an ultimate parent headquartered in those destinations.  ACA generally does not authorize exports for prohibited end uses or end users or to destinations subject to embargoes or other special controls.
5. Notified Advanced Computing (NAC): updated to generally authorize the export or reexport of eligible ACICs to an entity in, headquartered in, or with its ultimate parent headquartered in certain Tier Three Countries, provided that the exporter or reexporter meets BIS’ prior notification requirements.  BIS now requires additional information as part of the NAC notification process.

Where a license exception is not available, BIS will generally accord different treatment to license applications for entities based on tier:

1. Tier One Countries: reviewed under presumption of approval. 
2. Tier Two Countries: BIS has allocated a TPP cap to each such country.  Exports of ACICs generally count against these allocations.  License applications will be reviewed under a presumption of approval up to the per-country allocation, and after that, under a policy of denial. 
3. Tier Three Countries: reviewed under a presumption of denial.

Data Centers 

The Rule creates new mechanisms to facilitate the export of ACICs to certain data center end users.  The Rule updates the Data Center Validated End User (VEU) Program to create two new types of Data Center VEUs: 

1. Universal Validated End User (UVEU): allows validated companies headquartered or with an ultimate parent headquartered in a Tier One Country that own their advanced computing capacity to build data centers around the world, except in a Tier Three Country.  UVEUs cannot transfer or install more than 25% of their total AI computing power outside of the United States or Tier One Countries and may not transfer or install more than 7% of their AI computing power in any single country, other than the US or Tier One Countries.  UVEUs headquartered in the United States must keep at least 50% of their AI computing power in the United States. 
2. National Validated End User (NVEU): allows validated companies to build data centers in a specific country, except for in a Tier Three Country, subject to a per-NVEU per-country TPP allocation.

Conclusion

Exporters of ACICs and advanced AI model weights may need to take these new rules into account for existing and planned projects and partnerships. Companies developing or deploying AI have many new restrictions to consider and a corresponding multitude of potential exceptions. Under the new Rule, BIS has established a global licensing requirement for covered ACICs and AI model weights aimed at safeguarding US national security and foreign policy interests, while creating and updating corresponding license exceptions to make room for the positive economic and social potential of AI developed outside of the US in secure ecosystems that align with these interests.  Freshfields is closely monitoring these developments and is available to advise on these evolving rules.

[1] Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Republic of Korea, Spain, Sweden, Taiwan, the United Kingdom, and the United States.

[2] ECCNs 3A090.a, 4A090.a, and related .z commodities, software, and technology.