Industry Needs 'Awful Lot More' BIS Guidance on Chip Controls, Lawyer Says

U.S. and foreign companies “seem to be equally confused” by the Bureau of Industry and Security's new China chip export restrictions (see 2210070049), said Alison Stafford-Powell, a trade compliance lawyer with Baker McKenzie, speaking Nov. 15 during a virtual event hosted by the law firm. She called the new BIS rule “incredibly complex" and said industry needs more guidance from the agency.

She said BIS’s first round of frequently asked questions, published last month (see 2210310044), were “somewhat helpful,” but a range of due diligence and compliance questions remain unanswered. “We could all certainly do with an awful lot more FAQs,” Stafford-Powell said. BIS has said it plans to issue more FAQs on a rolling basis.

U.S. companies have long struggled to conduct due diligence on certain customers in China due to opaque ownership structures and a lack of clear, public information, and the latest restrictions could add to those struggles. Stafford-Powell said U.S. companies may run into “challenges” under Chinese law “in conducting some of this due diligence and asking these questions” as exporters try to determine whether a shipment is subject to a BIS license restriction. “Chinese law may restrict your ability to do that to some extent,” she said.

Some lawyers believe the new restrictions are the most sweeping and complicated export control rules that have ever been in the Export Administration Regulations (see 2211010042). Stafford-Powell specifically pointed to BIS’s new advanced computing foreign direct product rule, which she called “horribly, horribly, horribly complicated.”

BIS included a new “model certificate” in the regulations, which can be used by exporters to require other parties in a transaction to certify that they are not violating BIS’s new advanced computing FDP rule. But it remains unclear to what extent companies can rely on the certificate’s wording for compliance purposes. “It's so complicated that the BIS actually had to come out with a model compliance certificate to help companies figure out if this was relevant to their products or not,” Stafford-Powell said.