Export Controls: Commerce Implemented Advanced Semiconductor Rules and Took Steps to Address Compliance Challenges

What GAO Found

In October 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a new rule to control the export of advanced semiconductors and related manufacturing equipment. Advanced semiconductors can be used for artificial intelligence, including in medical diagnosis and for military purposes, such as modeling nuclear explosions.

Engineer Holding a Semiconductor

The stated goal of BIS’s advanced semiconductors rule was to address U.S. national security and foreign policy interest and to counter the People’s Republic of China’s access to advanced computing to modernize its military, including nuclear weapons development, advanced intelligence collection and analysis, and surveillance. BIS published the rule as an “interim final” rule, which enabled enforcement of the rule before the end of a public comment period. BIS took this approach to avoid stockpiling of controlled items and to address other national security or foreign policy concerns.

BIS issued two additional rules in 2023 that revised the controls of the 2022 rule. BIS also updated the technical specifications of the items controlled by these three rules and provided information requested by public commenters, such as on refined definitions and public briefings.

After October 2023, BIS conducted reviews of its export controls, including reviewing public comments on existing rules. As a result of these reviews, BIS issued an April 2024 update to the rules. In September, BIS updated the Commerce Control List, among other changes.

To develop, implement, and enforce compliance with the rules, BIS works with offices from six other U.S. agencies: the Departments of Defense, Energy, Homeland Security, Justice, State, and the Treasury. The roles of these agencies include providing technical or scientific expertise to Commerce, reviewing proposed rules, reviewing export license applications, conducting outreach to private sector and foreign partner governments to improve compliance with the rules, verifying the validity of licenses at the border, and investigating and prosecuting violations of the rules, among others.

The private sector has taken steps to comply with the new rules, according to GAO’s analysis of public comments, BIS documents, and other sources, as well as a number of interviews with private sector representatives. Compliance steps that companies took include updating and maintaining compliance programs and self-reporting potential violations. GAO’s analysis identified 10 reported compliance challenges, including lack of clarity of the rules. For example, specific Export Control Classification Numbers and what they encompass were unclear, leading some companies to ask whether an appliance would be considered a “computer” for the purposes of the export control rules.

BIS reported taking steps to address some of these challenges, including by soliciting feedback, refining definitions, and engaging with the private sector. For instance, BIS conducted briefings, seminars, and other outreach in the U.S. and overseas to increase public understanding of the export control rules and to collect industry feedback on ways to improve the rules’ clarity. BIS officials also told GAO that BIS plans to review the rules and publish periodic updates as needed, to match advancing technology and to improve the clarity of the rules, among other reasons.

Why GAO Did This Study

GAO was asked to report on BIS’s development and implementation of three advanced semiconductor and related manufacturing equipment export control rules promulgated in 2022 and 2023, as well as what is known about private sector compliance efforts. This report provides information on steps BIS has taken and plans to take, and on the roles of other U.S. agencies in developing, implementing, and enforcing the rules and in engaging with foreign partners. It also provides information on compliance steps companies have taken and challenges they have encountered, based on private sector public comments on the rules, as well as GAO interviews with Commerce and representatives from four advanced semiconductor industry companies, and two industry associations. GAO selected the companies that fulfilled specific criteria, such as whether they had developed, manufactured, or sold a product targeted by the rules, or submitted a public comment to the rules. GAO selected external counsel and industry associations based on a number of criteria, such as whether they had submitted a public comment on the rules or represented multiple companies in the U.S. semiconductor industry. In addition, the report describes steps Commerce has taken to address these challenges. A forthcoming GAO report will examine the steps BIS has taken to enforce the export control rules on advanced semiconductors and related manufacturing equipment, as well as BIS efforts to engage with key foreign partners regarding the rules. An additional forthcoming GAO report will examine BIS’s processes and resources to control exports more broadly.

For more information, contact Nagla’a El-Hodiri at (202) 512-7279 or elhodirin@gao.gov.