On May 13, 2025, the US Department of Commerce introduced tougher due diligence requirements for AI-related semiconductors. While some licensing for advanced semiconductors is expected to ease, compliance burdens are undeniably heightened, particularly concerning certain nations like China. This shift signifies a balancing act of promoting AI development abroad while protecting US interests.
In a notable move unveiled on May 13, 2025, the US Department of Commerce’s Bureau of Industry and Security (BIS) has raised the bar for due diligence requirements, especially for those in the AI and semiconductor sectors. Companies that deal with semiconductors tied to AI must now navigate stricter compliance measures, even as some global license requirements are set to be lifted. This change marks a significant pivot in how the US manages AI technologies and their global distribution.
This new guidance coincided with President Trump’s trip to the Middle East, where American tech firms have committed to expanding AI infrastructure. Although the finer details of these regulations are still pending, the overall trend signals a shift toward encouraging AI development internationally while. However, this also brings increased scrutiny on the AI industry to ensure appropriate end-user engagements and uses.
BIS has decided it will rescind former restrictions spanning advanced semiconductor controls that were set by President Biden just before he left office. It’s quite the shift investors and businesses should note—restrictions will still stay firm on certain countries, especially Gulf states, but others like Malaysia and India will benefit from eased access.
BIS also rolled out a set of guidelines aimed at clarifying due diligence concerning semiconductors. Among them includes advice about the risks involved with semiconductors developed in ‘countries of concern,’ particularly China. Specific models like Huawei’s Ascend series have been highlighted, but the broader warning applies to all semiconductors in the Export Control Classification Number (ECCN) 3A090.
The agency warns that any trade actions involving these semiconductors carry a notable risk of violating U.S. export control regulations. That means simple transactions—sales, transfers, exports—could lead to hefty penalties. It’s something to keep in mind as companies navigate this complicated regulatory landscape.
With the licensing rules relaxing somewhat, BIS did put out updated guidance aimed at helping companies spot possible illicit activities tied to semiconductor transactions. New “red flags” in those dealings might indicate potential compliance issues. For instance, transactions are questionable if the delivery location is unknown, or if there are indications that the data centers lack proper operation infrastructure to handle advanced semiconductors.
In a bid to protect against more illicit transactions, companies are urged to conduct thorough due diligence. Manufacturers are expected to notify clients that their technologies are under the jurisdiction of the EAR, and they should assess customers’ ownership structures carefully. This is particularly true for entities in higher-risk areas, like China, which are under the spotlight more than ever.
The policy statement from BIS also means exporters must be more vigilant about how advanced semiconductors are utilized, especially in relation to AI training. The new rules might require licenses if there’s any hint that these items could be used for military or weapons-related objectives in certain countries. Ignoring the signs and proceeding without a license could lead to significant legal trouble.
Congress, too, is keeping a close eye on the AI sectors. Recent Senate hearings have delved into how current policies, especially tariffs, may shape the domestic semiconductor and AI landscape. A new Chip Security Act in the House requires stricter location checks for semiconductor sourcing while pushing for transparency concerning potential diversions.
In light of President Trump’s recent Middle East trip, it seems AI development in that region will continue to be complicated by licensing requirements. The indications are that while licensing might slow things down, it could very well become more streamlined given the commitments being announced alongside the presidential visit.
Ultimately, these measures show the U.S.’s continued vigilance in preventing China’s access to cutting-edge AI technologies. Yet the increased requirements for due diligence signal that the pathway forward could be cumbersome and fraught. For companies, navigating these complexities is going to be tricky. On the bright side, the Validated End User program could simplify some of these compliance demands if it remains active under the current administration.
In a rapidly changing AI policy environment, and with the U.S. enforcement posture shifting, there are both challenges and opportunities for industry players. Legal firms like Mayer Brown are primed to help navigate these turbulent waters now more than ever.
The recent announcements by the US Department of Commerce indicate a dual focus: while easing some semiconductor regulations, there’s a new emphasis on strict compliance measures. Companies involved in AI and semiconductor dealings must ramp up their diligence to steer clear of legal pitfalls, especially in zones of concern like China. As the regulatory landscape shifts, firms will need to adapt dynamically to these changes while leveraging programs designed to streamline compliance.
Original Source: www.mayerbrown.com
