New U.S. Export Controls on Advanced Computing Items and Artificial Intelligence Model Weights: Seven Key Takeaways

On January 15, 2025, the U.S. Department of Commerce Bureau of Industry and Security (BIS) published in the Federal Register updated export controls on advanced computing items (including advanced integrated circuits (ICs) and related equipment, software, and technology) and, for the first time, controls on artificial intelligence (AI) model weights under the Export Administration Regulations (EAR).¹ These new regulations were published as an interim final rule and took effect on January 13, 2025, although compliance is not required until May 15, 2025.² BIS also published in the Federal Register a smaller companion rule on January 16, 2025, that expands licensing requirements on foundries and packaging companies seeking to export advanced computing equipment and requires compliance by January 31, 2025.³

We summarize these complex new regulations and offer our key takeaways below.

Expanded IC Controls

The new January 15 regulations revise and expand controls on advanced computing items using a two-pronged approach. BIS is (1) significantly expanding the geographic coverage of existing advanced computing item controls and then (2) creating various exceptions for shipments that advance U.S. foreign policy interests.

The new regulations first modify the existing advanced computing item controls on U.S. adversaries and certain other countries of concern to restrict shipments to or within a wide range of additional countries. Certain advanced ICs (under export control classification number (ECCN) 3A090.a) and related items will soon require a license to be exported, reexported, or transferred in-country to any country in the world.

At the same time, BIS is expanding the extraterritorial reach of these controls. Under the existing advanced computing foreign direct product rule, a license is required to ship certain foreign-produced advanced computing items that are the “direct product” of specified U.S. software or technology to or within certain countries of concern. The new regulations provide that this restriction will apply when such items are shipped to or within any country.

The regulations then create several license exceptions for transactions likely to further U.S. interests:

• Exports to allies. Exports to entities that are located and headquartered in the United States or one of 18 close U.S. allies,⁴ and do not have an ultimate parent company headquartered outside those countries, are eligible for a new license exception (License Exception Artificial Intelligence Authorization). This exception will be available so long as the exporter obtains certifications from the ultimate consignee that it will not reexport the advanced computing items to a prohibited end user, end use, or nonclose U.S. ally or use the advanced computing items to provide computational power to non-U.S. allies sufficient to train a controlled AI model. This exception is also available for exports of advanced AI model weights, as discussed below.
• Development, production, and storage. Exports of advanced computing items to private sector end users for the sole purpose of development, production, or storage of such items are also eligible for a new license exception (License Exception Advanced Compute Manufacturing), provided that the end users are not located in China or another arms-embargoed country. This license exception is intended to minimize disruption of supply chains and does not cover training an AI model.
• Low processing performance. Exports or reexports of the same advanced computing items to countries other than the closest U.S. allies are eligible for a new license exception (License Exception Low Processing Performance) that allows exports and reexports of advanced computing items up to a total processing power (TPP) annual quota of 26,900,000 that is assessed on a per-recipient basis.⁵ The quota is the same for all recipients and intended to allow for commercial use of AI technologies without providing advanced capabilities. Any exports or reexports beyond the annual quota will require an export license. Shipments to or within China and other arms-embargoed countries do not qualify for this exception.
• Data-center-validated end users. BIS is also expanding the existing authorization to ship to “validated” data-center end users it first introduced in October 2024. Under the new regulations, companies headquartered in the United States and close U.S. allies can apply for a universal authorization to receive controlled items necessary to build and run data centers anywhere in the world, subject to restrictions on the fraction of their total AI computing power that can be installed in data centers outside the United States and its close allies (and the fraction that can be installed in any individual such third country). Other companies can apply for validated end-user status on a country-by-country basis and can then receive controlled items to build data centers in each country for which they are approved under separate per-company, per-country TPP limits. Shipments to or within China and other arms-embargoed countries do not qualify for this exception.
• Certain non-data-center exports. An existing exception (License Exception Advanced Computing Authorized) authorizes shipments of advanced computing items not designed or marketed for data centers to or within certain countries of concern, subject to certain conditions. In light of the expansion of controls to additional countries, the new regulations modify this exception to be available for shipments to or within any destination worldwide (except for exports or reexports to China and other arms-embargoed countries), but only when the advanced computing items at issue were designed by certain U.S. allies. Specifically, while the January 15 rule expands the exception to be available for shipments destined to any country, the January 16 rule restricts the availability of this exception for shipments from front-end fabricators or outsourced semiconductor assembly and test (OSAT) companies.

The new regulations simultaneously tighten the already narrow license exceptions available for shipments to China and other arms-embargoed countries, including by requiring additional content in the mandatory notifications that must accompany such shipments.

Companies can still use the traditional license application process for controlled shipments that do not meet these exceptions. License applications for shipments to or within close U.S. allies will enjoy a presumption of approval, and applications for shipments to or within China and other arms-embargoed countries are subject to a presumption of denial. For other countries, however, BIS is enacting a new approach: License applications for advanced ICs (controlled under ECCN 3A090.a) and related items will be presumptively approved until the destination country hits a countrywide TPP quota and presumptively denied thereafter.

New Controls on AI Model Weights

The second major piece of the new January 15 regulation marks new terrain for BIS: For the first time, BIS will control AI “model weights.” “Model weights” are numerical parameters within an AI model that help determine the model’s outputs in response to inputs. AI models produce meaningless outputs without these weights, and the weights for advanced AI models can be produced only by computationally intensive model training that can take months. BIS thus sees controlling model weights as key to preventing U.S. adversaries from accessing advanced AI capabilities.

The new regulation creates a new ECCN (4E091) for these “frontier” AI model weights and requires a license to export, reexport, or in-country transfer to any country closed-source (unpublished) AI model weights that have been trained on a high levels of computing power (more than 10²⁶ operations).⁶ BIS estimates that fewer than five models globally currently exceed this threshold, and BIS will continue to adjust the applicable threshold in response to technological developments — possibly within the year. BIS paired this restriction with yet another new foreign direct product rule: A license will be required to export the same model weights to nonclose U.S. allies even if the model weights were produced outside the United States, so long as they were produced using certain U.S.-origin technology (such as ICs or servers).

Only shipments to close U.S. allies qualify for a license exception: They can use the newly introduced Artificial Intelligence Authorization exception. License applications to export such “frontier” AI model weights to any country other than close U.S. allies will be presumptively denied. BIS also added a new “red flag,” which provides that exporters should be on notice to potential unlicensed exports of controlled AI model weights where a U.S. subsidiary of an entity not headquartered in a close U.S. ally uses an infrastructure-as-a-service provider’s services to train a controlled AI model.

New “Due Diligence” Measures

BIS imposed various other new and revised controls on advanced computing items in a separate rule published on January 16. Significantly, the January 16 rule expands licensing requirements specifically for foundries and packaging companies seeking to export advanced computing equipment when “non-approved/authorized” IC designers or OSAT companies are involved. Moreover, this new rule restricts the availability of new and revised license exceptions for certain advanced computing items designed by “non-approved/authorized” IC designers. The new rule publishes initial lists of such ”approved” companies, provides instructions for other IC designers and OSAT companies to apply to join these lists, and has an accelerated compliance date of January 31, 2025 due to diversion concerns.

Key Takeaways

1. By continuing to use the interim final rule mechanism, BIS opted for a “regulate first, collect comments later” approach to a major update to U.S. export controls. BIS often publishes major updates to export controls as proposed rules first — giving industry time to review and comment on the rules before they are finalized. By using the interim final rule mechanism here, BIS skipped the front-end comment process. Instead, the January 15 final rule will require compliance as written on May 15, 2025, and the January 16 rule will require compliance on January 31, 2025. BIS will now collect and consider industry comments on these rules and will likely issue additional revisions or clarifications in the future.
2. The biggest changes apply to countries “in the middle” — those that are neither clear U.S. allies nor clear U.S. adversaries. Most shipments to entities in close U.S. allies will continue to be allowed under the new regulations, and most shipments to entities in China or other arms-embargoed countries will remain prohibited. The biggest impact of the new regulations is on countries that do not fall into either of these two categories. Companies shipping ICs (and related items) to such “middle” countries must now navigate complex new controls and exceptions — with the availability of many exceptions hinging on progress toward quotas that may not be easily visible by shippers.
3. BIS’ use of TPP quotas is novel and raises questions about how the quotas will be implemented. TPP quotas are omnipresent in these rules: The low processing power exception is subject to an annual TPP limit per recipient; country-level TPP quotas limit where data-center-validated end users can install their computing power and determine license application review policies for “middle” countries as described above. BIS will require license applicants to specify the computing power associated with their proposed shipments in their license applications and intends to post public updates on each country’s progress toward its quota on its website. However, many questions regarding how the quotas will be implemented remain unresolved. For example, it is not clear what the burden on exporters will be to ensure a particular ultimate consignee has not exceeded its annual computing power threshold for the low processing performance exception — but BIS will hold exporters liable for using that exception if an ultimate consignee has exceeded its annual limit. It is also unclear how BIS plans to allocate its licenses among various applicants seeking to benefit from the same limited quota space.
4. BIS is controlling AI model weights for the first time. Until now, BIS has focused on controlling AI by controlling the hardware needed to train it — such as ICs and other advanced computing equipment. These regulations are a notable shift to controlling numerical inputs to an AI model itself. As mentioned above, however, BIS designed these controls to regulate only model weights for a handful of the world’s most advanced AI models. Model weights for most AI models are not covered by the new rules.
5. Computing power leased by U.S. entities remains a perceived gap. The new regulations make efforts to ensure exports of controlled advanced computing items and model weights do not end up benefiting U.S. adversaries. The primary license exception for exports to close U.S. allies requires the shipment recipients to certify that they will not reexport the advanced computing items or AI model weights to a prohibited end user, end use, or nonclose U.S. ally or use them to provide computational power to non-U.S. allies sufficient to train a controlled AI model. However, BIS still has not imposed controls on access to U.S.-based computing power for a U.S. adversary. BIS has previously signaled that it is considering ways to close this gap.
6. BIS continues to expand the product scope and geographic reach of U.S. export controls at breakneck pace. The new regulations follow a steady stream of related new controls on advanced computing equipment in recent years, including in October 2022 (Sidley Update available here),⁷ October 2023 (Sidley Update available here),⁸ April 2024 (rule available here),⁹ and December 2024 (rule available here).¹⁰ Each update has significantly revised and expanded the product and/or geographic scope of BIS’ controls on advanced computing items. In the December 5, 2024, rule, for example, BIS added new controls on commodities related to semiconductor manufacturing¹¹ and expanded its jurisdiction to cover shipments of specified semiconductor manufacturing equipment and other items to certain end users and countries of concern¹² so long as such items contain U.S.-origin ICs — no matter how small a percentage of the product these circuits comprise. BIS’ frequent and substantial revisions to export control regulations have made it very difficult for companies to understand and operationalize their compliance obligations.
7. BIS is attempting to create a secure ecosystem for advanced AI development by enacting controls across the entire advanced computing supply chain. Through its new January 15 and 16 rules, BIS is seeking to control the entire AI and design and manufacturing supply chain, from the design of advanced computing equipment to where data centers are built and which parties ultimately have access to computing power. One consequence of this effort is a severe increase in the compliance burden on companies in the advanced computing supply chain. The new rules require companies to supply vast amounts of information to BIS to retain their export privileges — either through pursuit of “validated,” “authorized,” or “approved” status; as part of license applications; or in order to use existing license exceptions. The new rules also require companies to monitor the status of quotas and the distribution of their AI computing power to remain compliant. These reporting and monitoring requirements are complex, time consuming, and potentially expensive.

In light of the complex new rules, exporters may need to examine and adjust their compliance processes for U.S.- and foreign-made items or enhance due diligence procedures. Sidley lawyers are closely monitoring developments in U.S. export controls and are available to answer your questions. 

¹Framework for Artificial Intelligence Diffusion, 90 Fed. Reg. 4,544 (Jan. 15, 2025).
²Certain provisions related to security obligations for data center validated end users do not require compliance until January 15, 2026.
³Implementation of Additional Due Diligence Measures for Advanced Computing Integrated Circuits; Amendments and Clarifications; and Extension of Comment Period, 90 Fed. Reg. 5,298 (Jan. 16, 2025).
⁴This list, specified in Supplement No. 5 to 15 CFR Part 740, includes Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Republic of Korea, Spain, Sweden, Taiwan, the United Kingdom, and the United States.
⁵In-country transfers do not qualify for this exception.
⁶The computing-power threshold is calibrated to correspond to the compute power needed to train model weights for the most advanced AI.
⁷Implementation of Additional Export Controls: Certain Advanced Computing and Semiconductor Manufacturing Items; Supercomputer and Semiconductor End Use; Entity List Modification, 87 Fed. Reg. 62,186 (Oct. 13, 2022) (effective date Oct. 7, 2022).
⁸Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections, 88 Fed. Reg. 73458 (Oct. 25, 2023).
⁹Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections; and Export Controls on Semiconductor Manufacturing Items; Corrections and Clarifications, 89 Fed. Reg. 23,876 (Apr. 4, 2024).
¹⁰Foreign-Produced Direct Product Rule Additions, and Refinements to Controls for Advanced Computing and Semiconductor Manufacturing Items, 89 Fed. Reg. 96,790 (Dec. 5, 2024).
¹¹Specifically, this restriction applies to shipments destined to end users on the Entity List with a “Footnote 5” designation and shipments destined to Macau or countries in Country Group D:5.
¹²Specifically, this restriction applies to shipments destined to end users on the Entity List with a “Footnote 5” designation and shipments destined to Macau or countries in Country Group D:5.