{"slug": "moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes", "title": "Moolenaar: AI Chipmaker End-User Restrictions Undermined by Loopholes", "summary": "House Select Committee on China Chairman John Moolenaar urged the Bureau of Industry and Security (BIS) to clarify that the Foundry Due Diligence Rule remains in effect, citing loopholes that allowed Huawei to obtain millions of controlled Ascend logic dies from TSMC via front company Sophgo in 2023 and 2024. Moolenaar proposed either issuing guidance similar to the May 31, 2026, clarification for entities in country group D:5 and Macau, or formally rescinding the AI Diffusion IFR to re-establish a worldwide license requirement for front-end fabricators and OSATs.", "body_md": "# Moolenaar: AI Chipmaker End-User Restrictions Undermined by Loopholes\n\nChairman John Moolenaar of the Select Committee on China recently sent a** letter**[ ](https://urldefense.com/v3/__https://pq8zlsfbb.cc.rs6.net/tn.jsp?f=001opBei-vIgTqBjsPKwHie5v6e0gLh8prbtBi6pHhoS-RpTMK8MjuwBIUAob2lBKJYchvTDakXdbhrquVCHNry_oXnN9lzwQKxEs9jm8BB4a_LxK7Hd-SA2mGT6YSQ4-1_5X9-QfXlNR7W6sB05psUbC_C27ufnhdfuI0BrAXxdWNJcn8G_Ef4jQm4WjasCDeT5fsKMpw4L7Xmjel9_0gSypgKLgv-c0VxNToawzBiltU=&c=eP9TCwsI8LgJ5aYH6UcOB-bzfWLcMYMUnCmb286pzKp9hNJQLxWxQw==&ch=L1Y1GCtlm8wEa9DNqotdcs0vf3tilOUPkvQcdMXK9RFXVzV0FqVq6g==__;!!BSgrhSFG!BQXPJWkAvyJ52f_bxQRb33JluSvHeppu7tBVEnHAKyUTKv2KFRIJNjblN-o6OdoZmT7OW6XFg31ILQC9fsP41OlUOokCj9VcvBjEfbqin0g$)to Under Secretary Jeffrey Kessler at the Bureau of Industry and Security (BIS) asking the bureau to make it clear that the Foundry Due Diligence Rule remains in effect.\n\nIn the letter, Moolenaar writes:\n\n\"Thank you for leading recent actions to clarify guidance around worldwide licensing requirements for end users in country group D:5 and Macau. This is a critical step in preventing the Chinese Communist Party (CCP) from accessing high-end U.S. chips and preserving America’s technological edge.\n\nBut efforts to enforce our AI chip export controls continue to face challenges, including the critical task of ensuring that chipmakers conduct adequate due diligence on their customers. As Chairman of the House Select Committee on China (Select Committee) I urge the Bureau of Industry and Security (BIS) to take action that could substantially enhance enforcement of its existing regulations.\n\n...\n\nBIS should clarify that the Foundry Due Diligence Rule remains in effect**.**\n\nIn May 2025, BIS announced it would not enforce the Biden administration’s “AI Diffusion Rule.” This was an important action given the risks that rule posed to the United States’ ability to export its AI tech stack to U.S. allies and partners. However, the announcement created ambiguity as to whether front-end fabricators like TSMC can export unpackaged advanced dies to non-approved designers located outside of China, without performing the due diligence specified in the Foundry Due Diligence Interim Final Rule (IFR). These exports enabled Huawei to obtain millions of controlled Ascend logic dies from TSMC, using its front company, Sophgo in 2023 and 2024.\n\n...\n\nThere are at least two ways BIS could clarify the current regulatory ambiguity—a targeted clarification and a more comprehensive regulatory action.\n\nBIS could issue guidance similar to its May 31, 2026, guidance concerning entities headquartered in country group D:5 and Macau, clarifying that the worldwide regional stability (RS) license requirement remains in effect for exports from front-end fabricators. This is not a new action—many in the semiconductor industry already appear to have adopted this interpretation—but it would prevent the semiconductor industry as a whole from adopting the highly damaging alternative interpretation referenced previously or using it as cover against any future enforcement actions.\n\nAlternatively, BIS could publish a rule formally rescinding the AI Diffusion IFR, which could amend §744.23 to re-establish a separate worldwide license requirement for exports from front-end fabricators or OSATs. I stand ready to support you in taking these measures.\"\n\n**Background**\n\nChina previously exploited the lack of due diligence by chipmakers through third-country subsidiaries located outside of China. BIS responded by requiring export licenses for all Chinese entities, including their overseas subsidiaries, for Chinese-owned enterprises.\n\nHowever, foundries still risked selling advanced chip components to companies covertly operating as a front for Chinese companies. In response, BIS issued an allied whitelist of verified and vetted customers for license-free sale. Advanced chip components sold to unvetted customers were still subject to the license requirement.\n\nDuring the previous administration, the Biden-era BIS rolled these two rules into the AI Diffusion Rule in 2024. In 2025, the Trump administration rescinded the AI Diffusion Rule, and in May 2026, BIS announced guidelines clarifying that restrictions on companies located in or controlled by China remain in place.\n\n[Critical Infrastructure/Cyber](/issues/critical-infrastructurecyber)", "url": "https://wpnews.pro/news/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes", "canonical_source": "http://chinaselectcommittee.house.gov/media/letters/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes", "published_at": "2026-08-10 14:46:30+00:00", "updated_at": "2026-08-10 15:17:56.169785+00:00", "lang": "en", "topics": ["ai-policy", "ai-chips"], "entities": ["John Moolenaar", "Bureau of Industry and Security", "Jeffrey Kessler", "TSMC", "Huawei", "Sophgo", "House Select Committee on China"], "alternates": {"html": "https://wpnews.pro/news/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes", "markdown": "https://wpnews.pro/news/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes.md", "text": "https://wpnews.pro/news/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes.txt", "jsonld": "https://wpnews.pro/news/moolenaar-ai-chipmaker-end-user-restrictions-undermined-by-loopholes.jsonld"}}