BIS Implements Additional Due Diligence Measures for Front-End Fabricators and Outsourced Semiconductor Assembly and Test Companies

Read the interim rule here. 

“Front-end fabricator” is the company providing front-end fabrication services (e.g., photolithography, etch, deposition) to produce an integrated circuit (IC), creating circuits on the surface of a wafer through processes such as photolithography, etch, and deposition; while “OSAT” companies provide third-party manufacturing and testing services, including assembly, packaging, and testing, to semiconductor businesses.

The expanded license requirement is found in newly added Note 1 to Export Control Classification Number (ECCN) 3A090, which states that when front-end fabricators or “OSAT” companies seek to export, reexport, or transfer (in-country) certain “applicable advanced logic integrated circuits,” — that is, logic ICs produced using the “16/14 nanometer node” or below or using a non-planar transistor architecture. It is presumed that the ICs fall under ECCN 3A090.a and are designed or marketed for data centers. There are three ways to overcome this presumption, outlined in paragraphs a. through c. of Note 1 to 3A090:

1. The designer of the “applicable advanced logic integrated circuit is an approved IC designer (listed in supplement no. 6 to part 740) or an authorized IC designer.
2. The IC die is packaged by the “front-end fabricator” at a location outside of Macau or Country Group D:5, and the “front-end fabricator” makes certain attestations about the capabilities of the IC.
3. The IC is packaged by one of the approved “OSAT” companies (listed in supplement no. 7 to part 740).

All three of these options require certain attestations and reporting to BIS – see below. Further, the presumption does not apply to ECCNs 4A003.z, 4A004.z, 4A005.z, or 4A090. “As a result, the changes … are primarily limited to circumstances in which a “front-end fabricator” seeks to export an IC to a chip designer or “OSAT” company.”

This IFR is in full effect currently. Comments must be submitted by March 14, 2025.

What Are Approved IC Designers, Approved “OSAT” Companies, and Authorized IC Designers?

Approved IC Designers and Approved “OSAT” Companies”

Part 740, Supplement No. 6 lists out the Approved IC Designers. Part 740, Supplement No. 7 lists out the Approved OSAT Companies.

To apply to be added to these lists, an IC designer or an “OSAT” company must submit a request in the form of an advisory opinion containing the information described in Part 748, Supplement No. 4. This includes details like ownership, a description of the commodities, and agreeing to allow on-site BIS reviews.

Last But Not Least - Authorized IC Designers

There is no list of authorized IC designers. Rather, BIS has provided the following eligibility criteria:

• Prior to April 13, 2026, authorized IC designers are all IC designers:
  • Headquartered in Taiwan or a destination specified in Country Group A:1 or A:5;
  • Neither located in nor have an ultimate parent headquartered in Macau or a destination specified in Country Group D:5.
  • Have agreed to submit applicable information described in § 743.9(b) to the “front-end fabricator,” which the “front-end fabricator” must then report to BIS. 
• After April 13, 2026, authorized IC designers include any designer:
  • That meets the same criteria above.
  • Has submitted an application to be an approved IC designer within the past 180 days. In other words, post-April 13, 2026, authorized IC designers will lose their ‘authorized’ status 180 days after submitting their application for ‘approved’ status.

Authorized IC designers are subject to additional due diligence requirements, including new quarterly reporting requirements at § 743.9(b) beginning May 31.

Stricter License Requirements in Note 1 to ECCN 3A090

Note 1 to ECCN 3A090 states that “front-end fabricators” and “OSAT” companies will be presumed to be exporting 3A090.a ICs designed or marketed for data centers if they are seeking to export, reexport, or transfer (in-country) “applicable advanced logic integrated circuits.” As a reminder of why this presumption is a big deal - 3A090.a’s worldwide licensing requirement does not include items not designed or marketed for use in datacenters if they have a “total processing performance” under 4800. Further, certain license exceptions (i.e. License Exception NAC and License Exception NAC) are potentially available for 3A090.a and 3A090.b items not designed or marketed for use in datacenters (i.e. having a total processing performance of 4800 or greater).

As summarized above, there are three ways that this presumption can be overcome:

1. If whichever entity designed the “applicable advanced logic integrated circuit is an approved IC designer (listed in supplement no. 6 to part 740) or an authorized IC designer. Further the approved/authorized IC designer must submit a datasheet or other attestation that the IC’s total processing performance and performance density do not meet the parameters of 3A090.a. 
2. If the “front-end fabricator” that packaged the IC die did so outside of Macau or Country Group D:5, and the “front-end fabricator” attests that the “aggregated approximated transistor count” of the final packaged IC is below 30 billion transistors or that the final packaged IC does not contain high-bandwidth memory and that the “aggregated approximated transistor count” of the final packaged IC is below (1) 35 billion transistors for any exports, reexports, or transfers (in-country) completed in 2027; or (2) 40 billion transistors for any exports, reexports, or transfers (in-country) completed in 2029 or thereafter, then this overcomes the presumption by the “front-end fabricator” or “OSAT” company that the IC is specified in ECCN 3A090.a.
3. If packaging for the IC was done by one of the approved “OSAT” companies (listed in supplement no. 7 to part 740), and the approved “OSAT” attests that: the “aggregated approximated transistor count” of the final packaged IC is below 30 billion transistors or the final packaged IC does not contain high-bandwidth memory and that the “aggregated approximated transistor count” of the final packaged IC is below (1) 35 billion transistors for any exports, reexports, or transfers (in-country) completed in 2027; or (2) 40 billion transistors for any exports, reexports, or transfers (in-country) completed in 2029 or thereafter.

Narrowing License Exceptions AIA and ACM

In addition to the licensing scheme discussed above, the interim final rule also refines the scope of License Exceptions AIA and ACM.

These two exceptions were introduced in the recently issued Framework for Artificial Intelligence Diffusion. License Exception AIA authorizes exports, re-exports, and (in-country) transfers of eligible advanced computing ICs under 3A090.a, 4A090.a, and corresponding .z paragraphs as well as certain associated software/technology going to entities located within AND headquartered in, or whose ultimate parent company is headquartered in, one of the allied countries specified at paragraph (a) to Supplement No. 5 to Part 740. License Exception ACM authorizes the export, reexport, and (in-country) transfer of 3A090 and 4A090 (all paragraphs), as well as related .z commodities, software, and technology to any ‘private sector end user’ that is outside Country Group D:5 or Macau and does not have its headquarter/ultimate parent company in Country Group D:5 or Macau.

The new IFR singles out and adds a new requirement for ECCNs 3A090.a; 5A002.z.1.a, z.2.a, z.3.a, z.4.a, z.5.a; and 5A992.z.1. License Exception AIA or License Exception ACM is not available for these items, unless designed by an approved or authorized IC designer.

Foreign Direct Product/De Minimis Rules Updates

The rule also revises to the Foreign Direct Product and de minimis rules, expanding end users covered by the new De Minimis and FDPs applicable to Footnote 5 entities to include any end-user facility where the “production” of logic and DRAM “advanced-node integrated circuits” occurs. While BIS did this to make these rules more similar to the US person and end-user controls in 744.6 and 744.23, it is sure to cause confusion. The relatively new Footnote 5 FDPR is now a “Footnote 5 and ‘advanced-node integrated circuit’ production’” FDPR.