U.S. Congress Pressures: Enforcement Gaps Found in China Chip Export Controls
Miles Bennett
US lawmakers and the Commerce Department are openly clashing over an enforcement gap in chip export controls on China — the dispute centers on whether foundries still need licenses for China-linked orders, and the answer will determine whether advanced AI chips keep flowing to Beijing through third countries.
What is this "loophole" exactly?
The Foundry Due Diligence (FDD) rule, effective January 2025, requires TSMC, Samsung, and Intel to apply for licenses when filling global orders — unless they complete specific due-diligence checks. This means → foundries cannot just manufacture; they must verify the end buyer is not a restricted Chinese entity.
In May 2025, BIS said it would not enforce a separate regulation that provides the key legal basis for that license requirement. In plain terms = BIS pulled the legal foundation out from under its own rule, leaving it unclear whether foundries still need to apply.
Senator Elizabeth Warren wrote to BIS chief Jeffrey Kessler: without the license requirement, foundries like TSMC "may once again manufacture and export advanced chips for unvetted third-country intermediaries."
Why can't officials and Congress agree?
A BIS official said in early June that the FDD loophole "simply does not exist" — but did not address the legal-basis argument directly. This reflects a dispute not over facts but over how to read the regulation's binding force.
BIS indicated it might issue formal guidance to clarify its position, but none has materialized. A mid-June notice whose filename contained "FDD" did not touch the core policy question.
At a congressional hearing, Kessler said supplying AI chips to a "front company" in a restricted region would "absolutely be a violation." Warren responded that this failed to confirm BIS is enforcing the global license requirement designed to block transfers before they happen.
What does Samsung's behavior tell us?
Samsung has applied for licenses to export AI chips to Chinese companies ByteDance and Baidu. The chips were manufactured before the FDD rule took effect but were later brought under its scope. This means → Samsung is treating the FDD rule's key provisions as binding and proactively seeking compliance.
BIS has neither approved nor denied Samsung's applications — they sit in limbo. In plain terms = the rule was written, the company followed it, but the approval side has given no clear answer.
TSMC did not respond when asked whether the license requirement still applies; Intel declined to comment. It remains unclear whether any company has actually shipped chips by exploiting the gap.
Why does this matter?
Warren warned Kessler that BIS's "mismanagement" of export-control regulations could create opportunities for Huawei and others to funnel millions of advanced AI chips into China.
This reflects a structural problem in the US chip-control regime — a gap between rule-making and rule-enforcement, where legislative intent and administrative action are out of sync.
Whether this loophole is substantively closed will directly determine whether America's lead in the global computing-power race can be effectively protected.
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