AI creates opportunity for global economic change, yet requires local AI implementation

Biden’s AI Chip Export Regulation Officially Rescinded; Three Anti-China Guidelines Introduced

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A stopgap to an altogether new Trump regulation that’s still pending

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May 13th, 2025 – As we reported on May 9th, the Trump administration initiated the rescission of the Biden AI export regulation (Framework for Diffusion of AI). As of today, the Under Secretary of Commerce for Industry and Security, Jeffery Kessler has instructed BIS (Bureau of Industry and Security) enforcement officials not to enforce the Biden Administration’s AI Diffusion Rule. In addition, BIS has issued three new guidelines to further restrict China’s access to U.S. AI technology and to prevent the diffusion of China’s AI technology (Huawei’s GPUs). While not regulatory, these guidelines and their stated “penalties” are intended to act as a stopgap while the BIS continues to work on a replacement regulation that will be issued “in the future”.

 

The first guideline states that all companies in the supply chain and end-customers must conduct rigorous due diligence to identify end users and uses of GPUs, and to detect potential diversion to China, etc. Firms must also follow new “Know Your Customer”, “red flag” guidance and may not “self-blind”, particularly for cloud and infrastructure providers, to prevent unauthorized LLM training, exports or transfers. Penalties for non-compliance include criminal actions for U.S. entities, triggering of (presumably onerous) license requirements for foreign entities, and a blanket threat to be added to the U.S. Entity List (which precludes any U.S. firm from doing business with).

 

In addition, the second guideline specifically puts exporters on the hot seat by requiring them to fully vet their customers (that they’re legitimate, not transshipping to China and not allowing China use of IaaS for LLM training). The exporter will also obtain certifications, attestations, etc to this effect.

 

The above guidelines will add non-trivial operational burden to exporters, importers, end-customers and every company in the supply chain. Nevertheless, we advise our clients and all companies to fully comprehend and operationalize compliance controls to preclude the BIS of one day claiming, “you should’ve known, you're not trustworthy and now we need to talk consequences…”.

 

The final guideline is designed to blunt China’s Digital Silk Road initiative by limiting purchases of Huawei’s GPUs. As we reported in a prior Aiolian update, while Huawei’s Ascend GPUs and their Cloudmatrix 384 system are sub-optimal on data center footprint, power and system cost (by 3-4X), they do demonstrate that Huawei is fully capable of delivering AI capabilities at scale. The BIS makes a sweeping claim that “…such chips likely are either designed with certain U.S. software or technology or produced with semiconductor manufacturing equipment that is the direct product of certain U.S.-origin software or technology, or both” and therefore in violation of U.S. export regulations. Consequently, the BIS threatens that if any U.S. or foreign firms procure and/or use Huawei GPUs, they will be subject to “criminal and administrative penalties, up to and including imprisonment, fines, loss of export privileges, or other restrictions”. Assuming compliance, this policy damages China’s Digital Silk Road initiative since any China AI cloud company expansion (e.g. Alibaba Cloud) into developing nations will now be dependent on U.S. AI chips, and therefore subject to possible “use-case” restrictions in the future.

 

Our mission at Aiolian International is to help developing nations and their local companies create sovereign AI infrastructure while navigating the evolving US regulations for AI technology exports. Please don’t hesitate to contact us if you have questions.