The U.S. Department of Commerce issued guidance Sunday clarifying that export licenses are required for advanced computing chips sold to entities headquartered in China — or whose parent company is headquartered in China — even when those entities are located outside China.
The Bureau of Industry and Security said the license requirement, first established in November 2023, continues to apply to all destinations outside the United States when the chips are destined for China-headquartered firms or their subsidiaries. "BIS issued guidance clarifying export license requirements that have been in place since 2023," a bureau spokesperson said. "BIS will continue to enforce export controls rigorously to safeguard critical American technology."
At issue is whether Chinese AI companies with operations in countries like Malaysia were able to acquire high-end processors — among them Nvidia $NVDA's Blackwell chips — through their overseas subsidiaries without obtaining the required licenses, according to Reuters. The opening emerged after the Trump administration announced in May 2025 that it would not enforce the AI Diffusion Rule, a Biden-era regulation that had set licensing requirements for global access to AI chips.
How many chips moved through the gap during the roughly year-long window remains uncertain, though a knowledgeable source in the chip supply chain put the figure in the hundreds of thousands, according to Reuters. The Sunday posting came after an undated, authorless paper warning that "the floodgates have quietly opened" made its way around Washington policy circles, a copy of which was reviewed by Reuters.
A Nvidia official told Reuters that the company's situation is unaffected by the guidance, noting that the Commerce Department had already communicated the license requirement to Nvidia directly through a letter. Requests for comment sent to AMD $AMD, which also produces AI chips in high demand, went unanswered, according to Reuters.
The guidance does not require data center operators to stop using, storing, or servicing affected chips already in operation.
In a Sunday social media post, Chris McGuire — a former State Department official whom Reuters identifies as a technology and national security expert — argued that while the new guidance addresses one vulnerability, a separate problem goes unresolved: foundries such as Taiwan-based TSMC $TSM are no longer obligated to apply heightened scrutiny to verify that the cutting-edge chips they fabricate are not destined for Chinese shell companies. He said that issue was not fixed by the guidance. TSMC did not offer a comment when contacted, Reuters reported.