The Trump administration is tightening enforcement of export controls on advanced artificial intelligence chips, issuing fresh guidance Sunday that closes a potential loophole allowing sales to Chinese-affiliated firms based outside restricted countries.
The Commerce Department’s Bureau of Industry and Security (BIS) clarified that a license is required for selling advanced AI chips to any entity whose ultimate parent company is headquartered in China or another restricted nation, regardless of where the purchasing subsidiary operates. The move underscores ongoing tensions over technology transfer and national security, as the administration continues to navigate the fallout from its decision to scrap a broader Biden-era framework.
The guidance responds to confusion that arose after the Trump administration rescinded the AI Diffusion Rule in May 2025. That rule, introduced by the Biden administration in its final days, had created a tiered global licensing system for AI chip sales. It also subsumed portions of a 2023 licensing rule that originally required licenses for sales to entities linked to restricted countries.
When the Trump administration revoked the diffusion rule, it left unclear whether the 2023 requirement—which predated the newer framework—remained in effect. BIS’s latest statement makes clear that it does. “Because this license requirement predates the AI Diffusion Rule, BIS’s non-enforcement policy with respect to the destination-based license requirements for these advanced computing items … applies only to the extent such items are not for entities headquartered in or that have ultimate parent companies headquartered in” restricted countries, the guidance states.
The AI Diffusion Rule faced heavy criticism from the tech industry, which argued it would stifle innovation and burden companies with excessive regulation. When the Trump administration scrapped it in May, BIS said the rule “would have stifled American innovation and saddled companies with burdensome new regulatory requirements.” The bureau also pledged to issue a replacement, but no new rule has been proposed since.
Industry observers note the latest clarification effectively reinstates a key provision of the 2023 rule, which was originally issued under the Biden administration to update earlier chip export restrictions. The move comes amid broader debates over U.S. technology policy, including allegations of corruption and misuse of government funds that have drawn scrutiny from both parties.
The guidance is likely to affect major chipmakers like Nvidia and AMD, which sell advanced processors used in data centers and AI training. Analysts say the clarification could complicate supply chains for Chinese-owned firms operating in third countries, potentially raising costs and delaying projects.
The administration has not signaled whether it plans to introduce a broader replacement for the AI Diffusion Rule. Meanwhile, the tech industry continues to lobby for clearer, less restrictive export policies, arguing that overly broad controls could push allies toward Chinese suppliers. The Commerce Department has not commented on the timeline for a potential new rule.
This latest move is part of a pattern of incremental adjustments to export controls, as the Trump administration balances national security concerns with industry pressure. The issue remains politically charged, with some Republicans and Democrats alike calling for stronger restrictions on technology transfers to China, while others warn against harming U.S. competitiveness.
