US rewrites AI chip export rules after Biden's three-tier system collapsed before it took effect

The Biden administration issued the AI Diffusion Rule on Jan. 13, 2025, published in the Federal Register on Jan. 15 — its final full day in office — dividing the world into three tiers and restricting which countries could receive advanced AI chips and access to AI model weights. The rule would have required licensing for chip exports to most countries outside a small group of close U.S. allies.

The Trump administration's Bureau of Industry and Security rescinded the AI Diffusion Rule on May 13, 2025, two days before its scheduled May 15 compliance deadline. BIS Under Secretary Jeffery Kessler instructed enforcement officials not to enforce the rule, calling it overly bureaucratic and damaging to U.S. competitiveness. The rescission left chip companies and foreign governments operating without a clear export control policy for months.

The rescission followed intense lobbying from U.S. semiconductor companies concerned about fragmented supply chains and competitive disadvantage. NVIDIA's H100 and H200 chips — the dominant hardware for training large AI models — remained restricted for export to China under both the old and new frameworks, but the rescission removed restrictions that would have applied to dozens of U.S. allies including Portugal, Austria, and other European nations that objected to being classified in a lower tier than the UK.

Export controlsExport ControlsGovernment restrictions on selling or transferring specific technologies, goods, or information to foreign countries.Key ConceptExport ControlsGovernment restrictions on selling or transferring specific technologies, goods, or information to foreign countries.Open conceptBookmark on AI chips date to the Biden administration's October 2022 restrictions, which targeted advanced chips used to train military AI systems. The controls expanded in October 2023 and again with the January 2025 Diffusion Rule. Each expansion prompted complaints from chip companies including NVIDIA that controls were too broad and from national security officials that they were too narrow.

BIS issued a replacement framework on Jan. 13, 2026, effective Jan. 15. The new rule abandoned the three-tier country structure and focused China-specific controls on chip performance thresholds rather than broad country classifications. The replacement also introduced a case-by-case review process for a narrow category of advanced chips exported to non-restricted countries, replacing the quota and licensing regime the Diffusion Rule had proposed.

The policy gap between May 2025 and January 2026 — roughly eight months — created uncertainty for semiconductor companies, foreign governments planning AI infrastructure investments, and U.S. allies negotiating data center deals. Companies relied on pre-existing 2022 and 2023 restrictions during the gap while compliance lawyers navigated contradictory guidance from BIS about which rules applied. Investment decisions for AI data centers in allied countries stalled when investors couldn't determine which chip purchases would require U.S. government approval.

China accelerated domestic chip development in response to U.S. export controls. Huawei's Ascend 910B chip, produced without advanced lithography equipment, reached performance levels competitive with some restricted NVIDIA chips. The controls pushed Chinese AI development toward domestically designed silicon rather than stopping it.

Congress hasn't passed legislation authorizing AI export controls — they derive from the Export Control Reform Act of 2018, which gives the executive branch broad authority to restrict technology exports on national security grounds without congressional approval for each rule change. That means each administration can redesign the entire framework through executive action alone.