BIS Faces Backlash Over 2-Decade Slowdown After Lapse May Have Let Thousands of U.S. Chips Reach China
Updated
Updated · POLITICO · Jul 8
BIS Faces Backlash Over 2-Decade Slowdown After Lapse May Have Let Thousands of U.S. Chips Reach China
1 articles · Updated · POLITICO · Jul 8
Summary
Thousands of advanced U.S. chips may have reached Chinese subsidiaries after BIS dropped a Biden-era rule in May 2025 and waited until May 31 to clarify those sales still needed licenses.
Former officials and China hawks say BIS chief Jeffrey Kessler’s personal review of export licenses and blacklist actions has jammed the bureau, leaving applications piled up and rulemaking at its slowest pace in more than 20 years.
An 8-month freeze in Entity List additions is the longest since 2008, while chip-industry applicants reported average waits of 76 days for low-risk export licenses, up from BIS’s 38-day fiscal 2023 average.
BIS rejects the slowdown claims as a false narrative, saying it no longer rubber-stamps sensitive licenses and highlighting $324 million in penalties last year versus $16 million in 2024.
The dispute underscores a broader Trump administration split: hawks want tighter China tech curbs, while trade diplomacy with Xi Jinping has made officials wary of new flashpoints.
With the Pentagon blacklisting more Chinese tech giants, is the Commerce Department's slowdown creating a dangerous national security gap?
Is America's restrictive tech policy containing China or pushing other nations toward developing their own 'sovereign AI' solutions?
U.S. Closes AI Chip Export Loophole: New BIS Guidance, Licensing Shifts, and the Ongoing U.S.-China Tech Battle (May 2026)
Overview
In May 2026, the U.S. Commerce Department's BIS issued new guidance to close a major loophole in AI chip export controls. Experts had found that Chinese firms were bypassing restrictions by operating outside China, taking advantage of an enforcement gap that lasted nearly 18 months due to earlier U.S. tech policy. During this time, companies shipped advanced chips, like Nvidia Blackwell, to China-linked firms in places such as Malaysia and Singapore without proper approval. The updated rules now require export licenses for any entity whose ultimate parent company is based in China, Russia, or other restricted nations, no matter where the entity is located.