The Biden White House on Monday announced its “final rule” placing export controls on artificial intelligence (AI) chips before President-elect Donald Trump takes office next week, drawing swift condemnation from industry leaders who argue the Democratic administration is effectively undermining America’s leadership in the emerging technology.
With the stated goal of bolstering “U.S. security and economic strength,” the Biden-Harris administration released “an Interim Final Rule on Artificial Intelligence Diffusion.”
A White House fact sheet said the initiative “streamlines licensing hurdles for both large and small chip orders, bolsters U.S. AI leadership, and provides clarity to allied and partner nations about how they can benefit from AI,” as well as “builds on previous chip controls by thwarting smuggling, closing other loopholes, and raising AI security standards.”
When asked about whether they consulted with the incoming Trump administration on the policy, National Security Adviser Jake Sullivan pointed to a “critical time window” with respect to competition with China, telling reporters on Sunday that the United States is just between six and 18 months ahead of Beijing regarding AI technology.
“From our perspective, we have a national security responsibility to do two things. First, to preserve, protect and extend American AI leadership, particularly these would be strategic competitors. And second, ensure that the benefits of American AI are spread to people around the world, including the global build-out of data centers to run AI applications,” Sullivan said.
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Sullivan said the final rule “ensures that the infrastructure for training frontier AI, the most exquisite AI systems at the frontier, happens either in America or in the jurisdictions of our closest allies, and that that capacity does not get off-shored, like chips and batteries and other industries that we’ve had to invest hundreds of billion dollars to bring back onshore.”
In a call with Sullivan on Sunday, U.S. Commerce Secretary Gina Raimondo explained to reporters how the final rule takes a three-prong approach.
The secretary explained how it firstly works at “expanding and updating controls for advanced AI chips.” Secondly, as Raimondo categorized it, the rule works at “creating a new set of controls for the most advanced closed AI model weights [to] make sure they don’t fall into the hands of our adversaries.” She said the third step involves “imposing security conditions to safeguard critical technology and the largest AI clusters,” as well as “taking careful steps to ensure that the rule is targeted at national security risks and allows commerce to proceed.”
Raimondo said the action “is designed to safeguard the most advanced AI technology and ensure that it stays out of the hands of our foreign adversaries, but also enabling the broad diffusion and sharing of the benefits with partner countries.”
Although the rule is not enforceable for 120 days, industry groups and chip company executives expressed concern that the administration would implement a complex rule without consulting industry stakeholders in the final days of Biden’s term, arguing the framework undermines U.S. interests and stifles innovation.
Mexico, Portugal, Israel and Switzerland are among the countries that could face added restrictions.
NVIDIA, a major AI computing and technology company based in California, blasted the final rule in a statement released Monday.
“In its last days in office, the Biden Administration seeks to undermine America’s leadership with a 200+ page regulatory morass, drafted in secret and without proper legislative review,” Ned Finkle, vice president of government affairs at NVIDIA, wrote. “This sweeping overreach would impose bureaucratic control over how America’s leading semiconductors, computers, systems and even software are designed and marketed globally. And by attempting to rig market outcomes and stifle competition — the lifeblood of innovation — the Biden Administration’s new rule threatens to squander America’s hard-won technological advantage.
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“While cloaked in the guise of an ‘anti-China’ measure, these rules would do nothing to enhance U.S. security,” Finkle added. “The new rules would control technology worldwide, including technology that is already widely available in mainstream gaming PCs and consumer hardware. Rather than mitigate any threat, the new Biden rules would only weaken America’s global competitiveness, undermining the innovation that has kept the U.S. ahead.”
A tech industry group, the Information Technology Industry (ITI) Council, sent a letter to Raimondo last week asking that the U.S. government “issue any such contemplated rule as a Notice of Proposed Rulemaking (NPRM), rather than an interim final or final rule, given the significant potential geopolitical and economic implications of the proposed approach.”
ITI President Jason Oxman warned that the rushed framework proposed by the Biden-Harris administration would disrupt global supply chains and place the U.S. at a disadvantage.
“As we understand it, the rule would place global restrictions on countries’ access to integrated circuits, regardless of cluster size or use case,” Oxman wrote. “A rule of this nature would cede the global market to U.S. competitors who will be eager to fill the untapped demand created by placing arbitrary constraints on U.S. companies’ ability to sell basic computing systems overseas. Should the U.S. lose its advantage in the global AI ecosystem, it will be difficult, if not impossible, to regain in the future.”
The White House fact sheet said the final rule eliminates restrictions on chip sales for 18 key allies and partners. Those include Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Republic of Korea, Spain, Sweden, Taiwan and the United Kingdom.
However, the rule deems other countries would be subjected to caps on the chips they could import. The White House said entities “that meet high security and trust standards and are headquartered in close allies and partners” can obtain what the United States will consider the highly trusted “Universal Verified End User” status.
For those without the status, purchases would be capped at 50,000 graphics processing units per country, but government-to-government agreements can be struck to increase the limit to 100,000.
Entities headquartered in other countries that are not of concern to the U.S. can apply for “National Verified End User” status that would allow them to buy 320,000 advanced graphics processing units over two years, but some restrictions regarding how much AI computational capacity could be placed abroad by companies and other institutions would apply.
FOX Business’ Sarah Tobianski contributed to this report.
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