US Commerce Department withdraws controversial AI chip exports rule requiring foreign investments

US Commerce Department Pulls Controversial AI Hardware Export Rule

The US Commerce Department has withdrawn a controversial export rule that would have fundamentally reshaped regulating the global AI chip market 1

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. The draft regulation, submitted to the Office of Information and Regulatory Affairs in late February as part of the AI Action Plan Implementation initiative, disappeared from the regulatory tracking system on Friday without official explanation 1

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. According to a U.S. official, the proposal never progressed beyond an early draft stage and did not represent finalized policy direction 1

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. This marks the latest reversal by the Trump administration in its attempts to replace the Biden-era framework from January 2025 governing global access to AI chips 3

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Foreign Investment Requirements Would Have Doubled Costs

The withdrawn AI hardware export rule would have imposed significant financial burdens on foreign companies seeking AI accelerators from Nvidia, AMD, and other suppliers. For very large AI clusters involving 200,000 Nvidia GB300 GPUs or more deployed by a single organization within one country, operators would have been mandated to invest in AI infrastructure located in the U.S. as part of the overall arrangement 1

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. Export licenses previously granted to Cerebras and Nvidia to supply AI hardware to Saudi Arabia and the United Arab Emirates reportedly required these countries to match every dollar spent on domestic AI infrastructure with a dollar invested in AI infrastructure in the U.S. . If similar conditions were applied to other markets across Asia, Europe, and the Middle East, companies would have effectively faced their costs doubling 1

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Tiered Licensing System Proposed Different Approval Levels

The proposed export framework outlined a tiered licensing system linked to planned computing capacity. Shipments involving relatively modest volumes—up to 1,000 Nvidia GB300 GPUs—would have been eligible for accelerated approval, enabling exporters to ship hardware with limited regulatory resistance 1

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. Medium-scale installations would have required pre-authorization from the US Commerce Department before formally applying for export licenses. Operators would have been required to provide detailed operational transparency, including disclosure of business activities and infrastructure usage, while permitting on-site inspections by U.S. authorities to verify compliance 1

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. Foreign firms seeking up to 100,000 chips would have needed government-to-government assurances 3

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Internal Disagreements Signal Policy Uncertainty

The withdrawal likely reflects differing views within the Trump administration on how to achieve American AI dominance while addressing national security concerns 3

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. After abandoning the U.S. Diffusion Rule last spring, the Commerce Department has been working on new export rules for AI hardware that would both reinforce American dominance in AI technologies and standards while restricting adversaries' access to these technologies 1

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. The Commerce Department posted on March 5 that it was committed to promoting secure exports of the American tech stack and was discussing formalizing the approach it took with deals to send U.S. chips to data centers in the Middle East, but would not return to the Biden AI diffusion rule, which it described as burdensome 3

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. The Biden approach divided the world into three tiers: allies receiving unlimited chips, much of the world subject to limited numbers, and countries of concern like China blocked from receiving advanced chips 3

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. It remains uncertain whether the next draft will be stricter or more liberal to exporters and their customers outside America .