Warren Demands Records Over Possible Gap in China AI Chip Controls

Sen. Elizabeth Warren (D-Mass.) has demanded Commerce Department records to investigate whether the Trump administration weakened safeguards meant to stop advanced chips from reaching China through overseas middlemen.In a July 17 letter, Warren asked Jeffrey Kessler, under secretary of commerce for industry and security, to provide six categories of records by Aug. 7.The records include instructions given to chip manufacturers, license applications and decisions, customer-screening forms, company compliance reports, and internal assessments of how the administration’s enforcement policy affected controls on foreign-made AI chips.Warren, the ranking Democrat on the Senate Banking Committee, invoked a provision of the Export Control Reform Act that requires the Commerce Department’s Bureau of Industry and Security (BIS) to provide certain export-control information at the request of a committee chairman or ranking minority member.Her inquiry focuses on companies, such as Taiwan Semiconductor Manufacturing Co. (TSMC), that manufacture chips designed by other companies.Warren alleges that current policy may allow an unvetted company in a third country to order advanced chips without first facing U.S. government review—even if the company is secretly acting for a restricted Chinese customer.BIS did not respond by publication time to questions about Warren’s allegations or which existing rule would require advance approval in that situation.How the Safeguard Was Supposed to WorkThe dispute centers on two rules issued in January 2025.The first, known as the AI Diffusion Rule, requires U.S. approval before certain advanced computing chips can be sent almost anywhere in the world.The second, called the Foundry Due Diligence rule, applies to companies that manufacture or package chips for other businesses.Under that rule, manufacturers were generally required to treat certain advanced custom chips as controlled products unless the customer passed specified checks or qualified through an approved arrangement.BIS said the rule was intended to prevent restricted companies from hiding a chip’s capabilities or placing orders through intermediaries and shell companies.Warren said BIS adopted the rule after Huawei used an intermediary to order potentially millions of advanced chip dies—the pieces of silicon later packaged into processors—from TSMC. The stated volume is Warren’s allegation, not a publicly established government finding.In May 2025, Commerce directed BIS officials not to enforce the AI Diffusion Rule and promised to replace it. More than a year later, that replacement had not been issued.Warren argues that suspending the worldwide approval requirement disabled an essential part of the companion rule governing contract chipmakers.“Without that license requirement, foundries like TSMC may once again fabricate and export advanced chips for unvetted intermediaries in third countries,” Warren wrote.BIS Describes Current EnforcementBIS provided its clearest public account of the policy in a July 14 rule.The rule says the regulations still contain a worldwide licensing requirement for certain advanced computing products. It also says BIS is enforcing that requirement only for specified destinations and for companies headquartered—or ultimately parented—in China, Macau, or other covered locations.Under that policy, a company headquartered or ultimately parented in China remains subject to U.S. licensing requirements even when an overseas subsidiary places the order.Warren’s concern involves a different situation: an apparently independent customer outside China whose connection to a restricted Chinese company has not been identified.She said that without the broader licensing requirement, foundries may manufacture and export chips for unvetted third country intermediaries without first obtaining U.S. approval.A Separate Subsidiary IssueBIS addressed the treatment of overseas subsidiaries in May 31 guidance.The agency said controlled AI chips still require a license when supplied to a company headquartered—or ultimately parented—in China or another covered country, regardless of where the immediate buyer is located.The Epoch Times previously reported on criticism from Warren and Sen. Andy Kim (D-N.J.) that Commerce had taken too long to clarify that requirement.Her letter also cites a June 17 BIS FAQ addressing which products were covered by the May guidance. Warren said the FAQ did not address the foundry licensing question, although the document was originally uploaded under a filename referring to the Foundry Due Diligence rule.She is seeking every version of that FAQ and any internal BIS assessments of whether the May 2025 non-enforcement decision affected the licensing requirements associated with the foundry rule.Kessler Questioned in CongressRep. Young Kim (R-Calif.) questioned Kessler during a July 14 House Foreign Affairs Committee hearing.Kim asked whether a chip manufacturer would violate U.S. controls by making advanced AI chips for a front company that ultimately supplied them to an entity in a restricted country.“That would absolutely be a violation,” Kessler replied.Warren said his answer established that knowingly supplying chips through a front company would violate U.S. controls. She said it did not answer whether BIS currently requires manufacturers to seek approval for unvetted third country customers before the chips are made or exported.Her letter requests any guidance BIS has provided to chip manufacturers and packaging companies, along with license decisions and compliance reports submitted since the May 2025 non-enforcement announcement.TSMC declined to answer specific licensing questions.“TSMC is a law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls,” the company’s press team said in an emailed statement.“We maintain a robust and comprehensive export system for monitoring and ensuring compliance,” it added.Warren’s letter gives BIS until Aug. 7 to provide the requested records.