Executive Summary
The strategy of the United States towards chips export control defines what is prohibited. However, this relies on the action of individual companies to prevent these chips from entering countries, like China. The Guidance published by the US Bureau of Industry and Commerce (BIS) tried to solve loopholes that still allowed this to happen. Two months later, Nvidia introduced a Whitelist system which strengthened compliance procedures, and resulted in the cut off of half of its Asian buyers. This shows that, while the US still remains as the final authority, companies have gained a big role as enforcement authorities.
Key Points
- The US regulation on chips export control leans towards a company supervised process that determines the end-use and the end-user.
- Nvidia built its own system of export control through data center inspections, contract validations and interviews with end users
- Despite tightened restrictions, strategies like transshipment through third countries, allow for chips to enter China.
Analysis
Theoretically delegating the enforcement of export control to companies- in this case Nvidia – is a strategic decision, since they have a better scope of their supply chain than any other national organism could. In addition, BIS lacks capacity to assess all license requests or follow-ups with different suppliers. Nevertheless, the implementation of a Whitelist makes visible to what extent this delegation works. The May Guidance did not create a new enforcement agency or expand the government’s verification ability, rather it gave companies a more significant role on export control.
This occurrence is not new. The legal structure of policies, such as the Export Administration Regulations (EAR) and Foreign Direct Product Rule (FDPR), demonstrate that determining the destination and the end-use of chips is usually the role of exporters and re-exporters, as state organs lack effective verification capacity. In addition, the effectiveness of export controls tends to also rely on third-country actions which act as a liaison – although sometimes they are the final destination – that through practices like the use of encrypted communications or cloud rental, allow US chips in Chinese territory.
The implementation of Nvidia’s Whitelist demonstrates that a motivated company can resolve loopholes faster than an administration. However, the underlying problem remains, the absence of coordinated control between the US and its allies, leaves a gap that allows chips to enter China.
Policy Implications
- Formalize verification standards: if companies are now in charge of export control standards, rather than having each company design an independent one, there should be a certified auditor reviewing companies’ systems under a common framework.
- Coordinated control between allies: as most of the loopholes occur because each country has their independent system of export controls, working under an homogeneous structure would facilitate future coordination.
- Increase BIS capacity: increasing the internal control of companies will reduce loopholes if it comes along with an increase of the capacity national organisms have.
References
Bown, C. P. (2020). How the United States marched the semiconductor industry into its trade war with China. East Asian Economic Review, 24 (4), 349-388. Microsoft Word – 03 Chad P. Bown
Bureau of Industry and Security, U.S. Department of Commerce. (May 31, 2026). Guidance regarding enforcement of license requirements for advance computing items for entities headquartered in Country Group D:5 and Macau. https://www.bis.gov/media/documents/bis-guidance-may-31-2026.pdf#:~:text=The%20Department%20of%20Commerce%2C%20Bureau%20of%20Industry%20and,are%20located%20outside%20Country%20Group%20D%3A5%20or%20Macau.
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Manning, J. (August 2, 2026) Alibaba Bankrolled Kimi K3 with 20,000 Nvidia Chips: Now Gwen is Losing to Its Own Compute. Tech Times. Alibaba Bankrolled Kimi K3 With 20,000 Nvidia Chips: Now Qwen Is Losing to Its Own Compute
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Reinsch, W. A. , Whitney, J. and Schleich, M. (2024). Semiconductor exports and export controls. Center for Strategic and International Studies. 241119_Reinsch_Semiconductor_Exports.pdf
Shivakumar, S., Wesner, C. and Howell, T, (February 21, 2024). Balancing the ledger: Export Controls on U.S. Chip Technology to China. Center for Strategic and International Studies.Balancing the Ledger: Export Controls on U.S. Chip Technology to China