House Select Committee on China Chairman John Moolenaar is pressing the Trump administration to formally confirm that a rule requiring chipmakers to vet their customers before exporting advanced artificial intelligence chips remains in force, warning that lingering ambiguity could reopen a loophole.
Huawei, a Chinese tech giant banned from buying U.S.-linked advanced chips since 2020 because of national security concerns, could not legally buy advanced chips from TSMC, the world’s biggest chip manufacturer. So it set up a shell company, Sophgo, in China, to order $500 million worth of chips.
The Foundry Due Diligence Rule, established in January 2025, was meant to close this loophole by requiring chipmakers to presume certain chips are restricted and subject to a worldwide license requirement.
In May 2025, the U.S. announced it would not enforce a different, broader rule called the “AI Diffusion Rule,” one that restricted where AI tech generally could be sold worldwide.
Since the Foundry Due Diligence Rule originally appeared in the now-unenforced AI Diffusion Rule, foundries may assume it is no longer enforced.
In Mr. Moolenaar’s Thursday letter to Under Secretary of Commerce for Industry and Security Jeffrey Kessler, he praised recent guidance clarifying worldwide licensing requirements for end users in Country Group D:5, a U.S. government list of countries considered high-risk for weapons proliferation, and Macau, a semi-autonomous Chinese territory.
He argued that China previously exploited the lack of due diligence by chipmakers via third-country subsidiaries.
The measure is “a critical step in preventing the Chinese Communist Party (CCP) from accessing high-end U.S. chips and preserving America’s technological edge,” he wrote in the letter.
Mr. Moolenaar suggested issuing targeted guidance explicitly clarifying that the worldwide license requirement for front-end fabricators remains in effect, and formally rescinding the AI Diffusion Rule and amending it to re-establish a standalone worldwide license requirement.
He also requested a staff-level briefing by the end of the month covering the Bureau of Industry and Security’s plans and decision-making regarding clarifying the rule, as well as any investigations into chip diversion resulting from non-compliance with it.
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