Semiconductor Supply Chain Compliance: Export Controls, CHIPS Act, and Trade Risks

The New Semiconductor Trade Landscape

The global semiconductor industry is at the intersection of technology, national security, and trade policy in a way that no other industry has experienced. Since October 2022, the US has implemented sweeping export controls targeting advanced semiconductors and semiconductor manufacturing equipment destined for China. The CHIPS and Science Act, signed in August 2022, is channeling tens of billions of dollars in subsidies to encourage domestic chip manufacturing, but with significant strings attached regarding where recipients can invest and what they can sell abroad. For companies in the semiconductor supply chain, trade compliance has become a boardroom-level concern.

US Export Controls on Advanced Semiconductors

The Bureau of Industry and Security (BIS) has implemented controls that restrict the export of advanced computing chips, semiconductor manufacturing equipment, and supercomputer components to China. The controls target chips at or above certain performance thresholds (measured in total processing performance, or TPP) and the equipment used to manufacture them, including extreme ultraviolet (EUV) lithography systems, certain deposition and etching tools, and advanced packaging equipment. These controls extend to US-origin technology and to foreign-produced items that use US-origin technology or software, creating extraterritorial reach that affects companies worldwide.

• Advanced computing chips exceeding specified TPP thresholds
• Semiconductor manufacturing equipment including EUV lithography
• Advanced packaging and testing equipment
• Electronic design automation (EDA) software for certain chip architectures
• Supercomputer components and systems
• Related technology and know-how for producing controlled items
• Cloud computing services providing access to controlled chip capabilities

CHIPS Act Compliance Requirements

The CHIPS Act provides approximately $52.7 billion in subsidies for semiconductor manufacturing, R&D, and workforce development in the United States. However, companies receiving CHIPS Act funding must comply with several conditions. Most notably, recipients are prohibited from expanding semiconductor manufacturing capacity in countries of concern (primarily China) for a period of 10 years. This restriction covers both leading-edge and legacy chip production, with limited exceptions for chips intended for the Chinese domestic market that do not exceed specified technology thresholds. Recipients must also comply with extensive reporting requirements, workforce development commitments, and national security provisions.

Import Considerations for Semiconductor Components

On the import side, semiconductors face a relatively complex tariff landscape. Basic semiconductor devices are classified in HTS Chapter 85, with duty rates that vary based on the specific component type. Many semiconductor products enter duty-free or at low rates under MFN treatment, but Section 301 tariffs have added a 25% additional duty on certain semiconductor-related products from China, with rates increasing to 50% under the 2025-2026 review cycle. Importers of semiconductor materials and equipment must carefully classify their products and verify whether they are subject to additional tariffs.

Supply Chain Risk Management

The semiconductor supply chain is uniquely concentrated and vulnerable to disruption. Key chokepoints include advanced chip manufacturing (dominated by TSMC in Taiwan), EUV lithography (monopolized by ASML in the Netherlands), and advanced packaging (concentrated in Taiwan and South Korea). Companies that depend on semiconductors must develop robust supply chain risk management strategies that account for geopolitical risks, export control changes, natural disasters, and demand fluctuations. This includes mapping the full supply chain to identify single points of failure, qualifying alternative suppliers where possible, and maintaining strategic inventory buffers for critical components.

Compliance Program Essentials

Companies in the semiconductor supply chain need compliance programs that address both export controls and import regulations. On the export side, this means classifying all products against the CCL, screening end-users and end-uses against restricted party lists (particularly the Entity List, which includes numerous Chinese semiconductor companies), and implementing internal controls to prevent unauthorized technology transfers. On the import side, it means accurate HTS classification, monitoring for Section 301 and AD/CVD changes, and maintaining documentation to support claimed duty rates and preferences.

Looking Forward

The semiconductor trade landscape will continue to evolve rapidly. Additional export control measures are expected as technology advances and geopolitical tensions persist. The CHIPS Act funding process will create new compliance obligations for recipients and their suppliers. And the global push to diversify semiconductor manufacturing, with new fabs being built in the US, Europe, Japan, and India, will create new trade flows and compliance considerations. Companies that invest in robust trade compliance infrastructure now will be best positioned to navigate this rapidly changing environment.