US issues guidance on advanced chip diversion amid crackdown on third-country shipments

The US Commerce Department’s Bureau of Industry and Security (‘BIS’) has issued new guidance to help companies identify and prevent illegal diversion of advanced computing integrated circuits (‘ICs’) to China and other countries of concern, amid growing evidence of export control evasion through third countries.

The 13 May guidance outlines red flags and due diligence measures aimed at preventing advanced chips and systems from supporting China’s military modernisation, weapons development, and artificial intelligence capabilities.

‘BIS has determined that advanced computing ICs have the potential to enable military-intelligence and weapons of mass destruction (“WMD”) end uses,’ the bureau stated, noting that such chips are being used by China as part of ‘military modernisation efforts to improve the speed and accuracy of its military decision making, planning, and logistics, as well as of its autonomous military systems.’

The new guidance follows mounting concerns about the circumvention of US export restrictions, particularly through countries in Southeast Asia. In April, Singapore issued an unprecedented advisory warning companies against using the city-state to evade other countries’ export controls on semiconductor and AI technologies, after suspicions that controlled Nvidia AI chips had been sent to Malaysia in a possible sanctions evasion scheme. Singapore charged three men with fraud after the city-state was implicated in a US investigation into whether Chinese start-up DeepSeek had circumvented American restrictions on advanced Nvidia chips.

In its latest guidance, BIS identified eleven behavioural red flags that could indicate potential diversion schemes, including customers who only began ordering advanced chips after October 2022 when controls began, customers with residential addresses ordering commercial quantities, and companies with minimal online presence.

The guidance also specifically focuses on suspicious shipping routes and transshipment points – an issue that emerged in recent months when the Wall Street Journal reported Chinese buyers were successfully ordering Nvidia’s newest Blackwell AI chips through third parties in Malaysia, Vietnam and Taiwan.

For data centres, BIS recommends obtaining written attestations about infrastructure capabilities and conducting on-site visits. The guidance also addresses cloud service providers, noting that Infrastructure as a Service (‘IaaS’) providers should confirm they are not serving customers headquartered in China.

BIS emphasised that companies face potential civil or criminal enforcement action if they proceed with transactions when they have knowledge that violations may occur, warning that ‘exporters, reexporters, and transferors also may not self-blind to avoid licence requirements’.

https://www.bis.gov/media/documents/ai-counter-diversion-industry-guidance-may-13-2025.pdf