US closes chip export loophole targeting embargoed nations

The U.S. Department of Commerce’s Bureau of Industry and Security has shut down a legal workaround that allowed advanced AI chips to reach companies based in arms-embargoed countries, even when those firms operate outside those nations.

In a clarification issued June 1, the bureau confirmed that any company headquartered in a D:5 country—including China, Russia, Iran, and North Korea—or Macao must now obtain a separate license before receiving advanced computing products, regardless of where the company is physically located. This closes a gap that emerged after November 2023 licensing rules were imposed.

“We have received questions about whether the licensing requirement still applies to companies registered in D:5 countries and Macao but located outside those jurisdictions,” the bureau stated. “The answer is yes.”

The move follows confusion created by the Trump administration’s decision not to enforce a tiered export control system introduced by the Biden administration in January 2025. While those rules were never formally rescinded, the lack of enforcement left data center operators and chip buyers uncertain about compliance obligations.

Importantly, the new guidance does not disrupt legitimate data center operators who are already following export administration regulations. They may continue using, storing, and servicing advanced computing hardware without interruption.

For business leaders, the message is clear: supply chain due diligence must now verify not just where a customer operates, but where its headquarters is registered. Ignoring this distinction could mean running afoul of U.S. export controls.