Moolenaar presses Trump admin to confirm chip due-diligence rule still stands amid loophole fears

A top House Republican has urged former President Donald Trump to ensure that rules restricting the export of advanced AI chips to China remain in place, particularly targeting companies like Huawei. Rep. John Moolenaar, chairman of the House Select Committee on China, sent a letter to the Commerce Department under the Trump administration, emphasizing the importance of maintaining these restrictions to prevent Chinese entities from acquiring cutting-edge U.S. technology. Moolenaar’s letter addressed concerns over a potential loophole in current regulations that could allow Chinese firms to bypass export controls through intermediaries. He specifically highlighted the need for the Trump administration to formally confirm that the Foundry Due Diligence Rule, introduced in January 2025, continues to apply. This rule mandates that chip manufacturers conduct thorough checks on their customers before exporting advanced AI chips, aiming to block unauthorized transfers to high-risk jurisdictions. The Foundry Due Diligence Rule was initially part of a broader regulation known as the AI Diffusion Rule, which sought to limit the global spread of AI technology. However, in May 2025, the U.S. government announced it would not enforce this wider rule, raising questions about the status of its components, including the Foundry Due Diligence Rule. Some industry observers have speculated that the absence of enforcement might lead chipmakers to assume the rule is no longer active, potentially creating new vulnerabilities. In his letter, Moolenaar commended recent guidance issued by the Commerce Department that clarified licensing requirements for end users in Country Group D:5, a list of nations deemed high-risk for weapons proliferation, and Macau, a semi-autonomous region of China. He noted that China had previously exploited gaps in due diligence processes by using third-party subsidiaries to acquire advanced chips illegally. Moolenaar emphasized that the Foundry Due Diligence Rule is crucial in preventing the Chinese Communist Party from gaining access to high-end U.S. semiconductors and safeguarding American technological superiority. In his communication, he proposed that the Trump administration issue specific guidance confirming the continued applicability of the worldwide license requirement for front-end fabricators. Additionally, he recommended formally revoking the AI Diffusion Rule and revising it to establish a separate worldwide licensing framework. The letter also included a request for a detailed briefing by the end of the month from the Bureau of Industry and Security, focusing on their strategies and decisions related to clarifying the Foundry Due Diligence Rule. Moolenaar asked for information on any ongoing investigations into instances where chips were diverted due to non-compliance with existing regulations. Huawei, a major Chinese technology firm, has been prohibited from purchasing advanced U.S.-linked chips since 2020 due to national security concerns. Despite these restrictions, Huawei circumvented some limitations by establishing a subsidiary named Sophgo in China to procure approximately $500 million worth of chips. The Foundry Due Diligence Rule was designed to address such loopholes by imposing stricter scrutiny on customer verification processes for chip exports. The situation underscores the complexities surrounding international trade policies and the challenges faced by regulatory bodies in enforcing export controls effectively. As discussions continue around the future of these regulations, stakeholders are closely monitoring developments to assess how they might impact both domestic and global semiconductor markets.