AI Diffusion Rule Rattles Industry

The trade security community spent last week atwitter over the widely anticipated export controls on Artificial Intelligence related technology.   

The "Export Control Framework for Artificial Intelligence Diffusion" rule aims to control the global shipments of graphics processing units (GPUs) to forestall diversion through third countries.   Restrictions are said to include geographic controls as well as a worldwide licensing system that includes reporting requirements and exceptions.

The rule is expected to be introduced in final form, dispensing with the customary review and public comment process.   As the publication was expected Friday, some in the rulemaking process may be having second thoughts about that.

"Industry remains troubled by the Administration’s insistence on publishing a complex and consequential rule of this nature – without any prior consultation with industry or other stakeholders – in the final days of President Biden’s term," wrote Jason Oxman, President of the Information Technology Industry Council (ITI) in a letter to Commerce Secretary Gina Raimondo.

"As we understand it, the rule would place global restrictions on countries’ access to integrated circuits, regardless of cluster size or use case. A rule of this nature would cede the global market to U.S. competitors who will be eager to fill the untapped demand created by placing arbitrary constraints on U.S. companies' ability to sell basic computing systems overseas," Oxman continues.

"Should the U.S. lose its advantage in the global AI ecosystem, it will be difficult, if not impossible, to regain in the future.... Rushing a consequential and complex rule to completion could have significant adverse consequences that the Biden Administration will soon no longer be able to manage and address. We urge the Biden Administration to follow the appropriate regulatory review process and not destabilize global export controls at a time when stability will be especially important. "

Outspoken Oracle EVP Ken Gluck has been critical of the process, claiming "the Biden Administration’s “Export Control Framework for Artificial Intelligence Diffusion” will go down as one of the most destructive to ever hit the U.S. technology industry

"BIS could have fashioned a regulatory scheme specifically targeted at these and other high-risk uses and specified a set of restricted users of very high-volume GPUs. The Diffusion Framework misses this mark by a wide margin and chooses instead to disrupt U.S. leadership in cloud, chips, and AI.

"And what Congress accomplished by passing the CHIPS Act (a mere $280 billion) the Biden Administration takes away with the Diffusion Framework, because in one IFR it has managed to shrink the global chip market for U.S. firms by 80 percent and hand it to the Chinese."

" Substantial quantities of GPUs are common components of public cloud offerings all around the world....Somehow, this one basic fact—AI as a feature of all public, commercial clouds—escaped those drafting the Diffusion Framework.

"The Framework introduces so many new acronyms in what we may better call the Confusion Framework that it’s hard to keep them straight: AIA, ACM, LPP, DC VEU, UVEU, NVEU, TPP, ACA. Then the Framework identifies 20 AIA countries (Artificial Intelligence Authorization Countries) for modestly better regulatory treatment than the rest of the world, but at the same time creates a regulatory morass for cloud providers to even service some of our closest allies."

UPDATE: Rule published 1/13/2025 see [13326]