Commerce Department proposes new rules to guarantee proper use of CHIPS incentives program

Amid worries of misuse by foreign adversaries, the U.S. Department of Commerce issued a Notice of Proposed Rulemaking this week, laying out new guardrails for funds provided by the CHIPS for America Incentives Program.

To safeguard national security, these extra protections push to keep technology and innovations funded by CHIPS from being used by countries deemed to be of concern. The CHIPS and Science Act offers such funding for the expansion of semiconductor manufacturing, but this statute would officially bar affiliates of China, Russia, Iran, and North Korea from the program. Further, recipients would be unable to use funds in other countries than initially given, nor could they engage in joint research or technology licensing efforts with foreign entities of concern where national security is concerned.

Even after receipt, recipients would find themselves subject to restrictions. They would be barred from investing in most semiconductor manufacturing in countries of concern for a decade after the award.

“The innovation and technology funded in the CHIPS Act is how we plan to expand the technological and national security advantages of America and our allies; these guardrails will help ensure we stay ahead of adversaries for decades to come,” Secretary of Commerce Gina Raimondo said. “CHIPS for America is fundamentally a national security initiative, and these guardrails will help ensure malign actors do not have access to the cutting-edge technology that can be used against America and our allies. We will also continue coordinating with our allies and partners to ensure this program advances our shared goals, strengthens global supply chains, and enhances our collective security.”

Under the new rules, if accepted, standards would also be established to restrict advanced facility expansion in foreign countries of concern and limit the expansion of legacy facilities in those countries. Semiconductors would officially be deemed critical to national security, with the tighter restrictions affiliated with the label and U.S. export controls tightened in response. Lastly, new restrictions would be laid out for joint research and technology licensing efforts on any products or technologies, such as patents, trade secrets, or know-how, that raise national concerns.

Public comment will be accepted for 60 days, and industry, partners, allies, and other interested parties were encouraged to comment on the rulemaking.