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Policy brief 23 · Cyber / Bio / Kinetic

Chip Controls

Make AI chip export controls steady, enforced, and answerable to Congress.

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China's leading AI lab has said its binding constraint is chips, not money.1 America and its allies control the chokepoints of chipmaking,2 but the rules leak: Chinese firms rent restricted chips abroad, and licenses have swung within months. Congress should require findings and notice before high-risk licenses, make exporters verify where chips end up, close the cloud loophole, and bring allies into one regime.

The Problem

Advanced chips are the raw material of AI power. Washington has restricted the best ones from China since October 2022, tightening the rules in October 2023 and December 2024,3 and the controls bite. DeepSeek's founder said in 2024 that money was never the lab's constraint: "bans on shipments of advanced chips are the problem."1

But the rules lag the hardware. DeepSeek trained its breakout V3 model on 2,048 Nvidia H800s,4 a chip Nvidia could sell in China until an October 2023 rule, written to stop "technical workarounds," covered it.5 Three leaks undercut the controls:

  1. The cloud has no fence. As written, "physical export controls do not apply to remote access," a House sponsor said in January 2026.6 A Shanghai AI startup gained access to about 2,300 of Nvidia's export-restricted Blackwell chips housed in Jakarta, a deal lawyers called legal.7 Rep. Bill Huizenga (R-Mich.) put it plainly: "you can't buy it, so you shouldn't be able to rent it either."6
  2. The first buyer isn't the last. In mid-2025, Nvidia billed 22% of its revenue to customers in Singapore, where buyers centralize invoicing while the products "are almost always shipped elsewhere."8 A license that checks the first buyer cannot see the last.
  3. The line keeps moving. In April 2025, Washington required a license for Nvidia's H20 "for the indefinite future," citing the risk of diversion to Chinese supercomputers.9 By August 2025 it had granted licenses, and officials expected 15% of the revenue, though no regulation codified that condition.10 In January 2026, Commerce opened the more powerful H200 to case-by-case review.11

Why legislation: Congress gave Commerce broad export power in the Export Control Reform Act of 2018,12 so much of the problem is a failure to use and fund that power, not a lack of it. Two gaps are real. The law does not reach remote access, which is why the House voted 369–22 in January 2026 to add it.13 And no statute requires notice to Congress before top chips are licensed to China, as the law requires before major arms sales.14 American leadership in AI rests on American chips; the rules guarding that lead should be written down and explained.

The Solution

A four-step staircase: each step stands alone, and each step up adds reach. Scope: advanced AI chips as Commerce defines them, from the H20 class up, and computing services built on them, for countries and buyers of concern such as China; consumer products and ordinary cloud services are excluded. A domestic chip registry is addressed separately.

Step 1 — Put exceptions on the record. Before licensing covered chips to a country of concern, Commerce publishes a national-security finding, including any payment terms, and notifies Congress 30 days ahead, as arms sales already require. Congress may block a license only by passing a joint resolution, never by a one-house veto, the model the House Foreign Affairs Committee advanced in January 2026.15

Step 2 — Know the final customer. Exporters vet the ultimate buyer, its owners, where the chips will run, and any resale, and must report credible evidence of diversion or tampering, as the Chip Security Act would require.16 Location-verification features phase in only where testing shows they work.

Step 3 — Close the cloud loophole. Give Commerce explicit power to license remote access to covered chips by restricted buyers, as the House-passed Remote Access Security Act would,13 with customer checks for large rentals and exemptions for consumer and low-risk services. Review chip thresholds every six months, so the next workaround does not wait for an annual rewrite.

Step 4 — Bring allies inside the fence. Align chip and chipmaking-tool controls with the allies who share America's chokepoints, share enforcement leads, and fast-track exports to partners with equal protections. The main multilateral forum, the Wassenaar Arrangement, decides by consensus and counts Russia as a member,17 so build the smaller "plurilateral" coalition the 2025 AI Action Plan calls for.2 Review yearly whether controls merely shift sales to substitutes.

Where to start: Step 1 is the floor; it costs industry nothing. Step 3 is the heart, because the cloud is the widest open door.

Administration and enforcement: BIS leads, with State, Defense, Homeland Security, and Justice. Commerce proposes rules within 180 days and phases in cloud duties after final rules. Congress funds more export control officers abroad and technical staff; existing export-law penalties apply, with new ones defined for cloud violations.

Risks and Mitigations

  • Lost sales: Controls cost American firms real money; Nvidia took a $4.5 billion charge when the H20 license requirement hit,18 and they may push China to build its own. Target only top-end chips, coordinate with allies, and review effects yearly; some lost sales are a security cost worth stating openly.
  • Tracking can backfire: After U.S. bills proposed mandatory chip features, China's government publicly questioned whether the H20 had "built-in vulnerabilities," Nvidia reports.18 Require location checks only where tests show they work and cannot be turned into a back door, though suspicion abroad may persist.
  • Overreach: Rules can sweep in research and lawful commerce. Publish thresholds and license criteria, provide appeals, and keep published research and ordinary cloud use outside the rules; a foreign-risk label must never become a proxy for ethnicity.

Similar Bills

Fit measures similarity to this proposal's mechanisms: High = direct precedent; Partial = useful component with material differences; Related = adjacent approach.

Federal

Proposal or bill Relevant provisions and fit Fit
Export Control Reform Act of 2018 — 50 U.S.C. ch. 58
Enacted Aug. 13, 2018 (Pub. L. 115-232)		 Existing licensing, end-use, and enforcement framework for all four steps. Foundation; no express remote-access authority and no advance notice to Congress for chip licenses. High
H.R. 6875 — AI OVERWATCH Act
Mast (R-FL) + 12 Republican cosponsors
Ordered reported with a substitute (42–2) · Jan. 21, 2026		 Introduced §2 requires licenses for covered chips to countries of concern, certification to Congress 30 days before approval, and a joint resolution of disapproval under arms-sale procedures. Direct precedent for Step 1; compares introduced text; the substitute was not reviewed. High
H.R. 3447 — Chip Security Act
Huizenga (R-MI), Foster (D-IL) + bipartisan cosponsors; Senate companion S. 1705, Cotton (R-AR)
Ordered reported with a substitute (42–0) · Mar. 26, 2026		 Introduced §4(a) requires location verification within 180 days and prompt reporting of credible evidence of diversion or tampering. Precedent for Step 2; compares introduced text. High
H.R. 2683 — Remote Access Security Act
Lawler (R-NY) + bipartisan cosponsors
Passed House 369–22 · Jan. 12, 2026; in Senate Banking		 Engrossed §2 adds "remote access," including through cloud services, to the activities Commerce may control under ECRA; §3 requires consultation with Congress before rules. Direct precedent for Step 3. High
H.R. 5885 — GAIN AI Act of 2025
Moolenaar (R-MI), Krishnamoorthi (D-IL)
Referred to committee · Oct. 31, 2025		 Requires licenses for advanced chips to countries of concern and certification that U.S. buyers had a right of first refusal. Related supply-priority tool; a Senate version passed as an amendment to the Senate's defense bill in October 2025. Related

State

None. The Constitution gives Congress power over foreign commerce,19 and export licensing is a federal function; we found no state bill on AI chip exports.

What this adds: The House has advanced the pieces one at a time: review of chip licenses, diversion reporting, and cloud controls. This proposal joins them into one staircase, puts every high-risk exception and its terms on the public record, and makes allied coordination and yearly effectiveness reviews a legal duty.

Notes

  1. Jordan Schneider et al., "Deepseek: The Quiet Giant Leading China's AI Race," ChinaTalk, November 27, 2024. Annotated translation of Liang Wenfeng's July 2024 interview with 36Kr's Waves; the full line is "Money has never been the problem for us; bans on shipments of advanced chips are the problem." ↩ ↩2

  2. The White House, America's AI Action Plan, July 2025, pp. 21–22. America and its allies "hold near-monopolies on many critical components and processes in the semiconductor manufacturing pipeline"; the plan calls for "plurilateral controls for the AI tech stack." ↩ ↩2

  3. Bureau of Industry and Security, interim final rules at 87 Fed. Reg. 62186 (October 13, 2022; announced October 7, 2022), 88 Fed. Reg. 73458 (October 25, 2023; announced October 17, 2023), and 89 Fed. Reg. 96790 (December 5, 2024; announced December 2, 2024). ↩

  4. DeepSeek-AI, "DeepSeek-V3 Technical Report," arXiv, revised February 18, 2025, §3.1: "trained on a cluster equipped with 2048 NVIDIA H800 GPUs." ↩

  5. NVIDIA Corporation, Form 8-K, October 17, 2023, listing the H800 among chips newly requiring licenses; 88 Fed. Reg. 73458 (October 25, 2023) adds a performance-density parameter "to prevent technical workarounds." ↩

  6. 172 Cong. Rec. H621–622 (daily ed. January 12, 2026) (statements of Rep. Lawler, "physical export controls do not apply to remote access of items," and Rep. Huizenga). ↩ ↩2

  7. Jowi Morales, "Chinese AI startup gets access to 2,300 banned Blackwell GPUs by exploiting cloud loophole," Tom's Hardware, November 14, 2025, summarizing a Wall Street Journal investigation. The startup is INF Tech; the operator is Indosat Ooredoo Hutchison. ↩

  8. NVIDIA Corporation, Form 10-Q for the quarter ended July 27, 2025, filed August 27, 2025, revenue note: Singapore was 22% of quarterly revenue by billing location. ↩

  9. NVIDIA Corporation, Form 8-K, April 15, 2025 (government notices of April 9 and April 14, 2025). ↩

  10. NVIDIA Corporation, Form 10-Q, filed August 27, 2025: licenses granted in August 2025; "USG officials have expressed an expectation that the USG will receive 15% of the revenue," but no regulation codified it. The Form 10-K filed February 25, 2026 repeats that no regulation was published. ↩

  11. Bureau of Industry and Security, "Department of Commerce Revises License Review Policy for Semiconductors Exported to China," January 13, 2026; 91 Fed. Reg. 1684 (January 15, 2026). Nvidia's Form 10-Q filed August 26, 2026 reports that H200 sales were "restricted by the PRC government" and made up less than 1% of data-center revenue. ↩

  12. Export Control Reform Act of 2018, 50 U.S.C. §§ 4801–4852 (Pub. L. 115-232, div. A, title XVII, subtitle B, August 13, 2018). ↩

  13. H.R. 2683, Remote Access Security Act, 119th Cong. § 2 (engrossed text); passed the House 369–22 on January 12, 2026 (Roll no. 13); referred to Senate Banking January 13, 2026. ↩ ↩2

  14. Arms Export Control Act § 36(b), 22 U.S.C. § 2776(b): a sale may not proceed if Congress enacts a joint resolution of disapproval within 30 days of certification (15 days for close allies). ↩

  15. H.R. 6875, AI OVERWATCH Act, 119th Cong. § 2 (introduced text); ordered reported with a substitute 42–2 on January 21, 2026. ↩

  16. H.R. 3447, Chip Security Act, 119th Cong. § 4(a)(2) (introduced text). ↩

  17. Wassenaar Arrangement, "About us," accessed September 23, 2026: 42 participating states, including the Russian Federation; "All Plenary decisions are taken by consensus." ↩

  18. NVIDIA Corporation, Form 10-K for fiscal 2026, filed February 25, 2026, risk factors ($4.5 billion H20 charge in the first quarter of fiscal 2026; China's questions about "built-in vulnerabilities"). ↩ ↩2

  19. U.S. Constitution, art. I, § 8, cl. 3 ("To regulate Commerce with foreign Nations"). ↩