The Trump administration is drafting a new export control rule to close a loophole that allows Chinese companies to access advanced AI chips through data centers in countries such as Thailand and Singapore, according to The Information1,2. The Department of Commerce could share the proposed rule with trade groups for feedback as early as September.
The rule targets remote access to advanced AI compute hosted in countries not subject to the same export restrictions as China. One catalyst for the effort: Michael Kratsios posted on X in July alleging that Moonshot used distilled U.S. models to train its Kimi K3 model through Nvidia-equipped servers in Thailand.
The proposed regulation confronts a structural enforcement gap. An attorney at Baker McKenzie told The Information that it is widely acknowledged the Commerce Department cannot enforce a regulation on remote access, given that the agency has traditionally regulated the transportation of physical goods. One mechanism under consideration is know-your-customer checks, which the Biden administration put into effect through the Foundry Due Diligence Rule in early 2025. The Trump administration has said it will not enforce that rule.
The broader export control landscape remains unsettled. Soon after Donald Trump began his second term in 2025, the White House announced it would undo the Biden-era AI Diffusion Rule. That rule is still technically in effect, but the Commerce Department has said it will not enforce it in the interim. In March, the Commerce Department issued a statement about a tiered licensing structure for advanced AI chip exports, but the rule was revoked a little over a week later following pushback from the U.S. AI industry. Export controls are currently governed mainly by 2022-era rules that restrict Chinese access to advanced AI chips and advanced semiconductor manufacturing tools such as EUV lithography machines.
U.S. House members have called on the Trump administration to enforce the export controls that Joe Biden introduced at the end of his term in early 2025. Separately, Taiwan has taken enforcement action against alleged smugglers of Nvidia's most advanced AI chips to China: in July, one Nvidia employee was detained in Taiwan on suspicion of falsifying documents, and the Taiwanese government indicted nine people in relation to Supermicro servers being smuggled to China.
ANALYSIS The proposed rule would represent a shift from controlling physical chip shipments to regulating remote compute access, a domain where the Commerce Department has limited precedent and, by its own legal community's admission, limited enforcement tools. The administration faces a tension between tightening controls on Chinese AI access and its own pattern of rolling back Biden-era enforcement mechanisms, including the AI Diffusion Rule and the Foundry Due Diligence Rule, that were designed to address similar gaps.