Foreign Direct Product Rules

The license requirement referenced in footnote 1 to Supplement No. 4 to part 744 of the EAR was added in the August 2020 FDP rule. The subsequent February 2022 rule moved the license requirement to § 744.11(a)(2) and consolidated the provisions for Foreign Direct Product in §734.9 (Foreign-Direct Product (FDP) Rules. The Foreign-Produced Direct Product Rule as it relates to the Entity List is now described in § 734.9(e) of the EAR and based on: (1) whether the foreign-produced item (see § 734.9(e)(1) of the EAR): (i) is the direct product of “technology” or “software” subject to the EAR and classified under one of the specified Export Control Classification Numbers (ECCN); or (ii) is produced by any plant or major component of a plant that is located outside the United States, when the plant or major component of a plant itself is a direct product of U.S.-origin “technology” or “software” and classified under one of the specified ECCNs; and (2) there is knowledge that (see § 734.9(e)(2) of the EAR): (i) the foreign-produced item will be incorporated into, or will be used in the “production” or “development” of any “part,” “component,” or “equipment” produced, purchased, or ordered by a footnote 1 designated entity; or (ii) a footnote 1 designated entity is a party to any transaction involving the foreign-produced item, e.g., as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user.”

Yes. The scope of the rule applies to non-U.S. companies only. The rule imposes license requirements on any foreign-produced items that are subject to the FDP rule.

Yes, the August 2020 rule changed the licensing review policy. License applications for foreign-produced items subject to the EAR under § 734.9(e) that are capable of supporting the “development” or “production” of telecom systems, equipment and devices at only below the 5G level (e.g., 4G, 3G, etc.) will be reviewed on a case-by-case basis (see § 744.11(a)(2) of the EAR). All other license applications will be reviewed using the license review policy in the license requirement column of the Entity List for each footnote 1-designated entity, which is presumption of denial.

No. The rule applies to any item that meets the criteria of §734.9(e)(1) of the EAR.

Such a foreign-produced item could be within the scope of § 734.9(e)(ii), which applies to items “produced by” equipment described in that paragraph. Thus, if the equipment (which includes testing equipment) covered by § 734.9(e)(ii) is used to produce the foreign-produced item, such an item is covered.

Yes, it applies to both finished and unfinished wafers.

If the wafer meets the criteria of § 734.9(e)(1) and the wafer maker has “knowledge” that a footnote 1 designated entity is a party to the transaction involving the finished integrated circuit or higher-level assembly incorporating such wafer, then a license is required to export from abroad the wafer to the integrated circuit manufacturer. Either the wafer maker or the integrated circuit manufacturer may apply for the license, see Q17 through Q21 below.