In a strategic policy shift, the US Department of Commerce has abruptly withdrawn the much-anticipated AI Diffusion Rule, just a day before its enforcement deadline. At the same time, the government has ramped up restrictions on the export of high-performance AI chips, signaling a recalibrated approach to managing artificial intelligence technology and its global dissemination.
AI Diffusion Rule Withdrawn
The AI Diffusion Rule, introduced under the Biden administration, was designed to regulate how advanced AI technologies, including model weights and cloud computing access, could be exported abroad. It proposed a tiered system for countries:
- Tier 1: Trusted allies like Japan and South Korea with minimal restrictions.
- Tier 2: Nations like India, Mexico, and Portugal would face moderate restrictions.
- Tier 3: Countries already under arms embargoes, such as China and Russia, would face the harshest limitations.
Under the rule, countries in Tier 2 were expected to face strict quotas on AI chip imports and surveillance over high-performance computing capabilities. It also included provisions to monitor storage and export of AI model weights, aiming to keep advanced AI systems within allied nations.
However, opposition from top US tech companies, such as Nvidia, Microsoft, and Oracle, was swift and vocal. These firms warned the rule would stifle innovation, burden businesses with complex regulations, and damage America’s global competitiveness without effectively stopping adversarial nations from acquiring AI capabilities through indirect means.
Concerns also mounted from Tier 2 countries, many of which viewed their classification as diplomatically insulting. There was growing anxiety that the rule could drive them to seek alternatives from other nations, potentially China.
In light of this, the Department of Commerce has ordered the Bureau of Industry and Security (BIS) to officially rescind the rule, with a Federal Register notice to follow. According to Under Secretary Jeffery Kessler, the administration aims to build a more inclusive AI export policy, one that protects national security without alienating key partners.
Enhanced AI Chip Export Controls
While the AI Diffusion Rule has been scrapped, the US has simultaneously introduced tighter measures to control semiconductor exports:
- Ban on Huawei Ascend chips: The US has now clarified that the use of Huawei’s AI chips, globally, is restricted under existing export laws.
- Warnings on AI model training in China: The government has issued fresh advisories on the use of US-origin AI chips in training or deploying Chinese AI models.
- Supply chain security: American firms have been given updated guidance on securing their supply chains to prevent technology leaks.
These steps are part of a broader effort to maintain US dominance in AI while shielding critical technologies from potential misuse by adversarial nations.
What’s Next?
Though the AI Diffusion Rule is no longer moving forward, officials have hinted at a future replacement regulation that balances innovation with security. For now, the focus is on fostering domestic AI development and securing technological infrastructure.
The decision is expected to be welcomed by US tech firms concerned about regulatory burdens, even as it introduces new export barriers with geopolitical implications. This dual strategy reflects Washington’s ongoing attempt to lead the AI race while carefully managing global partnerships.