AI Chip Export Controls Now Follow the Headquarters, Not the Shipping Address

TL;DR: Since BIS guidance of 31 May 2026, US licensing for advanced AI chips turns on where a buyer's ultimate parent is headquartered, not only on where the chips are shipped. A seller, distributor or data centre operator that screens by delivery country alone can now ship legally to a country and still break the rules on the customer.

Key takeaways:

• BIS guidance dated 31 May 2026 confirms that a licence is needed for advanced computing items going to entities with an ultimate parent headquartered in Country Group D:5, which includes China, or in Macau, wherever the entity sits.
• The UAE moved into Country Group A:5 from 10 July 2026, yet the same rule keeps the headquarters test for Chinese-parented entities in the UAE.
• Since 15 January 2026, licence applications for H200-class chips to China get case-by-case review, but in July a senior Commerce official said very few shipments had taken place.
• The guidance does not address cloud access, and a reported $7 billion lease would give Tencent about 100,000 AI chips in Oracle data centres in Southeast Asia.

On Sunday 31 May 2026, the Bureau of Industry and Security published guidance that changed who counts as a Chinese customer. The guidance says a licence is required for advanced computing items going to an entity with an ultimate parent headquartered in China or Macau, "even if the entities themselves are located outside" those places.[^1][^2] The rule itself was not new. What changed was that BIS said it would enforce it.

The Headquarters Test, Rule by Rule

The requirement dates from a November 2023 rule and was later moved into the AI Diffusion Rule.[^2] When BIS said in May 2025 that it would not enforce that rule, many in the industry read the headquarters test as suspended too.[^3][^2] The 2026 guidance says it was not.

• The loophole and its size. Reuters reported that subsidiaries of Chinese firms in places such as Malaysia had been buying chips under that reading. One unnamed chip industry source put the volume "in the hundreds of thousands."[^4] That is a single anonymous estimate. Chris McGuire, who has written on chip controls for the Council on Foreign Relations, told Al Jazeera that Chinese companies had been buying "very likely at scale."[^5]
• The carve-out for data centres. Operators of data centres that are "otherwise engaged in activities consistent with the EAR" do not have to stop using or servicing chips they already hold, until BIS says otherwise.[^1]
• The UAE. A rule effective 10 July 2026 removed the UAE from Country Groups D:3 and D:4 and added it to A:5. The UAE government and approved companies get licence-free access to advanced computing items.[^6] The same rule keeps the licence requirement for entities with a D:5 or Macau parent "wherever located."[^6] Morgan Lewis concluded that the rule "does not generally ease exports of advanced computing items to the UAE."[^7]
• China itself. From 15 January 2026, BIS reviews licences for chips below set performance limits, including the Nvidia H200, case by case. Total exports to China may not exceed 50 percent of what goes to US customers, and buyers must screen their own customers.[^8][^9] On 14 July, Under Secretary Jeffrey Kessler told Congress that "very few shipments against licenses for H200s and equivalents have taken place."[^10][^11]

Put together, the map has changed. A friendly destination no longer settles whether a licence is needed. The parent company does.

Where Know Your Customer Checks Break Down

Most export screening asks three questions: what is the item, where is it going, and is the buyer on a list. The May guidance adds a fourth: who owns the buyer, all the way up. Ownership is harder to check than a shipping address, and in this field it has been gamed often.

What the record shows: on 1 October 2026 the Justice Department announced charges against a California man accused of smuggling more than $300 million of export-controlled servers to China. More than $176 million of that came from two firms based in Malaysia, and the servers moved through Malaysia and Singapore, where no licence was required.[^12][^13] A US seller could have cleared every one of those buyers on destination alone.

What we infer: the headquarters test closes part of that gap and leaves another one open. The guidance covers exports to a Chinese-parented entity. It does not mention cloud services or remote access.[^1] Tencent has reportedly agreed a five-year lease, worth about $7 billion, for roughly 100,000 AI chips in Oracle data centres across Southeast Asia.[^14][^15] If that deal is as reported, the chips stay in a US company's hands and the compute goes to a Chinese one. The House passed a bill aimed at remote access, 369-22, on 12 January 2026.[^16] Until a version becomes law, geopolitical risk for a data centre operator sits in its rental contracts, not its shipping records.

There is also a date to watch. The separate BIS Affiliates Rule, which extends Entity List limits to companies 50 percent or more owned by listed parties, is stayed only until 9 November 2026.[^17] The US Treasury has announced that the suspension will run to 10 January 2027, but as of 22 October BIS had not published a Federal Register notice to that effect.[^18] Our note on classification drift covers what that rule does to contracts already signed.

An AI Chip Export Controls Checklist for Sellers and Cloud Operators

BIS's own May 2025 guidance on diversion listed red flags for new customers and for infrastructure-as-a-service providers. One of them is a customer that will not answer requests for information.¹² Those red flags now carry more weight, because the parent company decides the licence question.

1. Trace every buyer to its ultimate parent. Record where the top of the chain is headquartered. A Singapore address and a Chinese parent now mean a Chinese customer for advanced computing items.³
2. Re-screen the existing book. Customers cleared during the year when the rule was widely read as unenforced should be checked again, starting with those in Malaysia, Singapore and the Gulf.⁴⁵
3. Treat the UAE approval list as narrow. Licence-free access applies to the UAE government and named approved entities. G42 and Core42's approval is set to expire on 6 April 2027 unless BIS extends it.⁶
4. Write ownership changes into contracts. A buyer bought by a Chinese parent mid-contract becomes a licensed customer. Require notice of any change of control and a right to suspend delivery.
5. Map who rents the compute. For data centre and cloud operators, list tenants by parent headquarters even though current guidance does not require it, because it is the gap lawmakers are already trying to close.⁷

The ownership chain analysis in our sanctions screening note applies here with a different list. For the wider technology picture, see the technology sector page.

Fortius Intel note: The open question is whether BIS will apply the same headquarters test to compute that is rented rather than shipped. If the reported Tencent lease goes ahead and draws no response, the answer for 2027 is no, and the control will cover hardware that Chinese firms increasingly do not need to own.

Methodology: this note draws on BIS guidance, press releases and Federal Register rules, Justice Department filings, the House roll call record, reporting from Reuters, Al Jazeera, Bloomberg and TrendForce, and law firm analysis from Holland & Knight, Morgan Lewis, Pillsbury and Akin Gump. Each figure was checked against a second independent source where one exists. This is not legal advice.

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Footnotes

1. Akin Gump, AI law and regulation tracker entry on the AI Diffusion Rule rescission and new guidance, 13 May 2025, https://www.akingump.com/en/insights/ai-law-and-regulation-tracker/bis-rescinds-ai-diffusion-rule-and-issues-new-guidance (retrieved 5 November 2026). Source for: the BIS guidance on diversion red flags for new customers and infrastructure-as-a-service providers, including a customer unwilling to answer requests for information. ↩

2. Bureau of Industry and Security, press release on the rescission of the AI Diffusion Rule, 13 May 2025, https://www.bis.gov/press-release/department-commerce-announces-rescission-biden-era-artificial-intelligence-diffusion-rule-strengthens (retrieved 5 November 2026). Source for: the instruction not to enforce the AI Diffusion Rule; guidance on protecting supply chains against diversion tactics. ↩

3. Bureau of Industry and Security, "Guidance Regarding Enforcement of License Requirements for Advanced Computing Items for Entities Headquartered in Country Group D:5 and Macau," 31 May 2026, https://www.bis.gov/media/documents/bis-guidance-may-31-2026.pdf (retrieved 5 November 2026). Source for: the licence requirement for entities headquartered in, or with an ultimate parent headquartered in, Country Group D:5 or Macau, even if located outside; the data centre carve-out "until further notice from BIS"; the absence of any reference to cloud or remote access. ↩

4. Reuters (via The Star), report on the US move to halt AI chip shipments to Chinese firms outside China, 1 June 2026, https://www.thestar.com.my/business/business-news/2026/06/01/us-takes-step-to-halt-nvidia-ai-chip-shipments-to-chinese-firms-outside-china (retrieved 5 November 2026). Source for: subsidiaries based in places such as Malaysia; the anonymous industry estimate "in the hundreds of thousands." The estimate has no independent cross-check. ↩

5. US Department of Justice, press release on the arrest of a California man for server smuggling, 1 October 2026, https://www.justice.gov/opa/pr/california-man-arrested-smuggling-more-300-million-export-controlled-computer-servers-china (retrieved 5 November 2026). Source for: more than $300 million of servers; more than $176 million from two Malaysia-based firms; shipment to countries such as Malaysia and Singapore where no licence was required; indictment returned on 29 September 2026. These are allegations, not findings. ↩

6. Federal Register, Bureau of Industry and Security, "Enhanced Favorable Treatment for the United Arab Emirates Under the Export Administration Regulations," 91 FR 43034, 14 July 2026, https://www.federalregister.gov/documents/2026/07/14/2026-14132/enhanced-favorable-treatment-for-the-united-arab-emirates-under-the-export-administration (retrieved 5 November 2026). Source for: effective date of 10 July 2026; removal from D:3 and D:4 and addition to A:5; licence-free access for the UAE government and approved entities; the requirement for D:5 or Macau parented entities "wherever located"; the G42 and Core42 authorisation expiring 6 April 2027 absent further notice. ↩

7. Office of the Clerk, US House of Representatives, Roll Call 13 (H.R. 2683, Remote Access Security Act), 12 January 2026, https://clerk.house.gov/evs/2026/roll013 (retrieved 5 November 2026). Source for: House passage by 369-22 on 12 January 2026. ↩