New 'RESTRICT Act' Imposes Five-Year Ban on Advanced Chip Exports to China, Requires Strict Licenses for Others

The Restoring Export and Security Trade Restrictions for Integrated Circuit Technologies Act, or the RESTRICT Act, is a laser-focused bill aimed squarely at controlling the flow of high-end computing power out of the U.S. For the next five years, this law puts a hard stop on exporting certain advanced integrated circuits—think the fastest chips used in data centers and AI—to specific “countries of concern,” which the bill explicitly defines to include China, Hong Kong, and Macau. For any other “covered country,” U.S. exporters will need a license from the Commerce Department, and that license must be denied if the end recipient is tied to one of those countries of concern.

The Chips That Matter

When we talk about “advanced integrated circuits,” the bill isn't vague; it points directly to specific technical classifications (Export Control Classification Numbers 3A090 or 4A090). These are the chips that power the most sophisticated data centers—the digital infrastructure that handles massive computing tasks. If a chip is functionally equivalent or substantially similar to those classified chips, or is simply marketed for data center use, it falls under the new restrictions. This specificity is crucial for U.S. tech manufacturers: they now have clear rules about which products are off-limits, but they also face the challenge of determining if a new chip design is “functionally equivalent” to the restricted list, which could be a gray area until the Commerce Department issues guidance.

The Licensing Tightrope

For U.S. companies that export these chips to countries not on the “concern” list (the “covered countries”), the new requirement is a mandatory license. More importantly, the bill mandates that the Commerce Department must deny that license if the ultimate recipient is headquartered in, or whose parent company is based in, a country of concern. This means U.S. exporters need to institute much tougher “know your customer” standards, tracing the ownership structure of their international clients much further up the chain than before. For a tech distributor, this adds a significant layer of compliance and administrative cost, turning what used to be a standard transaction into a complex regulatory hurdle.

Becoming an “Approved” Exporter

Recognizing that some U.S. companies need to use these chips globally while maintaining security, the bill carves out an exemption for “approved United States persons.” If you can get this approval, you can export the chips to countries not of concern, provided the chips remain under your company’s ownership and control. However, the path to becoming “approved” is steep. The regulations, which must be finalized within 90 days, require U.S. persons to meet strict standards: no more than 10% of your company’s ultimate beneficial ownership can be held by any entity residing in a country of concern. Furthermore, you must implement rigorous physical and cybersecurity measures, and submit to annual audits to prove compliance. This is a huge lift, especially for smaller tech firms or data center operators, but it’s the price of admission for those who need global flexibility while maintaining national security standards.

Real-World Impact and Implementation Challenges

The RESTRICT Act’s primary goal is clear: prevent advanced computing power from reaching geopolitical rivals. For the average person, this bill reinforces the ongoing decoupling of high-tech supply chains. For U.S. chip manufacturers, it means a guaranteed loss of a major market for their most advanced products for five years, potentially slowing down R&D investment or forcing a pivot to different markets. The biggest challenge lies in implementation. The Commerce Department has 90 days to define the security and ownership standards for “approved” persons, and the Under Secretary has the power to update the definition of “advanced integrated circuit” every two years. If those new definitions are too broad, they could inadvertently restrict the export of more common technology, creating immediate disruption for U.S. companies that rely on international sales to stay competitive.