Contribution of the Czech Confederation of Industry to the AI Diffusion Rule Consultation
The Confederation of Industry of the Czech Republic, as a representative of business and the largest employers' association in the Czech Republic, whose members are striving for the development of new technologies and for the continuation of Czech-US cooperation, calls for a reassessment of the proposal. We ask the Bureau of Industry and Security to apply the existing country groups in the AI Diffusion Rule.
The Confederation represents a broad spectrum of companies, including those connected to the American market, whether as investors in the USA or as businesses cooperating with American partners in modern technologies. A significant number of distinguished American companies, which conduct important business in the Czech Republic, are members of the Confederation.
The USA is a strategic partner for the Czech Republic. US investors in the Czech Republic include companies from defence, aerospace, telecommunications and IT industries. At the same time, the Czech capital has created over two thousand jobs in the United States over the past five years. And our companies have invested more than six billion dollars into the US economy.
For the Czech Republic, securing access to advanced semiconductor chips is paramount for its future in artificial intelligence development. These chips are the backbone of AI technologies, powering everything from data processing to complex machine learning algorithms. Ensuring access to cutting-edge chips is not just about technological advancement; it's about maintaining economic competitiveness, fostering innovation, and securing a strategic position in the evolving digital landscape. Furthermore, it is part of broader efforts within the country to enhance economic security and therefore continue to be trusted partner and ally on all levels.
Artificial intelligence and semiconductors are becoming a priority for the Czech Government. The Czech government, Czech and foreign companies, including American ones, are trying to develop these areas and strengthen their competitiveness.
The Bureau of Industry and Security’s (BIS) interim final rule on AI diffusion introduces a new system for classifying destination countries, which determines how export controls apply to AI-related technologies. While the objective is clear, creating an entirely new country classification is unnecessary, BIS should align these classifications in the AI Diffusion Rule with the existing country sets in Supplement No. 1 to Part 740 of the Export Administration Regulations (EAR). This would simplify regulations, reduce compliance costs for businesses, and ensure a more consistent approach to export controls while still meeting the national security goals of the AI diffusion rule.
We believe that using the well-established country groups leads to higher efficiency and lower regulatory complexity while reflecting the national security risks. The current system means consistency for the industry related to lower administrative uncertainty. It will better contribute to AI diffusion and coordination. As a committed NATO member and a close US ally and security and economic partner, it is concerning that allied European nations, including the Czech Republic, have been inexplicably excluded from the least restrictive destination country set under the interim final rule.
Moreover, this exclusion contradicts previous BIS decisions on export controls for other sensitive technologies, semiconductor manufacturing equipment or high-performance computing. For example, in prior rulemakings related to semiconductor manufacturing equipment and high-performance computing, BIS has consistently placed NATO members and other trusted partners within preferential licensing frameworks. Rules like “Advanced Computing Rule” (87 FR 62186) or “Semiconductor Manufacturing Equipment Controls” (88 FR 73458) are concrete examples showing that existing country groupings provide a reliable and effective mechanism for export control implementation.
The introduction of an entirely new set of country groupings also imposes significant compliance costs on industry. Exporters are already required to navigate complex EAR country groups when determining licensing requirements for various controlled items. The new destination country sets require exporters to conduct dual classification efforts—first under the EAR’s established country groups and again under the AI diffusion rule destination country sets. Moreover, it increases administrative costs associated with tracking and reporting compliance with an unfamiliar framework; and heightens the risk of inadvertent non-compliance due to inconsistencies between the AI diffusion rule and other BIS regulations.
At the same time, there are risks associated with the adoption of this framework, which could include, for example, forcing close US allies to seek AI collaborations elsewhere, which could put American companies at a disadvantage. This approach would needlessly hinder technological progress and international cooperation.
The export risks associated with countries like the Czech Republic are minimal and should be managed within the existing Country Group A, which includes NATO allies, multilateral export control partners, and key economic allies.
In conclusion, we would like to summarize that we fully understand the aim of the AI diffusion rule to balance national security priorities with economic and technological leadership. However, the introduction of a destination country system, which excludes the closest allies, weakens these goals. We believe that by aligning the AI diffusion rule with the existing EAR country groups, BIS can improve regulatory efficiency, strengthen international partnerships, reduce compliance challenges, and ensure national security effectiveness, while the current EAR’s country groups already reflect thorough national security assessments.
Given these conclusions, we urge BIS to revise the AI diffusion rule to align destination country sets with the country groups in Supplement No. 1 to Part 740 of the EAR.