- Lead. The US Commerce Department’s Bureau of Industry and Security has circulated a draft rule that would bar Chinese firms from renting American artificial intelligence chips through data centres in third countries such as Thailand and Singapore, targeting a gap in export controls that already restrict direct hardware sales to China.
- Fact. The House passed the Remote Access Security Act by a 369-to-22 vote in January 2026, providing legislative backing for closing the loophole, but the bill has been sitting in the Senate Banking Committee without a floor vote.
- Stake. Export-control lawyers say BIS may lack the statutory authority to police remote access without the Senate passing that legislation — leaving the draft rule’s legal standing uncertain even if it is finalised.
US export controls have restricted direct shipments of high-performance AI chips to China since 2022, but enforcement has struggled to keep pace with a workaround: Chinese firms renting compute from data centres in Southeast Asia and the Gulf that are not themselves subject to the restrictions. Commerce reportedly shared a draft rule addressing this gap with industry trade groups in September 2026, according to AI Weekly. The rule would impose licensing requirements on cloud computing providers that allow Chinese entities to access US-origin AI hardware remotely.
The Loophole Under Scrutiny
The existing controls focus on where chips are shipped and who takes physical possession of them. A Chinese firm renting GPU compute-hours from a data centre in Malaysia or the UAE does not technically receive a hardware export — the chips stay in place — which has allowed training of frontier AI models at scale without triggering current BIS licensing requirements. Commerce’s January 2026 rule moved H200- and MI325X-class chips to case-by-case review for China and required exporters to identify remote end users in countries of concern, but enforcement of the remote-use element has been limited.
The draft rule being circulated reportedly goes further, treating cloud-delivered AI compute as functionally equivalent to a hardware export when the end user is a Chinese entity. If finalised, data centres in countries outside the US that host US-origin chips would face disclosure requirements and potential denial orders when Chinese customers seek access.
Legal and Congressional Context
The statute question is not trivial. Export-control attorneys cited by AI Weekly argue that BIS’s authority under the Export Control Reform Act covers physical exports but does not clearly extend to intangible services delivered remotely. The Remote Access Security Act, which passed the House 369-22 in January, would give BIS explicit statutory authority to regulate cloud-based AI compute access by entities of concern. That bill’s stall in the Senate Banking Committee leaves Commerce in the position of trying to stretch existing authority in ways that could face legal challenge from cloud providers.
The regulatory push reflects a broader tension in Washington’s China technology strategy: existing controls have slowed but not stopped China’s access to frontier compute capacity, and the AI chip smuggling cases that have emerged this year — including a $300 million GPU diversion ring charged in California — show that both direct and indirect supply chains are actively circumventing restrictions.
Industry Reaction and What Comes Next
Cloud providers with significant infrastructure in Southeast Asia and the Gulf — including subsidiaries of US hyperscalers — would face compliance costs under the draft rule, since it would require them to screen customers for Chinese-entity ties before provisioning AI compute. Industry groups have pushed back on the draft’s scope, arguing that the rule as written could chill legitimate third-country customers who are not Chinese and that enforcement would be technically difficult to implement without a clear customer-verification standard.
Commerce has not set a public comment deadline, and the draft has not been formally published in the Federal Register. Whether the rule moves toward finalisation before the new Congress convenes in January — or whether it waits for the Senate to act on the Remote Access Security Act — will determine how quickly the loophole gets closed, and whether the broader US AI chip containment strategy can keep pace with the compute-rental market it is trying to control.