What is FDRP and Why it May Be Relevant to Your Company?
Question: What is FDRP and why should we be concerned about US export control rules?
Answer: The Foreign Direct Product Rule(the “FDPR”), used by the US Commerce Department’s Bureau of Industry and Security, expands the reach of the US export controls. It allows the US to assert jurisdiction over products manufactured outside of the US that contain or are the direct product of the specified US-originated software or technology. With respect to exports to China, the FDPR has been expanded to encompass supercomputers and advanced computing components. Any company exporting such products to China should have robust “know your supplier” procedures to make sure that none of the US technology has been used in the design of its products to be exported to China.
In light of intensified competition between China and the US, it is expected that the US export controls, and application of the FDRP in particular, will become one of the most powerful tools countering China’s technological rise. It is possible that similar restrictions will also be introduced in other areas deemed strategic or posing national security threat, such as biotechnology or artificial intelligence. In general, export controls, along with the use of sanctions, will be increasingly used by the US, and Israeli companies with US and China ties should be mindful of these developments.
Question: What is FDRP and why should we be concerned about US export control rules?
Answer: The Foreign Direct Product Rule(the “FDPR”), used by the US Commerce Department’s Bureau of Industry and Security, expands the reach of the US export controls. It allows the US to assert jurisdiction over products manufactured outside of the US that contain or are the direct product of the specified US-originated software or technology. With respect to exports to China, the FDPR has been expanded to encompass supercomputers and advanced computing components. Any company exporting such products to China should have robust “know your supplier” procedures to make sure that none of the US technology has been used in the design of its products to be exported to China.
In light of intensified competition between China and the US, it is expected that the US export controls, and application of the FDRP in particular, will become one of the most powerful tools countering China’s technological rise. It is possible that similar restrictions will also be introduced in other areas deemed strategic or posing national security threat, such as biotechnology or artificial intelligence. In general, export controls, along with the use of sanctions, will be increasingly used by the US, and Israeli companies with US and China ties should be mindful of these developments.
