Rule2023-28627
Preventing the Improper Use of CHIPS Act Funding; Revised Definition of “Material Expansion”
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 28, 2023
Effective
December 28, 2023
Issuing agencies
Commerce DepartmentNational Institute of Standards and Technology
Abstract
The Department of Commerce (the Department), through the National Institute of Standards and Technology, is amending the definition of "material expansion" in the September 25, 2023 final rule, Preventing the Improper Use of CHIPS Act Funding, to clarify that the construction of new semiconductor manufacturing facilities falls within the scope of the rule.
Full Text
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<title>Federal Register, Volume 88 Issue 248 (Thursday, December 28, 2023)</title>
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[Federal Register Volume 88, Number 248 (Thursday, December 28, 2023)]
[Rules and Regulations]
[Pages 89572-89574]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28627]
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DEPARTMENT OF COMMERCE
National Institute of Standards and Technology
15 CFR Part 231
[Docket No. 231218-0308]
RIN 0693-AB70
Preventing the Improper Use of CHIPS Act Funding; Revised
Definition of ``Material Expansion''
AGENCY: CHIPS Program Office, National Institute of Standards and
Technology, Department of Commerce.
ACTION: Final rule.
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SUMMARY: The Department of Commerce (the Department), through the
National Institute of Standards and Technology, is amending the
definition of ``material expansion'' in the September 25, 2023 final
rule, Preventing the Improper Use of CHIPS Act Funding, to clarify that
the construction of new semiconductor manufacturing facilities falls
within the scope of the rule.
DATES: This final rule is effective on December 28, 2023.
FOR FURTHER INFORMATION CONTACT: Vikram Viswanathan at (240) 309-9040
or <a href="/cdn-cgi/l/email-protection#b9d8cad2dad1d0c9caf9dad1d0c9ca97ded6cf"><span class="__cf_email__" data-cfemail="1677657d757e7f666556757e7f666538717960">[email protected]</span></a>. Please direct media inquiries to the CHIPS Press
Team at <a href="/cdn-cgi/l/email-protection#42323027313102212a2b32316c252d34"><span class="__cf_email__" data-cfemail="2f5f5d4a5c5c6f4c47465f5c01484059">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
The CHIPS Act, 15 U.S.C. 4651, et seq., established a semiconductor
incentives program (CHIPS Incentives Program) to incentivize, through
Federal funding, investments in the construction, expansion, and
modernization of facilities and equipment in the United States for the
fabrication, assembly, testing, advanced packaging, production, or
research and development of semiconductors, materials used to
manufacture semiconductors, or semiconductor manufacturing equipment.
The CHIPS Incentives Program is administered by the CHIPS Program
Office (CPO) within the National Institute of Standards and Technology
(NIST) of the Department.
On March 23, 2023, CPO published a proposed rule that requested
comment on defined terms used in the Act (including terms that will be
used in required agreements with covered entities), identified the
types of transactions that are prohibited under the Expansion Clawback
and Technology Clawback sections of the Act, and provided a description
of the proposed process for notification of certain transactions to the
Secretary (88
[[Page 89573]]
FR 17439). After considering extensive public comments, on September
25, 2023, CPO published a final rule Preventing the Improper Use of
CHIPS Act Funding (88 FR 65600). Among other issues, the final rule
addressed the Expansion Clawback, which prohibits the covered entity
and members of its affiliated group from engaging in any significant
transaction involving the material expansion of semiconductor
manufacturing capacity in a foreign country of concern. The final rule
also addressed the exceptions to this general prohibition.
The definition of ``material expansion,'' which is used both in the
general prohibition and in one of the exceptions, focused on the
expansion of ``existing'' semiconductor manufacturing facilities, which
created confusion as to whether the construction of entirely new
semiconductor fabrication facilities fell within the scope of the final
rule. This update to the final rule clarifies that new facilities are
included within the scope of the final rule.
Changes From the Final Rule
Definition of Material Expansion
The final rule defines ``material expansion'' as an ``increase of
the semiconductor manufacturing capacity of an existing facility by
more than five percent of the capacity memorialized in the required
agreement due to the addition of a cleanroom, production line or other
physical space, or a series of such additions.'' 15 CFR 231.108.
Defining material expansion in relation to ``an existing facility''
had the unintended effect of suggesting that the construction of new
semiconductor facilities fell outside the scope of the Expansion
Clawback. Such an interpretation would be inconsistent with the CHIPS
Act and the general restrictions of the Expansion Clawback, which
significantly limit the ability of covered entities to expand their
semiconductor manufacturing capacity in foreign countries of concern.
Indeed, CPO made clear in the proposed rule and in the preamble to the
final rule that the restrictions of the Expansion Clawback were
intended to apply to the construction of a new facility. In the
preamble of the proposed rule, CPO noted that the term ``material
expansion'' included ``the construction of new facilities and the
addition of new semiconductor manufacturing capacity and uses a
quantitative measure of 5 percent of existing capacity to provide clear
and predictable scoping.'' 88 FR 17439, 17441 (emphasis added).
Further, the definition in the proposed rule provides: ``Material
expansion means the addition of physical space or equipment that has
the purpose or effect of increasing semiconductor manufacturing
capacity of a facility by more than five percent or a series of such
expansions which, in the aggregate during the applicable term of a
required agreement, increase the semiconductor manufacturing capacity
of a facility by more than five percent of the existing capacity when
the required agreement was entered into.'' Id. at 17447. This
definition used the term ``facility'' generally, resulting in an
interpretation that a facility may be either new or existing.
Commenters also understood that the Expansion Clawback was intended
to address the construction of new semiconductor facilities. CPO
received 27 comment submissions, and a significant portion of those
comments related to material expansion. Numerous commenters noted that
the intent of the CHIPS Act was to allow existing facilities in a
foreign country of concern to continue to operate so that ongoing
operations would not be undermined and so funding recipients and could
realize the value of their prior investments. Commenters did not raise
significant concerns with placing restrictions on the construction of
new facilities, and in some instances suggested that the definition of
material expansion be modified to clarify that it was triggered by new
construction (``material expansion means building new cleanroom space
that does not exist on the date of the [award];'' material expansion
should apply to ``building new clean room/physical space''). There was
a general understanding that the Expansion Clawback was intended to
address new construction.
In the final rule, CPO provided explanations that reflect the
intent for the Expansion Clawback to address the construction of new
facilities. In response to comments on the definition of Significant
Renovations, CPO noted that ``[w]ithout the concept of significant
renovations, covered entities could evade the expansion prohibition
simply by significantly expanding an existing facility rather than
constructing a new facility.'' 88 FR 65600, 65607. This response
assumes that the construction of new facilities was addressed by the
Expansion Clawback, and that the concept of significant renovations was
needed to prevent circumvention of that prohibition.
In this rule, the modified definition of ``material expansion''
better reflects the intended scope of the Expansion Clawback.
Classification
Administrative Procedure Act (APA)
Pursuant to 5 U.S.C. 553(a)(2), the provisions of the APA requiring
notice of proposed rulemaking and the opportunity for public
participation are inapplicable to this rule, which places certain
limitations on funding recipients, because it relates to ``public
property, loans, grants, benefits, or contracts.'' \1\ Additionally,
although it was not required to do so, the Department, through the
March 23, 2023, proposed rule, provided advance notice and opportunity
for public comment on the definition of the term ``material
expansion.''
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\1\ The provisions of this amendment implement the Expansion
Clawback provisions of the Act and are also thus exempt from the
rulemaking provisions of the APA pursuant to 15 U.S.C.
4652(a)(6)(A)(iii).
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This final rule simply corrects an inadvertent omission in the
definition of ``material expansion,'' thereby accurately reflecting the
Department's explanation and discussion of public comments in the
September 25, 2023, final rule. Additional advance notice and
opportunity for comment would neither provide new information to the
public nor inform any agency decision-making regarding the defined
term. Finally, additional opportunity for public comment would be
contrary to the public interest, under 5 U.S.C. 553(b)(B), because this
rule provides clarity to applicants and awardees.
Executive Order 13132
This rule does not contain policies with federalism implications as
that term is defined in Executive Order 13132.
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
final rule is significant for purposes of Executive Order 12866.
Regulatory Flexibility Act
Because a notice of proposed rulemaking and an opportunity for
public comment are not required to be given for this rule by 5 U.S.C.
553(a)(2), the analytical requirements of the Regulatory Flexibility
Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no
regulatory flexibility analysis is required and none has been prepared.
Paperwork Reduction Act
This action does not contain a collection of information
requirement for the purposes of the Paperwork Reduction Act (44 U.S.C.
3501, et seq.).
[[Page 89574]]
List of Subjects in 15 CFR Part 231
Business and industry, Computer technology, Exports, Foreign Trade,
Government contracts, Grant Programs, Investments (US investments
abroad), National defense, Research, Science & Technology, and
Semiconductor chip products.
For reasons set out in the preamble, 15 CFR part 231 is amended as
follows:
PART 231--CLAWBACKS OF CHIPS FUNDING
0
1. The authority citation for 15 CFR part 231 continues to read as
follows:
Authority: 15 U.S.C. 4651, et seq.
0
2. Revise Sec. 231.108 to read as follows:
Sec. 231.108 Material expansion.
Material expansion means:
(1) with respect to an existing facility, the increase of the
semiconductor manufacturing capacity of that facility by more than five
percent of the capacity memorialized in the required agreement due to
the addition of a cleanroom, production line or other physical space,
or a series of such additions; or
(2) any construction of a new facility for semiconductor
manufacturing.
Tamiko Ford,
NIST Executive Secretariat.
[FR Doc. 2023-28627 Filed 12-27-23; 8:45 am]
BILLING CODE P
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