The Foreign Direct Product (FDP) rule is the part of U.S. export law that reaches goods made entirely outside the United States. Ordinarily, U.S. export controls apply to items that are U.S.-origin or contain enough U.S. content. The FDP rule extends that jurisdiction one step further: if a foreign-made item is the “direct product” of certain controlled U.S. technology or software, or if it is made by a plant or major component of a plant that is itself a direct product of U.S.-origin tools, then the foreign item can be subject to the U.S. Export Administration Regulations (EAR) even though it never physically passed through the United States. The leverage comes from the fact that so much of the world's chipmaking technology, software, and equipment traces back to U.S. origin.

Applied to semiconductors, the FDP rule is the instrument that gives U.S. controls global reach. The December 5, 2024 interim final rule (89 FR 96790) is explicit that this is the design intent. In describing what it does, the Bureau of Industry and Security (BIS) states that it is creating new FDP rules for certain commodities for a specific purpose.

"creating new Foreign Direct Product (FDP) rules for certain commodities to impair the capability to produce ``advanced-node integrated circuits'' (``advanced-node ICs'') by certain destinations or entities of concern"— Bureau of Industry and Security, 89 FR 96790 (Dec. 5, 2024), source

Why the rule reaches foreign-made tools and chips

The practical effect is that a piece of semiconductor manufacturing equipment, or an advanced chip, built in a third country can still require a U.S. license if it is the direct product of specified U.S. technology — for example, when the equipment is destined for use in the development or production of advanced-node integrated circuits that meet the parameter set out in the EAR's definition. The same rule pairs the FDP additions with new controls on semiconductor manufacturing equipment and related items, and with the high-bandwidth-memory control discussed elsewhere in the sector. The rule also revised the EAR's definition of “advanced-node integrated circuit,” including how the criterion applies to DRAM, so that the FDP reach attaches to a precisely defined class of advanced chips rather than a vague category.

This is why coverage of export controls that stops at “the U.S. restricted exports to China” misses the structure. The FDP rule is what makes those restrictions extraterritorial. Without it, a company could simply manufacture a controlled item abroad to escape U.S. jurisdiction; with it, the use of U.S.-origin technology or tooling anywhere in the production chain can pull the foreign-made result back under U.S. control. The agency frames the objective in capability terms — impairing the ability to produce advanced-node ICs by destinations or entities of concern — rather than in terms of any single product line.

The companion Entity List action

The December 2024 FDP rule did not publish alone. It published concurrently with a BIS final rule (89 FR, document 2024-28267) that added 140 entities to the Entity List under destinations including China, Japan, South Korea, and Singapore, and designated certain of them for entity-specific foreign-produced-item restrictions. The pairing matters: the FDP rule defines the extraterritorial reach, and the Entity List designations are where that reach is pointed. A given entity flagged for foreign-produced-item restrictions becomes a target the FDP rule can follow through foreign supply chains. Reading the two together is the only way to see the full mechanism — the rule that extends jurisdiction, and the list that aims it.

The supply-chain layer the rule addresses

One reason the December 2024 action runs to such length is that the FDP reach forces practical questions onto the businesses caught between U.S. technology and foreign production — foundries and the outsourced assembly-and-test companies (OSATs) that package chips. A companion January 2025 interim final rule (document 2025-00711) revised the EAR specifically to “assist foundries and Outsourced Semiconductor Assembly and Test (‘OSATs’) companies in complying with provisions of the EAR pertaining to advanced computing ICs in the supply chain,” adding due-diligence procedures for advanced-computing integrated circuits. That follow-on rule is a window into how the FDP mechanism actually bites: a foundry or packaging house sitting in a third country must now determine whether the advanced chips moving through its line implicate U.S.-controlled technology, because the FDP rule can attach U.S. jurisdiction to those chips regardless of where they were made. The due-diligence procedures exist because the extraterritorial reach is only enforceable if the firms in the middle of the supply chain can identify what is controlled. For a reader tracking how export controls translate into operational reality, this is the layer where the abstract jurisdiction of the FDP rule becomes concrete obligations — screening, certification, and documentation — for the manufacturing-services companies that touch the chips, not only for the named end users on the Entity List.

What the record shows

The verifiable facts: the Foreign Direct Product rule extends U.S. export jurisdiction to foreign-made items that are the direct product of specified U.S.-origin technology, software, or tools. The December 5, 2024 interim final rule (89 FR 96790) created new FDP rules for certain semiconductor commodities expressly “to impair the capability to produce ‘advanced-node integrated circuits’ … by certain destinations or entities of concern,” added controls on semiconductor manufacturing equipment and high-bandwidth memory, and revised the EAR definition of advanced-node IC including for DRAM. It published concurrently with an Entity List final rule adding 140 entities. Each of these is stated in the Federal Register text. The significance — that U.S. chip controls reach foreign-made goods through the technology used to make them — is established by the rule's own description of its FDP additions, not by characterization.