Foreign Direct Product Rule (FDPR)

October 8, 2022

The US Government recently imposed FDPR to limit China’s access to advanced computer chips and chip-making equipment, which are used for military modernization and development of weapons of mass destruction.

Key facts

The foreign direct product rule (FDPR) was recently applied on China’s advanced computing and supercomputer industry to prevent it from obtaining advanced computing chips.
The imposition of the FDPR would prevent companies, including those operating outside American soil, from selling certain products that were produced using American technology to Chinese consumers without the US government’s permission.
This rule will now apply to semiconductor chips used in supercomputers and certain artificial intelligence applications.
It will prevent China from developing nuclear weapons and other military equipment.
The imposition of the new rule would mean that China has to develop its own manufacturing technologies and processor technologies to replace the US or Western technologies that are currently being used. It is estimated to take 5 to 10 years for China to catch up with the current technologies.
Earlier, this rule was imposed on Chinese telecom company Huawei to curtail its supply of semiconductors and adversely affect the company’s smartphone business.
The rule is currently applied on Russia and Belarus. It was imposed in protest against the invasion of Ukraine.

What is Foreign Direct Product Rule?

The Foreign Direct Product Rule (FDPR) was introduced in 1959 by the US government to control the trading of the US technologies. It prevents and regulates trade of products (including those made in foreign countries) that were made using US-made technology and software. It mandates country-based licensing requirements and list-based restrictions apart from imposing traditional export controls to weaken the FDPR targeted countries’ ability to obtain critical items produced from US-origin technologies.

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