Feb 4 (Reuters) - The Trump administration is willing to allow China's ByteDance to buy Nvidia's ( NVDA ) H200 chips, but the AI chipmaker has not agreed to proposed conditions for their use, according to a person familiar with the matter.

The U.S. said it would approve the license about two weeks ago, the person said, but Nvidia ( NVDA ) has not accepted the U.S. government's Know-Your-Customer (KYC) requirement as now drafted - to ensure China's military does not access ‌the chips - among other conditions. 

More broadly, Nvidia ( NVDA ) is negotiating with the U.S. over the terms of licenses to ship its H200 AI chips to companies in China, according to ​the person and two others familiar with the matter. 

Nvidia ( NVDA ) said it was an intermediary between the U.S. government and potential customers ‍that would have to comply with the U.S. restrictions.

"We aren't able to accept or reject ⁠license conditions on our own," a ⁠company spokesperson said in a statement. "Although KYC is important, KYC is not the issue. For American industry to make any sales, the conditions need to be commercially ‌practical, else the market will continue to move to foreign alternatives." 

ByteDance, which ​owns TikTok and is one of the biggest AI companies in China, could not be immediately reached for comment. The Commerce Department did not immediately respond to a request for comment.

  Nvidia and its Chinese customers ⁠have once again found themselves caught in the crossfire of ‍the U.S.-China tech ​war. China has already granted preliminary approval to three of its largest tech companies - ByteDance, Tencent, and Alibaba - along with AI startup Deepseek to import the chips, though the regulatory conditions for China's approvals also are still being ‍finalized.

This news from the U.S. side represents the latest twist on whether China will get chip shipments first promised by President Donald Trump in early December, with a 25 percent cut to the U.S. government. The same arrangement applies to similar chips from firms such as Advanced Micro Devices and Intel.

Trump's decision was decried by China hawks, who viewed it as a risk to national security, and fear that China will use the chips to strengthen its military capabilities.

On January 15, the Commerce Department issued a ​regulation formally loosening ‍the licensing policy for the chips, but stipulating conditions. For example, it said the applicant had to certify and provide data to support that its customer will use "rigorous" Know Your Customer procedures to screen and prevent unauthorized ​remote access. In addition, it is required to provide a list of remote users tied to companies in Iran, Cuba, Venezuela and other countries of concern.

Before the chips could go to China, a U.S. third-party lab also is required to test the chips to ensure they meet specifications, a requirement viewed by many as a way for the U.S. to collect its 25 percent fee.

The Commerce Department typically circulates licenses pending approval to other agencies with the proposed conditions, according to a former Commerce official. Once they agree, the conditions may be sent to the license applicant - ​in this case, Nvidia ( NVDA ) - essentially asking the company if they can live with them. The applicant may suggest changes, which would be sent back to the agencies involved for their agreement. The departments of State, Defense and Energy are included.

One source suggested at least some chips are likely to go to China by the ‍time Trump plans to meet with Chinese President Xi Jinping in April.