Besides serving no purpose other than an attempt to enforce software by fiat (which would hurt legitimate business, make US AI companies noncompetitive, and do nothing to stop illegitimate use)... it's literally impossible to enforce.

There's a million loopholes (secret distillation so it's no longer foreign, serving mystery model from different jurisdiction, putting it in your basement and not telling anyone). And you bet the motivation and money is there to jump through these hoops.