December 06, 2018

Five Things You Should Know About ... Export Controls for Emerging Technologies

In accordance with the Export Control Reform Act of 2018 (“ECRA”), on November 19, 2018 the Bureau of Industry and Security (“BIS”) at the Department of Commerce issued an Advance Notice of Proposed Rulemaking (“ANPRM”) requesting public comment on criteria for identifying emerging technologies that are essential to U.S. national security.  In this week’s edition of Downrange we will examine five core components of the BIS ANPRM.

1. Purpose.  BIS oversees the export of items listed on the Commerce Control List (CCL), which are controlled under the Export Administration Regulations (EAR) and comprise a vast assortment of dual-use items that have both commercial and military applications.  The CCL does not, however, include technology that has not yet been subject to a national security evaluation by the U.S. Government due to its recent development (i.e., “emerging technologies”).  The ECRA seeks to address this vulnerability and the ANPRM solicits critical industry feedback on how emerging technologies should be evaluated.

As stated in the ANPRM, BIS is specifically interested in comments regarding:

  • How to define emerging technology to assist in the identification of such technology in the future;
  • Criteria to apply to determine whether there are specific technologies within various general categories (see below) that are important to U.S. national security;

  • Sources to identify emerging technologies;

  • Other general technology categories (see below) that warrant review to identify emerging technologies that are important to U.S. national security;

  • The status of development of emerging technologies in the U.S. and other countries;

  • The impact specific emerging technology controls would have on U.S. technological leadership; and

  • Any other approaches to the issue of identifying emerging technologies important to U.S. national security, including the stage of development or maturity level of an emerging technology that would warrant consideration for export control.

2. Scope of “Emerging Technologies.”  According to the ANPRM, the term “emerging technologies” includes technologies that are essential to U.S. national security.  The ANPRM cites as examples of emerging technologies those that have potential conventional weapons, intelligence collection, weapons of mass destruction, and terrorist applications, as well as those that could provide the U.S. with a qualitative military or intelligence advantage.

The ANPRM does not cover technologies that are not currently subject to the EAR, such as those used for “fundamental research,” as defined in 15 C.F.R. § 734.8.  Similarly, the ANPRM is not requesting comments on existing technology export controls, as they are not within the scope of the ECRA.

The ANPRM also refers to “foundational” technologies but makes clear that BIS will issue a separate request for comments regarding the scope of export controls for such technologies.

3. Export Controls. Once the Department of Commerce identifies an emerging or foundational technology in the CCL it will be authorized to establish export controls for the technology.  In establishing such controls, the Department will consider the potential end-use and end-users of the technology, and countries that are likely to receive such technology.  At a minimum, as with all exports, a license will be required for exporting emerging and foundational technologies to countries subject to a U.S. embargo.

4. Representative Technology Categories. BIS has identified general categories of technology on which it is focused, which include:

  • Biotechnology;
  • Artificial intelligence and machine learning technology;
  • Position, Navigation, and Timing technology;
  • Microprocessor technology;
  • Advanced computing technology;
  • Data analytics technology;
  • Quantum information and sensing technology;
  • Logistics technology;
  • Additive manufacturing;
  • Robotics;
  • Brain-computer interfaces;
  • Hypersonics;
  • Advanced Materials; and
  • Advanced surveillance technologies.

5. CFIUS Implications. As noted in our previous post, the Committee on Foreign Investment in the United States (“CFIUS”) has activated a “pilot program” that, pending the implementation of the Foreign Investment Risk Review Modernization Act (“FIRRMA”), expands CFIUS’ jurisdiction with respect to a specific category of transactions and imposes mandatory filing requirements that are within the scope of the program.  The pilot program applies to two categories of U.S. businesses:

  • A U.S. business that produces, designs, tests, manufactures, fabricates, or develops a “critical technology” in at least one of the pilot program industries identified in Annex A to 31 CFR 801 (the “Pilot Program Industries”).1
  • A U.S. business that designs, tests, manufactures, fabricates, or develops a critical technology that is designed specifically for use in at least one of the Pilot Program Industries.

Notably, FIRRMA expressly includes under the definition of “critical technologies” the very emerging and foundational technologies that are the subject of the ANPRM.  Accordingly, the criteria established for the definition of emerging technologies will have a direct impact on the application of the pilot program, in the immediate term, and on CFIUS’ jurisdiction, more broadly, in the medium to long-term.

BIS is accepting all public comments on the ANPRM that are submitted on or before December 19, 2018.  Comments can be submitted via the Federal eRulemaking Portal, available at http://www.regulations.gov, using identification number BIS 2018–0024.  Alternatively, comments can be mailed or delivered to the Regulatory Policy Division of BIS at the U.S. Department of Commerce, located in Room 2099B at 14th Street and Pennsylvania Avenue NW, Washington, DC 20230, using RIN 0694-AH61 as the reference number.    

 


1. Pilot Program Industries: Aircraft Engine and Engine Parts Manufacturing; Alumina Refining and Primary Aluminum Production; Ball and Roller Bearing Manufacturing; Computer Storage Device Manufacturing; Guided Missile and Space Vehicle Manufacturing; Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Part Manufacturing; Military Armored Vehicle, Tank, and Tank Component Manufacturing; Nuclear Electric Power Generation; Optical Instrument and Lens Manufacturing; Other Basic Inorganic Chemical Manufacturing; Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing; Petrochemical Manufacturing; Powder Metallurgy Part Manufacturing; Power, Distribution, and Specialty Transformer Manufacturing; Primary Battery Manufacturing; Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; Research and Development in Nanotechnology; Research and Development in Biotechnology (except Nanobiotechnology); Secondary Smelting and Alloying of Aluminum; Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; Semiconductor Machinery Manufacturing; Storage Battery Manufacturing; Telephone Apparatus Manufacturing; and Turbine and Turbine Generator Set Units Manufacturing.


About the Authors

Downrange authors Jennifer S. HuberAdam Munitz, and Lidiya Kurin are members of FH+H's International Trade + Transactions Practice. Focusing primarily on the defense, security, and intelligence sectors, Jennifer, Adam, and Lidiya help businesses translate their domestic successes into overseas growth and assist foreign entities with sensitive investments in, and acquisitions of, U.S. businesses.

Additional information regarding their capabilities and previous representations can be found here.

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The Bureau of Industry and Security issued an Advance Notice of Proposed Rulemaking requesting public comment on criteria for identifying emerging technologies that are essential to U.S. national security
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