On August 27, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued an advance notice of proposed rulemaking (the ANPRM) requesting public comment on the definition of, and criteria for identifying, "foundational" technologies1 that are essential to U.S. national security and should be subject to more stringent export controls.2 The ANPRM marks another step toward implementing the long-delayed "emerging and foundational technology" provisions of the Export Control Reform Act of 2018 (ECRA).3 Like the earlier ANPRM regarding emerging technologies, the rulemaking is still at a conceptual stage.
The ECRA, which was signed into law in August 2018, directs BIS to conduct an interagency review process to identify so-called "emerging and foundational technologies."4 These are intended to be technologies that historically have not been subject to export controls under multilateral regimes, but are nonetheless essential to U.S. national security. Technologies identified through this interagency process as emerging and foundational will added to the Commerce Control List and controlled under the Export Administration Regulations (EAR). In addition, any identified "emerging and foundational" technologies will be considered "critical technologies" under the Foreign Investment Risk Review Modernization Act. 5 As a result, foreign investments in U.S. businesses that engage in activities involving those technologies could require a mandatory notification to the Committee on Foreign Investment in the United States (CFIUS).6 We previously summarized the scope of the current mandatory CFIUS notification requirements and recent proposed changes here and here, respectively.
The interagency process called for in the ECRA to identify specific technologies that will be considered emerging and foundational has taken longer than most originally anticipated. On November 19, 2018, BIS took the first step toward implementing the relevant provisions of the ECRA by issuing an advanced notice of proposed rulemaking seeking public comment on identifying and defining "emerging" technologies (the Emerging Technology Rulemaking).7 The Emerging Technology Rulemaking included a list of 14 categories of technologies—such as biotechnology, artificial intelligence, additive manufacturing, and robotics—and requested input on the types of technologies within those categories that should be considered emerging. The Emerging Technology Rulemaking generated a substantial number of comments.8 Implementation of the Emerging Technology Rulemaking will be through the creation of specific export control categories on the Commerce Control List under the EAR, similar to those existing under current multilateral and unilateral export controls (and not, for example, broad export control categories like "artificial intelligence"). To date, four "emerging technology" control categories have been created.9 A number of additional emerging technology controls are reportedly in preparation, including controls on six emerging technologies agreed to during the Wassenaar Arrangement 2019 Plenary that are reportedly in the final stages of review,10 and we expect the process of identification and designation of new technologies to be an ongoing part of the U.S. export control process.11
The ANPRM solicits input on categories of technologies that should be considered "foundational" under the ECRA. As with emerging technologies, the output of this consultation is likely to be a process, not a rule identifying all foundational technologies. Rather, the broad categories create a framework for case-by-case implementation of individual, detailed control categories on the Commerce Control list through interagency consultation. The process is likely to be an ongoing one, both because the review of the categories in question will take time and because technologies and their importance will continue to evolve. According to the ANPRM, the interagency process associated with foundational technologies is expected to result in the imposition of new export control levels on foundational technologies currently subject only to anti-terrorism controls on the Commerce Control List (CCL) or through new Export Control Classification Numbers (ECCNs) in the CCL under the EAR.12
In contrast to the Emerging Technology Rulemaking, which set out 14 representative general categories of potential emerging technologies, the ANPRM only hints at general types of items (including commodities, software, and technology) that potentially could be considered foundational. Those include:
- Items currently subject to military end use/end user controls under the EAR, such as semiconductor manufacturing equipment and associated software, lasers, sensors, and underwater systems, that can be tied to military innovation in Russia, China, or Venezuela;
- Items currently subject to the lowest levels of export controls under the EAR (e., items subject only to anti-terrorism controls or classified as EAR99) for which an export license is not required for countries subject to a U.S. arms embargo, but that may warrant review to determine if they are essential to U.S. national security, such as items utilized or required for innovation in developing conventional weapons, enabling foreign intelligence collection activities, or weapons of mass destruction applications; and
- Items that have been the subject of illicit procurement attempts that may demonstrate some level of dependency on U.S. technologies to further foreign military or intelligence capabilities in countries of concern or development of weapons of mass destruction.13
The foundational technology rules could end up affecting goods, software, and technology in a wide range of industries, particularly those that are currently subject to relatively modest export controls.
BIS requested comments on a number of topics relating to foundational technologies, including: (i) how to define foundational technologies in a manner that assists in identifying the relevant technologies; (ii) the criteria that should be used to determine whether items currently subject to lower levels of export controls are essential to U.S. national security; (iii) the maturity of particular technologies and the status of development of foundational technologies in the United States and other countries; (iv) the impact that foundational technology controls may have on development of such technologies in the United States; and (v) enabling technologies (e.g., tooling, testing, and certification equipment) that should be included within the scope of a foundational technology.
Interested parties have until October 26, 2020 to submit comments through either the federal rulemaking portal14 or by mail to BIS.
1 "Technologies" is not limited to technology, but also includes commodities and software. Commodities, software, and technology are collectively referred to as "items."
2 85 Fed. Reg. 52934 (Aug. 27, 2020).
3 ECRA § 1758, 50 U.S.C. 4801.
4 ECRA §§ 1758(a)-(b).
5 15 C.F.R. § 800.215(f).
6 15 C.F.R. § 800.401.
7 83 Fed. Reg. 58201 (Nov. 19, 2018).
8 246 comments were received by the end of the comment period. Regulations.gov, Docket (BIS-2018-0024), available at: https://beta.regulations.gov/document/BIS-2018-0024-0001.
9 A final rule in June imposed controls on three technologies related to chemical and biological warfare designated as "essential to the national security of the United States," which were also adopted on a multilateral basis by the Australia Group: (i) specific precursor chemicals for chemical weapons, (ii) the Middle East respiratory syndrome-related coronavirus (MERS-related coronavirus), and (iii) single-use cultivation chambers with rigid walls. 85 Fed. Reg. 36483 (Jun. 17, 2020). A fourth technology, artificial intelligence technology used for geospatial analysis, was placed in a temporary unilateral control category under interagency national security authority pre-dating ECRA and is being proposed for multilateral controls. See 85 Fed. Reg. 459 (Jan. 6, 2020). As the relevant reason for control of the latter technology also triggers the CFIUS critical technology rules, this is largely a distinction without a difference.
10 Export Compliance Daily, OIRA Completes Review of BIS Rule on 2019 Wassenaar Controls (Aug. 11, 2020), available at: https://exportcompliancedaily.com/news/2020/08/11/OIRA-Completes-Review-of-BIS-Rule-on-2019-Wassenaar-Controls-2008100013. From a statement issued after the 2019 Plenary, these controls could be on a variety of technologies, including "cyber-warfare software, communications monitoring, digital investigative tools/forensic systems, sub-orbital aerospace vehicles, technology for the production of substrates for high-end integrated circuits, hybrid machine tools, and lithography equipment and technology." Wassenaar Arrangement, Statement Issued by the Plenary Chair on 2019 Outcomes of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Dec, 5, 2019), available at: https://www.wassenaar.org/app/uploads/2019/12/WA-DOC-19-PUB-001-Statement-issued-by-the-Plenary-Chair-on-2019-Outcomes.pdf.
11 Export Compliance Daily, BIS Preparing to Publish Emerging Tech Controls, Finalizing Internal Review of Foundational Tech ANPRM (May 20, 2020), available at: https://exportcompliancedaily.com/article/2020/05/20/bis-preparing-to-publish-emerging-tech-controls-finalizing-internal-review-of-foundational-tech-anprm-2005190052.
12 These designations will have an impact on CFIUS reviews, as technologies designated only for anti-terrorism reasons are not "critical technologies" for CFIUS purposes (whereas technologies designated as "foundational" are).
13 85 Fed. Reg. 52934.
Originally published by Foley & Lardner, August 2020
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