The U.S. Department of Commerce, Bureau of Industry and Security (BIS) has published an advance notice of proposed rulemaking (ANPRM) initiating a 30-day public comment process regarding export controls for certain emerging technologies. The notice launches the implementation of a key provision of the Export Control Reform Act of 2018 (ECRA), part of the National Defense Authorization Act for fiscal year 2019 (NDAA). In the ECRA, Congress authorized BIS to establish controls on the export, reexport and transfer (in country) of “emerging and foundational technologies.” The ANPRM, including a list of the 14 proposed representative technology categories and subcategories subject to review, can be found here. Our prior updates on the NDAA and ECRA can be found here.
1.No New Controls Have Been Implemented (Yet). Importantly, the ANPRM does not immediately change the export controls on any items that fall within the 14 representative technology categories. There is also no guarantee that stricter controls will be placed on any of the enumerated technologies. The purpose of the ANPRM is to solicit public feedback on how to identify and control emerging technologies. Once BIS identifies an item as “emerging,” it must, at a minimum, impose license requirements for export to countries subject to a U.S. embargo, including an arms embargo, such as China. Moreover, BIS does not plan to alter existing controls on technology already enumerated in the Commerce Control List (CCL). Rather, it seeks to control emerging and foundational technologies currently classified as EAR99 (generally not subject to export licensing requirements), which have been classified as such because they are not specifically enumerated on the CCL. Finally, BIS does not seek to expand jurisdiction over technologies not currently subject to the Export Administration Regulations, such as “fundamental research” described in 15 C.F.R. § 734.8 (i.e., academic research that is intended to be published).
2.Emerging Technologies Affect the Scope of CFIUS Jurisdiction. The Foreign Investment Risk Review Modernization Act (FIRRMA), which is also part of the NDAA, added “emerging and foundational technologies” to the list of critical technologies in the Committee on Foreign Investment in the United States (CFIUS) regulations. Moreover, CFIUS has implemented a pilot program making certain foreign investments in companies involved in critical technologies subject to a mandatory filing. As a result, foreign investors should carefully assess investments in U.S. companies that produce, design, test, manufacture, fabricate or develop one or more technologies enumerated in the ANPRM because any such technologies that are ultimately determined to be “emerging” could trigger preclose CFIUS filing requirements.
3.The Categories of Technologies Are not a Surprise. ECRA did not specifically identify emerging and foundational technologies that should be subject to controls. Instead, it described them generally as essential to the national security of the United States and not already identified as “critical technologies” under section 1703(a)(6) of the FIRRMA.4 Additionally, the 14 representative technology categories generally reflect public comments by the Trump administration concerning the Made in China 2025 initiative and competition in cutting-edge fields, such as artificial intelligence, robotics and aerospace technology. Moreover, other U.S. government agencies such as the National Institute of Standards and Technology and DIU (formerly the Defense Innovation Unit-Experimental) have recently highlighted the national security relevance of these same technologies.
4.Foundational Technologies Will Be Addressed Separately. The ANPRM states that BIS will issue a separate notice seeking public comment regarding foundational technologies. There is no publicly announced timeline for the companion rule. BIS has indicated that there currently is no consensus on the definitions of “emerging” and “foundational.” While “emerging” appears to focus on newer technologies, we expect “foundational” to include more established technologies that constitute the core building blocks for future innovation. The ANPRM specifically seeks public comment on how to distinguish emerging and foundational technologies.
5.National Security Is the Driving but not Sole Control Factor. The interagency group tasked with identifying emerging and foundational technologies must consider (a) the development of emerging and foundational technologies in foreign countries, (b) the effect export controls may have on the development of such technologies in the United States and (c) the effectiveness of export controls in limiting the proliferation of emerging and foundational technologies in foreign countries. To that end, the ANPRM seeks comments on both the “criteria to apply to determine whether there are specific technologies within these general categories that are important to U.S. national security” as well as “the impact specific emerging technology controls would have on U.S. technological leadership.”Specifically, BIS indicates that it wants to ensure that unilateral controls do not materially and adversely affect U.S. industry, including by discouraging foreign investment in the United States, encouraging offshoring research and development or incentivizing global supply chains that exclude U.S. content. BIS recognizes that any new controls may affect U.S. technological leadership and is therefore encouraging industry to provide comments on how best to strike the balance between national security and technological leadership.
Guidance on Public Comments and Next Steps
Pursuant to ECRA, an interagency process will determine the scope of controls on emerging and foundational technologies. To assist in identifying emerging technologies and applying appropriate controls, the ANPRM proposes the following “representative technology categories” for public comment:
- 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 (e.g., 3D printing)
- brain-computer interfaces
- advanced materials
- advanced surveillance technologies
The ANPRM seeks comments from the public by December 19, 2018 on how BIS should control emerging technologies; BIS will deal in a separate notice with the process to define and control foundational technologies. Following the 30-day public comment period, BIS will publish a proposed rule outlining specific controls on particular emerging technologies. This proposed rule will be subject to another public comment period, likely only 30 days due to the political pressure to expeditiously implement export control reform. Then BIS may publish more than one round of proposed rules or may issue a final rule. Therefore, any resulting controls will not be implemented for several months.
With respect to the 14 representative technology categories, BIS has specifically requested comments on “1) how to define emerging technology to assist identification of such technology in the future; 2) criteria to apply to determine whether there are specific technologies within these general categories that are important to U.S. national security; 3) sources to identify such technologies; 4) other general technology categories that warrant review to identify emerging technologies that are important to U.S. national security; 5) the status of development of these technologies in the United States and other countries; 6) the impact specific emerging technology controls would have on U.S. technological leadership; 7) 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.”