On November 19, 2018, the Bureau of Industry and Security, U.S. Department of Commerce (BIS) published an advance notice of proposed rulemaking (ANPRM) soliciting comments on the criteria to be used to identify emerging technologies that are essential to U.S. national security. Such technologies could include those that have potential uses in connection with conventional weapons, intelligence collection, weapons of mass destruction or terrorist applications, or could provide the United States with a qualitative military or intelligence advantage.
The comments will inform the interagency review process established by the Export Control Reform Act (ECRA) to identify and describe "emerging and foundational technologies." This interagency process is expected to result in proposed rules for new Export Control Classification Numbers on the Commerce Control List under the Export Administration Regulations (EAR), the export control regime governing the export, re-export and in-country transfer of commercial and dual-use hardware, software and technology. Comments are due on or before December 19, 2018.
The ECRA directs the interagency reviewers to consider multiple factors in assessing whether a technology is "emerging and foundational," including (i) the development of similar technologies in foreign countries, (ii) the impact export controls would have on the development of the technology in the U.S., and (iii) the effectiveness of export controls on limiting the proliferation of the technology to foreign countries.
Designation of a new technology as emerging will trigger BIS to impose export controls, including interim controls, on exports, re-exports and in-country transfers of such technology. Although BIS has broad discretion to specify the appropriate level of control, including by taking into consideration the potential end destinations, end users and end uses for such technology, the ECRA mandates that all technologies identified as "emerging and foundational" must at a minimum require a license for their export, re-export or in-country transfer to or in a country or territory subject to a comprehensive U.S. embargo or an arms embargo, which currently includes China.
BIS has compiled a list of technologies that currently are subject to the EAR, but are controlled only to comprehensively embargoed countries, such as Iran, countries designated as supporters of international terrorism, such as Sudan, and restricted end users or end uses. According to BIS, this is a representative list of technologies that BIS, through the interagency process, will assess to identify any specific emerging technologies that are important to U.S. national security for which effective controls can be implemented without negatively impacting U.S. leadership in the science, technology, engineering or manufacturing sectors. Note that although BIS intends to assess and potentially increase restrictions on the export, re-export and in-country transfer of such emerging technologies, it does not seek to exert control over technologies that are not currently subject to the EAR, such as "fundamental research." The list of representative technologies appears as Appendix A.
Through comments in response to the ANPRM, and as proposed rules regarding specifically identified emerging technologies are published for further comment, industry will have a unique opportunity to shape the controls in place on a broad range of emerging technologies, many of which are key innovation drivers and potentially could be negatively impacted by additional export-related regulatory burdens. Furthermore, there may be significant consequences for a wide range of companies and investors as those technologies determined to be emerging technologies for export control purposes will be treated as critical technologies for CFIUS purposes, in which case there will be heightened scrutiny in the event of any proposed foreign investment and, potentially, a mandatory filing requirement.
1 A separate rulemaking regarding the identification of foundational technologies will be forthcoming, although BIS would welcome comments on treating "emerging and foundational technologies" as separate types of technology.