Global Export Controls

By Jaclyn Jaeger

The evolution of critical and emerging technologies continues to affect how the United States and its international allies and partners uniformly protect against national security threats. For industry, the strengthening of these partnerships has implications on export controls compliance as well.

Recognizing the challenges for industry, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) published an interim final rule on Sept. 6 establishing controls related to quantum computing, semiconductor manufacturing, and other advanced technologies, with “broad technical agreement” among U.S. government’s international partners.

In a prepared statement, Alan Estevez, Under Secretary for BIS, said the rule “ensures our national export controls keep step with rapidly evolving technologies and are more effective when we work in concert with international partners.”

Added Estevez, “Aligning our controls on quantum and other advanced technologies makes it significantly more difficult for our adversaries to develop and deploy these technologies in ways that threaten our collective security.”

Controlled items

Under the rule, BIS has implemented export controls on the following:

• Quantum computing items: quantum computers, related equipment, components, materials, software, and technology that can be used in the development and maintenance of quantum computers.
• Advanced semiconductor manufacturing equipment: tools and machines essential for the production of advanced semiconductor devices.
• Gate All-Around Field-Effect Transistor (GAAFET) technology: technology that produces or develops high-performance computing chips used in supercomputers.
• Additive manufacturing items: Equipment, components, and related technology and software designed to produce metal or metal alloy components.

The rule adds 18 new “900 series” Export Control Classification Numbers (ECCNs) to the Commerce Control List (CCL) and revises nine more ECCNs for certain semiconductor, quantum, and additive manufacturing items. Affected industries should review the ECCNs, as they are highly technical.

License Exception IEC

Other like-minded countries, such as the Dutch government, also have implemented new export controls related to quantum computing and advanced semiconductor manufacturing. BIS said it anticipates “additional countries will implement similar controls soon.”

The rule creates new License Exception Implemented Export Controls (IEC) for countries that implement “equivalent national controls” to meet the terms of IEC. BIS explained that this eliminates the need to submit license applications for eligible items, “thereby fostering innovation opportunities among implementing countries.”

Some in the industry pressed for additional measures by BIS. For example, the Information Technology Industry Council (ICI) in a comment letter encouraged BIS to “develop a notification system – or at a minimum, establish regularly scheduled intervals for updates – so that companies can have real-time updates on the jurisdictions and controls benefitting from U.S. coordination with allies.”

See here a table BIS has posted that lists IEC eligibility status for countries and items.

General License and grandfather clause

The rule includes a General License that authorizes deemed exports or reexports of quantum technology and software to foreign persons “whose most recent country of citizenship or permanent residency is a destination specified in Country Group D:1 or D:5” and who are not prohibited persons under part 744 of the Export Administration Regulations (EAR).

The rule also includes a grandfathering clause that allows for continued and future access to technology and software for foreign employees and contractors with current access to such technology or software and were hired as of Sept. 6, the rule’s effective date.

Such provisions received broad support from industry and those in the research and development space. As Sarah O’Hare O’Neal, deputy general counsel of global trade at Microsoft, stated in a comment letter, “Some of the best quantum engineers in the world are non-U.S. nationals, including citizens of Country Group D:1 and D:5 countries. In this dynamic technological landscape, domestic quantum companies must be able tap into this international talent pool to hire skilled scientists and engineers.”

The General License authorization will be subject to annual reporting requirements, which BIS reasoned will “allow for visibility to ensure access is consistent with U.S. national security and foreign policy interests.”

Additionally, the rule requires termination reporting requirements. When a foreign person with access to software or technology, as described in the rule, leaves the employer or academic institution, a report must be provided that must include “the name, host company or university, and if known, if they are leaving the United States to go be employed in a destination specified in Country Group D;1 or D:5 or if they are leaving to change employer or university within the United States,” according to the rule. “This report is due within 30 days of the foreign person’s last day with the host company or university,”

Broader government effort

The significance of the rule for industry is the U.S. government’s strengthening of international partnerships under plurilateral arrangements that extend beyond traditional multilateral export control regimes, like the Wassenaar Arrangement. Established in 1995, the Wassenaar Arrangement is a multilateral export control regime of 42 participating countries whose stated purpose is to “promot[e] transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies.”

Participating countries apply export controls at the national level to items in the List of Dual-Use Goods and Technologies and the Munitions List to prevent unauthorized transfers or re-transfers of those items. Russia’s invasion of Ukraine, however, resulted in the Russian Federation and some others vetoing additions to the dual use and munitions lists.

This led certain other Wassenaar countries to separately and unilaterally impose controls on semiconductor production, quantum computing, and additive manufacturing items that “would have likely been agreed to in earlier years by the Wassenaar Arrangement had it not been for vetoes by Russia and other member states,” said Kevin Wolf, a partner at law firm Akin. This is referred to as the “Wassenaar Minus One” arrangement.

As Estevez highlighted in keynote remarks in March 2024, “While traditional multilateral export control regimes play a key role in ensuring international support for our actions, we must recognize that today’s geopolitical realities, today’s threats, and today’s pace of rapid technological change require creative thinking and greater flexibility to protect the national security of the United States and our allies.” He added that BIS will “continue working to bring others on board and further align our controls as we seek to address additional critical and emerging technologies.”

Another example of these like-minded partnerships is the AUKUS. Established in September 2021, the AUKUS is a trilateral partnership between Australia, the United Kingdom (UK), and the United States to strengthen these governments’ security and defense interests by promoting “deeper information sharing and technology sharing; and foster deeper integration of security and defense-related science, technology, industrial bases, and supply chains,” according to the Department of Defense.

To support the goals of the AUKUS, BIS in April 2024 published an interim final rule amending the EAR to afford Australia and the UK “nearly the same licensing treatment” as Canada, BIS stated, by removing certain license requirements; expanding the availability of license exceptions; and reducing the scope of end-use and end-user-based license requirements for exports, reexports, and transfers (in-country) to or within Australia and the UK.

Compliance implications

While plurilateral agreements with international allies and partners result in the progression of security and defense interests, export controls that are not uniform can create uncertainty for industry as to “what is coming next, what are the standards for control, which countries are controlling what, where, and under what policies,” Wolf said.

Consequently, companies in these industries are now having to implement a system of controls that monitor on a transaction-by-transaction basis – as opposed to an item-by-item basis to particular destinations – given the proliferation of various end-use and end-user controls. Companies must consider not only the ECCNs to determine the necessity of an export license but also the end-use and end-user, Wolf added.

With the new BIS rule, companies in the industries of quantum computing, advanced semiconductor manufacturing equipment, GAAFET technologies, and additive manufacturing should review their export and reexport policies and procedures, the new ECCNs, and new license exceptions to determine whether and where controls need updating, and where new reporting requirements may be needed.

ACI will be holding its “Advanced Forum on Global Export Controls” on Feb. 25-26, 2025, in Washington DC. For more information, and to register, please visit: https://www.americanconference.com/global-export-controls/