Yesterday, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published a final rule (the Final Rule) imposing export controls on additional emerging technologies pursuant to the Export Control Reform Act of 2018 (ECRA).[1]  We previously wrote about the process to identify and impose export controls on emerging and foundational technologies under the ECRA, as well as the steps taken in furtherance of that process to date, here.

Specifically, the Final Rule adds the following six technologies to the Commerce Control List under the Export Administration Regulations maintained by BIS:

  1. hybrid additive manufacturing/computer numerically controlled tools;
  2. computational lithography software designed for the fabrication of extreme ultraviolet masks;
  3. technology for finishing wafers for 5nm production;
  4. digital forensics tools that circumvent authentication or authorization controls on a computer (or communications device) and extract raw data;
  5. software for monitoring and analysis of communications and metadata acquired from a telecommunications service provider via a handover interface; and
  6. sub-orbital craft.

Export controls on these technologies were agreed to and have been adopted on a multilateral basis by the governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement).[2]  A previous final rule in June imposed controls on three technologies related to chemical and biological warfare pursuant to the ECRA (the CBW Rule).[3]  Those controls also were adopted on a multilateral basis by the Australia Group.[4]

The Final Rule, which marks another step in the incremental and deliberative process in implementing the “emerging and foundational technology” provisions of the ECRA, provides additional insight into how BIS intends to implement those provisions.  The Final Rule and the CBW Rule appear to signal that BIS intends to focus on proposing new controls in multilateral fora such as the Wassenaar Arrangement and the Australia Group rather than rapidly imposing new unilateral controls.  Although such an approach likely will delay the imposition of export controls on technologies that the U.S. government considers to be essential to U.S. national security, it will provide for more effective implementation (as it will be more difficult to simply turn to uncontrolled non-U.S. sources for the technologies to be controlled) and ensure that the U.S. export controls are consistent with U.S. commitments to the various multilateral export control regimes to which the United States is a party.

The process of developing new rules implementing the ECRA also affects the scope of transactions subject to mandatory notification to the Committee on Foreign Investment in the United States (CFIUS).  Technologies identified as “emerging” or “foundational” pursuant to the ECRA are considered “critical technologies” under the Foreign Investment Risk Review Modernization Act.  As a result, foreign investments in U.S. businesses that produce, test, or develop those technologies could require a mandatory notification to CFIUS.  We previously summarized the scope of the current mandatory CFIUS notification requirements and recent proposed changes here and here, respectively.

We expect that the creation of new controls on emerging and foundational technologies will continue as an incremental process for the indefinite future, both because identifying technologies currently not subject to multilateral controls but that nonetheless are essential to U.S. national security will take time and because technologies and their importance will continue to evolve.  As a result, companies should continue to monitor developments going forward.

[1] 85 Fed. Reg. 62583 (Oct. 5, 2020).

[2] Specifically, controls on these six technologies were agreed to during the Wassenaar Arrangement 2019 Plenary.

[3] 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).

[4] See 85 Fed. Reg. 36483 (Jun. 17, 2020).