U.S. Commerce Department Implements Multilateral Controls on Six Emerging Technologies

Originally posted on Pillsbury Global Trade blog

On October 5, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule that imposes new multilateral controls on six “emerging technologies,” agreed during the December 2019 plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement).  These recently developed or developing technologies “essential for the national security of the United States” include forensic hacking tools, surveillance software, sub-orbital craft, and manufacturing tools and technology used to make integrated circuits and semiconductors.

This rule marks a further multilateral implementation of emerging and foundational technology controls in the Commerce Control List (CCL) of the Export Administration Regulations (EAR).  Section 1758 of the Export Control Reform Act of 2018 (ECRA) created an interagency process for identifying “emerging and foundational technologies” which are “essential to the national security of the United States.”  ECRA also directs the U.S. government to propose that such technologies be added to multilateral control regimes, such as the Wassenaar Arrangement lists, which are updated annually.

Scope of Multilateral Controls

The six newly controlled technologies include the following:

• Hybrid Additive Manufacturing (AM)/ Computer Numerically Controlled (CNC) tools (2B001). This control reflects integrated additive manufacturing, also known as 3D printing, and multi-axis computer numerically controlled (CNC) machines to reflect current and future functionality to machines, including but not limited to turning, milling or grinding capabilities.
• Computational lithography software designed for the fabrication of extreme ultraviolet (EUV) masks (3D003). The rule updates 3D003 to control computational Extreme Ultraviolet Lithography (EUVL) software, which is used to optimize patterns on an EUV mask reticle, for making optimized photoresist patterns on wafers.
• Technology for finishing wafers for 5nm production (3E004). The rule would add ECCN 3E004 to control “technology” for the production of substrates for high-end integrated circuits, based on multiple parameters.
• Digital forensic tools that circumvent authentication or authorization controls on a computer (or computer device) and extract raw data (5A004 / 5D002). Such tools have been used by militaries and can quickly analyze a device and recover protected information. Per the final rule, the phrase “extract raw data” clarifies that items that are limited to extracting simple user data, such as contact lists, videos, and photos (for example to transfer personal information between mobile phone handsets), would not be controlled.  The rule also classifies such items as License Exception ENC Section EAR 740.17(b)(3)(iii)(B), meaning a CCATS submission would be required prior to exporting such tools to third parties, along with semi-annual sales reporting.
• Software for monitoring and analysis of communications and metadata acquired from telecommunications service provider via a handover interface (5D001). This software must have the ability to execute searches on the basis of “hard selectors” of either the content of communication or metadata acquired from a service provider and it must provide the ability to map the relational network or track the movement of targeted individuals based on such searches. It excludes software for Billing purposes, Network Quality of Service (QoS), Quality of Experience (QoE), mediation devices, or mobile payment or banking use.
• Sub-orbital craft (9A515). This refers to aircraft designed to operate above the stratosphere and land on Earth without completing an orbit. Accordingly, it does not meet the current definition of “spacecraft” in the CCL, which is limited to satellites and space probes.

Each of the six above listed technologies are controlled for national security (NS) reasons.

Takeaways

• Specific Criteria. BIS has continued the approach of implementing controls on “emerging technologies” that identify narrow and specific criteria rather than the broad categories of technology BIS had listed in its 2018 advance notice of proposed rulemaking (ANPRM) requesting public comments on emerging technologies.
• CFIUS Impact. These technologies are now relevant in the context of foreign investment transactions. Technologies identified as foundational and emerging technologies are considered “critical technologies” for purposes of Committee on Foreign Investment in the United States (CFIUS) reviews and investigations and can trigger jurisdiction for certain minority investments and mandatory filing requirements.
• Direct Product Rule. The ECCNs related to the above technologies are subject to national security controls. As such, any foreign-made products using such US technology or software could be subject to the EAR under the traditional foreign direct product rule.