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On August 27, 2020 the Department of Commerce’s Bureau of Industry and Security (“BIS”) published a long-awaited advance notice of proposed rulemaking (“ANPRM”) seeking public comment on criteria for identifying “foundational technologies” that are essential to US national security with a view to imposing export controls on such uncontrolled technologies. BIS will use the public comments during the interagency process aimed at developing new export controls on foundational technologies. After the interagency process is finalized, BIS will issue a “rules and comment periods” for any such new export controls.

This process is being undertaken pursuant to Section 1758 of the Export Control Reform Act of 2018 (“ECRA”), which mandates the establishment of a regular multi-agency process for identifying appropriate controls on emerging and foundational technologies that are “essential to the national security of the United States” and that are currently subject to very limited controls, or none at all, under other existing US export control regimes. BIS proposed a similar rulemaking process for “emerging technologies” in 2018, for more information on that process visit our prior blog post here.

BIS is accepting comments to the ANPRM by mail and via the Federal eRulemaking Portal until October 26, 2020. BIS strongly encourages companies to submit detailed comments to help shape appropriate controls for foundational technologies going forward.

Unlike the emerging technologies ANPRM, the foundational technologies ANPRM does not describe specific categories of technology, but notes that the term foundational technologies includes not only “technology” but also “commodities” and “software” as those terms are used in the Export Administration Regulations (“EAR”), and that BIS does not seek to expand jurisdiction over technologies that are not currently subject to the EAR, such as “fundamental research”. BIS did provide certain examples it may consider to be “foundational technologies,” as follows:

  • Items that are currently subject to control for military end use or military end user reasons under Supplement No. 2 to part 744 of the EAR, such as semiconductor manufacturing equipment and associated software tools, lasers, sensors, and underwater systems that can be tied to indigenous military innovation efforts in China, Russia or Venezuela.
  • Items that are currently classified as the AT level or as EAR99 but are being utilized or required for innovation in developing conventional weapons, enabling foreign intelligence collection activities, or weapons of mass destruction applications.

In order to assist BIS in this process, the ANPRM seeks public comment on:

  • How to further define foundational technology to assist in identification of such items;
  • Sources to identify such items;
  • Criteria to determine whether controlled items identified in AT level Export Control Classification Numbers (ECCNs), in whole or in part, or covered by EAR99 categories, for which a license is not required to countries subject to a U.S. arms embargo, are essential to U.S. national security;
  • The status of development of foundational technologies in the United States and other countries;
  • The impact specific foundational technology controls may have on the development of such technologies in the United States;
  • Examples of implementing controls based on end-use and/or end-user rather than, or in addition to, technology based controls;
  • Any enabling technologies, including tooling, testing, and certification equipment, that should be included within the scope of a foundational technology; and
  • Any other approaches to the issue of identifying foundational technologies important to US national security, including the stage of development or maturity level of a foundational technology that would warrant consideration for export control.

Companies should be cognizant that any confidential technical data they provide in their comments may not be kept confidential and could be published by BIS on the Federal eRulemaking Portal.  Baker McKenzie would be happy to assist interested companies in preparing and submitting public comments in response to this ANPRM.

Author

Terry Gilroy is a partner in the New York office of Baker McKenzie and a member of the Compliance and Investigations Practice Group. Prior to joining the Firm in 2018, Terry served as Americas Head of the Financial Crime Legal function at Barclays. Terry advises businesses and individuals on white collar and financial crime issues and has significant experience conducting investigations relating to compliance with the US Foreign Corrupt Practices Act (FCPA) and related bribery and corruption statutes, economic sanctions regulations as administered by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), and the Bank Secrecy Act and related anti-money laundering (AML) regulations and statutes. Terry spent six years on active duty in the United States Army as a Field Artillery officer.

Author

Meghan Hamilton is a member of the International Commercial Practice Group and the International Trade Compliance Sub-Practice Group in Baker McKenzie Chicago, where she has been an associate since 2015. Meg regularly assists multinational companies on sanctions, customs and export control compliance as well as other international trade matters, including commercial agreements and anti-boycott regulations. She is active in civic activities throughout Chicago, serving on the Young Professional Board of the Center for Disability and Elder Law as well as the Auxiliary Board of the Chicago Legal Clinic.

Author

Andrea Tovar regularly advises multinational companies on cross-border commercial transactions and complex international trade matters. Andrea is also a member of the firm’s Technology, Media & Telecommunications Global Industry Group and the California Diversity & Inclusion Committee.