The Director of the U.S. Department of the Treasury’s Office of Foreign Assets Controls (“OFAC”) made two sanctions-related determinations on September 15, 2022, pursuant to E.O. 14024 and E.O. 14071, related to “quantum computing” and the Russian Federation. The same day, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) complemented these actions by amending the Export Administration Regulations (EAR”), 15 C.F.R. parts 730-774, to impose new export controls for the Russian Federation on quantum computing-related hardware, software, and technology. Before you start asking yourself what “quantum computing” means as I did, bear with me.
Effective September 15, 2022, the E.O. 14024 determination authorizes the imposition of sanctions by OFAC or the Secretary of State—including full blocking sanctions (i.e. designation on the SDN List)—on any person determined to operate or have operated in the quantum computing sector of the Russian Federation economy. Any such persons are exposed to sanctions risks.
Furthermore, effective October 15, 2022, the E.O. 14071 determination specifically prohibits persons subject to U.S. jurisdiction from engaging in the export, reexport, sale, or supply, directly or indirectly, of quantum computing services to any person located in the Russian Federation, excluding:
- Any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a U.S. person; and
- Any service in connection with the wind down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.
When I first read these determinations, I was rather confused: “What is quantum computing?,” “Is it related to quantum physics?,” “Do I need to learn quantum physics to effectively counsel my clients?” Without a definition of the term “quantum computing” from OFAC, it would be difficult for potentially impacted businesses to understand the scope of sanctionable conduct under E.O. 14024, as well as prohibited conduct under E.O. 14071. OFAC did simultaneously publish several related FAQs (1083-1086) with some helpful guidance and definitions. However, there is still no official agency definition for the key term “quantum computing.”
According to OFAC’s FAQ 1084, for the E.O. 14071 determination, the agency anticipates publishing regulations defining the term “quantum computing services” to include any of a number of identified services when related to quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing, as well as services related to the exportation, reexportation, sale, or supply, directly or indirectly, of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing to any person located in the Russian Federation.
This attempt at a definition by OFAC only covers prohibited services related to “quantum computing,” but fails to define the term itself. How is a business potentially impacted by the E.O. 14071 determination expected to better understand whether any of its computer related services involve quantum computing or computers, as those terms are understood by the agency.
For the E.O. 14024 determination, according to FAQ 1083, OFAC interprets the term “quantum computing sector of the Russian Federation economy” to include activities related to products and services in or involving the Russian Federation in research, development, manufacturing, assembling, maintenance, repair, sale, or supply of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing. OFAC also interprets the term “quantum computing sector of the Russian Federation economy” to include the same services identified in FAQ 1084, when related to quantum computing. None of those identified services in either FAQ define “quantum computing” itself.
Still confused as to what “quantum computing” or “quantum computers” mean? You’re probably not alone. Hoping that perhaps the EAR provides a useful definition of these terms, given BIS’s complementary action, I referred to Part 772—Definitions of Terms— for guidance, to no avail. I also didn’t find anything while combing through the EAR’s Commerce Control List (“CCL”) in Part 774, where all controlled items are identified and sometimes further defined. If you’re curious how I conducted these searches: [CNTRL] + F for the term “quantum.”
BIS’s complimentary September 15, 2022 amendments to the EAR relating to quantum computing, include a new published rule in the Russia Industry Sectors Sanctions of Part 746. Specifically, a new licensing requirement under § 746.5 and all-new supplement no. 6 have been added to that Part. A BIS license is now required for the export, reexport, or transfer (in-country) to or within Russia of items subject to the EAR and listed in supplement no. 6. Paragraph (g) of the new supplement—titled “Quantum computing and advanced manufacturing”—identifies such controlled items, with additional guidance on the term “quantum computers.” Unless you’re an engineer with sufficient credentials and expertise—to navigate EAR controlled items more effectively, including the CCL—it is not very helpful for the layman. Case in point, Paragraph (g) notes, “‘Quantum Computers’ perform computations that harness the collective properties of quantum states, such as superposition, interference and entanglement. It applies to circuit model (or gate-based) and adiabatic (or annealing).”
Regardless of the EAR’s definitions of relevant terms, unfortunately OFAC has neither relied upon nor referenced the EAR or any relevant definitions therein, in so far as its own determinations are concerned under E.O. 14024 and E.O. 14071. The EAR and the laws and regulations administered by OFAC are separate and distinct, with their own respective statutory bases, unless OFAC specifically states otherwise in any applicable regulations. Short of registering for a course in quantum computing, you may feel inclined to look up the term in your go-to dictionary. I tried, and it didn’t help. Merriam-Webster defines the term “quantum computer” to mean, “a computer that takes advantage of the quantum properties of qubits to perform certain types of calculation extremely quickly compared to conventional computers.”
We can only hope for more immediate guidance from OFAC on what it means by “quantum computing.” At a minimum, given the highly technical nature of quantum computing, OFAC should follow BIS’s lead and/or coordinate with the agency in providing a technical definition of the term for businesses to decipher. In the meantime, given the strict liability nature of U.S. economic sanctions and export controls, it would be prudent for concerned businesses to interpret the term in its broadest sense while navigating and applying OFAC’s determinations.
The author of this blog post is Kian Meshkat, a California attorney specializing in U.S. economic sanctions and export controls matters, and Of Counsel with the law firm of Ferrari & Associates, P.C. in Washington D.C. If you have any questions please contact him at 202-440-2591 or firstname.lastname@example.org.
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