On September 6, 2024, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) published an interim final rule (IFR) implementing new export controls on quantum computing items and other advanced technologies.[1] In addition to subjecting these so-called critical and emerging technologies to more stringent export controls, investments by foreign persons into U.S. companies that develop or produce such technologies could be subject to mandatory Committee on Foreign Investment in the United States (CFIUS) filing requirements.[2]
The IFR, which reflects cooperation between the United States and certain of its international partners, imposes new export controls on the following types of items:
- 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 that are 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 that can be used in supercomputers.
- Additive Manufacturing Items: equipment, components, and related technology and software designed to produce metal or metal alloy components.
To implement these new controls, the IFR adds 18 new Export Control Classification Numbers (ECCNs) to the Commerce Control List (CCL) under the Export Administration Regulations (EAR) and modifies an additional nine ECCNs to cover the relevant technologies.[3] The relevant technologies are now subject to export license requirements for national security (NS) and regional stability (RS) reasons.[4] The IFR also limits the license exceptions that can be used to export the relevant technologies.[5]
In addition, the IFR adds a new license exception Implemented Export Controls (IEC) for specified countries (currently limited to Australia, Canada, France, Germany, Italy, Japan, Spain, and the United Kingdom) that have implemented equivalent technical national controls for specific items. Eligible items and destinations are available on the BIS website.[6]
Finally, to promote ongoing research and development of certain technologies, the IFR includes a deemed export (i.e., sharing or releasing controlled technology to a foreign person within the United States) and reexport license requirement exclusions for certain software and technology and a general license for deemed exports/reexports of certain technology/software, subject to annual reporting requirements.[7]
These new export controls also expand the scope of transactions that could trigger a CFIUS mandatory filing requirement. Specifically, items controlled for export under the EAR for NS and RS reasons are considered “critical technologies” for CFIUS purposes. Any foreign investment in a U.S. business that engages in covered activities involving such technologies that would require a license for export to the foreign investor, or any foreign person that holds (directly or indirectly) a 25 percent or more of the foreign investor, must be notified to CFIUS.
BIS is seeking public comment on the IFR until November 5, 2024.
[1] 89 Fed. Reg. 72926 (Sept. 6, 2024). https://www.federalregister.gov/d/2024-19633. See also Department of Commerce Implements Controls on Quantum Computing and Other Advanced Technologies Alongside International Partners, Department of Commerce, Bureau of Industry and Security (Sept. 5, 2024) (hereinafter “Press Release”), https://www.bis.gov/press-release/department-commerce-implements-controls-quantum-computing-and-other-advanced.
[2] We’ve previously written about developments relating to critical and emerging technologies here and here.
[3] In particular, the IFR adds the following 18 ECCNs to the CCL: 2B910, 2D910, 2E903, 2E910, 3A901, 3A904, 3B903, 3B904, 3C907, 3C908, 3C909, 3D901, 3D907, 3E901, 3E905, 4A906, 4D906, and 4E906. The IFR also revises the following nine ECCNs: 2E003, 3A001, 3B001, 3C001, 3D001, 3D002, 3E001, 4D001, and 4E001.
[4] Note that there is a 60-day delayed compliance date for quantum items with destinations in Country Group A:1 to allow time for submission of license applications.
[5] Amended 15 C.F.R. § 740.2(a)(22) restricts the use of all other license exceptions for these items except for IEC, TMP, RPL, GOV, and TSU.
[6] License Exception Implemented Export Controls (IEC) Eligible Items and Destinations. Sept. 5, 2024. https://www.bis.gov/media/documents/2024-9-6-rev-license-exception-implemented-export-controls-iec-eligible-items-and.
[7] See new 15 C.F.R. § 742.4(a)(5)(ii)(A)-(B). https://www.federalregister.gov/d/2024-19633/p-205.