On November 19, 2018, the U.S. Commerce Department's Bureau of Industry and Security (BIS) released its advance notice of proposed rulemaking (ANPRM) to control the export of emerging technologies. Comments on the ANPRM are due to the BIS on or before December 19. This ANPRM is extremely important for many industries and companies, because technologies that can currently be shared with virtually all countries around the world may soon be subject to significant limitations and regulatory restrictions. The controls imposed will impact the ability to export, reexport (shipment from one foreign country to another foreign country) and transfer in-country (collectively "export") emerging technologies to 1. foreign countries, including to partners, subsidiaries, manufacturers, and customers located abroad, and 2. foreign nationals located in the United States or abroad, including employees, interns, and consultants of U.S. entities. Further, these developments may also have a significant impact on transactions involving foreign investment into U.S. businesses because they may require a number of additional U.S. businesses in emerging technology sectors to make mandatory filings with the Committee on Foreign Investment in the United States (CFIUS).

Overview of ANPRM

The ANPRM seeks public comment to assist the BIS with defining and identifying emerging technologies, which are technologies not currently listed on the Export Administration Regulations' (EAR) Commerce Control List (CCL) or controlled multilaterally through one of the multinational export control regimes, including the Wassenaar Arrangement.¹ Instead, the U.S. is unilaterally imposing additional controls on designated emerging technologies based on the U.S. government's view that these controls are important for U.S. national security. A technology or finished product that can currently be exported to most countries without obtaining an export license may soon become subject to export licensing requirements as an "emerging technology." In the ANPRM, the BIS identified 14 general categories in which it seeks to determine whether there are specific emerging technologies of national security interest. These categories include additive manufacturing (3-D printing); artificial intelligence (including neural computing, computer vision, speech and audio processing, and natural language processing); biotechnology (including nanobiology and genomic and genetic engineering); navigation and timing (including self-driving car technology); microprocessor technology; robotics; quantum computing; and hypersonics.

What Does Control of an Emerging Technology Mean?

If an emerging technology is added to the CCL, then it will, at a minimum, be controlled for export to a number of countries, including China, Lebanon, Venezuela, and Cyprus. The export licensing requirements will extend to transfers of technology to foreign nationals of those countries in the United States. Accordingly, companies may need to apply for "deemed export" licenses for foreign national employees from countries such as China working on an emerging technology, and there is no guarantee that a license will be approved. In addition, the designation as an emerging technology will affect the types of joint venture partners, investment partners, and manufacturing operations that U.S. companies can select for these emerging technologies. Moreover, that designation will also impact whether a mandatory CFIUS filing will be required for foreign investment into or an acquisition of U.S. businesses that work with such technologies by a foreign person. A U.S. business that designs, fabricates, develops, tests, produces, or manufactures an emerging technology or produces products from an emerging technology will be a "pilot program U.S. business" for CFIUS purposes as described in our previous alert, and thus potentially subject to mandatory CFIUS filing regardless of the origin of the foreign investment if the other criteria for filing are satisfied.

While this ANPRM is the first of several steps before the actual listing of an emerging technology on the CCL, it is important as it will help establish the particular control parameters that will attach to the specific technologies and items produced from those technologies.

What Can I Do?

For parties who believe this rulemaking may impact technologies that they work with, we recommend submitting comments to the BIS no later than December 19, 2018. Any person can submit comments, including manufacturers and developers of products and technologies covered by any of the 14 categories, customers of items that are produced from an emerging technology, and trade associations. The BIS is specifically seeking comments addressing the following:

1. criteria for defining an emerging technology/emerging technology definitions;
2. criteria for determining specific technologies within the 14 identified general categories that are important to U.S. national security;
3. sources for helping identify emerging technologies;
4. whether there are additional general technology categories that warrant review for identifying emerging technology important to U.S. national security;
5. the development status of specific emerging technologies in the United States and abroad;
6. the impact that export licensing requirements for specific emerging technologies will have on U.S. technological leadership; and
7. additional comments that may be relevant to the identification of emerging technologies, including the stage of development or maturity level that would be appropriate for imposition of export controls.

By submitting comments, you have the opportunity to help shape the criteria related to your "emerging technology" category and potentially to delay the applicability of export controls on your technology until it meets a certain level of maturity, as well as to impact whether a mandatory CFIUS filing may be required for foreign investments in your industry. In addition, given that the technologies under review are largely uncontrolled for export currently, it is very important to review the list of the technologies of interest to BIS to get a head start on assessing and ensuring that policies are in place for your product development, employment, manufacturing, and shipping processes.

Next Steps

Once the ANPRM comment period has closed and the U.S. government has analyzed the comments, the BIS will issue a new proposed rule with specific emerging technologies to be added to the CCL, their export control classification number (ECCN), and their technical criteria.

The BIS is also going to issue a separate proposed rule to add new "foundational" technologies that are important to U.S. national security to the CCL. These technologies, like the "emerging" technologies that are the subject of this ANPRM, will similarly affect U.S. businesses that may not currently have controls on their technologies. The foundational technology proposed rule should be issued in early 2019.

The 14 Categories of the Emerging Technologies Identified

1. Biotechnology, including nanobiology;synthetic biology; genomic and genetic engineering; or neurotech.
2. Artificial intelligence (AI) and machine learning technology, including neural networks and deep learning (e.g., brain modelling, time series prediction, classification); evolution and genetic computation (e.g., genetic algorithms, genetic programming); reinforcement learning; computer vision (e.g., object recognition, image understanding); expert systems (e.g., decision support systems, teaching systems); speech and audio processing (e.g., speech recognition and production); natural language processing (e.g., machine translation); planning (e.g., scheduling, game playing); audio and video manipulation technologies (e.g., voice cloning, deepfakes); AI cloud technologies; or AI chipsets.
3. Position, Navigation, and Timing (PNT) technology.
4. Microprocessor technology, including Systems-on-Chip (SoC) and Stacked Memory on Chip.
5. Advanced computing technology, including memory-centric logic.
6. Data analytics technology, including visualization; automated analysis algorithms; or context-aware computing.
7. Quantum information and sensing technology, including quantum computing; quantum encryption; or quantum sensing.
8. Logistics technology, including mobile electric power; modeling and simulation; total asset visibility; or Distribution-based Logistics Systems (DBLS).
9. Additive manufacturing (e.g., 3D printing);
10. Robotics including micro-drone and micro-robotic systems; swarming technology; self-assembling robots; molecular robotics; robot compliers; or Smart Dust.
11. Brain-computer interfaces, including neural-controlled interfaces; mind-machine interfaces; direct neural interfaces; or brain-machine interfaces.
12. Hypersonics, including flight control algorithms; propulsion technologies; thermal protection systems; or specialized materials (for structures, sensors, etc.).
13. Advanced Materials, including adaptive camouflage; functional textiles (e.g., advanced fiber and fabric technology); or biomaterials.
14. Advanced surveillance technologies, including faceprint and voiceprint technologies.