New export controls

The Amending Regulations introduce three new entries to Schedule 3 of the Export Control Order, which controls for export certain dual-use goods. The new entries cover the following:

• PL9013 – Semiconductors, equipment for dry etching, Scanning Electron Microscope (SEM) equipment, integrated circuits, parametric signal amplifiers, cryogenic cooling systems and components, EUV masks and reticles, cryogenic wafer probing equipment and advanced materials.

• PL9014 – Quantum computers, qubit devices and qubit circuits, quantum control components and quantum measurement devices and computers, "electronic assemblies" and components containing certain integrated circuits.

• PL9015 – Certain additive manufacturing equipment and specially designed components.

The export or 'transfer by electronic means' of the goods, as well as certain technology and software related to the newly listed goods, is prohibited to all destination. Electronic transfers includes transmission of any electronic media, including also for example descriptions of technology orally over the phone. From 1 April a licence will be required for all such exports and transfers.

The Export Control Joint Unit ("ECJU") has updated the existing Open General Export Licence for the export of dual-use items to EU member states (the “OGEL”) to take into account the new entries. The OGEL will permit the export of items covered by the new entries to all 27 EU member states as well as Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland, the Channel Islands and the US (subject to certain exclusions, e.g. where they may be intended for an WMD end-use). The updated OGEL will come into force on 1 April 2024 and companies will be required to register on SPIRE prior to use.

For exports to any destination not covered by the OGEL, an export licence will be required. Licence applications with ECJU can take around two months to process, so any businesses expecting to need a licence for the export of such goods, software or technology should be prepared to submit an application as soon as possible.

In addition to the above measures, the Amending Regulations also introduced a number of other amendments to reflect routine technical updates made to the Wassenaar Arrangement munitions and dual-use lists. These amendments include changes to Schedule 2 of the 2008 Export Control Order and Annex I of the retained Dual-Use Regulation.

Increasing focus on emerging technologies

The new controls follow a focus from UK government (and indeed many other western countries) on emerging technologies over the past year. The National Quantum Strategy published in March 2023 included a key priority action to protect "key areas of quantum capabilities, including through the use of the National Security Investment Act and export controls, as well as offering guidance and support to the quantum community". Following this government published its National Quantum Strategy Missions in December and announced significant investment in the quantum sector in February.

The National Semiconductor Strategy was published in May 2023 and was accompanied by an announcement to invest up to £1 billion into the semiconductor sector over the next decade. The strategy included a commitment from Government to "work with business to assess the export control regime and how it could be expanded for sensitive emerging technologies, including semiconductors".

Therefore, alongside efforts to increase UK research and development in these fields, the UK government is also seeking to place greater control on know-how and products in these spaces seeping out of the UK.

The UK is not alone in the introduction of these export controls. While not introduced as part of the Wassenaar Arrangement, the UK has make these changes "along with a number of like-minded countries". We have seen several European countries adopting similar controls over the past year. France introduced new export controls on semiconductors and quantum equipment and technologies earlier this year, which have come into force on 1 March. Similarly, Spain introduced controls in 2023, as did the Dutch government, who announced controls on export of certain semiconductors to destinations outside of the EU; these entered into force in September 2023.

We expect to see further countries announce controls on these technologies over the coming months.

Separately, the UK government now subjects certain acquisitions of, and investments into, UK companies involved quantum technology, semiconductor, and various other emerging technological fields, to pre-closing Ministerial clearance under the National Security and Investment Act 2021. Notably, the expansion of the UK’s dual-control lists by virtue of the Amending Regulations has the effect of concurrently expanding the scope of the “military and dual-use” sensitive sector under this Act.

Next steps

With these developments in mind, it is important that companies in the semiconductor or quantum technologies sectors —particularly with those with significant operations and/or activities in the UK — are prepared to comply with the new export controls and apply for licences where required.

In addition, UK companies operating in these sectors will want to be aware of the potential implications under the National Security and Investment Act 2021 for their investment rounds.

The Hogan Lovells trade team has deep expertise and significant experience with export controls, and will continue to provide updates on the latest legal and policy developments.