On September 6, 2024, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) issued new export controls on quantum computing, semiconductor, and additive manufacturing items. A quantum computing rule has been long expected and further tweaks to the semiconductor controls in the Export Administration Regulations (EAR) are not extraordinary at this point given the Biden administration's policy focus on restricting foreign adversaries' access to sensitive technology. Even so, the Interim Final Rule (IFR) contains a few surprises and introduces a number of features that will apply broadly in the long term.

A Plurilateral Approach: "Implemented Export Controls"

BIS is subject to a statutory mandate (section 1758 of the Export Control Reform Act of 2018 (ECRA)) to control emerging and foundational technologies that are essential to national security. In the interest of efficacy, ECRA notes it is U.S. policy to coordinate U.S. export controls with multilateral regimes. However, the possibility of revisions to multilateral controls has been hampered by Russia's membership in the Wassenaar Arrangement. Undeterred, BIS found a way to fulfill its mandate in the face of this obstacle: the IFR introduces a new plurilateral approach. It implements controls on items not yet controlled by a multilateral regime through provisions "consistent with" controls implemented by several international partners (between two and eight countries, depending on the item). In conjunction, the IFR introduces a new term for these plurilaterally-controlled items — Implemented Export Controls (IEC) — and a suite of corresponding measures.

• New ECCNs: The IFR introduces 18 new Export Control Classification Numbers (ECCNs) for IEC items. These cover items such as materials that contain silicon and germanium isotopes and technology for the development and production of integrated circuits and devices using "Gate all-around Field-Effect Transistor" (GAAFET) structures, as well as others discussed briefly below. With a few exceptions, going forward, IEC items will be controlled under 900 series ECCNs, ending 900 to 979. 
• New "Worldwide" License Requirements: Most IEC ECCNs are controlled for National Security (NS) and Regional Stability (RS) reasons and will be controlled worldwide. Licenses will be required even for Australia, Canada, and the U.K., despite the fact those countries are not subject to NS or RS controls. 
• New License Exception IEC: A new license exception is available for exports of IEC items to countries identified on a list BIS will maintain on its website: "License Exception Implemented Export Controls (IEC) Eligible Items and Destinations" (IEC List). Countries will be added to the IEC List as BIS determines they have implemented comparable export controls; at present, only Italy and the U.K. are broadly eligible, with Australia, Canada, France, Germany, Japan, and Spain eligible for certain ECCNs. License Exception IEC does not require special certifications, or impose other prerequisites or reporting mandates. For countries not eligible for License Exception IEC, licensing policies range from presumption of approval to presumption of denial.
• New "Exclusions" for Deemed Exports and Deemed Reexports: A new "grandfather exclusion" allows current foreign person employees and contractors who already had access to IEC software and technology and were already employed by an entity as of September 6, 2024, to continue to access that software and technology without a license (excepting certain scenarios covered by a new General License). In addition, certain ECCNs and fact patterns correspond with a new "limited exclusion" (not available for D:1 and D:5 countries), while others are eligible for a "full exclusion."* 
• New General License (GL): A new GL authorizes certain exports, reexports and transfers (in-country) of GAAFET technology for development and production that was on-going as of September 6, 2024. The GL has a related GAAFET grandfather provision for foreign person employees. The GL also authorizes certain deemed exports and reexports for quantum items to foreign persons whose most recent country of citizenship or permanent residency is a D:1 or D:5 country. Annual reporting requirements apply to use of the GL. 

New Advanced Technology Controls

Quantum Computing

• New ECCNs cover quantum computers (4A906), Complementary Metal Oxide Semiconductor (CMOS) integrated circuits and parametric signal amplifiers (3A901), and cryogenic cooling systems (3A904), among other items, as well as related software and technology.
• The IFR provides a 60-day compliance delay (until November 5, 2024) for exports, reexports, and transfers (in-country) of most newly controlled quantum computing items to allow time for submitting and processing license applications.

Semiconductors

• New and revised ECCNs add controls on, or change license requirements and license exception availability for, semiconductor production-related items. Items affected include extreme ultraviolet (EUV) masks and reticles (3B001), Scanning Electron Microscope (SEM) equipment (3B903), epitaxial and other materials (3C907-3C909), software designed to extract Graphic Design System II (GDSII) layout data (3D907), and, as noted above, technology for GAAFET structures (3E905), among others. These changes are effective immediately.

3D Printing

• The IFR creates three new ECCNs relating to additive manufacturing items: 2B910, 2D910, and 2E910. These apply to advanced 3D printers designed to produce metal or metal alloy components, "specially designed" components for those printers, plus associated development and production software and technology. All three ECCNs are subject to new worldwide NS and RS reasons for control, as well as anti-terrorism (AT) controls. These changes are effective immediately.

Takeaways

• Compliance Implications: An organization's compliance team will need to confirm both actual hiring dates and the fact of pre-existing access to the applicable software and technology when assessing employee eligibility under the new "grandfather exclusion." In addition, while publishing the IEC List on the BIS website rather than adding it directly to the EAR as a supplement likely makes it easier for BIS to add countries as eligible destinations, compliance teams must be careful always to reference the most recent version of the list when analyzing eligibility for License Exception IEC.
• Committee on Foreign Investment in the U.S. (CFIUS) Implications: When seeking foreign investors, U.S. businesses that are engaged in producing, designing, testing, manufacturing, fabricating, or developing items classified under IEC ECCNs must keep in mind that the "worldwide" RS controls may now trigger mandatory CFIUS filings, even when the investor is eligible for License Exception IEC (see 31 C.F.R. §§ 800.215, 800.401).
• Notice and Comment: As an interim rule, the IFR remains subject to notice and comment despite the fact that it has immediate effect. BIS expressed a general interest in receiving comments on the IEC framework (particularly its impact on supply chains and compliance programs), the scope and clarity of the new ECCNs, and the scope of the license exceptions. Comments will be accepted through November 5, 2024. 

*Updated on September 18, 2024, to clarify the exclusions available for certain deemed exports and deemed reexports.

For more information, please contact:

Timothy P. O'Toole, totoole@milchev.com, 202-626-5552

Laura Deegan, ldeegan@milchev.com, 202-626-5942

Caroline J. Watson, cwatson@milchev.com, 202-626-6083

Melissa Burgess, mburgess@milchev.com, 202-626-5914

Manuel Levitt, mlevitt@milchev.com, 202-626-5921

Annie Cho, acho@milchev.com, 202-626-1570

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