On November 19, 2018, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a proposed list of 14 categories of “emerging” technologies that are “essential to the national security of the United States” and may become subject to new export control restrictions in the coming months. Companies and investors should pay close attention to this proposal as it clearly signals the direction of U.S. technology controls and investment policies – particularly with regard to transactions with China and further restrictions on foreign investments in the United States under the Foreign Investment Risk Review Modernization Act (FIRRMA). Comments from interested parties are due no later than December 19, 2018.
The latest action implements provisions of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Public Law No. 115-232) that require BIS to identify “emerging and foundational technologies” that should be subject to new export controls. Once identified, BIS is required to determine the appropriate level of export control and licensing policy that should be applied to each category of technology by end use and end destination.
A major driving force for these efforts is the growing concern over technology transfers to potential strategic competitors, such as China and the erosion of the U.S. defense-industrial base. Thus, it is expected that BIS will impose at least some additional export controls on the technologies identified through its rulemaking process when exported to China. Investments by non-U.S. persons in the technologies thus identified are also likely to face further scrutiny through the Committee on Foreign Investment in the United States (CFIUS) process.
The initial list of “emerging” technologies identified by BIS is wide-ranging, encompassing industries from biotechnology to artificial intelligence, aerospace, semiconductors and advanced manufacturing. BIS seeks comments from interested members of the public on whether these categories sufficiently capture emerging technologies of concern or whether they should be narrowed or further expanded. The proposed categories are:
1. Biotechnology, such as:
(ii) Synthetic biology;
(iii) Genomic and genetic engineering; or
2. Artificial intelligence (AI) and machine learning technology, such as:
(i) Neural networks and deep learning (e.g., brain modeling, time series prediction,
(ii) Evolution and genetic computation (e.g., genetic algorithms, genetic programming);
(iii) Reinforcement learning;
(iv) Computer vision (e.g., object recognition, image understanding);
(v) Expert systems (e.g., decision support systems, teaching systems);
(vi) Speech and audio processing (e.g., speech recognition and production);
(vii) Natural language processing (e.g., machine translation);
(viii) Planning (e.g., scheduling, game playing);
(ix) Audio and video manipulation technologies (e.g., voice cloning, deepfakes);
(x) AI cloud technologies; or
(xi) AI chipsets.
3. Position, Navigation, and Timing (PNT) technology.
4. Microprocessor technology, such as:
(i) Systems-on-Chip (SoC); or
(ii) Stacked Memory on Chip.
5. Advanced computing technology, such as:
(i) Memory-centric logic.
6. Data analytics technology, such as:
(ii) Automated analysis algorithms; or
(iii) Context-aware computing.
7. Quantum information and sensing technology, such as:
(i) Quantum computing;
(ii) Quantum encryption; or
(iii) Quantum sensing.
8. Logistics technology, such as:
(i) Mobile electric power;
(ii) Modeling and simulation;
(iii) Total asset visibility; or
(iv) Distribution-based Logistics Systems (DBLS).
9. Additive manufacturing (e.g. 3D printing).
10. Robotics such as:
(i) Micro-drone and micro-robotic systems;
(ii) Swarming technology;
(iii) Self-assembling robots;
(iv) Molecular robotics;
(v) Robot compliers; or
(vi) Smart Dust.
11. Brain-computer interfaces, such as:
(i) Neural-controlled interfaces;
(ii) Mind-machine interfaces;
(iii) Direct neural interfaces; or
(iv) Brain-machine interfaces.
12. Hypersonics, such as:
(i) Flight control algorithms;
(ii) Propulsion technologies;
(iii) Thermal protection systems; or
(iv) Specialized materials (for structures, sensors, etc.).
13. Advanced Materials, such as:
(i) Adaptive camouflage;
(ii) Functional textiles (e.g., advanced fiber and fabric technology); or
14. Advanced surveillance technologies, such as:
(i) Faceprint and voiceprint technologies.
In addition, in the coming weeks BIS expects to issue a second proposed list of “foundational” technologies that would be subject to similar export controls.
For more information on how these new controls on emerging and foundational technologies could affect your company or any transactions in which you are currently engaged or contemplating, please do not hesitate to contact the authors below or any other member of Drinker Biddle’s Customs and International Trade Team.