By: Alica Ma;  Li (Mary) Ma

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. This ANPRM is extremely important for many industries and companies. Technologies that can currently be shared with basically all countries may soon be subject to significant limitations and regulatory restrictions. The new restrictions will impact the ability to export, reexport (shipment from one foreign country to another foreign country) and transfer in-country 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 the Proposal

The BIS is currently seeking public comments with defining and identifying emerging technologies, which are technologies not currently listed on the Export Administration Regulations’ Commerce Control List or controlled multilaterally through one of the export control regimes.

New restrictions would require a type of technology or finished product that can currently be exported without obtaining an export license be subject to export licensing requirements as an “emerging technology.” 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 Export Mean?

If an emerging technology is added to the Commerce Control List, it will be controlled for export to a number of countries, including China, Lebanon, Venezuela, and Cyprus. Accordingly, companies may need to apply for “deemed export” licenses for foreign national employees from countries such as China working on an emerging technology.

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 and thus potentially subject to mandatory CFIUS filing regardless of the origin of the foreign investment if the other criteria for filing are satisfied.

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:

• criteria for defining an emerging technology/emerging technology definitions;
• criteria for determining specific technologies within the 14 identified general categories that are important to U.S. national security;
• sources for helping identify emerging technologies;
• whether there are additional general technology categories that warrant review for identifying emerging technology important to U.S. national security;
• the development status of specific emerging technologies in the United States and abroad;
• the impact that export licensing requirements for specific emerging technologies will have on U.S. technological leadership; and
• 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 impact whether a mandatory CFIUS filing may be required for foreign investments in your industry.

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.