The US Department of Commerce’s Bureau of Industry and Security (BIS) published an Interim Final Rule (IFR) on September 6, 2024 to implement worldwide export controls on quantum computing, semiconductor, addictive computing, and Gate All-Around Field-Effect Transistor (GAAFET) items and technologies.
BIS characterized the new controls as follows:
- Quantum Computing Items: Quantum computers, related equipment, components, materials, software, and technology that can be used in the development and maintenance of quantum computers
- Advanced Semiconductor Manufacturing Equipment: Tools and machines that are essential for the production of advanced semiconductor devices
- GAAFET Technology: Technology that produces or develops high-performance computing chips that can be used in supercomputers
- Additive Manufacturing Items: Equipment, components and related technology, and software designed to produce metal or metal alloy components
Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler explained that an important reason for implementing the new rules is to “develop and coordinate our controls alongside like-minded partners.” To implement the IFR, BIS is creating a new framework by doing the following:
- Creating new items in the “900 series” of the Commerce Control List (CCL) to have global licensing requirements with more limited license exception availability as compared to multilateral regime controls
- Revising certain Export Control Classification Numbers (ECCNs), even if it was originally introduced as a multilateral ECCN because creating a separate ECCN would have been more confusing
- Introducing a new License Exception “Implemented Export Controls” (IEC) to authorize exports and reexports to certain destinations where governments have enacted similar controls on these items as the United States.
NEW EXPORT CONTROLS ON QUANTUM COMPUTING AND SEMICONDUCTOR TECHNOLOGIES TO PRESUMPTIVELY APPLY WORLDWIDE
The United States has positioned itself as a leader in certain emerging and foundational technologies identified pursuant to the authority of the Export Control Reform Act of 2018, but maintaining this position requires stringent export controls to prevent sensitive technologies from unauthorized exports, reexports, and in-country transfers. The IFR places significant emphasis on the regulation of quantum technology and semiconductor manufacturing. Quantum computing, in particular, is a key area of focus because it is essential for various applications, ranging from encryption to advanced scientific research.
Notably, the IFR introduces new 900 series ECCNs where the last three digits are 900–970 to cover quantum processors, cryogenic cooling systems, and parametric signal amplifiers, among other quantum-related technologies. For context, the 500 series is currently being utilized to cover firearms in the 0x5xx ECCNs and “spacecraft” in 9x515 ECCNs, crime control and short supply controls have long shared the 980–989 series of ECCNs, and the 990–999 series ECCNs are being used for unilateral Anti-Terrorism (AT), Regional Stability (RS), and United Nations Sanctions (UN) controls.
The IFR also introduces measures to control the export of certain semiconductor technologies, specifically those using GAAFET technology, which is critical for the development of next-generation microchips. These chips are expected to enable more efficient artificial intelligence (AI) systems, military applications, and other advanced computing systems.
A summary of the 18 new ECCNs being added and the nine existing ECCNs being amended is provided at the end of this LawFlash.
LICENSE APPLICATION AND REVIEW POLICY
The new 900–970 series ECCNs are subject to a plurilateral NS and RS that designate the license requirement as “worldwide,” a term that has only been used in limited circumstances such as the License Exception ENC that is available for “less sensitive government end users” worldwide (except to AT-controlled countries). This worldwide license requirement is particularly notable because it extends to Canada, which has traditionally been exempt from many US export controls, as well as Australia and the United Kingdom, countries from which BIS recently removed most export controls in alignment with the AUKUS security agreement.
More specifically, the IFR sets forth the worldwide license requirement for national security reasons when an ECCN references § 742.4(a)(5) within an NS license requirement paragraph in the ECCN’s license requirement table, with the license review policy being
- presumption of approval for exports or reexports to countries in Country Group A:1;
- presumption of denial for those to Country Groups D:1 or D:5; and
- a case-by-case review applies to all other destinations.
There is a 60-day period (from the publication of the IFR on September 6 to November 5, 2024) to allow time for license application submission, compliance with the annual report requirement, and adjustments to internal compliance procedures.
The IFR adds the worldwide license requirement for regional stability reasons when an ECCN references § 742.6(a)(10) in an RS license requirement in the license requirement table of the ECCN, following a similar license review policy and a 60-day period.
LICENSE EXCEPTION IEC
Another important feature of the IFR is the introduction of the License Exception IEC framework, which allows for exports of the newly controlled items to “like-minded” international partners that have established similar export controls. Items classified under the 900 series ECCNs will be subject to worldwide licensing requirements. For example, the Netherlands and Japan have previously joined the United States in imposing certain export restrictions on advanced chip-making equipment and hence are designated as “eligible destinations” for related equipment.
Currently, the License Exception IEC is available for exports, reexports, or transfers (in-country) of eligible items within the product scope—currently, ECCNs 2B910, 2D910, 2E903, 2E910, 3A901, 3A904, 3B001.c.1.a, 3B001.c.1.c, 3B001.q, 3B903, 3B904, 3C907, 3C908, 3C909, 3D001 (for 3B001.c.1.a, 3B001.c.1.c, 3B001.q), 3D002 (for 3B001.c.1.a, 3B001.c.1.c), 3D901, 3D907, 3E001 (for 3B001.c.1.a, 3B001.c.1.c, 3B001.q), 3E901, 3E905, 4A906, 4D906, and 4E906—to eligible destinations within the country scope (specified in § 740.24 of the Export Administration Regulations).
A copy of the License Exception IEC Eligible Items and Destinations is appended for ease of reference and can be accessed via BIS’s IEC website. It is notable that License Exception IEC is currently available for a small group of countries that have implemented harmonized controls.
GENERAL ORDER NO. 6
BIS also adds General Order No. 6 to implement three authorizations in paragraph (f) of Supplement No. 1 to part 736 of the Export Administration Regulations (EAR).
Authorized GAAFET-Related Activities
A GAAFET General License (GL) is established under paragraphs (f)(1) and (f)(2) to promote US technology leadership through continued collaboration with trusted partners in allied nations. This applies to “development” or “production” activities that commenced on or before September 6.
Paragraph (f)(1) of the GL allows exports, reexports, and in-country transfers to specific end users located in countries listed in Country Groups A:5 and A:6, as outlined in Supplement No. 1 to Part 740 of the EAR. However, the GL does not cover deemed exports and reexports, as such exports to these countries are exempt from NS and RS controls under §§ 742.4(a)(5) and 742.6(a)(10) of the EAR.
Grandfather Provision
In paragraph (f)(2), the GL permits deemed exports and reexports of “technology” covered under ECCN 3E905 (including future advancements or versions) to foreign employees or contractors who were already employed by relevant entities as of September 6. These individuals must have citizenship or permanent residency in countries listed in Country Group D:1 or D:5 and must not be prohibited persons under Part 744 of the EAR (e.g., not listed on the Entity List, Unverified List, or Military End-User List or listed on the Denied Persons List).
Authorized Deemed Export of Quantum Items
Paragraph (f)(3) extends the GL to allow deemed exports or reexports of quantum “technology” and “software” in certain ECCNs—3D901 (for “software” for quantum items in ECCNs 3A901.b, 3B904), 3E901 (for “technology” for quantum items in 3A901, 3A904, 3B904, 3C907, 3C908, 3C909), and “technology” for quantum items in ECCNs 4D906 or 4E906—to foreign persons whose most recent citizenship or permanent residency is from a Country Group D:1 or D:5 destination, provided they are not prohibited persons under Part 744 of the EAR.
REPORTING REQUIREMENTS AND ENFORCEMENT
To enhance oversight and ensure compliance with the new restrictions, the IFR introduces additional reporting requirements under § 743.7 (for GAAFET GL) and § 743.8 (for quantum deemed exports and deemed reexports) of the EAR for companies exporting or reexporting controlled new 900 series ECCNs. Companies must now submit annual reports detailing their exports of quantum technologies and semiconductor manufacturing equipment, including deemed exports.
Reporting Requirements Associated with GAAFET GL
Companies that use the GAAFET GL for deemed exports and reexports of “technology” specified in ECCN 3E905 must submit an annual report that details the information exported via deemed exports and the persons to whom it was exported. If companies use the GAAFET GL for deemed exports and reexports to current employees, it must also report to BIS the voluntary or involuntary termination of employment of foreign person employees who received technology pursuant to the GL whose most recent country of citizenship or permanent residency is a destination specified in Country Group D:1 or D:5 within 30 days of termination.
Annual reports must include information typically included in a deemed export license application, which usually consists of a description of the technology, all parties involved in the collaboration, and details of the end item, including its ECCN if known. Termination reports are required when a foreign person employed under the GAAFET GL terminates their employment, specifying whether they are leaving the United States or changing employers within the country.
Report Requirements Associated with Quantum-Related Deemed Exports and Reexports
Additionally, quantum-related deemed exports and reexports also require reporting. Reports must include detailed information about the technology or software, the foreign person involved, and the end item. If a foreign person with access to such quantum technology leaves employment or academic institutions, a termination report must be filed within 30 days. Reports should be submitted to BIS with the subject line indicating it is a Quantum General License report.
The first annual report must be submitted by November 5, 2024 (60 days after the publication of the IFR), which is also the last date to provide comments, indicating that parties should not expect this requirement to change dramatically. Initial reports must cover the period between September 6 and October 28, 2024. Subsequent reports are due annually by February 1, covering the previous year (thus the initial annual report will be due February 1, 2025 for all 2024 activity covered by the regulation).
Reports should be submitted to BIS via email with specific subject lines depending on whether it is an annual or termination report. Failure to comply with these reporting requirements, or submitting false or incomplete reports, will constitute a violation of the EAR, resulting in enforcement actions that may include fines and other penalties.
OPPORTUNITIES FOR COMMENT
These technologies, being vital to both commercial and military applications, have been heavily scrutinized for their strategic importance. The IFR reflects the US government’s ongoing efforts to balance the need for technological innovation with its national security interest. By introducing new export controls on semiconductors, quantum technologies, and advanced manufacturing items, the US government aims to maintain its leadership in these critical areas while preventing foreign adversaries from gaining access to sensitive technologies. The IFR emphasizes collaboration with international partners and introduces the IEC framework and detailed reporting requirements to provide a more comprehensive approach to regulating the export of cutting-edge technologies.
Further, the IFR stipulates that covered investments in US companies involved in designing, fabricating, developing, testing, producing, or manufacturing the newly controlled items will now require mandatory review by the Committee on Foreign Investment in the United States (CFIUS), unless the foreign investor qualifies as an “excepted investor” under CFIUS regulations or another exemption applies.
As always, BIS seeks industry input on the potential impacts of the new export controls, particularly in areas related to quantum computing and advanced semiconductors. BIS also invites feedback on potential future regulatory changes that could further refine the IEC framework or extend export control requirements to other emerging technologies.
THE 18 NEW ECCNS IDENTIFIED IN THE 900 SERIES OF CCL: WORLDWIDE LICENSE REQUIREMENTS AND MORE LIMITED LICENSE EXCEPTION AVAILABILITY
THE NINE EXISTING ECCNS BEING AMENDED
BIS TABLE ON LICENSE EXCEPTION IEC ELIGIBLE ITEMS AND DESTINATIONS
The information in the table below was published by BIC[1] and modified by the authors for this LawFlash.
[1] License Exception Implemented Export Controls (IEC) Eligible Items and Destinations, US Department of Commerce, Bureau of Industry and Security (Sept. 5, 2024).
[View source.]
