BIS’s New Approach To Identifying “Emerging And Foundational Technologies” – Export Controls & Trade & Investment Sanctions

On May 23, 2022, the U.S. Department of Commerce Bureau of
Industry and Security (“BIS”) published a proposed rule identifying new unilateral
export controls on four dual-use biological marine toxins, the
synthesis and collection of which BIS has identified for evaluation
in accordance with the criteria set forth in Section 1758 of the
Export Control Reform Act of 2018 (“ECRA”).1
Section 1758 requires BIS to identify and establish appropriate
controls on the export, reexport, or transfer (in-country) of
“emerging and foundational technologies” that are
“essential to the national security of the United
States.”2 Importantly, the proposed rule announced
a change in BIS’s approach to identifying new technologies of
high strategic importance for control: moving forward, BIS will no
longer distinguish between “emerging technologies” and
“foundational technologies,” but rather “will
characterize all technologies identified pursuant to Section 1758
as ‘Section 1758 technologies.'”

Identification of Emerging and Foundational Technologies To
Date.

Since the enactment of ECRA on August 13, 2018, as part of the
John S. McCain National Defense Authorization Act for Fiscal Year
2019 (“2019 NDAA”),3 BIS has been under
pressure to swiftly identify “emerging and foundational
technologies” for control. On November 19, 2018, BIS published
an advance notice of proposed rulemaking (“ANPRM”), which
included a list of fourteen representative emerging technology
categories:

  1. Biotechnology;

  2. AI and machine learning technology;

  3. Position, Navigation, and Timing (“PNT”)
    technology;

  4. Microprocessor technology;

  5. Advanced computing technology;

  6. Data analytics technology;

  7. Quantum information and sensing technology;

  8. Logistics technology;

  9. Additive manufacturing (e.g., 3D printing);

  10. Robotics;

  11. Brain-computer interfaces;

  12. Hypersonics;

  13. Advanced Materials; and

  14. Advanced surveillance technologies.4

In 2019 and 2020, BIS issued four final rules related to
emerging technologies, placing controls on 37 technologies during
that period, including post-quantum cryptographic algorithms and law enforcement surveillance software. In 2021
and 2022, BIS placed new controls on emerging technologies, such as
nucleic acid assembler software and geospatial imagery software.

With respect to “foundational technologies,” there has
been even less progress. BIS’s heavily anticipated ANPRM on
foundational technologies, published August 27, 2020, did not
include an illustrative list of foundational technology categories
like the November 19 ANPRM; however, “semiconductor
manufacturing equipment and associated software tools, lasers,
sensors,” as well as “underwater systems” were
mentioned as possible examples of foundational
technologies.5 Still, almost four years after the
enactment of ECRA, BIS has identified zero “foundational”
technologies pursuant to Section 1758.

Criticism of BIS in Failing to Fulfil Section 1758
Obligations.

On June 1, 2021, the U.S.-China Economic and Security Review
Commission published a congressional advisory report criticizing the pace of BIS’s
identification of “emerging and foundational
technologies.”6 The report, titled “Unfinished
Business: Export Control and Foreign Investment Reforms,”
asserts that BIS has “failed to carry out its
responsibilities” under ECRA. “Current progress in
implementation falls short of congressional expectations for
expediency in addressing a key national security concern,” the
critical report argues.

On November 15, 2021, Senator Tom Cotton (R-AR), joined by nine
other Republican senators, sent a letter to Secretary of Commerce Gina Raimondo
urging her to direct BIS to hasten its process for identifying
“emerging and foundational technologies” pursuant to
Section 1758.7 The letter referenced “five
technology areas key to America’s strategic competition with
China,” including artificial intelligence (“AI”),
quantum computing, semiconductors, biotechnology, and autonomous
systems, which are being used to guide “efforts to prevent
U.S. adversaries like China from acquiring technologies necessary
for America’s future economic growth and military
advantage.” The letter urged “BIS to emulate the
Intelligence Community by identifying key American technologies
that need to be safeguarded from the Chinese Communist Party,”
highlighting Chinese AI firms in particular.

Continued Emphasis on Countering the CCP

Looming large over the emerging and foundational technologies
conversation is the specter of China and its push for independence
in the field of advanced technologies, exemplified by its state-led
industrial policies, collectively dubbed “Made in China
2025,” aimed at global dominance of the high-tech
manufacturing sector.

On May 25, 2022, House Foreign Affairs Committee Lead
Representative Michael McCaul (R-TX-10), who also serves as
Chairman of the House’s Republican China Task Force
(“CTF”), denounced BIS’s “proposed change in
terminology from ’emerging’ and ‘foundational’
technology to ‘1758 technologies'” as a “blatant
attempt to not live up to their responsibility to follow the 2018
law by identifying foundational technology.”8 The
CTF, a task force committed to “developing legislative
solutions to address the Chinese Communist Party’s
(“CCP”) malign global activity,” has applied
constant pressure on both Congress and the White House to hold the
CCP accountable for its economic policies and human rights abuses.
In September 2020, the CTF released a report containing more than 400 policy
recommendations – the majority of which were bipartisan
– on how the U.S. can effectively counter the economic and
national security threats posed by the CCP’s industrial and
corporate espionage policies. On June 8, 2022, Chairman McCaul and
other CTF members held a roundtable in Washington, D.C. on the
effective use of U.S. export controls to prevent the CCP from
acquiring dual-use U.S. technologies of high strategic
importance.

Warnings about the rise of the CCP on the world stage are not
limited to the Republican party. On May 26, 2022, Secretary of
State Antony Blinken gave a speech affirming the current
administration’s priority of countering the CCP, calling
“China… the only country with both the intent to reshape the
international order and, increasingly, the economic, diplomatic,
military, and technological power to do it.” These
pronouncements underscore the disquieting threat posed by the
CCP’s attempts to acquire sensitive U.S. technologies and the
rising geopolitical tensions between Washington and Beijing.

CFIUS Impact

The Foreign Investment Risk Review Modernization Act of 2018
(“FIRRMA”) was also enacted as part of the 2019 NDAA. The
FIRRMA strengthened and modernized the process by which the
Committee on Foreign Investment in the United States
(“CFIUS”) reviews certain transactions involving foreign
investment in the United States and certain real estate
transactions by foreign persons to determine the effect of such
transactions on U.S. national security. Importantly, FIRRMA
references Section 1758 of ECRA for purposes of defining
“critical technologies” subject to CFIUS’s mandatory
notification requirement.9 For example, the four marine
toxins and related technologies identified in BIS’s May 23
proposed rule will be considered “critical technologies”
for purposes of CFIUS review if the corresponding final rule is
published.

BIS hopes its removal of the distinction between
“emerging” and “foundational” technologies will
expedite the process for identifying relevant technologies and
implementing appropriate controls. In its May 23 proposed rule, BIS
clarified that its new characterization of “Section 1758″
technologies “will not affect the designation of ‘critical
technologies,’ for purposes of [CFIUS] screenings,” nor
will it “affect the scope of controls on any technologies
controlled consistent with Section 1758 of ECRA.”

BIS’s decision to forego the distinction between
“emerging” and “foundational” technologies does
not change the interaction between ECRA and FIRRMA. However,
companies dealing with “Section 1758 technologies” should
be aware of their potential obligations under FIRRMA and related
CFIUS regulations pertaining to “critical technologies”
(for more information, see our previous article,
CFIUS Regulations & Export Controls Impacting CFIUS
Scrutiny
).

CET List

Distinct from BIS’s ongoing efforts to identify
“emerging and foundational technologies” as required by
Section 1758, in February 2022, the interagency National Science
and Technology Council (“NSTC”) Subcommittee on Critical
and Emerging Technologies published its updated Critical and Emerging Technologies
(“CET”) List. The CET List will “inform
forthcoming strategy on U.S. technological competitiveness and
national security.”10 Though the CET List is
separate from the running list of “emerging and foundational
technologies” mandated by ECRA, the lists have many
technologies in common, such as biotechnology, AI, and hypersonics.
Some notable technologies present in the CET List but missing from
BIS’s list above include advanced gas turbine engine
technologies, financial technologies (“fintech”), and
advanced nuclear energy technologies, including fusion energy.

Only time will tell whether BIS’s new approach to
identifying “Section 1758 technologies” will enable
quicker and more comprehensive identification of emerging and
foundational technologies essential to U.S. national security. In
the meantime, companies dealing with cutting-edge technologies of
strategic importance to the U.S. should stay tuned for the latest
developments in this rapidly evolving area of law.

Footnotes

1. Commerce Control List: Controls on Certain Marine
Toxins, 87 Fed. Reg. 31,195 (May 23, 2022), available at

2. The ECRA is codified at 50 U.S.C. §§
4801-4852. Section 1758 of ECRA (Requirement to identify and
control the export of emerging and foundational technologies) is
codified at 50 U.S.C. § 4817.

3. Pub. L. No. 115-232.

4. Review of Controls or Certain Emerging Technologies,
83 Fed. Reg. 58,201 (Nov. 19, 2018), available at

5. Identification and Review of Controls for Certain
Foundational Technologies, 85 Fed. Reg. 52,934 (Aug. 27, 2020),
available at

6. Rafaelof, Emma, “Unfinished Business: Export
Control and Foreign Investment Reforms,” U.S.-China Economic
and Security Review Commission (June 1, 2021), available
at

7. Letter from Senator Tom Cotton to Secretary of
Commerce Gina Raimondo (Nov. 15, 2021), available at

8. “McCaul on BIS Decision to Change Terminology,
Dodge Statutory Responsibility,” Foreign Affairs Committee
Press Release (May 25, 2022), available at

9. Section 721(a)(6)(A) of the Defense Production Act of
1950, as amended, provides that the term “critical
technologies” includes “[e]merging and foundational
technologies controlled pursuant to section 4817 of [Title 50 of
the U.S. Code].” See 50 U.S.C. §
4565(a).

10. “Critical and Emerging Technologies List
Update,” Fast Track Action Subcommittee on Critical and
Emerging Technologies, National Science and Technology Council
(Feb. 2022), available at

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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