The US Department of Commerce’s Bureau of Industry and Security (“BIS”) issued an interim final rule (the “IFR”) on September 6, 2024 that imposes new “plurilateral” worldwide licensing controls on certain advanced technologies, including certain quantum, semiconductor-related and additive manufacturing items, under new and amended ECCNs in the Export Administration Regulations (the “EAR”), introduces a new license exception for certain items to allied countries implementing equivalent controls, adds two new general licenses for certain Gate All-Around Field-Effect Transistor (“GAAFET”) and quantum technologies, and certain deemed export/reexport exclusions, among other updates to the EAR and the CCL.
These changes are being implemented alongside similar export control reforms introduced in Italy, Canada, and the United Kingdom, which are covered in prior blog posts here, here, and here.
While the IFR is effective September 6, 2024, certain provisions in the IFR concerning exports, re-exports, and/or transfers (in-country) of certain quantum computing items listed on the CCL to destinations specified in Country Group A:1 are not effective until November 5, 2024.
The IFR also solicits comments from the public on three key changes introduced with this rule – (1) the framework of controls implemented in coordination with international partners and allies, including the impact of the proposed framework on supply chains and compliance programs; (2) the scope and clarity of the new ECCNs; and (3) the scope and clarity of new license exceptions. Comments on these aspects of the IFR are due by November 5, 2024, and can be submitted here.
- Worldwide Licensing Requirement for Certain Items Subject to New National Security or Regional Stability Controls
The IFR imposes new worldwide licensing requirements for 18 new and 9 amended ECCNs that are subject to “plurilateral” control for National Security under new Section 742.4(a)(5) or Regional Stability under new Section 742.6(a)(10) of the EAR in the license requirement table of the ECCN, unless an exclusion from the licensing requirements applies or the exports/re-exports are eligible for a license exception or general license.
New ECCNs introduced with this rule fall under the 900-970 series in the Commerce Control List to more clearly indicate items subject to the new plurilateral National Security and Regional Stability controls. Pre-existing multilateral ECCNs are being amended to avoid confusion through creating a separate ECCN.
New and amended ECCNs subject to these new worldwide national security and regional stability controls are: 2B910 (certain additive manufacturing equipment to produce metal or metal alloys), 2D910, 2E003, 2E903, 2E910, 3A001, 3A901 (certain cryogenic CMOS ICs), 3A904 (certain cryogenic cooling systems and components), 3B001.c.1.a (isotrophic dry etching equipment), 3B001.c.1.c (anistrophic dry etching equipment), 3B001.q (certain EUV masks and reticles), 3B903 (certain scanning electron microscopes (“SEM”) equipment designed for imaging of semiconductor devices or integrated circuits), 3B904 (certain cryogenic wafer probing equipment), 3C001 (certain hetero-epitaxial materials), 3C907 (certain epitaxial materials), 3C908 (certain fluorides, hydrides, chlorides, of silicon or germanium), 3C909 (certain silicon, silicon oxides, germanium or germanium oxides), 3D001 (for 3B001.c.1.a, 3B001.c.1.c, 3B001.q), 3D002 (for 3B001.c.1.a, 3B001.c.1.c), 3D901, 3D907 (certain software designed to extract GDSII or equivalent (e.g. OASIS) layout data and circuit netlist), 3E001 (for 3B001.c.1.a, 3B001.c.1.c, 3B001.q), 3E901, 3E905 (certain GAAFET technology), 4A906 (certain quantum computers), 4D001, 4D906, 4E001, and 4E906.
Certain quantum-related ECCNs have a 60-day delayed compliance period (i.e., until November 5, 2024) to destinations in Country Group A:1. These are: 3A901, 3A904, 3B904, 3C907, 3C908, 3C909, 3D901 (for 3A901.b, 3B904), 3E901 (for 3A901, 3A904, 3B904, 3C907, 3C908, 3C909), 4A906, 4D906, or 4E906.
The IFR restricts the use of license exceptions other than the new License Exception IEC – discussed below – (Section 740.24 of the EAR) and limited parts of the following License Exceptions TMP (Section 740.9 of the EAR); RPL (Section 740.10 of the EAR); GOV (Section 740.11 of the EAR); and TSU (Section 740.13 of the EAR) for items described in this IFR.
Applications for licenses to export items subject to these controls will be reviewed with a presumption of approval when the destination is in Country Groups A:1, A:5, and A:6 (Supp. No. 1 to Part 740 of the EAR), while applications to export articles subject to these controls will be reviewed with a presumption of denial when the destination of the exports is in Country Groups D:1 or D:5.
BIS also reminds exporters that these newly-controlled items will amount to “critical technologies” for purposes of the mandatory filing requirements under the Committee on Foreign Investment in the United States (“CFIUS”) regulations.
- New License Exception Implemented Export Controls (“IEC”) for Allied Countries Implementing Equivalent Controls
The IFR implements a new License Exception IEC at Section 740.24 of the EAR for exports, re-exports, and transfers (in-country) to certain allied countries that BIS has determined have implemented equivalent technical national controls for relevant items. The stated intent is to support ongoing collaboration and innovation. The countries and specific ECCNs for which License Exception IEC applies are listed in a separately published document on BIS’s website here, and will also be marked in the notation of each individual ECCN.
BIS indicates that the document will be updated as additional countries implement export controls that are harmonized with those of the United States and other allied countries already eligible for this license exception.
- Deemed Export and Reexport Exclusions
The IFR provides for certain exclusions from the licensing requirements for deemed export and deemed re-exports of certain “technology” and “software” related to semiconductor manufacturing and quantum computing.
- Grandfathering Clauses: The IFR provides a grandfathering clause to allow continued and future access to “technology” and “software” (including future advancements or versions of the same “technology” and “software”) that would otherwise require a license under the new national security or regional stability controls for foreign person employees and contractors that already have access to such “technology” or “software” and are employed by entities as of September 6, 2024. This grandfathering clause does not apply to GAAFET technology specified at ECCN 3E905 to foreign persons whose most recent country of citizenship or permanent residency is a destination listed in Country Groups D:1 or D:5, though such foreign persons are still authorized to access such “technology” or “software” under the new GAAFET General License discussed below (subject to certain reporting and record-keeping requirements).
- Complete Exclusion for Anisotropic Dry Plasma and Isotropic Dry Etch Equipment “Technology” and “Software”: The IFR provides a complete exclusion from licensing requirements for deemed exports and deemed re-exports of “technology” and “software” in ECCNs 3D001, 3D002, and 3E001 for anisotropic dry plasma etch equipment and isotropic dry etch equipment in 3B001.c.1.a and c.1.c.
- Limited Exclusion for Certain Semiconductor Manufacturing and Quantum “Technology” and “Software”: The IFR provides a limited exclusion from the new National Security and Regional Stability licensing requirements for specific “software” or “technology” (including for EUV masks and reticles, quantum items, SEM and for GAAFET structures) when exported to foreign persons, except for foreign persons whose most recent country of citizenship or permanent residency is a destination listed in Country Groups D:1 or D:5. The ECCNs to which this limited exclusion from deemed export/re-export licensing applies include: 2D910, 2E910, 3D001, 3D901, 3D907, 3E001, 3E901, 3E905, 4D906, and 4E906.
- New “Gate All-Around Field-Effect Transistor” (“GAAFET”) and Quantum General Licenses
In addition, BIS has introduced two new authorizations to support US collaboration with partners in allied countries for “development” and “production” activities for semiconductor manufacturing and integrated circuits that began on or prior to September 6, 2024, and a new authorization for deemed exports and re-exports of certain quantum “technology” and “software.” The new authorizations listed at paragraph (f) of Supp. No. 1 to Part 736 of the EAR are briefly summarized below.
- The GAAFET General License
The new GAAFET General License is intended to mitigate the disruption the new rules cause to US companies and entities in allied countries engaged in the development and production of semiconductor manufacturing equipment and integrated circuits that incorporate GAAFET technology.
Subparagraph (f)(1) of Supp. No. 1 to Part 736 authorizes exports, re-exports, and transfers (in-country) of GAAFET technology specified under the new ECCN 3E905 to end-users in destinations listed in Country Groups A:5 or A:6 for the ongoing “development” or “production” of integrated circuits where such “development” or “production” began on or before September 6, 2024.
Subparagraph (f)(2) authorizes deemed exports and deemed re-exports of ECCN 3E905 technology (including future advancements or versions of such “technology”) to foreign person employees or contractors whose most recent citizenship or permanent residency is a destination in Country Group D:1 or D:5 (and who are not prohibited parties under Part 744 of the EAR) provided that such foreign persons were already employed by entities as of September 6, 2024. This appears to include not just permanent and regular employees, but also “newly hired” employees as of September 6, 2024.
These authorizations are subject to reporting and recordkeeping requirements at subparagraphs (f)(4) and (f)(6) and end-use / end-user restrictions at subparagraph (f)(5) of Supp. No. 1 to Part 736 of the EAR. BIS has also added Section 734.7 to provide reporting requirements for exports, re-exports, and transfers (in-country) of “technology” specified under ECCN 3E905 that is exported pursuant to the GAAFET GL. This includes both annual reporting (by February 1 each year) and reports on termination.
- Quantum General License
BIS acknowledges that US technological leadership in quantum computing depends in part on the industry’s ability to leverage the expertise of foreign nationals. Meanwhile, the development of quantum computing technology is being pursued globally. As a result, the ability of US industry to maintain its technological leadership and have access to the most advanced quantum technology is dependent on the industry’s ability to access foreign nationals and their expertise and recruit experts throughout the world. Because of that, BIS acknowledges that limiting the access of foreign persons who are citizens or permanent residents in a destination listed in Country Groups D:1 or D:5 to quantum technology would be detrimental to US industry and innovation in the sector.
To mitigate these concerns, BIS has included a new Quantum General License at subparagraph (f)(3) of Supp. No. 1 to Part 736 of the EAR to authorize deemed exports and deemed re-exports of certain quantum software and technology under ECCNs 3D901 and 3E901 to foreign nationals of a destination listed in Country Groups D:1 or D:5 (and who are not prohibited parties under Part 744 of the EAR).
Deemed exports/re-exports of quantum technology and software under this Quantum General License are also subject to reporting in Section 743.8. This includes an initial report 60 days after publication of the IFR (September 6, 2024), then annual reporting by February 1 each year, as well as reports upon termination. This applies to deemed exports and deemed re-exports of “technology” or “software” for the “development” or “production” of items controlled under ECCNs 3A901, 3A904, 3B904, 3C907, 3C908, 3C909, 4A906. Based on such annual reporting, BIS may determine that a foreign national’s continued access to quantum technology may be subject to a licensing requirement.
Companies are urged to review these complex changes carefully and submit comments about their impact to BIS. Further changes may yet be expected.
