On September 6, 2024, the Bureau of Trade and Safety (BIS) issued an interim final rule (the September 6 IFR) implementing new and revised export controls regarding rising or crucial applied sciences within the fields of quantum computing, superior semiconductor manufacturing gear, gate-all-around field-effect transistor (GAAFET) expertise, and additive manufacturing. In keeping with BIS, the company is “harmonizing controls with like-minded international locations” in an effort to face “shoulder to shoulder…with our allies and key companions” and to ultimately implement multilateral controls on these merchandise.1 Citing vital nationwide safety considerations, many of the new controls carried out by the September 6 IFR took impact instantly.
Most importantly, the September 6 IFR:
- provides 18 new Export Management Classification Numbers (ECCNs) and revises 9 ECCNs. Many of those new/revised ECCNs are related or similar to controls carried out by the UK and sure European international locations earlier this 12 months;
- imposes a worldwide license requirement on the exports, re-exports, or transfers (in nation) for most of the newly managed objects, together with limitations on using sure license exceptions;
- introduces a brand new license exception, referred to as License Exception Applied Export Controls (License Exception IEC), for international locations which have carried out equal controls for particular objects; and
- minimizes the influence on deemed exports and re-exports, relying on the expertise, to new and/or current staff and contractors, by way of numerous grandfathering clauses, exclusions, and a brand new basic license (GL) below Normal Order No. 6.
Exporters must be conscious that actions topic to the brand new September 6 IFR controls might impose:
- new and persevering with licensing obligations, most of that are efficient instantly, however compliance necessities for exports, re-exports, and transfers (in-country) of quantum objects laid out in ECCNs 3A901, 3A904, 3B904, 3C907, 3C908, 3C909, 3D901 (for 3A901.b, 3B904), 3E901 (for 3A901, 3A904, 3B904, 3C907, 3C908, 3C909), 4A906, 4D906, or 4E906 to locations in Country Group A:1 are delayed till November 5, 2024.
- new reporting obligations for exports, re-exports, and transfers and deemed exports and re-exports occurring after September 6, 2024, with the primary such report due by November 5, 2024.
New ECCNs
The brand new interim closing rule provides 18 new ECCNs and revises 9 current ECCNs, specializing in 4 main crucial and rising applied sciences. These embody:
- quantum computing objects, together with quantum computer systems, and associated gear, parts, supplies, software program, and expertise used of their growth and upkeep (ECCNs 3D901, 3E901, 4D906, or 4E906);
- superior semiconductor manufacturing gear, that includes the instruments and machines essential for producing superior semiconductor units (ECCNs 3B001, 3B903, 3D907);
- GAAFET expertise needed for innovation in high-performance computing chips that can be utilized in supercomputers (ECCN 3E905); and
- additive manufacturing objects, which cowl gear, parts, and associated expertise and software program designed for producing steel or steel alloy parts in addition to particular coating expertise (ECCNs 2B910, 2D910, 2E903, 2E910).
We’re glad to help in evaluating whether or not your applied sciences, software program, or merchandise meet any of the brand new ECCN parameters.
Exports and Re-exports: Licensing Coverage, Normal License, and License Exception
Exports and re-exports of the newly categorised {hardware} and related software program and expertise now require a license for a lot of locations, topic to sure exceptions, together with:
- The entire objects categorised below the brand new ECCNs and a choice of associated gear, software program, and expertise below the revised ECCNs are managed for export and re-export worldwide for nationwide safety (NS) and regional stability (RS) causes.
- There’s a presumption of approval when the export or re-export is to international locations in Country Group A:1, A:5, and A:6 and a presumption of denial for locations in Country Group D:1 or D:5; all different locations shall be reviewed on a case-by-case foundation.
- Whereas the brand new necessities are efficient instantly, these entities exporting sure quantum computing objects2 have a delayed compliance interval for exports, re-exports, and in-country transfers to Nation Group A:1 locations below NS and RS controls to finish license purposes or implement inner compliance procedures for related ECCNs by November 5, 2024.
A brand new GL in Normal Order no. 6. authorizes exports, re-exports, and in-country transfers of GAAFET ”expertise” laid out in ECCN 3E905 for the “growth” or “manufacturing” of built-in circuits to finish customers situated in Nation Group A:5 or A:6 when the event or manufacturing “started to be carried out on or previous to September 6, 2024.”3 Entities who make the most of this GL are topic to a particular, annual reporting obligation, which is mentioned additional beneath.
The interim closing rule additionally creates a brand new License Exception, License Exception IEC, which authorizes exports and re-exports to and amongst, and in-country transfers inside, international locations which have carried out equal nationwide export controls. BIS separately released a chart that lists international locations eligible for License Exception IEC. On the similar time, the rule limits using different license exceptions for the newly categorised objects.
Deemed Exports and Re-exports: Grandfathering Clauses, Normal License, and Exclusions
BIS acknowledges that dropping entry to international expertise and lecturers can be “devastating” to U.S. expertise management, given the heavy reliance on international experience and relationships in analysis and growth of crucial and rising applied sciences, particularly amid a worldwide scarcity of expertise.4 BIS additionally acknowledges that firms are strongly incentivized to, and therefore already, implement measures to guard proprietary info. For that purpose, the interim closing rule seeks to restrict the influence of the newly carried out controls on deemed exports and re-exports. Underneath the “deemed export” rule, an export license should be obtained earlier than “releasing” managed supply code or expertise to a international nationwide, even when situated in the USA, if a license can be required to export or re-export that supply code or expertise to the particular person’s most up-to-date nation of citizenship or everlasting residency. The grandfathering clauses and different deemed export or re-export exclusions within the interim closing rule are an effort to keep away from additional disrupting ongoing analysis and growth in crucial and rising applied sciences.
BIS included the next authorizations to help firms with deemed exports and re-exports to international nationals5 of supply code or expertise managed by the brand new ECCNs:
- GAAFET expertise (ECCN 3E905): The brand new GL features a grandfathering clause for deemed exports and re-exports (together with future updates) to international particular person staff or contractors of Country Group D:1 or D:5 nationality who had been employed on or earlier than September 6, 2024, topic to new reporting obligations.
- Quantum applied sciences and software program (ECCN 3D901, 3E901, 4D906, or 4E906): Deemed exports and re-exports to international particular person staff or contractors of Country Group D:1 or D:5 nationality are licensed by the brand new GL, topic to extra particular reporting obligations.
- Dry etch gear: There’s a full deemed export and re-export license requirement exclusion from NS and RS license necessities for expertise or software program in ECCNs 3D001, 3D002, and 3E001 for anisotropic dry plasma etch gear and isotropic dry etch gear in 3B001.c.1.a and c.1.c. This aligns with the exclusions carried out in an earlier rule, ”Export Controls on Semiconductor Manufacturing Items.”6
- Excluding ECCN 3E905, all remaining new ECCNs:7 Grandfathering clauses for license necessities for NS and RS apply to deemed exports or re-exports of supply code or expertise, together with for future developments and updates, to staff or contractors already employed as of September 6, 2024, together with international nationwide staff or contractors whose most up-to-date nation of citizenship is a D:1 or D:5 nation.
- Software program and expertise for newly categorised objects: There’s a restricted exclusion from license necessities imposed below NS and RS controls for deemed exports and re-export for sure supply code or expertise captured by the next ECCNs 2D910, 2E910, 3D001, 3D901, 3D907, 3E001, 3E901, 3E905, 4D906, and 4E906. The restricted exclusion applies to deemed exports or re-exports to international individuals whose most up-to-date citizenship or everlasting residency shouldn’t be a Country Group D:1 or D:5 nation.
We’ve got created a software to help entities in navigating these new deemed export guidelines, licenses, and exceptions, out there here.
Particular Reporting Obligations
Companies, tutorial establishments, and different entities affected by the brand new interim closing rule must also pay attention to annual and termination reporting necessities concerning the brand new basic license; these reviews are to supply BIS the mandatory visibility and oversight required to deal with related nationwide safety dangers. Affected entities ought to take explicit discover that the primary report for i) exports and deemed exports of ECCN 3E905 pursuant to the brand new GL and ii) deemed exports of quantum software program or expertise pursuant to the brand new GL, in all situations protecting the interval from September 6 to October 28, 2024, is due by November 5, 2024. Subsequent annual reviews should be submitted by February 1 for the reporting interval ending December 31 of the prior calendar 12 months.
i) For exports, re-exports, and transfers of merchandise, software program or expertise laid out in ECCN 3E905 for GAAFET objects below the GL:
- The exporting entity should make annual reviews to BIS concerning a) its finish customers in Country Group A:5 or A:6, and b) staff and contractors who’re residents of or everlasting residents of Country Group D:1 or D:5 international locations receiving deemed exports or deemed exports pursuant to the GL grandfather clause.
- An entity with deemed exports of ECCN 3E905 should additionally file a termination report inside 30 days of the voluntary or involuntary termination of international nationwide staff and contractors who’re residents of or everlasting residents of Country Group D:1 or D:5 international locations.
ii) For deemed exports of quantum software program or expertise below the GL8:
- Entities that launched lined quantum software program or expertise to international individuals of Country Group D:1 or D:5 nationality are accountable for submitting annual and termination reviews to BIS.
- Termination reviews are due inside 30 days of a lined international particular person’s final day with the host firm or college.
Though the rule is efficient instantly, BIS is searching for public comments on these adjustments till November 5, 2024.
We’ve got developed instruments to help firms in assessing the applicability of those new controls and implementing any inner procedural adjustments required. For extra info or any questions on these adjustments or any associated matter, please contact Josephine Aiello LeBeau (202-973-8813, jalebeau@wsgr.com), Anne Seymour (202-973-8874, aseymour@wsgr.com), Jahna Hartwig (202-973-8868, jhartwig@wsgr.com) or any member of the export control and sanctions apply at Wilson Sonsini Goodrich & Rosati.
