U.S. Commerce Department Seeks New Quantum Technology Export Controls

Rule Would Broaden CFIUS Filing Requirements

On September 6, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published an interim final rule (Proposed Rule) that would impose new export controls on certain advanced technologies, including items involved in quantum computing and semiconductor manufacturing.

According to the BIS press release dated September 5, 2024, and Federal Register publication 89 Fed. Reg. 72926 (Sept. 6, 2024), the Proposed Rule is in furtherance of cooperative efforts with “like-minded” international partners. In addition to establishing tightened and expanded export controls, the Proposed Rule would, in many cases, also affect foreign ownership of and access to the covered technologies by requiring foreign persons investing in companies that develop, manufacture or market them to file for review with the Committee on Foreign Investment in the United States (CFIUS).

The Proposed Rule covers these technologies by modifying the Export Administration Regulations (EAR), newly adding 18 Export Control Classification Numbers (ECCNs) to the Commerce Control List (CCL), and modifying several additional ECCNs to bring them within the Rule’s ambit. These ECCNs would be controlled and subject to export license requirements under the “national security” and “regional stability” categories.

The Proposed Rule would specifically apply new controls to:

• 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.
• Gate All-Around Field-Effect Transistor (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.

Press Release, Bureau of Industry & Security, Department of Commerce Implements Controls on Quantum Computing and Other Advanced Technologies Alongside International Partners (Sept. 5, 2024).

While the Proposed Rule strictly limits the license exceptions applicable to the export of these technologies, it also establishes a new license exception — Implemented Export Controls (IEC) — for countries that are deemed to have implemented similar technical controls for equivalent technologies. As listed on the BIS website (https://www.bis.gov/media/documents/2024-9-6-rev-license-exception-implemented-export-controls-iec-eligible-items-and), currently, those countries are Australia, Canada, France, Germany, Italy, Spain and the United Kingdom. Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler stated in the press release: “Not only are we adopting new emerging technology controls with this rule, we are also building increased agility into our system with a new license exception for trusted partners.” Id.

In line with this “agility,” the Proposed Rule also includes (subject to annual reporting requirements) “deemed export” (sharing controlled technology or information with a foreign national while within the U.S.) and reexport license exclusions for some specified technologies and a general deemed export and reexport license exclusion for others (subject to the same reporting requirements). Id. The press release states that these license exclusions are to facilitate ongoing research and development. “[T]here is a 60-day delayed compliance date for quantum items to certain destinations to allow for the submission of license applications and revisions to internal compliance procedures.” Id.

Finally, the Proposed Rule broadens the range of transactions possibly subject to mandatory filing with CFIUS. The controlling of these technologies and items for export under the “national security” and “regional stability” provisions of the EAR renders them “critical technologies” for purposes of CFIUS review and filing requirements. Id. Any export of such technologies would require a license from BIS; any investment by a foreign person or by an entity in which a foreign person holds (even indirectly) a 25% or greater interest in any enterprise that develops, manufactures, maintains or markets “critical technologies” requires filing a Declaration or Notice to CFIUS.

Parties seeking to comment on the Proposed Rule must do so by November 5, 2024.