Congress Looks to Update Export Controls to Include “Emerging and Foundational Technologies”

Congress Looks to Update Export Controls to Include “Emerging and Foundational Technologies”

On 22 May, the Senate Banking Committee marked up and reported the Foreign Investment Risk Review Modernization Act of 2018 (S. 2098), a bill designed modernize and strengthen the Committee on Foreign Investment in the United States (CFIUS), which is authorized to review foreign investments in U.S. business in terms of their impact of national security.

One of the bipartisan provisions added to the mark-up by Chairman Mike Crapo and Ranking Member Sherrod Brown was Section 25, which would establish a new interagency process to identify emerging and foundational technologies deemed essential to the national security of the United States and not otherwise classified as critical technologies under the Defense Production Act of 1950.

The review process would involve representatives of the Departments of Defense, Energy and State and heads of other federal agencies as appropriate. Among the factors to be taken in account by reviews are the development of emerging and foundational technologies in foreign countries, the effect export controls if imposed would have on the development of those technologies in the United States, and the effectiveness of export controls in limiting the proliferation of emerging and foundational technologies to foreign countries. The process for designating these technologies would be informed by a range of information, including:

  • Public sources
  • Classified intelligence
  • Information relating to CFIUS reviews
  • The development of emerging and foundational technologies abroad
  • The impact that export controls could have on the development of these technologies in the United States

The findings and recommendations would be referred to the Secretary of Commerce, who is empowered to establish appropriate export controls under the Export Administration Regulations affecting the export, re-export or in-country transfer of technology targeted by the review. This includes so-called “deemed exports” or the research done by foreign investigators/students on the regulated technology at U.S. universities, laboratories and research institutions.

Some areas are exempted from new export control process, including technology exports already prohibited under the International Emergency Economic Powers Act or under any other provision of law; the sale of finished items and associated technology by a United States person; the sale or license of integration or similar services; the transfer of equipment and associated technology that does not result in foreign production of critical technologies; and/or transactions where the foreign party’s role is limited to supplying goods or services procured by the U.S. party.

Section 25 would also empower the Secretary of State to propose the addition of an emerging or foundational technology deemed significant to national security to the list of technologies controlled under the relevant multilateral export control regimes.

Proponents of Section 25 note that the technologies on the current export control lists are fairly mature, and in many instances are outdated from a national security perspective. Section 25 merely creates a new process to assess emerging technologies for the purposes of updating the export control lists. Others express concern, however, that aggressive restrictions on “emerging and foundational” technology through the export control process could ultimately marginalize U.S. security by hampering the ability of the U.S. commercial sector to keep pace with international advances in such emerging fields as quantum computing, artificial intelligence, or nanoscale technologies.

The Senate bill and its House companion (H.R. 5841) have advanced in both houses, and now await floor consideration. The White House and large organizations, such as the Chamber of Commerce, have signaled their support for the bill. However, all eyes are currently turned toward the President’s planned announcement on 30 June of a proposed export restrictions on “industrially significant technologies,” along with visa-related controls of Chinese students and researchers in the United States.

Update

Since publication of this article, Section 25 of the Foreign Investment Risk Review Modernization Act of 2018 (S. 2098), has been incorporated into the House and Senate versions of the National Defense Authorization Act (S2987/H.R. 5515). The Senate bill was approved on 19 June, and House leaders hope to finalize the House version before the August break.


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