International Trade and Global Business

 

Tighter Export Controls May Be Coming

The evolution of new technologies has generated national security concerns over how to control the sale of such technologies outside the countries that produce them. If you’re involved in any part of the supply chains supporting these technologies, you’ll want to monitor carefully what government regulators are up to, especially in the coming months.

The technologies are artificial intelligence, biotech, machine learning, quantum computing, micro processing technology and 3D manufacturing. Regulators are looking at what are called emerging technologies and foundational technologies, with both representing a melding of economic and national security.

The major object of concern is China, whose government has announced a goal of dominating emerging technologies and the commercialization of them. Concern about the theft of trade secrets, especially by foreign militaries, has only heightened concern and accelerated action to prevent such things from happening.

One way to do this is by restricting access to homegrown technology that might compromise economic and national security.

The US government enacted the Export Control Act (ECRA) of 2018 to control access to technologies essential to national security. Then there’s the Foreign Investment Risk Review Modernization Act (FIRRMA) designed to prevent the movement of critical technologies abroad through acquisition of US companies by foreigners. Looks for attempted acquisitions to be examined very carefully such acquisitions.

The Bureau of Industry and Security of the Commerce Department asked the industry last year for help defining emerging technologies and to weigh in on the impact of controls. A similar process directed at foundational technologies will take place later. Industry input is crucial because government alone cannot be a qualified judge of what is and isn’t a sensitive technology.

More than 200 comments were posted, many indicating that technologies on the emerging list have already emerged to the point where controlling them might be difficult or impossible. Some bits and pieces are already subject to control, making additional efforts redundant. Better is to identify things that are not now controlled but are required for specific identifiable weapons and intelligence collection.

The other major set of comments focused on not controlling things that a country of concern can buy elsewhere or develop themselves. Restrictions in biotech could hamstring US companies by ceding markets to competitors in an area where research and development are already global. Carelessly applying restrictions could interfere with the creation of lifesaving drugs.

Other restrictions could inadvertently disrupt supply chains which are increasingly global.

The extension of controls to intellectual property carried in the brains of workers in specific countries, referred to as deemed exports, because technical knowledge can leave or be shared with foreign entities on a denied list becomes more problematic because many companies have a global workforce.

The US government is right to consult private sector stakeholders on a regular basis to ensure that controls are correctly targeted and can be modified as changing situations dictate.

Proposed rules are due out at the end of summer, with final rules—after review of more comments—are expected by the end of the year.

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