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BIS Seeks Comments on Identifying “Foundational Technologies”

foundational technologies

BIS Seeks Comments on Identifying “Foundational Technologies”

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) recently published an Advanced Notice of Proposed Rulemaking (“ANPRM”) regarding the identification and review of controls for certain “foundational technologies.” This ANPRM represents another step toward implementation of the “emerging and foundational technology” provisions set forth in the Export Control Reform Act (“ECRA”) of 2018, which has been slow to get off the ground. Section 1758 of the ECRA requires that “foundational technologies” be identified and that BIS establish appropriate controls for that technology under the Export Administration Regulations (“EAR”).

The ANPRM solicits public comments concerning the definition of and criteria for identifying “foundational technologies” in order to apply controls to “emerging technologies” and “foundational technologies” which are essential to U.S. national security, pursuant to the ECRA. Specifically, BIS is asking interested parties to submit comments by October 26, 2020, responding to the following topics:

-How to further define foundational technology to assist in the identification of such items;

-sources to identify such items;

-criteria to determine whether controlled items identified in AT level Export Control Classification Numbers (ECCNs), in whole or in part, or covered by EAR99 categories, for which a license is not required to countries subject to a U.S. arms embargo, are essential to U.S. national security;

-the status of development of foundational technologies in the United States and other countries;

-the impact specific foundational technology controls may have on the development of such technologies in the U.S.;

-examples of implementing controls based on end-use and/or end-user rather than, or in addition to, technology-based controls;

-any enabling technologies, including tooling, testing, and certification equipment, that should be included within the scope of a foundational technology; and

-any other approaches to the issue of identifying foundational technologies important to U.S. national security, including the stage of development or maturity level of a foundational technology that would warrant consideration for export control.

BIS explained that it does not seek to expand jurisdiction over technologies that are not already subject to the EAR. BIS, through an interagency process, seeks to determine whether there are specific foundational technologies that warrant more restrictive controls.  Interested parties may submit comments through the federal rulemaking portal (regulations.gov) or via mail to BIS.

Husch Blackwell encourages clients and companies to review the recent ANPRM for applicability.

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Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Julia Banegas is an attorney in Husch Blackwell LLP’s Washington, D.C. office.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

hong kong

President Trump’s Executive Order Ends Hong Kong Country of Origin

On July 14, 2020, President Trump signed into law an Executive Order that ends Hong Kong’s differential treatment compared to the People’s Republic of China (“PRC” or “China”). The President’s action follows the Chinese government’s decision in late May to impose new national security legislation on Hong Kong that outlaws any act of “secession,” “terrorism,” or “collusion” with a foreign power.

The United States government objects to this legislation and believes that it has compromised Hong Kong’s autonomous status, which justified  Hong Kong’s differential treatment from China for a number of purposes. As President Trump stated following the signing of the Executive Order, “Hong Kong will now be treated the same as mainland China…no special privileges, no special economic treatments and no export of sensitive technologies.”

As a result of the Executive Order, any imported Hong Kong origin goods will now be considered Chinese origin and will be subject to the Section 301 tariffs on certain Chinese imports, or any antidumping or countervailing duty orders applicable to China.

The Executive Order also eliminates any passport preferences for persons from Hong Kong as opposed to those from the PRC and revokes any Export Administration Regulation (“EAR”) license exceptions for exports, re-exports, and in-country transfers pertaining to Hong Kong. The order also authorizes steps to end other forms of U.S.-Hong Kong cooperation unrelated to international trade, such as the Fulbright exchange program.

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Robert Stang is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He leads the firm’s Customs group.

Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

Turner Kim is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

EXIM'S

CHAIRMAN REED UNDERSCORES EXIM’S SUPPORT FOR AMERICAN INNOVATION GLOBALLY TO COUNCIL ON COMPETITIVENESS

Export-Import Bank of the United States (EXIM) President and Chairman Kimberly A. Reed participated in a Council on Competitiveness virtual dialogue with more than 40 members of the Council’s “Technology Leadership and Strategy Initiative” on June 8. Attendees represented a range of businesses, universities, and research institutions from across the country.

During the event, Reed highlighted EXIM’s role in advancing American innovation by helping U.S. businesses export their “Made in the USA” products around the world. She also discussed EXIM’s new Program on China and Transformational Exports, established in EXIM’s historic reauthorization, which is intended to help level the playing field for U.S. exporters and workers by directly neutralizing export subsidies for competing goods and services offered by the People’s Republic of China.

“The Council on Competitiveness has worked for many years to jump-start American productivity, and I was honored to join this esteemed group to focus on how the U.S. government can support innovation on the global stage,” Reed said.

Speaking of innovation, four days later Reed hosted a teleconference with 140 business leaders and stakeholders in the artificial intelligence, quantum computing, and high-performance computing sectors. On the call, Reed highlighted how EXIM’s partnership with the private sector can support and accelerate the success of American companies in of these transformative industries.

“These transformational exports drive growth in the United States economy, enhance our economic and national security, and improve our quality of life,” said Reed.

blacklisting

BLACKLISTING DEPLOYED IN THE BATTLE OVER TECH TRADE

National Security an Overriding Consideration

If there is one defining feature of current U.S. trade policy, it is that national security has become an overriding consideration in how the United States engages China. It is also a focal point of U.S. engagement with its main allied trading partners.

The Trump administration has added many tools to its arsenal in combatting what it refers to as “vectors of economic aggression” by China. Tariffs are only the most visible. The United States – and other countries – are increasingly turning to the practice of “blacklisting” persons and companies that pose a national security risk.

Through controls on exports of particular technologies, governments can either prohibit their sale to foreign entities, governments or individuals, or require the technologies be sold only upon issuance of a government license.

Not New, But Expanded

Controlling the export of commercial technologies that have “dual use” or military applications is a longstanding practice. The General Agreement on Tariffs and Trade 1994 includes a general prohibition on quantitative restrictions on both imports and exports, but contains built-in exceptions that allow for export control regimes.

In the United States, the Export Control Act requires the Secretary of Commerce to establish and maintain a list of controlled items, foreign persons, and end-uses determined to be a threat to U.S. national security and foreign policy for the purpose of regulating the export, reexport and in-country transfer of those technologies and to those entities.

countries turning to blacklisting

Futureproofing

At today’s blistering pace of tech innovation, the lines between technologies that are used commercially in the products we buy as private sector businesses and consumers are increasingly blurred with their potential applications in a military setting.

Under the 2018 Export Control Reform Act, Congress authorized the Commerce Department to review its list of controlled technologies to consider “emerging and foundational technologies” that should be added to its control list.

The technologies contemplated include a hit parade of Sci-Fi innovations such as neural networks and deep learning, swarming technology, self-assembling robots and smart dust (whatever that is), in addition to more recognizable technologies such as quantum computing, additive manufacturing and propulsion technologies.

Special Designations

In addition to technologies that may be controlled for export, the Commerce Department also maintains a Restricted Entity List. Entities designated are subject to a policy of presumed denial for all products, whether on the controlled technologies list or not. American companies may not export to entities on this list except through waivers and specific licenses.

Huawei Technologies, the Chinese telecommunications giant that is chasing global market share in 5G mobile technology, finds itself on the Restricted Entity List, along with all of its overseas affiliates. Other Chinese companies on the list include FiberHome Technologies Group, another 5G network equipment provider, as well as China’s leading artificial intelligence startups Megvii, SenseTime and Yitu Technologies.

The U.S. government is concerned with entities that could engage in industrial and electronic espionage and infiltrate critical U.S. military systems. But the Commerce Department also took the novel step recently of adding companies to its Restricted Entity List that furnish the Chinese state and its security bureaus with technologies used to surveil and repress civil society.

In October 2019, the United States blacklisted 28 Chinese governmental and commercial organizations, citing human rights violations and abuses in China’s campaign targeting Uighurs and other predominantly Muslim ethnic minorities in the Xinjiang Uighur Autonomous Region. The companies included Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. which are two of the world’s largest producers of surveillance products as well as several of China’s leading companies in facial and voice recognition.

A Chinese Finger Trap

Last month, as U.S.-China relations continued to deteriorate in very public ways, the U.S. government added two dozen more Chinese governmental and commercial organizations to the Restricted Entity List. The Department of Commerce said they have ties to weapons of mass destruction and military activities.

As with a Chinese finger trap, American companies are now ensnared at both ends. They must comply with U.S. export restrictions but doing so may land them on China’s newly created “Unreliable Entity List”. China created the list as a countermeasure and says it will go after American companies for causing “material damage to the legitimate interests of Chinese companies and relevant industrial sectors” and creating a potential threat to China’s national security.

American cos caught in trap

More Can Play at That Game

The global landscape is actively shifting as countries work to shore up and modernize their export control regimes.

In 2009, the European Union (EU) set up a community-wide regime for the control of exports, transfers, brokering and transit of dual-use items to ensure a common EU list of dual-use items, common criteria for assessments and authorizations throughout the EU.

Last year, Japan and Korea got into a major trade spat when the Japanese government removed South Korea from its so-called “white list” of preferred trading partners for strategic technologies, subjecting some Japanese exports to South Korea to new screening.

Japan’s placement of three chemicals used to make computer chips on the control list resulted in delayed shipments that affected the entire global semiconductor industry since South Korean companies account for nearly two-thirds of the world’s memory chips. South Korea retaliated by dropping Japan from its white list.

One Good Turn Deserves Another

For its part, China deemed its own “Unreliable Entity List” to be unreliable. In January this year (on the same date the U.S.-China Phase One deal was signed in Washington) the National People’s Congress in Beijing published a draft of China’s first comprehensive national Export Control Law, providing China with increased leverage to apply and counteract U.S. export control measures. Safe to say we’ll be reading a lot more about blacklisting in the coming years.

An interesting report to dive deeper:

2018 Report on Foreign Policy-Based Export Controls, U.S. Department of Commerce Bureau of Industry and Security

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.
Tariffs

Auto Tariffs Continue Triggering Concerns

In response to the recent proposed 25 percent auto tariffs on imports in the name of national security, LIBRE Initiative President Daniel Garza released a lengthy statement highlighting his concern for domestic manufacturers and consumers paying the ultimate price if imposed.

“Tariffs are taxes that hurt consumers. Tariffs on imported cars will increase the cost of those autos, but that would be followed by domestic manufacturers increasing their prices as well – a process we recently saw happen after tariffs were imposed on imported washing machines.”

“These tariffs could also hurt domestic car makers by increasing the costs of parts they use in manufacturing. In the end, families will not be able to avoid paying higher prices for these products, and many people will feel the impact of higher costs.”

“Tariffs like these hurt consumers, and they hurt our economy. We encourage the White House to work to eliminate all tariffs, across the board. Imposing these new taxes now would only hurt the economy and hurt Americans.”

The LIBRE Initiative, established in 2011, is a Texas-based non-partisan, non-profit grassroots organization with a vision to support and educate the Hispanic community with tools for success.

Source: LIBRE Initiative