Commerce Doesn't Seem Close to Releasing Foundational Tech Rules, Trade Lawyer Says

The Commerce Department is “nowhere near” publishing an export control rule on foundational technologies and is likely not close to releasing its advance notice of proposed rulemaking, Squire Patton Boggs trade lawyer George Grammas said. Commerce management has had a draft of the ANPRM since at least mid-2019, Grammas said. “It doesn't seem to be going anywhere fast,” he said, speaking during a Feb. 20 webinar hosted by Content Enablers. “We don’t seem to be anywhere near seeing a rule on foundational technologies in the near term.”

In October, Matt Borman, Commerce’s deputy assistant secretary for export administration, said the Bureau of Industry and Security was still working on the ANPRM draft (see 1910290062). Borman said Commerce planned to release the notice before 2020 and said a series of export controls on emerging technologies would be issued within the “next few weeks,” but the process has been plagued by delays (see 2002040057). Once Commerce management finishes the ANPRM draft for foundational technology, it will be released to the Office of Management and Budget for review, which “could take some time,” Grammas said.

A BIS spokesperson said the agency is “in the process of finalizing” the foundational technology ANPRM. “However, we are always looking to ensure our control lists are updated to meet national security challenges,” the spokesperson said.

The lack of foundational technology rules and a limited set of emerging technology controls (see 1905220051 and 2001030024) has led to a lack of clarity around the definition for critical technologies within the Foreign Investment Risk Review Modernization Act (see 2002110042). FIRRMA expands the jurisdiction of the Committee on Foreign Investment in the U.S. to cover transactions and investments involving critical technologies, which include foundational and emerging technologies. But those technologies have not yet been clearly defined by Commerce due to delays in rulemaking. “As of today, it’s an empty set,” Grammas said.

Commerce’s most recent emerging technology rule -- which was released in January and placed controls on geospatial imagery software -- was created under export control authority in place before the Export Control Reform Act of 2018. That authority allowed Commerce to skip a formal public comment period by publishing the control as an interim final rule, which allowed the rule to take effect immediately, Grammas said. While it is unusual for Commerce to skip comment periods (see 2002050047), and ECRA lays out a preference for proposing emerging technology rules for public comment, Commerce may use that tactic to publish more emerging technology rules without a public comment period, Grammas said.

“If they had done it under the ECRA authority, it would have been a proposed rule and there would have been opportunity to comment,” he said. “But the Commerce Department elected to use its pre-ECRA authority to implement the controls, and that may well be the way they proceed on an ongoing basis.”

The ability to propose the emerging technology controls as final rules gives Commerce “greater flexibility,” Grammas said. “I think what we can see from emerging technologies is the continuation of rules that are final rules or interim final rules under pre-ECRA authority.”

Commerce’s narrow artificial intelligence control in January over geospatial imagery software suggests the agency intends to propose narrow controls over emerging technologies, Grammas added, rather than the broad, sweeping controls that much of the U.S. industry feared (see 1911070014). “You can begin to see from looking at these additions to the Commerce Control List that the Commerce Department is … seeking to define specific control parameters,” he said.

Industry fears of sweeping controls began after Commerce released its emerging technology ANPRM in November 2018, which listed 14 broad categories of technologies, including AI, robotics and quantum computing. Commerce likely learned from that experience, Grammas said. “I don’t know how it will define foundational technologies,” Grammas said, “but I do think that we shouldn't expect to see another list like we saw for emerging technologies.” He said Commerce will probably release “something that is more of a narrative and gives us an indication of what is intended to be captured by foundational technologies.”