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US Department Of Commerce’s Bureau Of Industry & Security (BIS) Implements Additional Controls On Semiconductor And Gas Turbine Engine Technologies – Terrorism, Homeland Security & Defence



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On August 15, 2022, the US Department of Commerce’s Bureau
of Industry and Security (BIS) published an interim final rule, implementing multilateral
controls on the following four technologies that meet the criteria
for emerging and foundational technologies under Section 1758 of
the Export Control Reform Act (ECRA) as essential to the national
security of the United States: two substrates of ultra-wide bandgap
semiconductors (Gallium Oxide (Ga2 O3) and diamond), Electronic
Computer Aided Design (ECAD) software specially designed for the
development of integrated circuits with any Gate-All-Around
Field-Effect Transistor (GAAFET) structure, and pressure gain
combustion (PGC) technology for the production and development of
gas turbine engine components or systems. The changes became
effective on August 15, 2022, except for the changes relating to
the ECAD software for integrated circuits with GAAFET structure
which are scheduled to become effective on October 14, 2022.

Changes Made to the Commerce Control List

The interim final rule implements the decisions from the
December 2021 Wassenaar Arrangement Plenary meeting by adding the
four technologies to the Commerce Control List. Specifically, BIS
(1) revised ECCNs 3C001.d-f, 3C005.a-b, 3C006, and 3E003 for two
substrates of ultra-wide bandgap semiconductors; (2) created a new
ECCN 3D006 for ECAD software for development of integrated circuits
with GAAFET structure; and (3) revised ECCN 9E003.a.2.e for PGC
technology. The affected ECCNs are controlled for National Security
and Anti-Terrorism reasons under the Export Administration
Regulations (EAR). As a result, the export, reexport and transfer
(in-country) of these items to or within many countries, including
China, would require a license from BIS.

Importantly, BIS identified these technologies as emerging and
foundational technologies pursuant to Section 1758 of ECRA. This
means that there may also be potential implications for the
Committee on Foreign Investment in the United States (CFIUS)
reviews. Under CFIUS regulations, emerging and foundational
technologies controlled under Section 1758 of ECRA are considered
“critical technologies,”  and an investment into
US companies engaged in such technologies may trigger a mandatory
CFIUS declaration requirement.

Savings Clause

There is a limited “savings clause” available for
shipments of items removed from eligibility for a License Exception
or for exports, reexports or transfers (in-country) without a
license (NLR) as a result of the changes if they were enroute
aboard a carrier to a port of export, reexport or transfer
(in-country), on August 30, 2022 (or October 14, 2022 in the case
of 3D006 software), pursuant to actual orders for exports, reexport
or transfer (in-country) to or within a foreign destination,
provided that the actual export, reexport or transfer occurs before
September 14, 2022 (or November 14, 2022 in the case of 3D006
software).

Request for Comments

BIS is seeking comments and input from the industry regarding
the scope of license requirement and review of license applications
for export of ECAD software designed for GAAFET circuits.
Interested parties may submit comments to BIS by September 14,
2022.

Conclusion

The changes in the interim final rule may have significant
impact on those in the semiconductor industry. As noted above,
items controlled for National Security reasons require a license to
export, reexport or transfer (in-country) to or within many
countries, including China. In addition, while BIS noted that it is
not aware of any current production of engines using PGC, the
changes in the interim final rule may impact research institutions
and companies engaged in research of PGC technology or those
contemplating development or production of commercial engines using
PGC technology. Therefore, companies in the semiconductor industry
and those working with PGC technology should carefully review the
additional controls imposed by the interim final rule to assess any
impact the changes may have on their business. Moreover, persons
considering investing in US businesses with these technologies
should consider potential applicability of mandatory declaration
requirements under CFIUS regulations.

Originally Published by Junghyun Baek contributed to this
Advisory.  Mr. Baek is a graduate of Harvard Law School and is
employed at Arnold & Porter’s Foreign Legal Consultant
Office as a Law Clerk.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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