U.S. Implements Plurilateral Export Controls Framework and Additional Controls on Semiconductor, Quantum, and Additive Manufacturing Items

U.S. Implements Plurilateral Export Controls Framework and Additional Controls on Semiconductor, Quantum, and Additive Manufacturing Items

September 9, 2024

On September 6, 2024, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) implemented a new framework in the Export Administration Regulations (“EAR”) to address plurilateral export controls adopted by the United States and allied countries other than through a multilateral regime. This new framework was established via an interim final rule entitled Commerce Control List Additions and Revisions; Implementation of Controls on Advanced Technologies Consistent with Controls Implemented by International Partners (the “Rule”). The framework establishes worldwide national security and regional stability destination controls on items subject to U.S. and partner country plurilateral controls, and adds a new license exception that authorizes exports, reexports, and transfers to partner countries that have implemented harmonized controls. 

The Rule also adds 18 new Export Control Classification Numbers (“ECCNs”) to the Commerce Control List (“CCL”) and revises nine additional ECCNs to implement controls on certain semiconductor, quantum, and additive manufacturing items. It also establishes additional deemed export and reexport controls relevant to the quantum computing, aerospace, and integrated circuit (“IC”) development and production sectors, and creates three new general licenses relevant to Gate all-around Field-Effect Transistor (“GAAFET”) items and deemed exports/reexports of quantum computing technology and software. 

The Rule is effective September 6, 2024, with a delayed compliance effective date of November 5, 2024, for exports, reexports, and transfers of certain quantum computing items to specified allied countries to minimize disruption and allow for the submission of license applications. BIS is seeking public comment on the Rule and the potential impact of deemed export/reexport controls on the quantum computing sector by no later than November 5, 2024.

Since it was established in 1995, the Wassenaar Arrangement—a multilateral export controls regime consisting of 42 participating States—has worked in coordination to identify items for dual use or munitions list export controls. Each participating State would then implement the agreed multilateral controls at the national level. The Russian Federation is a member of the Wassenaar Arrangement and has, since its further invasion of Ukraine in 2022, vetoed additions to the dual use and munitions lists (along with a few other States). In the absence of a functioning multilateral regime, the United States and partner countries (the so-called “Wassenaar Minus One” group), including the UK, France, Spain, Canada, and Italy, have continued to develop harmonized control entries that previously would have been addressed through the Wassenaar Arrangement. However, implementation of these plurilateral controls is not uniform across an identified group of States, such that the EAR’s existing Country Chart structure for destination-based license requirements would not be an effective means to identify BIS’s intended license requirements. 

To address this challenge, BIS has implemented via the Rule a new CCL structure to help identify items subject to plurilateral controls, and a new License Exception Implemented Export Controls (“IEC”) that authorizes exports, reexports, and transfers of certain items to or within partner countries that have adopted equivalent controls for such items, as identified on BIS’s website.

This section first discusses the new CCL structure. It then describes the destination and deemed export/reexport controls applicable to items subject to plurilateral controls, and the new License Exception IEC. Finally, it summarizes three new general licenses relevant to GAAFET and quantum computing items, as well as the associated reporting requirements for those general licenses. The final sections provide a brief summary of the new and revised ECCNs and BIS’s request for comments. 

Commerce Control List Structure

Through the Rule, BIS has developed a “900 series” of entries on the CCL to help differentiate between plurilateral and unilateral export controls. Going forward, ECCNs ending with digits 900 through 979 identify items that are subject to plurilateral controls, which are controlled worldwide with limited license exception availability generally, but may be authorized for export, reexport, or transfer to or within partner countries with harmonized controls under License Exception IEC. ECCNs ending with digits 980 through 989 indicate items subject to crime control or short supply controls. Finally, ECCNs ending in digits 990 through 999 indicate items subject to unilateral anti-terrorism (“AT”), regional stability (“RS”), and United Nations Sanctions (“UN”) controls. BIS notes in the rule that because certain ECCNs were established prior to this system through a multilateral regime and will now contain items subject to both multilateral and plurilateral controls, there will be exceptions to this new CCL structure, such as for ECCN 3B001. The 000 through 699 ECCN endings continue to identify the same categories of items as they have historically, specifically: 

• 000-099 continues to identify items subject to National Security (“NS”) controls tied to the Country Chart;
• 100-199 continues to identify items subject to Missile Technology (“MT”) controls;
• 200-299 continues to identify items subject to Nuclear Nonproliferation (“NP”) controls;
• 300-399 continues to identify items subject to Chemical and Biological (“CB”) controls;
• 500-599 is shared and may refer either to firearms or spacecraft and related commodities controlled for NS and other reasons; and
• 600-699 continues to identify items that are either identified on the Wassenaar Arrangement Munitions List or were formerly on the U.S. Munitions List.

Plurilateral Destination Controls and Deemed Export/Reexport Exclusions

To implement the worldwide license requirement on items subject to the new plurilateral controls through the Rule, BIS has added in EAR Part 742 additional NS and RS controls that apply to ECCNs that reference the specific NS or RS sub-paragraph in Part 742 instead of, or in addition to, a specific column on the Commerce Country Chart.

The new NS control at EAR Section 742.4(a)(5), and the parallel RS control at EAR Section 742.6(a)(10), each establishes a worldwide license requirement for all items subject to the control, which may be overcome only by License Exceptions IEC, TMP (limited to paragraphs (a)(3), which authorizes certain technology transactions, and (a)(6), for commodities for inspection, testing, calibration, or repair), RPL, GOV (restricted to paragraph (b), which authorizes certain transactions involving or directed by the U.S. government), and TSU (restricted to paragraph (a), which covers operation software and technology, and paragraph (c), which covers software updates). Items subject to RS controls fall within the definition of “critical technologies” for purposes of foreign investment reviews by the Committee on Foreign Investment in the United States (“CFIUS”), which may explain the establishment of parallel controls. If BIS had instead controlled these items only for NS purposes, then they would not fall within the definition of “critical technologies,” because the new NS controls are not multilateral export controls.

The NS control at EAR Section 742.4(a)(5) and the RS control at EAR Section 742.6(a)(10) do not apply to deemed exports or deemed reexports of technology or software:

• To employees or contractors who were already employed by an entity seeking to rely on the exclusion as of September 6, 2024, including for “future advancements or versions of the same” technology or software, provided the employees or contractors are not prohibited persons under EAR Part 744 (e.g., on the Entity List or other restricted party lists), except for deemed exports or deemed reexports of ECCN 3E905 GAAFET technology to non-U.S. persons whose most recent country of citizenship or permanent residency is a destination specified in Country Groups D:1 or D:5 in Supp. No. 1 to EAR Part 740. A separate general license for deemed exports and deemed reexports of such GAAFET technology is discussed further below, along with associated reporting requirements;
• Controlled in the following ECCNs when released to non-U.S. persons whose most recent country of citizenship or permanent residency is other than a destination specified in Country Groups D:1 or D:5 in Supp. No. 1 to EAR Part 740: ECCNs 2D910; 2E910; 3D001 (software for “EUV” masks and reticles in ECCN 3B001.q); 3D901 (for software for quantum items in ECCNs 3A901.b and 3B904 and for scanning electron microscopes (“SEMs”) in ECCN 3B903); 3D907 software designed to extract “GDSII” or equivalent data; 3E001 (technology for “EUV” masks and reticles in ECCN 3B001.q); and 3E901 (for technology for quantum items in 3A901, 3A904, 3B904, 3C907, 3C908, and 3C909, and for SEMs in ECCN 3B903); 3E905 (technology according to the General Technology Note for the development or production of integrated circuits or devices, using GAAFET structures); and technology (for quantum items in ECCNs 4D906 or 4E906); or
• Controlled in ECCNs 3D001, 3D002, or 3E001 for anisotropic dry plasma etch equipment or in ECCN 3B001.c.1.a or c.1.c for isotropic dry etch equipment.

The license review policy for these new NS and RS controls is a presumption of approval for destinations in Country Groups A:1, A:5, or A:6, a presumption of denial for destinations in Country Groups D:1 or D:5, and case-by-case for all other destinations, unless also subject to a more restrictive NS control policy.

License Exception Implemented Export Controls 

License Exception IEC authorizes exports, reexports, and transfers of specific ECCNs or sub-paragraphs of ECCNs to or within partner countries that have adopted a harmonized control as listed in the License Exception IEC Eligible Items and Destinations chart on BIS’s website. As an example, License Exception IEC currently authorizes exports, reexports, and transfers of all ECCN 3A901 items to Canada, but authorizes only exports, reexports, and transfers of ECCN 3A901.a items to Australia. It appears that BIS intends to update the chart as partners adopt controls, such that if Australia were to adopt harmonized controls on the remaining sub-paragraphs of ECCN 3A901 in the future, License Exception IEC could authorize exports, reexports, or transfers to Australia of items included in those additional sub-paragraphs after BIS updates the chart on its website.

General Licenses and Reporting Requirements

To “ensure continued technology leadership of U.S. companies and prevent disruption of the current semiconductor manufacturing supply chain,” BIS added two GAAFET general licenses and a general license for quantum items in new General Order No. 6, paragraph (f) of EAR Part 736, Supp. No. 1, each of which is subject to reporting requirements, as follows:

• GAAFET exports, reexports and transfers (in-country) (paragraph (f)(1)): This general license authorizes the export, reexport, or transfer of GAAFET technology controlled under ECCN 3E905 for the development or production of ICs to end users located in a destination specified in Country Groups A:5 or A:6 of EAR Part 740, Supp. No. 1, when such development or production activity began to be performed on or before September 6, 2024.
• GAAFET grandfather clause for deemed exports and deemed reexports (paragraph (f)(2)): This general license authorizes deemed exports or deemed reexports of ECCN 3E905 GAAFET technology (including for future advancements or versions of the same technology) to non-U.S. person employees or contractors already employed by entities as of September 6, 2024, whose most recent country of citizenship or permanent residency is a destination specified in Country Groups D:1 or D:5 (e.g., China) and who are not prohibited persons under EAR Part 744 (e.g. on the Entity List, Unverified List, Military End-User List, or the Denied Persons List).
• Quantum deemed exports and deemed reexports (paragraph (f)(3)): This general license authorizes deemed exports or deemed reexports of quantum software and technology controlled under ECCNs 3D901 and 3E901 (for quantum items in ECCNs 3A901.b, 3B904) and technology for quantum items in ECCNs 4D906 or 4E906, to non-U.S. persons whose most recent country of citizenship or permanent residency is a destination specified in Country Groups D:1 or D:5 (e.g., China) and who are not prohibited persons under EAR Part 744.

Pursuant to new paragraph (f)(4), exports, reexports, and transfers, including deemed exports and reexports, under these general licenses are subject to annual reporting requirements that require the identification of specific non-U.S. persons and technology or software in accordance with Section 743.7 (for the GAAFET general licenses) and Section 743.8 (for the general license for quantum items), with the first report due 60 days after the Rule’s publication (i.e., on November 5, 2024) and annually thereafter. The general licenses are also subject to end-user restrictions in paragraph (f)(5) and recordkeeping requirements in paragraph (f)(6).

As noted, through this Rule, BIS has added 18 new “900 series” ECCNs and revised nine additional ECCNs to control certain semiconductor, quantum, and additive manufacturing items. The new ECCNs are technical in nature and should be reviewed closely by parties operating in those industries. 

The new semiconductor controls notably include new ECCN 3E905, which controls GAAFET technology. In the Rule, BIS has advised that ECCN 3E905 includes process recipes, but does not control an IC design such as the physical layout file in GDSII format or electronic design automation (“EDA”) tools, or any other technology used to produce the physical layout file for IC design. In an explanatory note to the “Related Controls” paragraph of ECCN 3E905, BIS also advises that “ECCN 3E905 does not apply to vertical GAAFET architectures, e.g., those used for 3D NAND.” Additionally, ECCN 3B001 has been revised to impose worldwide NS and RS license requirements for isotropic dry etching equipment (3B001.c.1.a), anisotropic dry etching equipment (3B001.c.1.c), and “EUV” masks and “EUV” reticles designed for ICs, and not specified by 3B001.g, and having a mask “substrate blank” specified by 3B001.j (3B001.q).

The quantum controls include controls on quantum computers and related electronic assemblies and components (ECCN 4A906), certain cryogenic cooling systems (ECCN 3A904), certain cryogenic wafer probing equipment (ECCN 3B904), and certain materials used for quantum computers (ECCNs 3C907, 3C908, and 3C909). The Rule also establishes controls on related technology and software. As noted, BIS has established a compliance effectiveness date of November 5, 2024, for the new plurilateral NS and RS license requirements applicable to exports, reexports, and transfers of quantum computing items specified in ECCNs 3A901, 3A904, 3B904, 3C907, 3C908, 3C909, 3D901 (for 3A901.b, 3B904), 3E901 (for 3A901, 3A904, 3B904, 3C907, 3C908, 3C909), 4A906, 4D906, or 4E906 to destinations specified in Country Group A:1 to minimize disruption and allow for the submission of license applications. 

The new additive manufacturing controls at ECCNs 2B910, 2D910, 2E903, 2E910, and 2E003 impose controls on certain equipment designed to produce metal or metal alloy components as well as related software and technology for such equipment and for the development or manufacture of coating systems.

In addition to comments on the new framework and ECCN entries, BIS has requested comments on the potential impact of removing the general license for quantum computing deemed exports, including the anticipated challenges associated with compliance with deemed export restrictions, and potential alternative methods to control quantum computing technology. To help inform potential future controls, BIS has also asked for information on aspects of technology development and interactions relevant for potential deemed export restrictions.

As noted, BIS is seeking comments by November 5, 2024. 

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We are closely monitoring developments concerning U.S. export controls and will issue further updates in the event of material developments. In the meantime, we would be happy to address any questions you may have or to assist with comments to BIS.

Covington’s International Trade Controls team—which includes lawyers in the firm’s offices in the United States, London, and Frankfurt—regularly advises clients across business sectors, and would be well-placed to provide support in connection with these new and proposed export controls developments, or to assist with comments on these proposed rules. Our trade controls lawyers also work regularly with Covington's Global Public Policy team—consisting of over 120 former diplomats and policymakers in the United States, Europe, the Middle East, Latin America, Africa, and Asia—many of whom have had substantial government experience in sanctions and export controls matters, and who regularly advise our clients on emerging sanctions policy matters and related engagements with government stakeholders.