The Commerce Department extended comments on future temporary general license extensions under export administration regulations by about a month to April 22, says Thursday's Federal Register. The feedback will determine “continuing need” and scope for future extensions for the temporary general license for Huawei, the department said Wednesday. Thursday, Reuters reported senior administration officials agreed to new measures to further restrict foreign exports of chips to Huawei. It's unclear if President Donald Trump will OK the change. The White House and Commerce Department's Bureau of Industry and Security didn't comment.
Ian Cohen
Ian Cohen, Deputy Managing Editor, is a reporter with Export Compliance Daily and its sister publications International Trade Today and Trade Law Daily, where he covers export controls, sanctions and international trade issues. He previously worked as a local government reporter in South Florida. Ian graduated with a journalism degree from the University of Florida in 2017 and lives in Washington, D.C. He joined the staff of Warren Communications News in 2019.
U.S. administration officials will meet with EU and Japanese counterparts next month to lobby for increased scrutiny of mergers and acquisitions involving sensitive technologies, said Thomas Feddo, Treasury Department assistant secretary-investment security. The U.S. is implementing revisions in the Foreign Investment Risk Review Modernization Act (see 2002120034). FIRRMA will adapt to any rulemaking changes in technology, and Treasury prioritized improving investment screening among allies and quadrupled Office of Investment Security staffing as the Trump administration focuses on maintaining a technological edge over China, Feddo said Wednesday. Industry worries about lack of clarity on what's considered critical tech (see 2001150018). Treasury “does not have a lot of latitude” to define this, Feddo said, and the agency is awaiting direction. “Obviously we’re looking to the Commerce Department to develop and designate emerging technologies,” he told the Asia Society: But the ability to review M&A won't be hurt.
A Commerce Department agency plans the first meeting of its Emerging Technology Technical Advisory Committee this spring, amid delays issuing prospective members security clearances. A Bureau of Industry and Security spokesperson emailed that the agency remains “on target” to have the meeting before summer. Commerce officials originally scheduled the meeting for December, and then January, delaying it each time. ETTAC applicants are impatient, and trade lawyers have heard little information, they said in interviews last week. Adrienne Braumiller, a trade lawyer with Braumiller Law Group and member of BIS’ Regulations and Procedures TAC, has “no clear understanding” of why the process has taken so long, calling it “rather protracted and lengthy.” Doug Jacobson of Jacobson Burton heard about “numerous delays in the process” but hasn't heard why. ETTAC’s “primary focus” will be to identify emerging technologies with dual-use applications, says its charter. Those efforts will inform Commerce restricting sales of emerging technologies, which faced delays (see 1911070026). Commerce has released two sets of controls on emerging technologies without ETTAC input.
Discussions within the Commerce Department to expand U.S. export control jurisdiction over foreign exports to Huawei would have a chilling effect on the U.S. semiconductor industry, said Semiconductor Industry Association President John Neuffer. Current U.S. export restrictions on Huawei are already hurting the industry’s ability to sell to China, said Neuffer during an Information and Technology Innovation Foundation workshop Tuesday. China is about 35 percent of U.S. semiconductor sales, and more restrictions would further alienate Chinese customers who are weary of being added to Commerce’s Entity List, he said: “Some of them are afraid they’re next.” Neuffer said the semiconductor industry remains uncertain about the U.S. approach toward Huawei and China. He warned the Trump administration against further revisions to the U.S. export control system. “We think that’s not necessary,” Neuffer said, adding the U.S. shouldn’t place controls on nonsensitive products with no national security nexus, such as smartphone chips. “There have been some confused waters for us in terms of understanding exactly what the U.S. government intends on doing with Huawei and the China market generally,” Neuffer said.
As Foreign Investment Risk Review Modernization Act rules take effect Thursday, FIRRMA’s definition for critical technologies remains unclear due to a lack of Commerce Department proposed rules on emerging and foundational technologies, trade lawyers said. FIRRMA expands jurisdiction of the Committee on Foreign Investment in the U.S. to review some investments involving critical tech (see 2001150018). Commerce “has really issued just one set of regulations that could possibly cover emerging and foundational technologies,” said Vinson & Elkins' Dave Johnson, referencing an interim final rule to restrict exports of geospatial imagery software released by Commerce in January: “There's a lot of work they have to do in this area.” Johnson, speaking alongside Vinson & Elkins' Damara Chambers at a Tuesday panel hosted by the law firm, said the scope of businesses affected by FIRRMA’s regulations that deal in critical tech could be significant. Voluntary declarations may be very helpful, Chambers said. “For benign transactions that ... aren’t complicated for CFIUS to get their arms around, those should move very quickly under this voluntary filing process,” she said. “I’m very excited about the concept.” The Commerce Department didn't comment Wednesday.
The Commerce Department doesn’t have a timeline for releasing its next set of controls on emerging technologies and its advance NPRM for foundational technologies, despite expectations from top officials both would be published before 2020 (see 1912110040), a Bureau of Industry and Security official said Tuesday. “I would have thought that they would be out earlier,” said Hillary Hess, director of BIS’ regulatory policy division, at a Sensors and Instrumentation Technical Advisory Committee meeting. “I think everybody would like to see them come out, but I’m not sure how long it’s going to take. I’m having trouble getting a bead on it myself.” Interagency working groups are reviewing the proposed emerging technology controls, which include potential restrictions on exports of artificial intelligence and robotics items, Hess said. Although BIS published a January interim final rule that placed export controls on geospatial imagery software, that rule stemmed from existing export administration regulations process in place since 2012, Hess said. “None of [the working group] rules have been published yet.” Hess said the ANPRM for foundational technologies is in internal review.
Treasury Department Foreign Investment Risk Review Modernization Act final regulations made several changes, without providing a further definition for “critical technologies” that industry had sought (see 1911210029). The regulations, effective Feb. 13, as expected (see 1909040029) expand authority of the Committee on Foreign Investment in the U.S. to review a broader range of foreign business dealings in the U.S. “Commenters recommended narrowing the definition and noted that the Department of Commerce, at the time of the proposed rule, had yet to define emerging and foundational technologies,” Treasury said Monday. “FIRRMA defines ‘critical technologies,’ and FIRRMA does not give the Treasury Department discretion to change this statutory definition through these regulations.” The agency won't define emerging and foundational technology, deferring to the Commerce Department. Commerce didn't comment Wednesday. Regulations got other changes based on public comments, Treasury says in Friday's Federal Register. Comments on a non-tech change are due Feb. 18. The Covington law firm outlined the changes.
Expanding export administration regulation limits to further control foreign shipments to Huawei would have a “dramatic” impact on international supply chains, said Kevin Wolf, a trade lawyer with Akin Gump. The actions, which the Commerce Department is considering (see 1912110039), include expanding the direct product rule and broadening the de minimis rule. “This is a really, really big deal,” said Wolf Friday in Boston on a Massachusetts Export Center panel. “The collateral, psychological effect of this, I fear, is really going to be quite dramatic.” The changes could apply to foreign-made items that contain U.S.-origin content not controlled for national security reasons. They wouldn't apply to dual-use goods and sensitive technologies, just consumer goods, Wolf said. The rule may apply to “wholly formed made items that no other country controls, creating a jurisdictional rule for foreign companies” when selling to Huawei that would likely be difficult to comply with, he said. The rule would make dealing with foreign-made U.S. content and technology “very frustrating and difficult for foreign companies,” Wolf said, which may have a ripple effect.
The Commerce Department is considering several expanded restrictions on foreign shipments to Huawei of items containing U.S. technology (see 1911070026), said Rich Ashooh, assistant secretary-export administration. The department is discussing expanding the direct product rule that subjects certain foreign-made products containing U.S. technology to American regulations, and a broadened de minimis rule, he told a Regulations and Procedures Technical Advisory Committee meeting. Ten associations wrote Secretary Wilbur Ross last week that the potential changes “could negatively impact a wide range of commercial transactions” that don't have national security implications. BSA|The Software Alliance, CompTIA, the Information Technology Industry Council, the Semiconductor Industry Association, the Software & Information Industry Association and others said the department proposals would encourage “design-out of U.S. technology by non-U.S. firms, while also imposing massive new compliance burdens for U.S. and non-U.S. companies alike." Ashooh said Tuesday any potential rule changes would likely be subject to public comment, under the Export Control Reform Act. “The default is to go seek the public support,” he said.
The Commerce Department hopes to release proposed controls on emerging technology exports “in the next couple weeks,” said Matt Borman, deputy undersecretary for export administration. “We’ve got a set that we’re working on in internal review,” he told a Materials and Equipment Technical Advisory Committee meeting Wednesday. “So we’re hoping to get those through interagency [review] and out for public comment in the next couple weeks.” Officials have said for months the controls would be released soon, and companies and trade groups are growing concerned (see 1911070026). Also at the meeting, Borman said decisions on Huawei license applications are coming (see 1911210027).