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The Biden Administration’s Export Controls on Emerging Technologies: Recent Developments and Implications

The Biden Administration’s Export Controls on Emerging Technologies: Recent Developments and Implications

The Biden Administration’s Export Controls on Emerging Technologies: Recent Developments and Implications

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Ⅰ.Background and Overview
Ⅱ. Key Issues 
Ⅲ. Prospect and Policy Recommendations


Ⅰ.Background and Overview 

The intensifying race for technological supremacy between the U.S. and China\ together with the current wave of restructuring of global supply chains\ is prodding the U.S. and other major countries to overhaul their export control systems covering emerging technology exports. The U.S.\ in particular\ enacted the Export Control Reform Act (ECRA) in 2018 to make significant changes to U.S. export controls\ particularly with respect to emerging and foundational technologies (ETF)\ and has strived to increase controls on the export of technologies since then. With the rollout of U.S. export controls on emerging technologies being linked up with the Biden administration’s plans to restructure the global supply chain\ tightened export controls imposed by the U.S. will have significant ramifications across the globe. 
 
U.S. House of Representatives Foreign Affairs Committee Chairman Ed Royce (R-CA)\ who introduced the Act\ stressed the need to tighten export controls to limit China and other unfriendly nations’ acquisition of U.S. emerging and foundational technologies. However\ concerns have been raised by some\ especially those working at U.S. tech firms\ about increased export controls on EFT. It is argued that regulating high-tech industries for national security reasons could adversely affect Washington’s efforts to preserve its technological competitive advantage. 
 
In addition\ given the level of China’s technological prowess\ it is pointed out that tighter rules surrounding the exports of emerging technologies could be less effective than expected and would backfire by undermining the United States’ cooperation with other nations on the development of new technologies. Despite these concerns\ the U.S. Department of Commerce pushed ahead with its plan and released an initial list of 14 emerging technologies to be restricted on November 14\ 2021. While the ECRA did not provide a specific definition of EFT\ the list of technologies subject to limited controls overlapped with the key industries laid out by the Made in China 2025 initiative. 
 
The Biden administration is rolling out tightened export controls on emerging technologies in parallel with its restrictions on foreign investments into U.S. businesses using or developing emerging technologies. On August 13\ 2018\ Congress enacted the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). The legislation\ which became effective on February 13\ 2020\ modernizes and strengthens the CFIUS to more effectively guard against the risk to the national security of the United States posed by certain types of foreign investment (including the investment made by Chinese firms)\ and for other purposes. The Law intends to promote continued U.S. technology leadership\ and greatly extends the jurisdiction of CFIUS over “certain non-controlling investments” into U.S. businesses involved in sensitive personal data\ critical infrastructure\ or critical technology. 


Ⅱ. Key Issues 

The Biden administration inherits most of the export license exceptions implemented by its predecessor. The U.S. Department of Commerce provides a list of export license exceptions\ and as a matter of fact\ exporters were three times more likely to export items under license exceptions than to export goods under a license. And in June 2020\ the Commerce Department eliminated License Exception Civil End Users (CIV) for eligible D:1 countries. License Exception CIV allows the export of certain items controlled for national security (NS) reasons only to civil end-users in D:1 countries. The elimination would mean that exporters seeking to ship U.S. items falling under the jurisdiction of the Export Administration Regulations (EAR) from specific third countries to a D:1 country such as China would require a license or other type of authorization before export\ re-export\ or transfer.
 
Furthermore\ the U.S. government has implemented the modified License Exception Additional Permissive Re-exports (APR) since June 2020 to regulate the exports and re-exports of certain non-sensitive items to China for military end use (MEU). The U.S. government also proposed to remove countries in Country Group D as a category of eligible destinations when certain national security-controlled items are re-exported from Wassenaar participating states\ including the Republic of Korea. License Exception APR is still in effect despite the Trump administration’s bid to revoke it\ so countries located in Country Group A\ most of whom are Wassenaar participating countries\ may approve a license for the re-export of U.S.-origin items that would have been denied if exported directly from the U.S.
 
The Biden administration has pressed ahead with an expansion of export controls on foreign-produced items deemed the direct product of U.S.-origin national security-controlled technologies and software in compliance with Foreign-Produced Direct Product Rule (FDPR). As a result\ it is required to obtain permission from the U.S. Department of Commerce to transfer the foreign-produced item produced by any plant or major component of a plant located outside the U.S. to the end user if it is a direct product of U.S.-origin technology or software. In particular\ the Commerce Department’s Bureau of Industry and Security (BIS) announced an expansion of export controls on Huawei and its subsidiaries\ so Huawei’s semiconductors\ SRAMs\ DRAMs\ and components of mobile devices are now subject to export and re-export controls.
 
The Biden administration has been weighing policy options to effectively control the intangible transfer of technology to stem the flow of sensitive technologies to foreign adversaries. The government’s use of export controls on data processing software and efforts to prevent tech brain drain has dramatically ramped up under President Biden with tightened restrictions on joint R&D projects arranged to develop new technologies. However\ as it is practically impossible to implement extensive export controls on the transfer of intangible technologies\ including data processing software\ the Biden administration is focusing on tightening up “choke points” among numerous EFT.


Ⅲ. Prospect and Policy Recommendations

In response to the Biden administration’s tightened export controls on new technologies\ China\ the European Union\ and Japan have promptly formulated responses although their efforts vary in scope. China and the EU have modified related regulations to keep pace with the U.S.’ ECRA to tighten up their export controls on new technologies while minimizing the damage caused by the U.S. government’s expanded export controls. Unlike China and the EU\ Japan has not enacted limits to counteract the Biden administration’s expansion of export controls\ but it is reviewing a proposal for tightening export controls for national security purposes.
 
It is forecast that the Biden administration will align its policies with U.S. allies and partners by forging bilateral and multilateral arrangements within the frameworks of the Quad\ Five Eyes\ and MAST to cast a more comprehensive\ closely-knit net to prevent foreign competitors from accessing critical technologies and circumventing its export controls. Such initiative derives in part from the various challenges the U.S. faced in reflecting its stance and national security interests under the Wassenaar regime. To better cope with future developments\ South Korea needs to calibrate its position strategically and decide on participation in the U.S.-led arrangements. In this regard\ it is recommended that government officials and strategic thinkers in Seoul orchestrate efforts to overhaul the existing system and regulations\ and to strengthen the country’s domestic capabilities by conducting an empirical analysis of related policies and regulations adopted by major countries including the U.S.


* Attached the File

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