International Unilateral Export Controls—An Increased Focus on Advanced Technologies

On 11 March 2024, the UK expanded its export control regime to include new controls on specific emerging technologies, such as quantum computing, semiconductor technologies and additive manufacturing, under The Export Control (Amendment) Regulations 2024 (the ECO 2024). The new controls came into force on 1 April 2024.

The new UK controls coincide with changes introduced by France, the Netherlands and Spain to their national export control regimes, which have extended the scope of export restrictions beyond the dual-use items specified within Annex I of Council Regulation (EU) 2021/821 (the EU Dual-Use Regulation). The Netherlands and Spain added items to their national control lists, which were published in the EU’s Official Journal on 20 October 2023¹. France subsequently, on 2 February 2024, also adopted unilateral controls in addition to the EU Dual-Use Regulation, which are yet to be published in the EU’s Official Journal. Finally, Japan also adopted unilateral controls.

Key Takeaways:

• • The UK, France, Spain, the Netherlands and Japan have imposed autonomous (unilateral) export controls on specific advanced technologies and materials, extending beyond the EU Dual-Use Regulation and international regime-based controls.
  • New categories of items subject to UK export controls include certain semiconductor production equipment and materials, quantum computing technologies, as well as additive manufacturing equipment.
  • The series of unilateral export control actions reflects the growing disfunction of the consensus-based regimes, particularly the Wassenaar Arrangement, largely as a result of Russian vetoes of decisions to amend the regime control lists to address emerging technology issues. Other countries are expected to impose unilateral controls on items over the course of 2024 for similar reasons.
  • Investments (in excess of 25% ownership or voting rights) in entities with a UK nexus engaged in activities involving the new categories of UK controlled items will be caught by the national security investment review process of the UK National Security and Investment Act 2021. Similarly, investments in entities engaged in activities involving the now unilaterally controlled technologies in France, the Netherlands, Spain and Japan may also be caught by these countries’ national security investment review processes.

The UK Export Control (Amendment) Regulations 2024

The UK’s ECO 2024 came into force on 1 April 2024, and introduced several changes to The Export Control Order 2008 (the ECO 2008), which currently retains the export controls imposed on dual-use items specified within Annex I and IV of Council Regulation (EC) No 428/2009 (the Retained Dual-Use Regulation) following the UK’s exit from the EU.

The amendments introduced by the ECO 2024 include routine technical updates based on changes to the control lists administered by multilateral export control regimes, such as the Wassenaar Arrangement (munitions list), Australia Group, Nuclear Suppliers Group and the Missile Technology Control Regime, which were agreed in December 2023.

In addition, the ECO 2024 amended Schedule 3 of the ECO 2008 (Controlled Dual-Use Goods, Software and Technology) by introducing further, unilateral, controls on specific emerging technologies which the UK, along with a number of like-minded countries, has committed to implement in order to strengthen national controls. The amendments to Schedule 3 include the addition of three new categories of items, namely PL9013, PL9014 and PL9015, which relate to:

In addition to the covered hardware, ‘software’ and ‘technology’ for the ‘development’ or ‘production’ of the hardware are also controlled.

As of 1 April 2024, it has become prohibited for UK persons to export or “transfer by electronic means” goods, “software” or “technology” falling with categories PL9013, PL9014 and PL9015 to any destination outside the UK.

According to the Explanatory Note, the ECO 2024 has expanded the UK’s controls on the above items for the purposes of strengthening national controls, as well as addressing weaknesses in the multilateral system, alongside several like-minded countries. Presumably, this refers to an impasse in the Wassenaar Arrangement to adopt new technology controls due to Russia’s position in respect of the introduction of such new controls on a multilateral level.

The UK’s export control licensing regime has largely aligned itself with the EU following Brexit, for instance by adopting Retained General Export Authorisation 001 (the Retained GEA001), which is one of the six retained GEAs contained in Annexes to the UK’s Retained Dual-Use Regulation. The Retained GEA001 is a general export authorisation that covers the export to the US (among other destinations) of all dual-use items specified in Annex I to the Retained Dual-Use Regulation, except those listed in Annex IIg.

However, the new categories of technologies which have been added to Schedule 3 of the ECO 2008 (i.e. PL9013, PL9014 and PL9015) are national export controls which are both distinct from and extend beyond the controls of the Retained Dual-Use Regulation.

On 26 March, 2024, the UK’s Export Control Joint Unit, together with the UK Department for Business and Trade, published the Notice to Exporters (NTE 2024/05), confirming that the Open General Export Licence (OGEL) for the export of dual-use items to EU member states has been updated to take into account the changes made to Schedule 3 of the ECO 2008. The updated OGEL came into force on 1 April, 2024, and permits the export of items specified in categories PL9013 (Semiconductor technologies), PL9014 (Quantum computing) and PL9015 (Additive manufacturing equipment) to all 27 EU member states, as well as the Retained GEA001 destinations. The full list of destinations (as specified in Schedule 5 of the OGEL) is as follows: Austria, Australia, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, The Channel Islands and the USA.

The current version of the OGEL dated 24 March, 2022, has been revoked—but UK exporters who have previously registered for an earlier version of the OGEL do not need to re-register for the updated version as registrations are carried over to the current in force version of the OGEL. Where this OGEL is not valid for exports of PL9013, PL9014 or PL9015 items (e.g. because the destinations are not covered under the OGEL), UK exporters will need to apply for a Standard Individual Export Licence or an Open Individual Export Licence.

New controls introduced by ECO 2024 may also create implications for investors, particularly where investments are made in entities with a UK nexus that engage in activities involving these newly controlled items. For example, the acquisition of over 25% of ownership or voting rights, or an increase thereof by more than 25% in such entities now is subject to mandatory notification under the UK’s National Security and Investment Act 2021, pursuant to Section 6 of that Act and Schedule 12 to the National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021, which identifies entities engaged in researching, developing or producing goods or technology included in Schedules 2 and 3 of the ECO 2008 or Annex I of the Retained Dual-Use Regulation.

France

On 2 February 2024, the French government issued its Order of 2 February 2024 (the Order), imposing national controls on goods and technologies associated with quantum computer and advanced electronic components/semiconductors. The Order was made pursuant to Article 9(1) of Regulation (EU) 2021/821 (the EU Dual-Use Regulation), which permits EU member states to prohibit or impose an authorisation requirement on the export of dual-use items not listed in Annex I for reasons of public security, including the prevention of acts of terrorism, or for human rights considerations. The new French controls therefore extend beyond the existing controls of the EU Dual-Use Regulation.

In summary, the export from the EU of the goods/software/technologies listed in the Annex to the Order will be subject to French authorisation requirement.

The list of goods/software/technologies subject to the new authorisation requirement include two of the categories also covered by the UK unilateral controls, namely:

• • Certain semiconductor technologies and equipment (but not the semiconductor materials and also not some of the semiconductor (production) equipment covered in the UK regulations).
  • Quantum computing technologies.

The French unilateral controls do not include the additive manufacturing technologies covered by the new UK regulations.

As in the new UK regulations, in addition to the covered technologies (hardware), ‘software’ and ‘technology’ for the ‘development’ or ‘production’ of these technologies (hardware) are also controlled.

As of 1 March, 2024, exporters are required to obtain a licence from the French dual-use authority, the Service des biens à double usage (SBDU), to export the above items from France to a non-EU country. As a result, companies operating within the advanced technologies and quantum industries, which use such items in their manufacturing process, must closely consider the impact that the French controls may have on their organisation and supply chains.

What is more, the increased focus on quantum technologies also appears to highlight growing concerns among the French Government of the need to regulate and control advanced technologies, which is demonstrated by the broad scope of the controls to include essential components for quantum computing. These concerns appear to align with the broader policy objectives of the EU’s Economic Security Strategy, namely safeguarding international security through the prudent management of dual-use technologies.

Spain

On 7 June, 2023, the Spanish government amended Annex III.5 to Royal Decree 679/2014 (the Decree), which sets out items subject to export licensing not included in Annex I to the EU Dual-Use Regulation. As the French additional controls, the Spanish regulations are based on Article 9(1) of the EU Dual-Use Regulation. The Decree imposes a license requirement on the identified items.

In particular, Annex III.5 of the Decree now imposes export control requirements on a subset of the categories included in the UK regulations, as follows:

• • Certain semiconductor (production) equipment (in particular, scanning electron microscope equipment designed for imaging semiconductor devices or integrated circuits and certain equipment designed for dry etching, as also covered by the UK and French regulations).
  • Certain semiconductor technology (in particular, technology for the development or production of integrated circuits or devices, using gate envelope field effect transistor (GAAFET) structures, as also covered by the UK and French regulations).
  • Quantum computing technologies (as also covered by the UK and French regulations).
  • Certain additive manufacturing equipment designed or modified to produce, from energetic materials, explosive, pyrotechnic or propellant devices or shapes (not covered by the UK and French regulations).

In accordance with the Decree, exporters will be required to obtain a licence from the Spanish General Directorate of International Trade of Military and Dual-Use Items when seeking to export items specified in Annex III.5 from Spain outside the EU.

As in the new UK and French regulations, in addition to the covered technologies (hardware), software and technology for the ‘development’ or ‘production’ of these technologies (hardware) are also controlled.

The Netherlands

In accordance with Article 9(1) of the EU Dual-Use Regulation, the Netherlands issued its Regulation on Advanced Production Equipment for Semiconductors (Regulation) on 23 June 2023, which introduces a license requirement (and no prohibition) on the export of certain semiconductor production equipment from the Netherlands.

The unilateral Dutch controls do not overlap with those enacted by the UK, France and Spain addressed above, but with the Japanese unilteral controls, discussed below.

The semiconductor production equipment targeted by the Regulation includes production equipment, software and technology as well as specially designed components and accessories, as set out in the Annex to the Regulation. The technology referenced in same Annex is classifiable under 3E005 and covers: “technology which is required for the development, production or use of goods specified in this scheme under headings 3B001.l, 3B001.m, 3B001.f.4, 3B001.d.12, 3B001.a.4 or 3B001.d.19”.

According to the Minister for Foreign Trade and Development Cooperation, these measures were adopted in recognition of the crucial contribution that semiconductors can make to certain military applications and can be used for the development of high-quality military (weapon) systems and weapons of mass destruction.²

The above measures were introduced after the Dutch Government, together with the United States and Japan, announced that it had reached a tri-lateral agreement in May 2023, which seeks to impose new export restrictions on the export of advanced microchips technology (e.g. advanced lithography tools). The agreement marked the first step taken by an EU member state to create a parallel export regime with the United States,³but also recognised the growing importance that the Netherlands and Japan have in the production of semiconductor manufacturing equipment.⁴ For example, in 2019, the two countries combined reportedly enjoyed more than 99 percent of worldwide market share of the production of lithography steppers and scanners.⁵

Applicability of French, Spanish and Dutch Controls Lists in Other EU Member States

Where an EU member state in question has not implemented similar legislation, an export license would not be required to transfer items listed in the French, Spanish or Dutch national controls lists unless the exporter has been informed by the competent authority of that EU member state that the item in question is or may be intended for use of concern with respect to public security or human rights considerations. In those circumstances, an export license would be required and should be obtained in the EU member state from where the technology is being exported, even if the particular EU member state does not have any national legislation in place imposing such a license requirement. The broad applicability of Articles 9 and 10 of the EU Dual-Use Regulation therefore means that the relevant authority of any EU member state may impose an export license requirement on the basis of national legislation of another EU member state once that legislation has been published in the EU’s Official Journal (as happened with the national control lists published in October 2023), in case of concerns about its end use. The new national controls may therefore also apply to exports from EU member states other than France, Spain and the Netherlands.

Japan

On 23 May 2023, Japan issued Ministry of Economy, Trade and Industry (METI) Order No. 25 of 2023, which amends Ministerial Order Specifying Goods and Technologies Pursuant to the Provisions of the Appended Table 1 of the Export Trade Control Order and the Appended Table of the Foreign Exchange Order (Ministry of International Trade and Industry Order No. 49 of 1991, as amended) by adding the following items to the list of items subject to the list-based controls (as opposed to the catch-all controls): (i) over 20 types of semiconductor production equipment used for the production of advanced node semiconductors (i.e. certain equipment for extreme ultraviolet (EUV) or ArF immersion lithography; EUV mask and mask blank inspection equipment; certain equipment for dry or wet cleaning; certain deposition or annealing equipment; certain equipment for dry isotropic, dry anisotropic, wet or anisotropic etching); (ii) EUV pellicles; and (iii) certain (software) programs designed for the use of the foregoing equipment. The new controls also extend to certain components and accessories of the newly controlled equipment, as well as certain technology (excluding (software) programs and process design kits) necessary for the design or manufacture of, and certain (software) programs designed for the design or manufacture of, the newly controlled equipment and EUV pellicles.

As a result of this amendment, effective 23 July 2023, a license is required to export the newly controlled semiconductor production equipment or related items from Japan to any destination worldwide. Exporters can apply for an individual export license for each transaction, which will be reviewed by METI on a case-by-case basis. Alternatively, depending on the destination of such export, the exporter may be able to use its General Bulk License, Special General Bulk License or Specific Bulk License.

METI has explained that the purpose of these new unilateral controls is to “supplement the Wassenaar Arrangement” and thereby “prevent military diversion” of these items and that it has considered, among other things, “the latest developments on the relevant countries’ export controls regarding semiconductor production equipment”. In this regard, after METI published the draft version of the amendment earlier in March 2023, its Minister stated that “Japan is introducing measures that it thinks are necessary” after discussions with “allies and like-minded countries, including the United States and the Netherlands”.

Analysis

The new export control measures introduced by France, the Netherlands, Spain and the UK highlight that several important members of the Wassenaar Arrangement, are closely monitoring the evolution of advanced technologies and their importance to national security. For example, the UK’s National Semiconductor Strategy published on 19 May, 2023, emphasized that the UK’s policy objectives for enhancing national security include using appropriate levers, such as investment screening tools and export controls over the UK’s most sensitive semiconductor assets. Whilst the UK measures will seek to balance security with sector growth, the controls will aim to prevent hostile actors from developing technological capabilities that may cause harm to national security.

Furthermore, the national export controls adopted by France, Spain and the Netherlands appear to coincide with the EU’s announcement of its five initiatives to strengthen economic and national security (see previous Akin Client Alert) on 24 January 2024. As explained in its White Paper on export controls, the European Commission has emphasized the need for greater coordination at the EU level of national control lists, as well as introducing uniform controls on items not adopted by the multilateral export control regimes due to being blocked by certain member states. Whilst the proposed measures seek to achieve greater coordination, they are likely to face criticism from member states, citing increased complexity, bureaucracy and diverging economic interests.

In fact, there are certain differences in Japan’s new measures related to semiconductor production equipment compared to such measures that the United States and the Netherlands have implemented. For example, unlike the U.S. controls, but consistent with the Dutch regulations, Japan’s license requirement applies to exports to all countries worldwide. Moreover, Japan has imposed controls on more types of semiconductor manufacturing equipment compared to the new Dutch Regulation described above, and items subject to control under Japanese and U.S. rules are not fully aligned even after the United States implemented the so-called 17 October 2023 rules. Furthermore, the new Japanese measures are implemented within the existing regulatory framework by adding new items to the list of controlled items, meaning that Japan has not implemented novel U.S. controls on, for example, U.S. person activities in support of the development or production of advanced-node semiconductors in China and certain other destinations.

^{1 “Compilation of national control lists under Article 9(4) of Regulation (EU) 2021/821 of the European Parliament and of the EU Council of 20 May 2021, which set up a Union regime for the control exports, brokering technical assistance, transit and transfer of dual-use items”, OJ C 2023/441.}

^{2 Regulation of the Minister for Foreign Trade and Development Cooperation of 23 June 2023, no. MinBuza.2023.15246-27 introducing a licensing requirement for the export of advanced production equipment for semiconductors that are not listed in Annex I of Regulation 2021/821 (Advanced Production Equipment Regulation for semiconductors).}

^{3 https://www.politico.eu/article/us-dutch-officials-meet-to-hammer-out-chips-control-deal-export-blocks-china/}

^{4 https://www.csis.org/analysis/clues-us-dutch-japanese-semiconductor-export-controls-deal-are-hiding-plain-sight}

^{5 https://www.csis.org/analysis/clues-us-dutch-japanese-semiconductor-export-controls-deal-are-hiding-plain-sight}