Highlights:

• The Department of Commerce has issued the first in a series of new rules imposing export licensing requirements on “emerging technologies” as mandated by the Export Control Reform Act (“ECRA”) in 2018.
• This first new rule targets certain types of geospatial imagery software utilized in artificial intelligence and machine learning applications. Businesses using this controlled software will now face export licensing requirements before the software can be released outside the United States.
• The Commerce Department’s targeted imposition of the export licensing requirements in this new rule suggests that the application of export controls to other “emerging technologies” may be narrower than originally anticipated.  But, those additional emerging technologies that are specifically identified by the Commerce Department will almost certainly face similarly strong control on exports.

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On January 6, 2020, the Department of Commerce’s Bureau of Industry and Security (“BIS”) issued the first of what is expected to be a series of new export controls on “emerging technologies” deemed essential to U.S. national security, as authorized under the Export Control Reform Act of 2018. This new rule applies the first round of export controls on emerging technologies to discrete imagery software, indicating that BIS will be more narrowly targeting the emerging technology export controls than had been earlier believed by U.S. industry. Specifically, the new rule imposes a license requirement for the export and reexport of software specially designed to automate the analysis of geospatial imagery to all countries, except Canada. Such software is used in a wide range of applications covering artificial intelligence and machine learning technologies.

Specifically, the interim final rule adds the following software to the 0Y521 series of Export Control Classification Numbers (“ECCN”) on the Export Administration Regulations (“EAR”) Commerce Control List (“CCL”):

Geospatial imagery “software” “specially designed” for training a Deep Convolutional Neural Network (“DCNN”) to automate the analysis of geospatial imagery and point clouds, and having all of the following:

1. Provides a graphical user interface that enables the user to identify objects (e.g., vehicles, houses, etc.) from within geospatial imagery and point clouds in order to extract positive and negative samples of an object of interest;
2. Reduces pixel variation by performing scale, color, and rotational normalization on the positive samples;
3. Trains a DCNN to detect the object of interest from the positive and negative samples; and
4. Identifies objects in geospatial imagery using the trained DCNN by matching the rotational pattern from the positive samples with the rotational pattern of objects in the geospatial imagery.

Technical Note: A point cloud is a collection of data points defined by a given coordinate system. A point cloud is also known as a digital surface mode.

Items classified under the 0Y521 series are controlled for regional stability (RS) Column 1 reasons, which requires a license for export or reexport to all countries, except Canada, with a case-by-case license application review policy. The only license exception available for these items at this time is for exports, reexports, and transfers (in-country) made by or consigned to a department or agency of the U.S. Government (License Exception GOV).

Items in the 0Y521 series of ECCNs are added upon a determination by the U.S. Government that the items warrant control for export because they may provide a significant U.S. military or intelligence advantage or because foreign policy reasons justify control. These items are typically emerging technologies (including emerging commodities, software, and technology) that are not yet included in the CCL, so such items are listed here while the U.S. Government determines whether classification under a revised or new ECCN, or an EAR99 designation, is appropriate. That decision must be made within one year (in this case, by January 6, 2021) unless the 0Y521 classification is extended, provided that the U.S. Government has submitted a proposal to the relevant multilateral regime(s) to obtain multilateral controls over the item. In the new rule, BIS has indicated that the U.S. Government currently plans to propose to the Wassenaar Arrangement that multilateral controls be placed on this software.

BIS noted that this rule is being issued on an interim basis because while the U.S. Government believes that it is in U.S. national security interests to immediately implement these controls, it also wants to provide the interested public with an opportunity to comment on the control of new items. Thus, comments may be submitted within 60 days of issuance of this rule. BIS will review and, if appropriate, address such comments through subsequent rulemaking.

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