A final rule issued by the Bureau of Industry and Security (BIS) on October 5, 2021 will place new controls on the export of certain biotech software designed for nucleic acid assemblers and synthesizers by establishing new Export Control Classification Numbers or “ECCN” to regulate the export. The BIS is the arm of the U.S. Department of Commerce responsible for the regulation and licensing of exports of commercial and so-called, “dual-use” technology.
Background
Software for nucleic acid (including DNA and RNA) assembly and synthesis is used for genetic editing, as well as for the development of new drugs to treat diseases such as cancer and viral infections. However, it can also be used in offensive military technology to create chemical and biological weapons of mass destruction, with devastating economic, environmental, and societal effects. The new rule effectively implements a May 2021 decision from the multilateral Australia Group, founded in 1985 following Iraq’s use of chemical weapons in the Iran-Iraq war, to deter the proliferation of chemical, biological, and nuclear technology that can be used in weapons of mass destruction. All 42 member-states of the Group will establish comparable controls for this kind of software.
New ECCNs Created
The new rule[1] creates two new ECCNs. The first, ECCN 2D352, regulates the export of “Software for Nucleic Acid Synthesizers/Assemblers” by requiring a license to export the software in question to countries subject to restrictions for chemical and biological weapons (CB) and anti-terrorism (AT) reasons. No license will be required to export to most NATO and EU member states, Argentina, Australia, India, Japan, Mexico, New Zealand and South Korea. The second, ECCN 2E001, regulates the export of “technology” used in ECCN 2D352 requiring a license to export said technology to countries subject to restrictions for national security (NS), chemical and biological weapons (CB), missile technology (MT), non-proliferation (NP), and anti-terrorism (AT) reasons. Under ECCN 2D352, an export license will be required for most countries with the exception of most NATO and EU member states.
Industry Impact
The new rule is likely to affect genetic and biotechnology companies in multiple areas, including product development, research, IP licensing, sales, the hiring of foreign nationals, and cross-border transactions and investment. A greater number of export licenses are expected to be required as a result of this rule, requiring companies to plan sufficiently in advance of a proposed export. Foreign investment, mergers, and acquisitions involving companies with this genetic software technology are likely to be subject to mandatory review by the Committee for Foreign Investment in the United States, or CFIUS.
For more information or assistance with determining the impact of the new rule on your business, please contact Michael Mendelson at [email protected] or 202.596.6610.
Michael Mendelson is a Member of Outside GC in the Washington, D.C. region. With over 20 years of experience, Michael handles a broad variety of matters for established and start-up clients including complex international transactions, M&A, early stage financing, government contracts, commercial contracts.
[1] As codified in Title 15 of the Code of Federal Regulations, Parts 742 and 746
