Export Controls

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In a development that could cause every advanced reactor startup to reexamine its growth strategy, the US government (USG) yesterday afternoon issued a new framework concerning exports to China, which largely closes the export market to advanced reactor companies.

The framework document, which is available here and was described to a limited audience in a briefing yesterday that we attended, sets forth the following policy regarding exports of technology or technical data subject to the US Department of Energy (DOE) nuclear export control regulations in 10 CFR Part 810, and exports of equipment and materials under the NRC’s nuclear export control regulations in 10 CFR Part 110.

The DOE Part 810 export controls framework is likely of most interest to advanced reactor companies, and is summarized below:

  • Presumption of Denial for the Following Export Authorization Requests:
    • Any exports related of advanced reactor technologies (i.e., light water SMRs and non-light water reactors), and related fuel cycle exports.  It appears that fuel cycle exports that could benefit advanced reactors, even if designed primarily for traditional light water reactors, could get caught up in this “presumption of denial.”
    • Any export of codes or software.
    • Any exports at all to the company China General Nuclear (CGN) or its affiliates.  DOE will not provide a public list of affiliates, but applicants can go check with DOE beforehand.
    • Any “new technology transfers after January 1, 2018” are also presumed to be denied export authorization.  It is unclear exactly what this means, but it is potentially a catch-all to make clear the limited nature of those exports still permissible.
  • Exports for Which Approvals May Still be Attainable (Presumption of Approval, But After Heightened End User Review):
    • Amendments or extensions for existing authorizations “for technology transferred prior to January 1, 2018.”  This does not apply to advanced reactors.  It will also likely be an area of confusion going forward as to how the USG position against “new” technology transfers above will apply to these existing authorizations.
    • Certain technology transfers for operational safety purposes, with a clear operational safety benefit and after heightened review of the end user.
    • Transfers of technology required to support sale of an item that is “commercially available.”  This is likely to be limited in scope.

In case of a conflict, the presumption of denial appears to defeat the presumption of approval—e.g., exports to CGN appear off-limits no matter what.  A few other key points to relate:

  • NRC Export Control Policy Changes:  The changes to NRC export controls mimic those impacting DOE controls.  The key point is that any exports related to “direct economic competition with the United States” are presumed to be denied an NRC license.  Examples provided include sales to support the Hualong One and unique U.S. components for the CAP-1400 reactors.  Likely this would also catch any effort to support a Chinese advanced reactor.  Exports to support the AP-1000, or related projects in China that rely on current-gen technology, can potentially move forward, but will be heavily scrutinized.   In theory, sales of light water SMR or advanced reactors themselves are permitted too, but with no technology transfer above and beyond installation and operation.
  • Implications on Department of Commerce (DOC) Export Controls: Today’s action appears largely limited to 10 CFR Parts 110/810 nuclear export controls, and does not directly impact exports regulated by DOC.  However, we understand that DOC is currently considering potential new restrictions with regarding China.   These may involve changes in licensing policy, including adding licensing requirements for items that previously could be exported without a license.  Considering that DOC hosted this event, it would appear the agency staff at least agree in principle with the strong action taken there.
  • End User Reviews: There will be new, “case-by-case” heightened reviews for exports to non-CGN end users that assess risk of diversion, risk to parties in the deal, and risk to US national and economic security—and balance these risks against the economic and strategic benefits of the exchange.  DOE and the NRC may be able to place conditions on exports to mitigate the above-listed risks.    Exactly how these reviews will be conducted is likely still to be determined, including if DOE and NRC will want to go as far as what some other agencies (such as DOC) do with end user reviews.
  • Application to Chinese Nationals/Partially-Owned Businesses: To also make clear, this policy applies to hiring of Chinese foreign nationals in the United States, and can impact deals with entities that are just partially owned by Chinese nationals or businesses.  The authors asked the USG at the briefing as to whether this policy applied to deemed exports, and the USG panelists confirmed that it did.  They directed that questions related to partial ownership be directed to DOE for review.
  • Other Related Actions:  This policy change also highlights the recent CFIUS and DOC export controls legislation passed by Congress, which was again geared towards China.  To add, USG has started to implement parts of this legislation, including a CFIUS pilot program to implement the sections of that legislation concerning investments in critical technologies, likely including a broad scope of nuclear technologies.

All in all, this is just one more example of a renewed government focus on the national security implications of losing the US civil nuclear industry to foreign competitors, as highlighted in our Back from the Brink paper (which was featured in an event last week at the Center for Strategic and International Studies on Nuclear Energy, Naval Propulsion, and National Security).

Specific to China, since 2017 the USG has been looking at this issue, following a spate of IP theft and diversion cases that have not seemed to stem in recent years.  While the Allen Ho/CGN litigation was certainly a driver, USG panelists noted in their briefing many other examples of China allegedly diverting civilian nuclear resources and technology to military end uses, using a “whole nation” strategy.  This included forcing civilian institutions to do military nuclear work, comingling civil and military nuclear efforts (for example, in the area of floating reactors), diverting IP provided for civilian nuclear use to military end uses, and repurposing US civilian nuclear IP and codes for military end use.  The FBI representative appeared to indicate that there were other, classified examples.

For more information, please feel free to contact the authors.