Dual-Use Dilemma: Balancing Commercial Innovation With National Security Needs
Dual-use technology serves both civilian and military purposes, posing challenges in balancing innovation with security. Here's what you need to know:
What is Dual-Use Technology?
Items like AI, facial recognition, and 3D printing can be used commercially or in defense, raising concerns about misuse and security risks.Key Challenges:
Rapid innovation creates compliance and export control issues.
Security risks include data breaches, sabotage, and intellectual property theft.
High compliance costs burden companies, with disputes costing up to $25,000 or more.
Regulatory Frameworks:
ITAR: Strictly controls defense-related exports.
EAR: Oversees dual-use items with more flexibility.
Global Agreements: Wassenaar Arrangement ensures transparency in technology exports.
Examples of Dual-Use Technologies:
AI: Used in both autonomous vehicles and military intelligence.
3D Printing: Creates aircraft parts but risks sabotage and structural flaws.
Quantum Computing: Promises breakthroughs but threatens existing encryption.
Solutions for Businesses:
Strengthen cybersecurity with tools like multi-factor authentication.
Protect intellectual property through NDAs and secure systems.
Build robust compliance programs and conduct regular audits.
Dual-use technology offers immense potential but requires careful management to mitigate risks and align with national security needs.
U.S. and Global Regulations
ITAR and EAR Requirements
The U.S. relies on two main frameworks to manage sensitive technologies: ITAR (International Traffic in Arms Regulations) and EAR (Export Administration Regulations). These frameworks are vital for protecting national security.
Feature ITAR EAR Oversight Agency State Department (DDTC) Commerce Department (BIS) Focus Defense Articles (USML) Commercial/Dual-Use Items (CCL) Registration Mandatory Not Required License Types More Restrictive Flexible Options Penalty Severity Higher Maximum Fines Lower Maximum Fines
In FY 2021, the Bureau of Industry and Security (BIS) processed 41,446 license applications, marking a 9.4% increase from the prior year. Following new rules on AI semiconductor exports to China, BIS expects to review an additional 1,600 licenses annually.
Global Control Agreements
The Wassenaar Arrangement (WA), established in 1996, is the leading international framework for overseeing dual-use technology exports. With 42 member countries, the WA aims to ensure transparency in the transfer of conventional arms and dual-use technologies.
National Security Advisor Jake Sullivan highlighted its strategic role:
"demonstrated that technology export controls can be more than just a preventative tool. If implemented in a way that is robust, durable, and comprehensive, they can be a new strategic asset in the U.S. and allied toolkit to impose costs on adversaries, and even over time degrade their battlefield capabilities."
Similarly, Secretary of State Antony Blinken reflected on the evolving global dynamics:
"We are at an inflection point. The post-Cold War world has come to an end, and there is an intense competition underway to shape what comes next. And at the heart of that competition is technology."
Business Compliance Costs
Compliance with dual-use regulations comes with steep financial and operational burdens for businesses. Legal and consulting fees for basic disputes can reach $25,000, while complex cases may cost millions. The impact doesn't stop at direct expenses:
Productivity Loss: 54% of businesses reported significant performance declines due to regulatory actions.
Export Restrictions: Non-compliance risks losing export privileges.
Reputation Damage: Public consent agreements can tarnish a company's image.
To mitigate these challenges, businesses should focus on building strong compliance programs:
Product Classification
Analyze products against the U.S. Munitions List and the Commerce Control List to determine licensing requirements.Documentation Systems
Use the SNAP-R portal for EAR classifications and maintain thorough compliance records.Regular Audits
Periodically review and update compliance procedures to stay aligned with regulations.
Secretary of Commerce Gina Raimondo emphasized the impact of these controls:
"U.S. exports to Russia in the categories where we have export controls, including semiconductors, are down by over 90 percent since Feb. 24... so that is crippling."
The balancing act between encouraging technological progress and safeguarding national security continues to shape these regulatory landscapes.
An Overview of Extra-territorial Export Control Rules, Requirements, and Best Practices
Security Methods for Technology Companies
Protecting sensitive technologies, especially dual-use innovations, requires a layered security strategy. Companies need to implement safeguards that protect critical assets while maintaining operational efficiency.
IP and Trade Secret Defense
Experts recommend focusing on four main areas to protect intellectual property and trade secrets:
Protection Area Key Implementation Steps Expected Outcomes Documentation Secure filing systems and access logs Clear tracking of information flow Physical Security Badge access and video surveillance Restricted facility access Employee Training Regular briefings and certifications Fewer internal security risks Legal Framework NDAs and confidentiality agreements Strong legal protections
For example, The Super Tennis Racket Company successfully protected its 'Serve Machine 1100' by using badge-controlled access, video monitoring, employee training, and NDAs. While physical and legal protections are essential, digital security plays an equally critical role.
Digital Security Standards
Cybersecurity threats are projected to cost the global economy over $10.5 trillion by the end of 2024. To combat these risks, companies must adopt advanced strategies such as Zero Trust Architecture (ZTA) and other modern security measures.
Synoptek explains:
"Cybersecurity measures are steps taken to keep computers, networks, and data safe from hackers and other online threats. They include tools like firewalls and antivirus software, as well as best practices like controlling access to sensitive information and training employees to spot potential risks."
Key digital security practices include:
AI-Powered Authentication: Systems that continuously verify users based on real-time threats and behavior patterns.
Multi-Factor Authentication (MFA): Mandatory use across all access points, especially for sensitive technologies.
Quarterly System Audits: Regular reviews of permissions and access logs to identify vulnerabilities.
CUI Data Management
In addition to digital security, managing Controlled Unclassified Information (CUI) is crucial. The GSA highlights:
"CUI, regardless of its form, shall be protected in a manner that minimizes the risk of unauthorized disclosure while allowing for access by authorized holders."
Best practices for safeguarding CUI include:
Encrypting data during transit and storage to comply with CMMC 2.0 standards.
Using attribute-based access control (ABAC) for precise data management.
Classifying data into CUI Basic and CUI Specified categories for proper handling.
Failing to secure CUI can lead to severe issues such as identity theft, security breaches, and hefty compliance penalties. Regularly updating security protocols and providing employee training are essential steps in maintaining strong CUI protection.
Public-Private Partnerships
Public-private partnerships bring together commercial advancements and national security priorities, aligning dual-use technologies with defense objectives.
Military-Industry Programs
The Department of Defense (DoD) runs initiatives like DIU, AFWERX, SpaceWERX, and NavalX to connect private sector innovation with military needs quickly.
One example is Pison, a company specializing in wearable gesture control. As part of the MassChallenge Air Force Labs program (2019–2020), Pison achieved notable milestones:
Achievement Result Funding Secured $12M in venture capital funding Market Access Established connections with multiple DoD program offices Growth Stage Currently raising Series B funding (2023)
"Startups and small businesses are moving faster than the government is typically used to. Before they would consider working with us, we needed to simplify and accelerate our process to meet them halfway."
– Capt. Steve Lauver, AFWERX Director of Technology Accelerators
These programs highlight how military-led efforts can tap into private sector speed and innovation, a concept also seen in academic partnerships.
Academic Research Transfer
Academic research is a key driver of dual-use technology. The Small Business Technology Transfer (STTR) program connects academic institutions with private companies, enhancing defense capabilities through collaborative research.
Bringing academic advancements into industry and defense requires strong communication across sectors.
Cross-Sector Communication
Clear communication is critical to balancing open innovation with strict security protocols. However, high costs and challenges in forming partnerships remain. Jake Cusack, co-founder and managing partner of the CrossBoundary Group, explains:
"There are often high transaction costs in partnering, especially when the activity or goals are more novel, and initial coordination costs are typically sunk costs."
Programs addressing these challenges include:
NATO's DIANA Initiative: Focuses on emerging technologies like AI, quantum computing, and biotechnology.
BLAST Program: A Paris-based accelerator that has helped startups raise over €20 million for aviation, space, and defense technologies.
HENSOLDT's FCAS Accelerator: Aims to integrate European civil technologies into dual-use applications.
Additionally, the U.S. SBIR Program, which provides $3.2 billion annually, stands as the largest venture capital source globally, underscoring the government's investment in these partnerships.
Current Dual-Use Examples
3D Printing in Aircraft Parts
Airbus and Boeing are leveraging 3D printing to drastically reduce the time and cost of producing tooling, jigs, and fixtures - cutting both by 60–90%. Satair, a subsidiary of Airbus, recently delivered the first certified metal 3D-printed spare part to a U.S. airline. Here’s how it performed:
Production Time: 26 hours for 4 parts
Certification Time: 5 weeks
Material Used: Titanium that meets original safety standards
However, alongside these advancements, there are growing concerns. The Atlantic Council cautions:
"the speed of innovation, technological advancement and adversary capability is potentially outstripping policy and regulatory development in many areas of the ecosystem"
Security risks tied to 3D printing include firmware deletion that can halt production, sabotage of components, and subtle structural flaws that are nearly impossible to detect. While the efficiency gains are undeniable, they come with serious security challenges.
Military AI Applications
AI, much like 3D printing, introduces complex dual-use dilemmas. It offers groundbreaking possibilities but requires strict oversight to mitigate risks. Here's a quick comparison of AI applications:
Application Commercial Use Military Use Autonomous Systems Self-driving vehicles Unmanned vehicles Data Processing Business intelligence Military intelligence
The U.S. Department of Defense underscores the importance of human oversight in weaponized AI:
"Autonomous and semi-autonomous weapon systems will be designed to allow commanders and operators to exercise appropriate levels of human judgment over the use of force"
Balancing innovation with control remains a critical challenge in this space.
Quantum Computing Security
Quantum computing is predicted to become a $50 billion industry by 2030, but it also poses a serious threat to existing cybersecurity measures. Dr. Michele Mosca from the Institute for Quantum Computing explains:
"Quantum computing will upend the security infrastructure of the digital economy. Quantum technology in general promises to disrupt several areas of advanced technology and bring unprecedented capabilities that can be harnessed to improve the lives of people worldwide. At first glance it appears to be a curse to security, as cryptographic algorithms that proved to be secure for decades may be breached by quantum computers. This is in fact a blessing in disguise since this challenge gives us a much-needed impetus to build stronger and more-resilient foundations for the digital economy."
To address these risks, NIST has selected four encryption tools capable of resisting quantum computer attacks. Recent findings reveal:
73% of U.S. organizations believe quantum computing threats are unavoidable
Existing encryption methods like RSA and AES are vulnerable to quantum-based attacks
Efforts to develop post-quantum cryptography (PQC) are gaining momentum to counter future threats
The NSA has also highlighted the stakes:
"The impact of adversarial use of a quantum computer could be devastating to [National Security Systems] and our nation"
Quantum computing represents a perfect example of the dual-use challenge - pushing the boundaries of technology while grappling with its potential risks.
Conclusion: Next Steps
Suggested Law Updates
Regulators need to revise laws to address challenges posed by dual-use technologies. For example, the Department of Commerce's Bureau of Industry and Security (BIS) has already introduced export controls for advanced quantum technologies. These measures include strict reporting requirements for companies working on AI models that meet these thresholds:
Computing power exceeding 10^26 computational operations
Networking speeds above 300 Gbit/s in clusters
Systems capable of over 10^20 operations for AI training
Additionally, policymakers should establish a dedicated unit within the Department of Commerce to evaluate the broader economic effects of export controls. These legal updates must go hand-in-hand with robust corporate security measures.
Action Plan for Companies
To stay compliant while fostering innovation, companies need a well-rounded security strategy. Here's a quick overview:
Strategic Focus Implementation Steps Expected Outcomes Governance Appoint a board-level security lead; set up a risk register Clear accountability and better risk management Protect Critical Assets Strengthen cybersecurity; vet buyers and suppliers Improved protection of intellectual property Global Compliance Obtain required export licenses Stronger adherence to regulations
Shield.AI is a great example of balancing innovation with defense needs, showing how to handle dual-use technologies effectively.
"Good security practices can protect your competitive advantage, making your company more attractive to investors and customers. Laying strong foundations from the start will help your security to be more effective and less costly as your business grows."
– National Physical Security Authority
To succeed, companies should:
Thoroughly document and classify sensitive technologies and data
Build security protocols into the product development process
Perform detailed due diligence on partnerships and collaborations
Create and test incident response plans
"dual-use is a market strategy that might be deployed defense-first, commercial-first, or both"
– Gene Keselman, MIT School of Management Lecturer