Standards Export Control Rule Published

The long-awaited Standards Rule has been published by the Commerce Department,  revising Export Administration Regulations to facilitate US industry participation in international standards setting bodies.

As we reported last month [12385] lack of clear guidance from Commerce has chilled come companies' participation for fear of running afoul of export controls. 

Hillary Hess, Director of Regulatory Policy for BIS discussed the new rule at the June Rules and Procedures Technical Advisory Committee.  "

"The information shared in those bodies, especially given that you are probably sitting down with your competitors, is not what people like to call the “crown jewels.” It’s relatively low-level technology. However, entities on the Entity List reach all the way down to that type of technology. Anything subject to the EAR99 can be very sensitive.

"Some companies on the Entity List do participate in those standards. Sometimes companies worry about that, and sometimes they don’t even know who will be at the table until they get there. So, it was not a good situation.

"We had taken a couple of runs at trying to ensure that the type of information shared in these bodies is not restricted. We’ve done that by limiting it to pretty low-level technology and limiting it to standard-setting activities to avoid leakage of technology."

In this  rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to revise the scope and the terms used in the EAR to describe “standards-related activities” that are subject to the EAR. BIS is making these revisions to ensure that export controls and associated compliance concerns do not impede the participation and leadership of U.S. companies in legitimate standards-related activities.

Noting that "other countries are already racing to replace U.S. participation with their own leadership and standards," the rule follows several years of efforts to balance export control objectives with participation in the setting of international standards.

 Background:

The U.S. standards development system is unique because it is built upon a wide variety of processes that are open, voluntary, decentralized, and led by the private sector. Finalized standards are primarily published by private sector standards organizations, not the U.S. Government.

The U.S. Government is prioritizing efforts to maintain private sector participation in critical and emerging technolgies (CET) standards development in identified areas that are essential to U.S. national security and competitiveness in critical industries including

• biotechnologies;
• positioning, navigation and timing services;
• communications and networking technologies;
• and quantum information technologies among others.

BIS Regulatory Actions and Standards

In 2022 BIS published an interim final rule, “Authorization of Certain “Items” to Entities on the Entity List in the Context of Specific Standards Activities” ( see 87 FR 55241) (the September 2022 rule), that amended the EAR to authorize the release of specified items subject to the EAR when such release is for a “standards-related activity” as defined in the EAR.

The September 2022 interim final rule makes three key amendments to the June 2020 rule:

• It broadens the scope of exceptions to the Entity List licensing requirements to include both technology and software;
• In addition to EAR99 and anti-terrorism items, the rule change allows companies to release certain kinds of cryptographic technology or software in the context of “standards-related activities”; and
• The new rule removes previous definitions of “standards” and “standards organizations” that respondents found confusing and replaces them with a definition for “standards-related activity” to include “the development, adoption or application of any standard, with the intent that the resulting standard will be ‘published.’”

BIS has been actively involved on issues related to standards and export controls since the addition of Huawei to supplement no. 4 to part 744 (Entity List) of the EAR on May 16, 2019 ( See 84 FR 22961 (May 21, 2019)).

The addition of Huawei to the Entity List imposed a license requirement on all exports, reexports and transfers (in-country) to Huawei and its listed affiliates. Since that action and subsequent additions of other Huawei affiliates to the Entity List, BIS has published two interim final rules specific to how the EAR treat standards-related activities.

(a) TGL and the June 2020 IFR

Five years ago, BIS issued a Temporary General License (TGL) to authorize certain activities with Huawei, including, among other things, U.S. industry's participation as necessary for the development of 5G standards by a duly recognized standards body when Huawei was also participating in the standards-related activities ( see 84 FR 23468 (May 22, 2019)).

The TGL was subsequently extended through August 13, 2020. As the TGL was set to expire, BIS published an interim final rule with a request for comment, “Release of “Technology” to Certain Entities on the Entity List in the Context of Standards Organizations” ( see 85 FR 36719, the June 2020 rule), that amended the EAR to authorize the release of certain technology to Huawei and its affiliates on the Entity List.

Chilling Effect

In public comments received in response to the June 2020 rule, U.S. industry raised concerns that the definitions and provisions promulgated in the June 2020 rule were chilling U.S. industry's participation in standards development.

Standards bodies began to view the United States as a less than ideal place to hold standards meetings and discussions, as U.S. export controls introduced an element of non-openness which is contrary to the spirit and definition of standards organization espoused by OMB A-119. As a result, U.S. leadership in international standards development was at risk in key industries.

b) September 2022 IFR

In response to the public comments received on the June 2020 rule and following renewed consultation among government agencies, BIS published the September 2022 rule amending the EAR to authorize the release of specified items subject to the EAR without a license to entities added to the Entity List pursuant to § 744.11 in the narrow circumstance when that release occurs in the context of a “standards-related activity,” as defined in the September 2022 rule.

B. Changes to Licensing Requirements in the Context of Specific Standards Activities

 BIS is amending the EAR to ensure that export controls and associated compliance concerns do not continue to impede or jeopardize U.S. participation and leadership in legitimate standards-related activities.

BIS has concluded that excluding end-use and end-user controls from the authorization has had and will continue to have unintended negative consequences on the U.S. national security interests by curtailing U.S. involvement in legitimate standards-related activities.

To address these concerns and to further streamline and clarify controls over technology and software subject to the EAR as related to standards-related activities, BIS is making the following revisions to the EAR:

1. Moving the authorization for “standards-related activity” that was added to § 744.11 in the September 2022 rule to § 734.10. BIS is also making necessary conforming changes to § 744.16 and the introductory paragraph to supplement no. 4 to Part 744. This final rule does not change existing provisions in these sections regarding patents and whether they are subject to the EAR.

2. Revising the existing definition of `standards-related activity' and adding the revised definition to § 734.10.

This rule clarifies that a “standards-related activity” includes activities conducted with the intent to “publish” a standard as well as those conducted for an already “published” standard. BIS revises the definition of “standards-related activity” to remove the phrase “with which compliance is not mandatory.”

In addition, in Part 772, BIS is revising the definition for “standards-related activity” to reference § 734.10.

When “technology” or “software” is released for a “standards-related activity,” the same item scope promulgated in the September 2022 continues to apply, i.e.,

• specific “technology” or “software” is not subject to the EAR if the item is designated EAR99, controlled on the CCL for anti-terrorism (AT) reasons only,
• or the release is of specified “software” and “technology” when specifically for the “development,” “production,” and “use” of cryptographic functionality.

Below we reproduce the relevant text.  The complete rule can be found at [FR Doc. 2024-15810 ]

List of Subjects

15 CFR Part 734

• Administrative practice and procedure
• Exports
• Inventions and patents
• Research
• Science and technology

15 CFR Part 744

• Exports
• Reporting and recordkeeping requirements
• Terrorism

15 CFR Part 772

• Exports

Accordingly, parts 734, 744 and 772 of the Export Administration Regulations (15 CFR parts 730 through 774) are amended as follows:

PART 734—SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS

1. The authority citation for 15 CFR part 734 is revised to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.;50 U.S.C. 1701 et seq.;E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13637, 78 FR 16129, 3 CFR, 2014 Comp., p. 223; Notice of November 1, 2023, 88 FR 75475 (November 3, 2023).

2. Amend § 734.3 by revising paragraph (b)(3)(iv) to read as follows:

3. Section 734.10 is revised to read as follows:

PART 744—CONTROL POLICY: END-USER AND END-USE BASED

4. The authority citation for 15 CFR part 744 is revised to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.;50 U.S.C. 1701 et seq.;22 U.S.C. 3201 et seq.;42 U.S.C. 2139a; 22 U.S.C. 7201 et seq.;22 U.S.C. 7210; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 13020, 61 FR 54079, 3 CFR, 1996 Comp., p. 219; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; 3 CFR, 2022 Comp., p. 563; Notice of September 7, 2023, 88 FR 62439 (September 11, 2023); Notice of November 1, 2023, 88 FR 75475(November 3, 2023).

5. Section 744.11 is amended by revising paragraph (a) introductory text and removing and reserving paragraph (a)(1) to read as follows:

6. Section 744.16 is amended by revising paragraph (a) to read as follows:

7. Supplement no. 4 to part 744 is amended by revising the introductory text to read as follows:

Supplement No. 4 to Part 744—Entity List

This supplement lists certain entities subject to license requirements for specified items under this part 744 and part 746 of the EAR. License requirements for these entities include exports, reexports, and transfers (in-country) unless otherwise stated. A license is required, to the extent specified on the Entity List, to export, reexport, or transfer (in-country) any item subject to the EAR when an entity that is listed on the Entity List is a party to the transaction as described in § 748.5(c) through (f). of the EAR This list of entities is revised and updated on a periodic basis in this Supplement by adding new or amended notifications and deleting notifications no longer in effect.

PART 772—DEFINITIONS OF TERMS

8. The authority citation for 15 CFR part 772 continues to read as follows:

Authority: 50 U.S.C. 4801-4852; 50 U.S.C. 4601 et seq.;50 U.S.C. 1701 et seq.;E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783.

9. Section 772.1 is amended by

a. Revising the definition of “Standards-related activity.”

The revisions read as follows: