Standards-Related Export Controls this Summer

The Commerce Department’s Bureau of Industry and Security (BIS) expects to issue a final rule this Summer revising the Export Administration Regulations (EAR) to authorize the release of certain technology and software in the context of standards setting and development in standards organizations.

Much of the rulemaking activity was initiated in response to the Huawei sanctions and US firms' continued participation in 5G telecoms standards negotiations.  The Bureau published the interim rule in June of 2020, incorporating comments in a follow on interim rule two years later.

"it is at the Office of Management and Budget under interagency review. We did have some interagency comments on it. It hasn’t been there a terribly long time, but I am hopeful that it will be published this summer," Hillary Hess, Director of Regulatory Policy for BIS, said Tuesday.

"So, we’ve had a number of standards rules going back to about 2020. The focus has been on information released as part of participation in a standards body, a standards effort, so you have companies meeting to set international standards. Some companies have been there.

"Participation in standards bodies is very important. It is important to U.S. technological innovation and U.S. technological leadership, frankly.    We want U.S. companies to participate in standards bodies. We don’t want U.S. companies to have to conform to standards that they didn’t help set.  

"Unfortunately, some companies’ participation in these bodies has been chilled by the fear of running afoul of export controls.

"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."

Background:

BIS  has issued interim rules that allow the release of certain technology and software to entities on the Entity List without a license for standards-related activities, most recently in September 8,2022  [87 FR 55241]

On June 18, 2020, BIS published an interim final rule  with a request for comments that authorized the release of certain items subject to the EAR to certain entities on the Entity List without a license, when that release occurs in a standards organization environment. The June 2020 exceptions for technologies designated as EAR99 goods and items on the CCL only for anti-terrorism reasons applied just to Huawei and its affiliates, whereas the revised rule applies to all entities on the Entity List.. [85 FR 36719]

The comments received by BIS advised that the changes promulgated in the June 18 interim final rule did not resolve the uncertainty of U.S. industry regarding participation in standards organizations that included Entity Listed entities.

The September 9th rule clarified that U.S. companies no longer require an export license to release certain cryptographic technologies and software in the context of legitimate “standards-related” activities to entities on the BIS Entity List.

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.’”

“U.S. stakeholders need to be fully engaged in international standards organizations, particularly where the critical but sometimes invisible standards that they set have important national security as well as commercial implications,” said Under Secretary of Commerce for Industry and Security Alan Estevez. on the release of the 2022 Interim Rule.