BIS amends EAR to expand standards-related activity exemptions

On Thursday, July 18th, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released an interim final rule amending the Export Administration Regulations  to revise the scope and terms used to describe “standards-related activities” that are subject to the EAR. Specifically, this revision removes from EAR jurisdiction certain technology and software released for a “standards-related activity” to all Entity List parties and broadens the definition of a “standards-related activity,” including extending the definition to cover technology or software released for an already published standard as well as activities conducted for standards intended to be published.

Background

This IFR further expands and clarifies previous EAR revisions affecting U.S. participation in standards-related activities from May 2019¹ and June 2020². The most recent revision³, published in September 2022, amended the EAR to authorize the release of certain technology and software without a license to Entity List parties pursuant to § 744.11 when that release occurs in the context of a “standards-related activity.” Although this rule expanded standards-related authorizations, BIS agreed with public comments that the September 2022 rule and corresponding definitions were “not broad enough” to allow free participation in standards development in support of U.S. national security and commercial interests. As the U.S. Government continues to try to “remove and prevent barriers to private sector participation in standards development⁴,” a practice that the Commerce Department agrees is “crucial” to protecting U.S. national and economic security, BIS has indicated its commitment to ensuring that export controls and licensing requirements do not limit the ability of U.S. industry to meaningfully participate.

Changes

In response to the public comments received and interagency discussions, BIS amended part 734 of the EAR to remove activities meeting the definition of “standards-related activity” from the jurisdiction of the EAR’s controls and licensing requirements. “Technology” or “software” that might otherwise be controlled by the EAR is not subject to the EAR when released for a “standards-related activity” to end users listed in part 744 of the EAR if (1) it is designated EAR99, controlled on the CCL for anti-terrorism (AT) reasons only, or is specifically for the “development,” “production,” or “use” of cryptographic functionality and (2) if the activity is for a “published” standard or occurs with the intent that the resulting standard will be published. Section 734.10 was revised to read as follows:

§ 734.10 Patents and standards-related activity.

(b) Standards-related activity. A standards-related activity includes the development, adoption, or application of a standard (i.e., any document or other writing that provides, for common and repeated use, rules, guidelines, technical or other characteristics for products or related processes and production methods), including but not limited to conformity assessment procedures. A “standards-related activity” includes an action taken for the purpose of developing, promulgating, revising, amending, issuing or reissuing, interpreting, implementing or otherwise maintaining or applying such a standard. When released for a “standards-related activity,” “technology” or “software” is not subject to the EAR provided it meets at least one condition in both paragraphs (b)(1) and (2) of this section:

(1) The “technology” or “software” is:

(i) Designated EAR99;

(ii) Controlled on the CCL for anti-terrorism reasons only; or

(iii) For the following ECCN “items” level paragraphs of “technology” or “software” specifically for the “development,” “production,” or “use” of cryptographic functionality once the release is for a “standards-related activity:” “software” that is classified under ECCN 5D002.b or 5D002.c.1 (for equipment specified in ECCN 5A002.a and 5A002.c only); “technology” that is classified under ECCN 5E002 (for equipment specified in ECCN 5A002.a, .b and .c); and “technology” for software controlled under ECCN 5D002.b or .c.1 (for equipment specified in ECCN 5A002.a and .c only) when the release is for a “standards-related activity;” and

(2) The “standards-related activity:”

(i) Is for a “published” standard; or

(ii) Occurs with the intent that the resulting standard will be “published.”

Clarifications

In addition to reiterating the desire to facilitate the ability of U.S. industry to participate in and lead international standards development across industries, in the release of this amendment, BIS also addressed several concerns and questions posed via public comment on the September 2022 rule. In declining to expand the definition of “published” to explicitly cover standards development activities and/or the “sharing of technical assistance and exchange of information,” BIS clarified in response to a public comment that the exchange of technical data in the conformity process (provided it is for the purpose of standards-development activities) is already covered by the definition of “standards-development activity” in part 772. Additionally, BIS confirmed that “published” standards are not limited to standards-related activities only by those involved in the standard's development and that a third-party entity that is not a member of the organization that published the standard but engages in “standards-related activity” with that standard is still covered by the definition of “standards-related activity” in § 734.10 and the definition of “published” in § 734.7 of the EAR. Finally, BIS confirmed that the “published” criteria in § 734.7 of the EAR that makes information not subject to the EAR is applicable when the information, technology, or software has been made available to the public without restrictions on its further dissemination, irrespective of a cost or membership requirement. This means that, as long as any member of the interested public could pay and obtain membership if desired, this EAR exception extends to standards-related activity by these organizations. In declining to explicitly expand the definition of “standards-related activity” to include activities that are conducted in a Voluntary Consensus Standards Body (VCSB), BIS clarified that “the relevant activities of a VCSB are already captured in the definition of ‘standards-related activity,’” and welcomes public comments on whether there are any additional VCSB activities that fall outside the current definition of “standards-related activity” and remain subject to the EAR.

Notably, the revised definition for “standards-related activities” is broad and includes “any document or other writing that provides, for common and repeated use, rules, guidelines, technical or other characteristics for products or related processes and production methods” and actions “taken for the purpose of developing, promulgating, revising, amending, issuing or reissuing, interpreting, implementing or otherwise maintaining or applying such a standard.” Additionally, the revised rule includes no specific locus requirements on the participant and applies the exception to both published and unpublished standards. Because release of certain technology and software in standards-related activities are no longer subject to the EAR, this technology and software can be released in standards-related activities involving parties on the Entity List or any prohibited party list maintained by BIS. This IFR removes a large amount of activity from EAR jurisdiction, clearing the way for U.S. companies to more freely exchange technology and software with all foreign participants in standards-related activity that previously might have otherwise required BIS authorization.

All comments on the IFR are due by September 16, 2024.

Next steps

Please contact any of the listed Hogan Lovells attorneys for assistance in evaluating the impact of the IFR on your business.

Authored by Beth Peters and Ashley Roberts. 

Summer associate Kelly Heesch Sharbo contributed to this report.