The kinds of technology that can now be released for the required purpose include ones designated as EAR99 or controlled on the Commerce Control List only for anti-terrorism reasons.
In news welcomed by many companies, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has announced it is easing export controls on certain kinds of technology for specified uses relating to Huawei Technologies Co., Ltd. and many of its affiliates in China and around the world. However, as discussed below, U.S. and non-U.S. companies must realize that exporting or reexporting many kinds of products or technology to Huawei and its affiliates on the Entity List generally continues to be prohibited unless a license or other authorization can be obtained from BIS.
On June 18, 2020, BIS published an interim final rule in the Federal Register to amend the Export Administration Regulations (EAR) to authorize the release of certain U.S. technology to Huawei and its affiliates on the Entity List without a license if such release is made for the purpose of contributing to the revision or development of a “standard” in a “standards organization.” The kinds of technology that can now be released for the required purpose include ones designated as EAR99 or controlled on the Commerce Control List only for anti-terrorism reasons.
The interim final rule creates some crucial definitions. To begin with, the term “standard”: “This term is equivalent to ‘standard’ or ‘technical standard’ as defined in Office of Management and Budget Circular A-119 (Rev. 2016) (81 FR 4673 (Jan. 27, 2016)), ‘Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities’ section 2.a…” In turn, under section 2.a of the Office of Management and Budget Circular A-119 (OMB Circular A-119), the term “standard” or “technical standard” is defined to include all of the following:
- Common and repeated use of rules, conditions, guidelines or characteristics for products or related processes and production methods and related management system practices;
- The definition of terms; classifications of components; delineation of procedures; specification of dimensions, materials, performance, designs or operations; measurement of quality and quantity in describing materials, processes, products, systems, services or practices; test methods and sampling procedures; formats for information and communication exchange; or descriptions of fit and measurements of size or strength; and
- Terminology, symbols, packaging, marking or labeling requirements as they apply to a product, process or production.
The term “standards organization” is defined under the interim final rule as being equivalent to a “voluntary consensus standards body” as defined in the OMB Circular A-119. Specifically, pursuant to OMB Circular A-119, a “voluntary consensus standards body” is defined as a type of association, organization or technical society that plans, develops, establishes or coordinates voluntary consensus standards using a development process that includes the following attributes or elements:
- Openness: The procedures or processes used are open to interested parties. Such parties are provided meaningful opportunities to participate in standards development on a nondiscriminatory basis. The procedures or processes for participating in standards development and for developing the standard are transparent.
- Balance: The standards development process should be balanced. Specifically, there should be meaningful involvement from a broad range of parties, with no single interest dominating the decision-making.
- Due process: Due process shall include documented and publicly available policies and procedures, adequate notice of meetings and standards development, sufficient time to review drafts and prepare views and objections, access to views and objections of other participants, and a fair and impartial process for resolving conflicting views.
- Appeals process: An appeals process shall be available for the impartial handling of procedural appeals.
- Consensus: Consensus is defined as general agreement, but not necessarily unanimity. During the development of consensus, comments and objections are considered using fair, impartial, open and transparent processes.
When announcing the new interim final rule, Commerce Secretary Ross stated the “Department is committed to protecting U.S. national security and foreign policy interests by encouraging U.S. industry to fully engage and advocate for U.S. technologies to become international standards.” In a press release issued on the same date, BIS further noted that the interim final rule was intended to contribute to the U.S. industry’s ability to more fully contribute to standards-development activities that could help to influence the future of 5G, autonomous vehicles, artificial intelligence and other cutting-edge technologies.
In essence, the interim final rule returns U.S. companies to the status quo ante, from an Entity List perspective, with respect to disclosures of such technology to Huawei and its affiliates in legitimate standards-development contexts only, and not for commercial purposes. For more details on various actions that BIS has taken to tighten export controls relating to Huawei and its affiliates on the Entity List and the implications for U.S. and non-U.S. companies, please see our previous Alert.
The interim final rule took effect June 18, 2020. Notwithstanding this, BIS will accept comments on the interim final rule that are submitted by August 18, 2020. Such comments must be filed via the federal eRulemaking Portal.
About Duane Morris
Attorneys in the firm’s Government Contracts and International Trade Group have considerable experience in assisting clients on a wide range of matters involving U.S. export controls and economic sanctions. Such assistance includes: performing export control classification reviews; advising on the viability of proposed transactions; applying for and obtaining licenses and other kinds of export authorizations from BIS and other U.S. government agencies (e.g., DDTC and OFAC); and developing, implementing and assessing trade compliance programs for companies.
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