A New Landscape for Information Technology Export Controls: Part 1 - Introduction

Part 1 of a Three Part Series by Felice Laird, Export Strategies, LLC

 

2020 has brought in a new wave of U.S. export controls and other significant actions that have an effect on global trade in telecommunications and information security products.  New export controls on hardware, software and related technical data have been imposed as part of efforts to identify and restrict “emerging technologies” in the telecom space.  By and large, these controls result from group decisions made by the US and many European countries, while others reflect the United States’ unusual use of executive powers.  For example, while the export ban to Huawei and its many subsidiaries was done by the Bureau of Industry and Security (BIS) primarily using its authorities under the Export Control Reform Act (ECRA), the various US government procurement bans on equipment produced by Huawei has been done under various Executive Orders issued under the International Economic Emergency Powers Act (IEEPA).  The recent Executive Orders banning the use of TikTok https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-posed-tiktok/ and WeChat  https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-posed-wechat/ cited IEEPA, were intended to force the major app distribution platforms run by US companies to stop allowing downloads of the apps in the US.

For the trade compliance professional, it’s important to be able to tell what is a classic “export  control” on hardware, software and technical data and what may look like an export control but is really an effort to manage domestic supply chain concerns, or to further human rights in particular countries.  For example, the US government alleges that the TikTok and WeChat apps have been used to collect personal data on US citizens, and to track the movements and activities of people worldwide, which is a human rights concern.   Yet the entities owning the apps have not been identified on the various government “restricted” parties list and to date there are no transaction related limits on doing business with the companies involved.  The attempt to restrict transactions via Executive Order/IEEPA in this case has led to judicial proceedings, citing the lack of due process.   In the case of Huawei, the US Government has alleged that Huawei supplies countries like Iran with their telecommunications equipment, makes and sells network infrastructure equipment used by US telephone, mobile phone and wired service providers that may contain illegal “back doors”, and manufactures cellphones loaded with apps that can track users. 

 

For the purposes of this article series, we will focus on changes to the Export Administration Regulations (EAR ) that were published in September and /October 2020 as they pertain to telecommunications and information security.  Export controls on “dual use”  telecommunications and information security technologies appear in Category 5 of the Commerce Control List (CCL).  This Category is regularly reviewed by the US and its partners in the Wassenaar Arrangement.  The 2020 changes have been published as Final Rules, and thus were not subject to prior industry consultations.  Concurrently, the Commerce Department has implemented a comprehensive ban on direct and indirect trade with Huawei companies affecting both US and non-US companies. The ban has taken the form of an Entity List designation, and a carefully crafted expansion of the Foreign Direct Product Rule.  

For those who deal with exports of encryption or information security products, Felice Laird offers a series of Live and On Demand Webinars that range from the Basics, to DIY Encryption Classifications, to Advanced Encryption Classifications

Coming Soon: 

Part II – 2020 Changes to Category 5 Part 1

Part III- 2020 Changes to Category 5 Part 2