United States: BIS And State Department Issue Rules On Key Export Control Definitions And Cloud Computing

On June 3, 2016, the Department of Commerce's Bureau of Industry and Security (BIS) and the Department of State's Directorate of Defense Trade Controls (DDTC) issued new rules revising existing definitions and adding new ones in the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). The new rules, part of the Administration's Export Control Reform Initiative, seek to enhance clarity, promote consistency of terms across the two export control regimes, and update the EAR's treatment of electronically transmitted and stored technology and software. Following is an overview of some of the key revised and new definitions.

BIS Final Rule

The BIS Final Rule goes into effect on September 1, 2016, and is not subject to further public comment (unlike the DDTC's contemporaneous interim final rule described below, which is subject to further public comment by July 5, 2016).

Exports to the "Cloud"

The Final Rule provides that transmitting or storing electronic data that meet certain security standards would not constitute an export of that data, provided that the technology or software is:

(1) Unclassified;
(2) Secured using "end-to-end encryption";
(3) Secured using cryptographic modules (hardware or software) compliant with Federal Information Processing Standards Publication 140-2 (FIPS 140-2) or its successors, supplemented by software implementation, cryptographic key management, and other procedures and controls that are in accordance with guidance provided in current U.S. National Institute for Standards and Technology publications, or other equally or more effective cryptographic means; and
(4) Not intentionally stored in a military-embargoed country or in the Russian Federation.

Thus, transmission of controlled technology and data to, or storage in, a foreign country under these conditions no longer constitutes an export. As ongoing (i.e., end-to-end) encryption is a requirement for this safe harbor provision, the EAR now include a definition of "end-to-end encryption" as (i) the provision of cryptographic protection of data such that the data are not in unencrypted form between an originator (or the originator's in-country security boundary) and an intended recipient (or the recipient's in-country security boundary), and (ii) the means of decryption are not provided to any third party. The originator and the recipient may be the same person. Transmissions within a cloud service infrastructure also fit within this safe harbor provision when the transmission is made from one node or cloud infrastructure element to another, provided that it was appropriately encrypted before any data crossed a national border.

Access Information

The rule also includes a definition for "access information," which is information (like decryption keys, network access codes and passwords) that would allow access to encrypted technology and software in unencrypted form. Such access information is subject to the same level of export controls as the data being accessed if the data were un-encrypted. The rule also clarifies that a victim of a data or security breach related to encrypted data is not considered responsible for the export, reexport, or transfer of that data, provided that the originator of the technology did not provide access information or otherwise permit access to the encrypted data.

Such revisions make feasible a wider variety of cloud computing and cloud storage solutions, and significantly simplify associated compliance with export controls, relative to EAR controlled technology and software. However, the EAR also contain an important limitation that releasing decryption keys or other access information that will permit a foreign person access to technology or technical data will constitute an export and be subject to the export control restrictions applicable to the foreign country in question. In addition to maintaining the requisite level of encryption, companies will need to establish ongoing data security practices to take advantage of this provision. It is important to keep in mind that these changes do not apply to ITAR controlled technical data, with respect to which restrictions on the use of the cloud have not changed. Thus, it remains critically important that companies continue to distinguish between EAR controlled technology and software, on the one hand, and ITAR controlled technical data, on the other hand, when considering the use of cloud services.

Fundamental Research

The rule revises the definition of "fundamental research" to make it more concise and straightforward while covering the same scope. The shorter definition eliminates previous references to basic and applied research and instead focuses on the core concept of fundamental research – ordinarily published and shared broadly without restriction. Fundamental research is now defined as research in science, engineering or mathematics, the results of which ordinarily are published and shared broadly within the research community, and for which the researchers have not accepted restrictions on publication for proprietary or national security reasons.

Deemed Exports and Reexports

The rule retains the deemed export rule in the EAR, which provides that a release of technology or source code subject to the EAR to a foreign national, outside of or within the United States, is deemed to be an export to the home country of that foreign national. The rule affirms longstanding BIS policy that the export is deemed to occur to the foreign national's most recent country of citizenship or permanent residency.

If a U.S. or foreign national releases technology or source code in a country other than his home country, such release is not considered a deemed reexport if the receiving party is authorized to receive the technology or source code (by license, license exception or where no license is required) and the receiving party's home country is a country to which export of the technology or source code would be authorized. Additionally, release to bona fide, regular and permanent employees of an entity is not considered a deemed reexport if (i) the entity is authorized to receive the source code or technology, (ii) the employee is a national exclusively of 36 NATO-member and certain other friendly countries and (iii) the release takes place entirely within the physical territory of any such country or within the United States.

State Department Interim Final Rule

Export and Reexport

The DDTC Interim Final Rule revises the ITAR definition of "export" to more closely align with, but is not the same as, the EAR's definition, and to remove activities that now fall within the definitions of "reexport" or "retransfer," as discussed below. The revised definition of "export" clarifies that any release of technical data in the United States to a foreign person is considered an export to all countries where that person holds or has held citizenship, or holds permanent residency. In this way, the ITAR and EAR definitions of "export" still differ, as the EAR only considers such a release of technical data to be an export to the foreign person's last country of citizenship or permanent residency. The State Department also revised the definition of "reexport" to mirror the new definition of "export." The new definition applies to shipments, releases or transfers between two foreign countries, or to a third country national outside the United States.


The rule adds to the ITAR a definition of "release." Under the new definition, activities that constitute a release include allowing a foreign person to inspect a defense article such that technical data is revealed, and oral or written exchanges of technical data with a foreign person, either in the United States or abroad. Prior to the new rules, there had been uncertainty about whether merely allowing the ability to access controlled technical data, where the foreign person did not actually access the data, constituted a release. The Department clarified with the interim rule that merely providing access does not constitute a release, but rather the foreign person must access the data as a result of the physical access he or she was granted for a release to have occurred. The Department also specifically noted that all ITAR controlled software remains technical data, and as such, is subject to the rules governing "releases."


The Interim Final Rule also implements a new definition of "retransfer." Under the new definition, a "retransfer" occurs when there is a change in the item's end user or end use within the same country. Authorization will still be required to provide a defense article to a subcontractor or intermediate consignees in the same country (unless previously authorized, e.g., via TAA), as that would constitute a change in end user and end use. Certain activities, such as disclosures of technical data to a foreign national abroad, may be covered by the new definitions of both "reexport" and "retransfer."

Also of note, the interim rule allows foreign persons who are authorized to receive technical data in the U.S. to receive that same technical data abroad, when on temporary assignment for their employer.  This exemption covers "reexports" and "retransfers" as well, though technical data must be secured while abroad to prevent unauthorized "release."  This change builds upon the Department's amendment last year authorizing U.S. persons employed by a U.S. company to travel abroad with ITAR-controlled technical data for their own use and to share such data with fellow U.S. person employees of the same company while abroad.

The State Department did not adopt all of the proposed definitional rule changes that were originally announced on June 3, 2015, during the initial stage of the rulemaking process, but rather indicated that the remaining provisions will be subject to additional separate rulemakings. The proposed rules that were not adopted in this final interim rule included significant changes to the ITAR's treatment of technical data exports. It remains to be seen whether, and in what form, those proposed revisions will be adopted.


The new rules significantly harmonize the EAR's and ITAR's terminology and treatment of reexports and transfers, and clarify key terms like "export" and "deemed export," which should assist companies that deal in exports controlled under both the EAR and ITAR in their efforts to comply with both sets of regulations. Moreover, the new EAR regulations will allow companies to use cloud technology to transfer and store "dual use" unclassified technology and software, without the burden of export control requirements, as long as such data meets the encryption requirements described above. Companies that deal in technical data subject to ITAR controls must be alert to the fact that the State Department has not yet issued such rules exempting exports of encrypted data, e.g., to the cloud, from ITAR regulations. These rule changes represent an ideal time for companies to assess and update their export control compliance programs, and determine whether they can avail themselves of the new provisions regarding technical data and software.

As noted, the BIS and State Department rules will take effect on September 1, 2016, with the State Department accepting comments on the Interim Final Rule until July 5, 2016. The State Department has not yet announced when it plans to publish rulemakings on the remainder of the definitions it proposed in June of last year. Companies should remain alert to expected further developments from DDTC in this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.