US, EU Can Use TTC to Ease Export Compliance Challenges, ITI Says
The U.S. and the European Union should use the Trade and Technology Council to address a host of export control harmonization issues to help ease export compliance challenges for American and European companies, the Information Technology Industry Council said. ITI -- which represents many of the world’s largest technology companies, including Apple, Amazon, Google and Intel -- said an increasing number of export regulations and restrictions are placing too heavy a burden on industry and could impede global innovation.
In comments to the Bureau of Industry and Security, ITI specifically pointed to BIS’s frenetic Entity List activity -- including more than 500 additions since 2017 -- and the EU’s new dual-use export regulations (see 2109090007 and 2112090043). “Rapid and drastic changes” to different export control regulations can be difficult to track, the council said.
As compliance departments “work to keep pace with the changing landscape, they are increasingly devoting more and more of companies’ limited resource pools to export compliance, which impacts their ability to invest in advancing technological developments,” ITI told BIS this month. “Deepening cooperation with the EU on export controls presents an opportunity to not only support more effective controls but to better mitigate the administrative and compliance challenges companies face in complying with various export control regimes.”
ITI submitted the comments to BIS after the agency in November requested feedback on areas and priorities for export control cooperation between the U.S. and the EU (see 2111290014). ITI, which represented various technology companies during the TTC’s inaugural meeting in Pittsburgh last year, applauded the TTC’s work so far and said it hopes it can produce “a commercially meaningful set of initial policy deliverables by spring 2022.”
One “deliverable” could be a harmonized licensing approach, ITI said. The U.S. and the EU, and potentially other countries, should mutually recognize each other's license exceptions, exclusions and authorizations, the group said, which could speed up trade and reduce compliance costs. “Status quo means companies that have obtained EU export licenses for export of products out of the EU are also obliged to secure U.S. export licenses due to the extraterritorial application of U.S. controls,” ITI said.
The U.S. and the EU should also hold periodic, confidential discussions to compare their commodity rulings to ensure certain exports are treated the same by both governments. “Even in instances where the words of the respective rule are identical, the same product can be subjected to a variety of outcomes in the U.S. and the EU,” ITI said. More collaboration can make sure “the same facts lead to the same outcome every time.”
The group specifically pointed to export controls surrounding encrypted data, which may be subject to different restrictions in each jurisdiction. The U.S., unlike the EU, recently eliminated certain reporting and licensing requirements for certain encrypted data (see 1912300024 and 2104050019).
“Industry and governments in the EU would benefit from adoption of a similar rule,” ITI said, adding that it would “promote easier collaboration between the U.S. and the EU, simplify the compliance obligations of companies in both jurisdictions, and encourage companies to use robust encryption to protect sensitive data.”
Both the U.S. and the EU should also avoid placing broad end-use restrictions that don’t identify specific end-users, which can lead to “huge compliance challenges” and are “difficult to scale,” ITI said. The group said the EU’s new dual-use regulations don’t identify any military end-users and “place the burden of identifying nefarious entities on the exporter.”
The U.S., however, has multiple lists of restricted entities, including military end-user lists maintained by BIS (see 2012210047) and the Defense Department (see 2106280023) and a list of Chinese military companies maintained by the Treasury Department (see 2112160062). BIS has considered issuing an additional military intelligence end-user list, which would cover entities subject to certain military-intelligence end-use and end-user restrictions (see 2109300061 and 2101140035).
“Although exporters undertake their best efforts with respect to ‘know your customer’ (KYC) due diligence on customers, this work creates a tremendous amount of compliance overhead and is ultimately not an effective mechanism for determining whether one customer out of hundreds, thousands, or tens of thousands may intend to use the technology in question for a nefarious purpose,” ITI said. “In almost all instances, we would expect a government to have more and better information than private industry.”