BIS's Foreign Military Intelligence Rule on Hold, Official Says

The Bureau of Industry and Security has placed its foreign military intelligence rule (see 2101140035) on hold and may not implement the rule’s changes later this month, a BIS official said. Although the rule was published in the Federal Register in January, BIS included it in the Biden administration’s regulatory freeze because it wasn’t scheduled to take effect until March 16.

The rule is “currently pending” as the agency determines whether to follow through with the increased restrictions, said Hillary Hess, BIS’s regulatory policy director. “We're looking at how to proceed,” Hess said during a March 9 Regulations and Procedures Technical Advisory Committee meeting. “It's not decided yet.”

The interim final rule was introduced during the final days of the Trump administration and was intended to impose new controls on technologies and activities that support foreign military-intelligence end-uses and end-users in China, Russia and other “terrorist-supporting” countries (see 2101140035). It also includes enhanced controls to prevent U.S. parties from supporting certain weapons programs. Export control lawyers said the rule was expected to create due-diligence issues for exporters even as many companies waited to see whether the rule was part of the Biden administration's freeze and review of Trump administration policies (see 2102190042).

Hess said BIS will update its website to explain that the rule is part of the regulatory freeze and that the agency is reviewing whether to change the effective date. She said she is unsure whether the public comment period, which ended March 1, will be extended. “I'm not sure how exactly it'll happen. We may need to do a separate action. I’m not completely clear on that,” Hess said. “But yes, something will be made public.”

BIS received five comments on the rule, according to the federal government regulations website, but has released only two of them. The first comment, filed by Akin Gump and released by BIS last week, said the rule would lead to expansive licensing requirements and place burdensome compliance obligations on U.S. companies (see 2103050016). The second comment, submitted by the Association of University Export Control Officers in February and released by BIS March 8, said the rule is unclear and could impact university activities, including collaboration on fundamental research.

AUECO asked BIS to clarify the scope of items covered by the rule, including those that aren’t subject to the Export Administration Regulations. Universities may “suffer an incredible administrative burden” if they are required to apply for licenses before they share journal articles, course materials, software or data that “arose from fundamental research before sharing with persons who could qualify as ‘military-intelligence’ end users,” the group said. “While it may seem like an overreach to think that these items could ‘support’ the general prohibitions in” the rule, “the very nature of scientific inquiry and discovery makes it nearly impossible to predict with certainty that these items couldn’t not support those activities.”

Although universities are aware of the risks stemming from China’s military-civil fusion strategy, the AUECO said schools still struggle to determine whether an entity or a person meets the definition of a military end-user under BIS regulations, and the same confusion will likely extend to a military intelligence end-user. Because of this, universities are more likely to “decline the engagement” with a potential military intelligence end-user if they can’t verify that they are safe to deal with. “Without further guidance or clarification from BIS,” AUECO said, “this rule could have the unexpected consequence of chilling academic collaboration.” A BIS spokesperson said the agency is “carefully” considering all public comments.

AUECO also said that the similarity of the terms “military end-user” and “military-intelligence end-user” could cause problems for university officials and researchers who aren’t experts on export controls. “Adding another category with a very similar name will most likely confuse people, especially those who do not have a primary responsibility in the areas of export control or compliance,” the group said. “This has the potential to cause a great deal of confusion among persons who are trying to comply with the regulations but conflate the two terms.”