EXPORT CONTROL REGULATIONS FOR CLOUD-BASED STOREFRONTS

BIS Issues Advisory Opinion on Application of Export Controls to Cloud-Based Storefronts

Tuesday, December 02, 2014

Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security issued Nov. 13 an advisory opinion regarding the application of the Export Administration Regulations to cloud-based storefronts. In the situation at issue, users utilize a software application in the cloud (by sending data to the cloud for processing and causing the processed data to be transmitted back to them) instead of downloading it from a server for local use, as is the case with traditional online application stores.
BIS was asked whether its Jan. 13, 2009, advisory opinion determining that the service of providing computational capacity through grid or cloud computing is not subject to the EAR (because the service provider is not shipping or transmitting any commodity software or technology subject to the EAR to the user) would apply to a cloud-based storefront. BIS was also asked to indicate whether a license would be required to allow government end-users of a country not listed in Supplement No. 3 to Part 740 of the EAR to utilize software classified as Export Control Classification Number 5D002 on the Commerce Control List that are eligible for export under 15 CFR 740. l 7(b )(2) (ENC restricted items).
BIS responded that, consistent with the Jan. 13, 2009, advisory opinion, there is no export of software in the cloud-based storefront fact pattern described above. There is thus no basis for a license requirement if government end-users of a country not listed in Supplement No. 3 to Part 740 of the EAR utilize software described in section 740.17(b)(2) if it is located on a server in the United States . BIS also notes that software described in section 740.17(b )(2) that has been classified by BIS may be exported under license exception ENC to a non-government end-user in any destination other than Sudan, Syria, Iran, Cuba or North Korea for purposes of creating a cloud-based storefront. In addition, if the software is accessed and utilized by government end-users, no reexport of the software would take place.