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DEPARTMENT OF COMMERCE 

15 CFR Part 7 

[Docket No. 240119–0020] 

RIN 0694–AJ35 

Taking Additional Steps To Address 

the National Emergency With Respect 

to Significant Malicious Cyber-Enabled 

Activities 

AGENCY: Bureau of Industry and 

Security, Department of Commerce. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: The Executive order of 

January 19, 2021, ‘‘Taking Additional 

Steps To Address the National 

Emergency With Respect to Significant 

Malicious Cyber-Enabled Activities,’’ 

directs the Secretary of Commerce 

(Secretary) to propose regulations 

requiring U.S. Infrastructure as a Service 

(IaaS) providers of IaaS products to 

verify the identity of their foreign 

customers, along with procedures for 

the Secretary to grant exemptions; and 

authorize special measures to deter 

foreign malicious cyber actors’ use of 

U.S. IaaS products. The Executive order 

of October 30, 2023, ‘‘Safe, Secure, and 

Trustworthy Development and Use of 

Artificial Intelligence,’’ further directs 

the Secretary to propose regulations that 

require providers of certain IaaS 

products to submit a report to the 

Secretary when a foreign person 

transacts with that provider or reseller 

to train a large Artificial Intelligence 

(AI) model with potential capabilities 

that could be used in malicious cyberenabled activity. The Department of 

Commerce (Department) issues this 

notice of proposed rulemaking (NPRM) 

to solicit comment on proposed 

regulations to implement those 

Executive orders. 

DATES: Comments must be received 

April 29, 2024. 

ADDRESSES: All comments must be 

submitted by one of the following 

methods: 

• By the Federal eRulemaking Portal: 

https://www.regulations.gov at docket 

number DOC–2021–0007. 

• By email directly to: 

IaaScomments@bis.doc.gov. Include 

‘‘E.O. 13984/E.O. 14110: NPRM’’ in the 

subject line. 

• Instructions: Comments sent by any 

other method or to any other address or 

individual, or received after the end of 

the comment period, may not be 

considered. For those seeking to submit 

confidential business information (CBI), 

please clearly mark such submissions as 

CBI and submit by email or via the 

Federal eRulemaking Portal, as 

instructed above. Each CBI submission 

must also contain a summary of the CBI, 

clearly marked as public, in sufficient 

detail to permit a reasonable 

understanding of the substance of the 

information for public consumption. 

Such summary information will be 

posted on regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Kellen Moriarty, U.S. Department of 

Commerce, telephone: (202) 482–1329, 

email: IaaScomments@bis.doc.gov. For 

media inquiries: Jeremy Horan, Office of 

Congressional and Public Affairs, 

Bureau of Industry and Security, U.S. 

Department of Commerce: OCPA@

bis.doc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

IaaS products offer customers the 

ability to run software and store data on 

servers offered for rent or lease without 

having to assume the direct 

maintenance and operating costs of 

those servers. Foreign malicious cyber 

actors have utilized U.S. IaaS products 

to commit intellectual property and 

sensitive data theft, to engage in covert 

espionage activities, and to threaten 

national security by targeting U.S. 

critical infrastructure. After carrying out 

such illicit activity, these actors can 

quickly move to replacement 

infrastructure offered by U.S. IaaS 

providers of U.S. IaaS products (‘‘U.S. 

IaaS providers’’). The temporary 

registration and ease of replacement for 

such services makes it more difficult for 

the government to track malicious 

actors. Additionally, the ability of 

malicious actors to use foreign-person 

resellers of U.S. IaaS products (‘‘foreign 

resellers’’), who might not track 

identity, hinders law enforcement’s 

ability to obtain identifying information 

about malicious actors through service 

of compulsory legal process. This shift 

in adversary tradecraft also challenges 

the U.S. Government’s ability to identify 

victims of malicious cyber activity and 

enable specific network defense and 

remediation efforts. Furthermore, the 

emergence of large-scale computing 

infrastructure—to which U.S. IaaS 

providers and foreign resellers provide 

access as a service, and which foreign 

malicious actors could use to train large 

AI models that can assist or automate 

their malicious cyber activity—has 

raised considerable concern about the 

identities of entities that transact with 

providers to engage in certain AI 

training runs. 

To address these threats, the President 

issued E.O. 13984, ‘‘Taking Additional 

Steps To Address the National 

Emergency With Respect to Significant 

Malicious Cyber-Enabled Activities,’’ 

which provides the Department with 

authority to require U.S. IaaS providers 

to verify the identity of foreign users of 

U.S. IaaS products, to issue standards 

and procedures that the Department 

may use to make a finding to exempt 

IaaS providers from such a requirement, 

to impose recordkeeping obligations 

with respect to foreign users of U.S. IaaS 

products, and to limit certain foreign 

actors’ access to U.S. IaaS products in 

appropriate circumstances. The 

President subsequently issued E.O. 

14110, ‘‘Safe, Secure, and Trustworthy 

Development and Use of Artificial 

Intelligence,’’ which calls for the 

Department to require U.S. IaaS 

providers to ensure that their foreign 

resellers verify the identity of foreign 

users. E.O. 14110 also provides the 

Department with authority to require 

U.S. IaaS providers submit a report to 

the Department whenever a foreign 

person transacts with them to train a 

large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. 

II. Introduction 

E.O. 13984 and E.O. 14110 draw upon 

the President’s authority from the 

Constitution and laws of the United 

States, including the International 

Emergency Economic Powers Act 

(IEEPA) (50 U.S.C. 1701 et seq.), the 

National Emergencies Act (NEA) (50 

U.S.C. 1601, et seq.), and 3 U.S.C. 301. 

Section 1 of E.O. 13984 requires the 

Secretary to propose, for notice and 

comment, regulations that mandate that 

U.S. IaaS providers verify the identity of 

foreign persons that sign up for or 

maintain accounts that access or utilize 

U.S. IaaS providers’ IaaS products or 

services (Accounts or Account)—that is, 

a know-your-customer program or 

Customer Identification Program (CIP). 

Under E.O. 13984, such a program must 

set forth the minimum standards for 

IaaS providers to verify the identity of 

a foreign person connected with the 

opening of an Account or the 

maintenance of an existing Account. 

The proposed regulations must include 

the types of documentation and 

procedures required to verify the 

identity of any foreign persons acting as 

a lessee or sub-lessee of these products 

or services; the records that IaaS 

providers must securely maintain 

regarding a foreign person that obtains 

an Account; and methods of limiting all 

third-party access to this collected 

information, except insofar as such 

access is otherwise consistent with E.O. 

13984 and allowed under applicable 

law. Moreover, the proposed regulations 


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must consider the type of Account, 

methods of opening an Account, and the 

types of identifying information already 

available to IaaS providers that help 

accomplish the objectives of identifying 

foreign malicious cyber actors using any 

such products while also avoiding an 

undue burden on U.S. IaaS providers. 

They must also allow the Secretary, 

after consultation with the heads of 

various Federal agencies, to exempt any 

IaaS providers or any specific type of 

Account or lessee from the requirements 

of any regulation issued pursuant to this 

section, including due to a finding that 

the IaaS provider, Account, or lessee 

complies with security best practices to 

otherwise deter abuse of IaaS products. 

Section 2 of E.O. 13984 requires the 

proposed regulations to allow the 

Secretary to use, as necessary, one of 

two special measures included in E.O. 

13984 to require U.S. IaaS providers to 

prohibit or limit access to Accounts that 

foreign malicious cyber actors use to 

conduct malicious cyber-enabled 

activity. E.O. 13984 authorizes these 

measures if the Secretary, in 

consultation with heads of appropriate 

Federal agencies, finds that reasonable 

grounds exist to conclude that either: (i) 

a foreign jurisdiction has a significant 

number of foreign persons offering U.S. 

IaaS products that are, in turn, used for 

malicious cyber-enabled activities, or a 

significant number of foreign persons 

directly obtaining U.S. IaaS products 

and using them in malicious cyberenabled activities; or (ii) a foreign 

person has established a pattern of 

conduct of offering U.S. IaaS products 

that are used for malicious cyberenabled activities or directly obtaining 

U.S. IaaS products for use in malicious 

cyber-enabled activities. As further 

explained below, the Department would 

conduct an investigation before making 

any such finding under section 2 of E.O. 

13894. 

One special measure the Secretary 

could take would be to prohibit or 

impose conditions on opening or 

maintaining an Account with any IaaS 

provider by: (a) a foreign person located 

in a foreign jurisdiction that has a 

significant number of foreign persons 

offering U.S. IaaS products that are used 

for malicious cyber-enabled activities; 

or (b) on behalf of such a foreign person. 

The second special measure would 

allow the Secretary to prohibit or 

impose conditions on opening or 

maintaining an Account in the United 

States by any IaaS provider for, or on 

behalf of, a foreign person found to be 

offering U.S. IaaS products that are used 

for malicious cyber-enabled activities or 

on accounts opened directly by foreign 

persons who are known to obtain U.S. 

IaaS products for malicious cyberenabled activities. 

Section 4.2(c) of E.O. 14110 requires 

the Secretary to propose regulations 

requiring U.S. IaaS providers to submit 

to the Department a report when a 

foreign person transacts with the IaaS 

provider to train a large AI model with 

potential capabilities that could be used 

in malicious cyber-enabled activity. The 

report, at a minimum, must include the 

identity of the foreign person and the 

existence of a training run that meets 

the criteria set forth in this section, as 

well as any other information specified 

in regulation. This section of E.O. 14110 

also instructs the Secretary to determine 

the set of technical conditions that a 

large AI model must possess in order to 

have the potential capabilities that 

could be used in malicious cyberenabled activity and to update that 

determination as necessary and 

appropriate. 

Section 4.2(c) of this E.O. also 

requires that U.S. IaaS providers 

prohibit any foreign reseller of their U.S. 

IaaS product from providing those 

products unless such foreign reseller 

submits to the U.S. IaaS provider a 

report, which the U.S. IaaS provider 

must provide to the Department, 

detailing each instance in which a 

foreign person transacts with the foreign 

reseller to use the U.S. IaaS product to 

train a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. In 

accordance with this requirement, 

section 4.2(d) requires the proposed 

regulations to require U.S. IaaS 

providers to ensure that foreign resellers 

of U.S. IaaS products verify the identity 

of any foreign person that obtains an 

IaaS account from the foreign resellers. 

The Department is directed to set forth 

the minimum standards that a U.S. IaaS 

provider must require of their foreign 

resellers to verify the identity of a 

foreign person who opens an account or 

maintains an existing account with a 

foreign reseller. 

III. Comments on the Advanced Notice 

of Proposed Rulemaking 

On September 24, 2021, the 

Department published in the Federal 

Register an advanced notice of proposed 

rulemaking (ANPRM), 86 FR 53018 

(Sep. 24, 2021), soliciting comments on 

how the Department should implement 

various provisions of sections 1 and 2 of 

E.O. 13984, described above, and 

section 5 of E.O. 13894, which defines 

several key terms as they relate to the 

proposed regulations. The Department 

received twenty-one (21) comments to 

the ANPRM, which are available on the 

public rulemaking docket at https://

www.regulations.gov. 

This section summarizes the 

comments received in response to the 

ANPRM and explains the Department’s 

proposed regulations to implement 

sections 1, 2, and 5 of E.O. 13984. The 

proposed rule text incorporates many of 

the suggestions the Department received 

in response to the ANPRM, as set out in 

more detail below. 

(1) Definitions 

The Department sought comments on 

the terms ‘‘United States person’’ and 

‘‘United States Infrastructure as a 

Service Provider.’’ The commenters who 

responded to this question argued that 

the term ‘‘United States person’’ should 

not be interpreted to include foreign 

subsidiaries of a U.S. IaaS provider, as 

this extension would exceed the scope 

of E.O. 13984. Commenters differed 

about how broadly to interpret the term 

‘‘United States Infrastructure as a 

Service Provider.’’ Many requested the 

Department to interpret this term as 

broadly as possible to capture as much 

potential foreign malicious cyber 

activity as possible. Others believed the 

Department should interpret the 

definition narrowly to avoid implicating 

cloud service providers who offer other 

cloud-based services, such as Platform 

as a Service (PaaS) and Software as a 

Service (SaaS) offerings, but do not offer 

IaaS products. This proposed rule 

reflects the Department’s consideration 

of all relevant comments. 

(2) Customer Identification Program 

Regulations and Relevant Exemptions 

In the ANPRM, the Department 

sought information about how to 

implement requirements for companies 

to verify a foreign person’s identity 

upon the opening of an Account and 

while maintaining an existing Account. 

The Department sought comments on 

verification procedures and 

recordkeeping requirements the 

Department should consider including 

in regulations. 

Many commenters expressed support 

for implementing data retention and 

recordkeeping requirements, as directed 

by E.O. 13984, across a broad spectrum 

of U.S. IaaS providers’ products or 

services to capture a large portion of 

malicious cyber-enabled activity on 

these platforms. While commenters 

generally supported requiring U.S. IaaS 

providers to verify the identity of all 

prospective customers, some suggested 

that any regulation the Department 

promulgates in response to E.O. 13984 

will be ineffective, as malicious cyber 

actors are savvy enough to avoid 

identity verification. 


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Other commenters requested that the 

Department’s proposed regulations 

allow U.S. IaaS providers to adopt riskbased approaches to verify the identity 

of their customers. These approaches, 

they argued, would allow IaaS providers 

flexibility to adjust their CIPs to meet 

new threats and vulnerabilities as they 

arise. Most commenters agreed that the 

Department should consider the costs 

and benefits of these requirements for 

U.S. IaaS providers and expressed 

concern that the costs of compliance 

would be substantial. As discussed 

further below, the Department has 

proposed standards and procedures that 

take into consideration the size, 

complexity, and risk profile of the IaaS 

provider and its product offerings. 

The Department requested comments 

on current practices, if any, that U.S. 

IaaS providers use to verify the identity 

of their customers and the burden that 

any new regulations would impose on 

these IaaS providers. Commenters 

reported that there is no uniform set of 

data that U.S. IaaS providers collect 

before opening an Account for a 

customer, but email addresses and 

payment methods are normally 

required. Most commenters indicated 

that any requirements in this proposed 

regulation would impose burdens on 

U.S. IaaS providers, and that the 

Department should weigh this burden 

against the anticipated benefit any 

regulations mandating identity 

verification would have on national 

security. The Department acknowledges 

that this rulemaking will impose 

compliance costs for at least some U.S. 

IaaS providers and has addressed these 

costs in the regulatory impact analysis 

included in the preamble of this 

proposed rule. 

The Department asked about the 

impact any proposed regulations would 

have on data protection and security, 

especially considering the European 

Union General Data Protection 

Regulation (GDPR) and the California 

Consumer Privacy Act (CCPA). Many 

commenters encouraged the Department 

to propose regulations that would 

enable U.S. law enforcement officials to 

gain access to data stored by domain 

name registries and registrars that has 

proven more difficult since the 

enactment of the GDPR. Others focused 

on ensuring that the processing of 

customers’ data to carry out the 

provisions of any proposed regulation 

would be consistent with the GDPR or 

CCPA. Still others requested that any 

proposed regulation not frustrate 

ongoing negotiations to open the flow of 

data between foreign countries and the 

United States. The Department 

acknowledges these comments and has 

sought to ensure these proposed 

regulations are consistent with national 

and international obligations, either 

because the specific information 

requested is not protected, or because 

the need for data collection falls into 

relevant exemptions. 

The Department sought comments on 

how to implement the authority, granted 

by section 1(c) of E.O. 13984, to provide 

exemptions from the requirements of 

any regulations issued pursuant to E.O. 

13894. Many commenters expressed 

hope that the Department could 

promulgate best practices for IaaS 

providers to adopt or strive to meet in 

order to avoid compliance costs 

associated with any proposed 

regulations. Others asked the 

Department to tailor these regulations to 

apply only to those products and 

services most used by foreign malicious 

cyber actors. The Department is 

proposing procedures for IaaS providers 

to obtain exemptions from the CIP 

requirements. Under these procedures, a 

U.S. IaaS provider seeking to obtain an 

exemption for itself, a specific type of 

account or lessee, or its foreign reseller, 

would provide a written submission to 

the Secretary outlining its program to 

comply with security best practices to 

deter the abuse of U.S. IaaS products. A 

finding by the Secretary that the 

program incorporates such best 

practices would exempt an IaaS 

provider from the CIP requirements in 

section 1(a) of E.O. 13984. 

Some commenters urged the 

Department not to include exemptions, 

believing this practice to be contrary to 

the intent of E.O. 13984 to address the 

use of U.S. IaaS products for malicious 

cyber-enabled activities. In these 

proposed regulations, the Department 

has endeavored to provide a pathway to 

enable U.S. IaaS providers to apply for 

an exemption where such exemption is 

warranted while still accomplishing the 

policy goals of E.O. 13984. The 

Department welcomes comments and 

feedback on its proposed approach, as 

well as on potential standards and best 

practices that could deter the abuse of 

U.S. IaaS products by malicious actors. 

(3) Special Measures Restrictions 

In the ANPRM, the Department 

sought comments on procedures the 

Secretary should use to decide when 

and how to impose a special measure. 

The Department asked what sources of 

information the Secretary should 

consider, how the Secretary should 

publish any findings, how long the 

special measure’s effects should last, 

and how to determine which special 

measure to invoke. 

Commenters encouraged the 

Department to consider how to leverage 

existing authorities and procedures, 

such as the Department’s existing 

authority to prohibit certain Information 

and Communications Technology and 

Services (ICTS) transactions or the 

Department of the Treasury’s Office of 

Foreign Assets Control’s (OFAC) 

sanctions procedures, to minimize the 

burden of these special measures. Other 

commenters indicated that the threat of 

these special measures will result in lost 

U.S. business, as foreign persons may 

move to IaaS products and services 

furnished from companies 

headquartered in foreign countries. Still 

others expressed doubt that these 

special measures would accomplish 

their intended purpose. 

In crafting these proposed regulations 

regarding special measures, the 

Department looked to a variety of 

sources, including OFAC’s sanction 

procedures, and has sought to minimize 

the costs to U.S. businesses while still 

meeting the requirements of E.O. 13984. 

IV. Proposed Rule and Request for 

Comments 

Following consideration of the 

comments received in response to the 

ANPRM, the Department is proposing 

regulations to implement sections 1, 2, 

and 5 of E.O. 13984 and the applicable 

provisions of E.O. 14110. The 

provisions implementing E.O. 13984 

would apply to U.S. IaaS providers that 

offer U.S. IaaS products, as defined in 

E.O. 13984 and this proposed rule. 

‘‘U.S. IaaS providers’’ includes any U.S. 

person that offers IaaS products, to 

include both direct providers of U.S. 

IaaS products and any of their U.S. 

resellers. 

To implement section 1 of E.O. 13984, 

the Department proposes to require 

providers to verify the identity of 

foreign customers. To implement 

section 2 of E.O. 13984, the Department 

proposes procedures for the Secretary’s 

decision-making process regarding 

whether and how to issue 

determinations about special measures. 

Regarding the definitions in section 5 of 

E.O. 13984, the Department proposes 

interpretations of terms defined in the 

E.O. and proposes definitions for several 

additional key terms. 

To implement section 4.2(c) of E.O. 

14110, the Department proposes 

regulations related to foreign resellers of 

U.S. IaaS products that would apply to 

U.S. IaaS providers as defined in E.O. 

13984 and this proposed rule. The 

Department uses ‘‘foreign reseller’’ to 

mean any foreign person who has 

established an account with a U.S. IaaS 

provider to provide IaaS products 


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subsequently, in whole or in part, to a 

third party. 

To implement section 4.2(c) of this 

E.O., the Department proposes a process 

for U.S IaaS providers to report to the 

Department when they have knowledge 

they will engage or have engaged in a 

transaction with a foreign person that 

could allow that foreign person to train 

a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. To 

implement section 4.2(d) of this E.O., 

the Department proposes regulations 

that would require U.S. IaaS providers 

to require foreign resellers of their U.S. 

IaaS products to verify the identity of 

foreign persons who open or maintain 

an account with a foreign reseller. 

The Department proposes definitions 

for terms used within E.O. 14110, 

including a definition for a ‘‘large AI 

model with potential capabilities that 

could be used in malicious cyberenabled activity.’’ Based on this 

definition, the Secretary will determine, 

as required by E.O. 14110, the set of 

technical conditions that a large AI 

model must possess in order to have the 

potential capabilities that could be used 

in malicious cyber-enabled activity. 

That determination will be a binding 

interpretation of what constitutes a 

‘‘large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity.’’ As 

this area of technology is fast 

developing, and as directed by E.O. 

14110, the Secretary will update, as 

‘‘necessary and appropriate,’’ the initial 

determination of which set of technical 

conditions meet the definition. The 

Department will publish these binding 

updates to the technical condition 

determinations in the Federal Register. 

The Department requests comments on 

all aspects of this proposed rule. 

(1) Definitions 

This proposed rule adopts several 

definitions found in section 5 of E.O. 

13984, including ‘‘entity,’’ ‘‘foreign 

jurisdiction,’’ ‘‘foreign person,’’ 

‘‘Infrastructure as a Service Account,’’ 

‘‘Infrastructure as a Service product,’’ 

‘‘Malicious cyber-enabled activities,’’ 

‘‘person,’’ ‘‘Reseller Account,’’ ‘‘United 

States person,’’ and ‘‘U.S. Infrastructure 

as a Service product.’’ In addition, this 

proposed rule clarifies the definition of 

‘‘U.S. Infrastructure as a Service 

provider’’ found in section 5 of E.O. 

13984. The proposed rule also adopts 

several definitions found in section 3 of 

E.O. 14110, including ‘‘artificial 

intelligence’’ or ‘‘AI,’’ ‘‘AI model,’’ ‘‘AI 

system,’’ ‘‘dual-use foundation model,’’ 

‘‘foreign reseller,’’ ‘‘generative AI,’’ 

‘‘integer operation,’’ ‘‘machine 

learning,’’ and ‘‘model weight.’’ Finally, 

the Department proposes several 

definitions of key terms in this rule, 

including ‘‘customer’’ and ‘‘beneficial 

owner,’’ as well as definitions for terms 

such as ‘‘availability,’’ ‘‘confidentiality,’’ 

‘‘Customer Identification Program,’’ 

‘‘Department,’’ ‘‘disassociability,’’ 

‘‘foreign beneficial owner,’’ ‘‘foreign 

customer,’’ ‘‘foreign reseller, 

‘‘individual,’’ ‘‘integrity,’’ ‘‘knowledge,’’ 

‘‘large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity,’’ 

‘‘manageability,’’ ‘‘predictability,’’ 

‘‘privacy-preserving data sharing and 

analytics,’’ ‘‘Red Flag,’’ ‘‘reseller,’’ ‘‘riskbased,’’ ‘‘Secretary,’’ ‘‘threat landscape,’’ 

‘‘training,’’ ‘‘training run,’’ and ‘‘United 

States reseller.’’ Some of the proposed 

definitions are discussed below, 

although the Department welcomes 

comments on all definitions in this 

proposed rule. 

A. Availability 

The Department proposes to define 

‘‘availability’’ as ensuring timely and 

reliable access to and use of information 

and information systems by an 

authorized person or system, including 

resources provided as part of a product 

or service. 

B. Beneficial Owner 

E.O. 13984 requires verification of the 

identity of foreign persons that obtain 

accounts, and it defines ‘‘person’’ as ‘‘an 

individual or entity.’’ Therefore, the 

Department proposes to require U.S. 

IaaS providers to collect the same 

identifying information and verify the 

identity of beneficial owners of 

Accounts owned or maintained by 

entities. Under the proposed rule, a 

beneficial owner is defined as an 

individual who either: (1) exercises 

substantial control over a Customer, or 

(2) owns or controls at least 25 percent 

of the ownership interests of a 

Customer. The Department seeks 

comments on these definitions, 

including the meaning of ‘‘substantial 

control.’’ 

C. Confidentiality 

The Department proposes to define 

‘‘confidentiality’’ as preserving 

authorized restrictions on information 

access and disclosure, including means 

for protecting personal privacy and 

proprietary information. 

D. Customer Identification Program 

The Department proposes to define 

‘‘Customer Identification Program’’ as a 

program created by a U.S. IaaS provider 

or foreign reseller that dictates how the 

IaaS provider will collect identifying 

information about its customers, how 

the IaaS provider will verify the identity 

of its foreign customers, store and 

maintain identifying information, and 

notify its customers about the disclosure 

of identifying information. 

E. Department 

The Department proposes to define 

‘‘Department’’ as the United States 

Department of Commerce. 

F. Disassociability 

The Department proposes to define 

‘‘disassociability’’ as enabling the 

processing of data or events without 

association to individuals or devices 

beyond the operational requirements of 

the system. 

G. Foreign Beneficial Owner 

The Department proposes to define 

‘‘foreign beneficial owner’’ as a 

beneficial owner that is not a United 

States person. 

H. Foreign Customer 

The Department proposes to define 

‘‘foreign customer’’ as a customer that is 

not a United States person. 

I. Foreign Reseller 

The Department proposes to adopt the 

definition from E.O. 14110 and define 

‘‘foreign reseller’’ to mean a foreign 

person who has established an IaaS 

Account to provide IaaS subsequently, 

in whole or in part, to a third party. This 

is consistent with the definition for 

foreign reseller included in E.O. 14110. 

J. Individual 

The Department proposes to define 

‘‘individual’’ as any natural person. 

K. Infrastructure as a Service Product 

This proposed definition adopts the 

E.O. 13984 definition for ‘‘Infrastructure 

as a Service product’’, which is any 

product or service offered to a 

consumer, including complimentary or 

‘‘trial’’ offerings, that provides 

processing, storage, networks, or other 

fundamental computing resources, and 

with which the consumer is able to 

deploy and run software that is not 

predefined, including operating systems 

and applications. The consumer 

typically does not manage or control 

most of the underlying hardware but has 

control over the operating systems, 

storage, and any deployed applications. 

The term is inclusive of ‘‘managed’’ 

products or services, in which the 

provider is responsible for some aspects 

of system configuration or maintenance, 

and ‘‘unmanaged’’ products or services, 

in which the provider is only 

responsible for ensuring that the 


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product is available to the consumer. 

The term is also inclusive of 

‘‘virtualized’’ products and services, in 

which the computing resources of a 

physical machine are split between 

virtualized computers accessible over 

the internet (e.g., ‘‘virtual private 

servers’’), and ‘‘dedicated’’ products or 

services in which the total computing 

resources of a physical machine are 

provided to a single person (e.g., 

‘‘baremetal’’ servers). 

The Department believes that this 

expansive definition will allow for 

regulations to apply to a broad range of 

IaaS product offerings that can be used 

by foreign malicious cyber actors to 

carry out attacks on the United States or 

United States persons. Note that this 

definition includes all service offerings 

for which a consumer does not manage 

or control the underlying hardware, but 

rather contracts with a third party to 

provide access to this hardware. This 

definition would capture services such 

as content delivery networks, proxy 

services, and domain name resolution 

services. It does not, however, capture 

domain name registration services for 

which a consumer registers a specific 

domain name with a third party, as that 

third party does not provide any 

processing, storage, network, or other 

fundamental computing resource to the 

consumer. The Department seeks 

comment on the categories of products 

or services that fall within this 

definition. 

L. Integrity 

The Department proposes to define 

‘‘integrity’’ as guarding against improper 

information modification or destruction 

and includes ensuring information nonrepudiation and authenticity. 

M. Knowledge 

The Department proposes to define 

‘‘knowledge’’ as knowledge of a 

circumstance (the term may be a variant, 

such as ‘‘know,’’ ‘‘reason to know,’’ or 

‘‘reason to believe’’) including not only 

positive knowledge that the 

circumstance exists or is substantially 

certain to occur, but also an awareness 

of a high probability of its existence or 

future occurrence. Such awareness is 

inferred from evidence of the conscious 

disregard of facts known to a person and 

is also inferred from a person’s willful 

avoidance of facts. This definition is 

similar to that in the Department’s 

Export Administration Regulations. 

N. Large AI Model With Potential 

Capabilities That Could Be Used in 

Malicious Cyber-Enabled Activity 

The Department proposes to define 

‘‘large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity’’ as any 

AI model with the technical conditions 

of a dual-use foundation model, or that 

otherwise has technical parameters of 

concern, that has capabilities that could 

be used to aid or automate aspects of 

malicious cyber-enabled activity, 

including but not limited to social 

engineering attacks, vulnerability 

discovery, denial-of-service attacks, data 

poisoning, target selection and 

prioritization, disinformation or 

misinformation generation and/or 

propagation, and remote command-andcontrol, as necessary and appropriate of 

cyber operations. The Department seeks 

comment on this proposed definition. 

E.O. 14110 also instructs the Secretary 

to determine and to update, ‘‘as 

necessary and appropriate,’’ the set of 

technical conditions for a ‘‘large AI 

model to have potential capabilities that 

could be used in malicious cyberenabled activity.’’ Based on the above 

definition, the Secretary will make this 

initial determination and any necessary 

and appropriate updates to it which the 

Department will publish in the Federal 

Register. Such technical conditions may 

include the compute used to pre-train 

the model exceeding a specified 

quantity. 

The Department seeks comment on 

the proposed definition, as well as on 

the Secretarial process for determining 

and, because of rapidly advancing 

technology, updating the set of specific 

technical conditions necessary for a 

large AI model to meet the definition 

and have the potential capabilities that 

could be used in malicious cyberenabled activities. 

O. Manageability 

The Department proposes to define 

‘‘manageability’’ as providing the 

capability for granular administration of 

data, including alteration, deletion, and 

selective disclosure. 

P. Predictability 

The Department proposes to define 

‘‘predictability’’ as enabling reliable 

assumptions by individuals, owners, 

and operators about data and their 

processing by a system, product, or 

service. 

Q. Privacy-Preserving Data Sharing and 

Analytics 

The Department proposes to define 

‘‘privacy-preserving data sharing and 

analytics’’ as the use of privacyenhancing technologies to achieve 

disassociability, predictability, 

manageability, and confidentiality when 

performing analytics on data. 

R. Red Flag 

The Department proposes to define 

‘‘Red Flag’’ as a pattern, practice, or 

specific activity that indicates the 

possible existence of malicious cyberenabled activities. 

S. Reseller 

The Department proposes to define 

‘‘reseller’’ as a person that maintains a 

Reseller Account. 

T. Risk-Based 

The Department proposes to define 

‘‘risk-based’’ as based on an assessment 

of the relevant risks, including those 

presented by the various types of service 

offerings maintained by an IaaS 

provider, the methods used to open an 

Account, the varying types of 

identifying information available to an 

IaaS provider, and an IaaS provider’s 

customer base. 

U. Secretary 

The Department proposes to define 

‘‘Secretary’’ as the Secretary of 

Commerce or the Secretary’s designee. 

V. Threat Landscape 

The Department proposes to define 

‘‘threat landscape’’ as the broad 

environment of geopolitical, economic, 

and technological factors that must be 

evaluated when developing risk-based 

procedures that enable an IaaS provider 

to form a reasonable belief of the true 

identity of each Account owner and 

beneficial owner to deter facilitating 

significant malicious cyber-enabled 

activities. 

W. Training or Training Run 

The Department proposes to define 

‘‘training’’ or ‘‘training run’’ as any 

process by which an AI model learns 

from data through the use of computing 

power. 

X. United States Infrastructure as a 

Service Product 

The Department proposes to clarify 

the E.O.’s definition of ‘‘United States 

Infrastructure as a Service product.’’ 

The E.O. defines this term as ‘‘any 

Infrastructure as a Service Product 

owned by any United States person or 

operated within the territory of the 

United States of America.’’ The 

Department considers Reseller Accounts 

as IaaS products. 

Y. United States Infrastructure as a 

Service Provider 

E.O. 13984 defines ‘‘United States 

Infrastructure as a Service provider’’ as 

‘‘any United States Person that offers 

any Infrastructure as a Service product.’’ 

The Department notes that this 


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definition of ‘‘United States 

Infrastructure as a Service provider’’ 

includes any United States person that 

is a direct provider of U.S. IaaS products 

and any of their U.S. resellers. The 

Department proposes to consider U.S. 

resellers of U.S. IaaS products as IaaS 

providers subject to these proposed 

regulations. 

In response to the ANPRM, several 

commenters suggested that the 

Department clarify whether this term 

includes foreign subsidiaries of United 

States persons. Specifically, these 

commenters believed including foreign 

subsidiaries of United States persons in 

this definition would exceed the scope 

of the E.O., which focuses on threats to 

the United States from U.S. IaaS 

products, not those offered by foreign 

subsidiaries. The Department proposes 

to clarify that a foreign subsidiary of a 

U.S. IaaS provider is not considered to 

be a ‘‘United States Infrastructure as a 

Service provider.’’ 

E.O. 13984 requires the Secretary to 

propose regulations to require providers 

to ‘‘verify the identity of a foreign 

person in connection with the opening 

of an Account or the maintenance of an 

existing Account.’’ It requires that any 

regulations set out the types of 

documentation or procedures ‘‘required 

to verify the identity of any foreign 

person acting as a lessee or sub-lessee of 

these products or services.’’ The 

Department proposes to consider U.S. 

resellers of U.S. IaaS products as U.S. 

IaaS providers subject to these proposed 

regulations. 

(2) Customer Identification Program 

Regulations and Relevant Exemptions 

Under this proposed rule, U.S. IaaS 

providers and their foreign resellers 

would maintain CIPs, perform effective 

customer verification, and maintain 

identifying information about their 

foreign customers, which is critical to 

combating malicious cyber-enabled 

activities. The Department proposes to 

require that all U.S. IaaS providers 

implement their own CIPs, require CIPs 

of their foreign resellers, and report to 

the Department on these CIPs. The 

Department will consider allowing U.S. 

IaaS providers an adjustment period to 

implement some provisions of this 

proposed regulation and notify the 

Department accordingly, and anticipates 

that compliance would be required 

within one year of the date of 

publication of any final rule. 

Accordingly, the Department 

proposes to require IaaS providers 

develop their own risk-based CIP. 

Taking into consideration the different 

types of IaaS Accounts, the different 

methods used to open the Accounts, 

and the types of information available to 

identify foreign malicious cyber actors, 

while avoiding the imposition of an 

undue burden on providers, the 

Department proposes to allow each 

provider to create a CIP that matches its 

unique service offerings and customer 

bases. Provided that IaaS providers meet 

certain minimum requirements in their 

CIPs, providers can create CIPs that are 

flexible and minimally burdensome to 

their business operations. 

The Department proposes to require 

U.S. resellers of U.S. IaaS Accounts to 

establish CIPs and identity verification 

procedures to be used any time they act 

as a reseller for U.S. IaaS products. The 

CIPs of such U.S. resellers would be 

subject to the minimum standards in 

this proposed rule. U.S. resellers would 

be responsible for establishing the 

identity of their potential customers, 

including all prospective beneficial 

owners of these Accounts, and 

determining whether they are U.S. 

persons. U.S. resellers would also be 

responsible for verifying the identity of 

their foreign customers under this 

proposed rule. The Department requests 

comments on whether resellers that are 

small businesses might find it more 

difficult to develop a CIP. The 

Department proposes to allow U.S. 

resellers, by agreement with a U.S. IaaS 

provider, to reference, use, rely on, or 

adopt the CIPs created by the U.S. IaaS 

provider to help minimize any 

compliance burdens on the reseller. The 

Department further seeks comments on 

whether resellers currently request 

identifying information from their 

customers and how these resellers verify 

the identity of their prospective foreign 

customers. 

The Department seeks comments on 

whether to require IaaS providers to 

conduct third-party or internal audits to 

confirm their compliance with CIP 

requirements in the proposed rule. The 

Department also seeks comments on 

whether the Department should receive 

and approve all CIPs. The Department 

additionally seeks comments on 

whether the rulemaking should require 

U.S. IaaS providers to submit Red Flags 

either to the Department or to another 

relevant department or agency. Below, 

the Department explains additional 

specific requirements for CIPs. 

A. Data Collection Requirements 

Under the proposed rule, each CIP 

must include procedures that U.S. IaaS 

providers and their foreign resellers will 

use to collect information from all 

covered existing and prospective 

customers, that is, those who have 

applied for an account. At a minimum, 

the following data would be collected: 

a customer’s name, address, the means 

and source of payment for each 

customer’s Account, email addresses 

and telephone numbers, and internet 

protocol (IP) addresses used for access 

or administration of the Account. IaaS 

providers may alter their CIPs to require 

additional information from prospective 

customers that is necessary to verify the 

identity of any foreign person, but all 

CIPs must, at a minimum, collect the 

previously listed data. The Department 

proposes omitting a requirement for 

collecting and verifying national 

identification numbers because, based 

on public feedback, the Department 

believes that national identification 

number verification would be unduly 

burdensome and would not be 

necessary to verify identity. The 

Department seeks comments on whether 

other forms of identification, such as 

digital or technology-based 

identification, should be included as an 

acceptable means by which IaaS 

providers may verify customers’ 

identities, and if companies have 

privacy-protecting or privacy-enhancing 

technologies to verify this same 

information or other alternatives that 

can effectively achieve identity 

verification. 

The Department believes that many 

U.S. IaaS providers and their foreign 

resellers already collect this information 

from their customers, and that the 

proposed rule would set a baseline for 

data collection that would help all 

providers effectively verify and 

document the identities of their 

customers. The Department seeks 

comments on the costs and burdens 

associated with this proposed 

requirement and whether the 

Department should include additional 

data collection in a baseline 

requirement for CIPs. The Department 

proposes a requirement that providers 

make a written description of their CIPs 

available for inspection by the 

Department, which may identify 

specific shortcomings for providers to 

resolve. The Department seeks comment 

on this proposal. 

The Department is proposing to 

require that CIPs account for the 

collection of identifying information 

about the actual Account owner and all 

beneficial owners of the Account. 

Specifically, the proposed required 

description of the CIP would specify 

how providers would ensure that all 

beneficial owners of an Account at its 

inception and any new beneficial owner 

added to the Account undergo the same 

identification procedures as the person 

opening the Account. The Department 

seeks comment on this approach. 


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B. Prospective Customers From the 

United States 

E.O. 13984 addresses threats to U.S. 

IaaS products and services by foreign 

malicious cyber actors. Section 1 of the 

E.O. therefore requires the Department 

to propose regulations to require U.S. 

IaaS providers to verify the identity of 

‘‘a foreign person that obtains an 

Account.’’ 

Therefore, the Department proposes to 

require U.S. IaaS providers to verify the 

identity of foreign persons who obtain 

an Account from providers and to 

require the same of their foreign 

resellers. Although providers would be 

required to create a CIP that includes 

the minimum data collection 

requirements for all prospective 

customers, they would not be required 

to verify the identity of customers with 

Accounts opened by or on behalf of a 

U.S. person, unless a foreign beneficial 

owner is added to the Account or the 

Account or a portion of the Account is 

resold to a foreign person. 

The Department seeks comments 

about whether the proposed data 

collection requirements above would 

enable providers to accurately 

distinguish foreign current and 

prospective customers from others. If 

these proposed requirements are 

inadequate, what additional required 

information should be included in the 

CIPs to aid in these efforts? The 

Department also seeks comments on the 

availability of secure data deletion 

standards and whether to require their 

implementation for Accounts 

determined to be opened, owned, and 

accessible exclusively by U.S. persons. 

C. Identity Verification 

The Department proposes to require 

that CIPs include procedures to ensure 

that U.S. IaaS providers and their 

foreign resellers verify the identity of all 

foreign Account owners and foreign 

beneficial owners. Under the proposed 

rule, providers may craft their own 

procedures and methods to verify the 

identity of their prospective foreign 

customers and beneficial owners, 

provided that their CIPs include riskbased procedures that enable the 

provider to form a reasonable belief 

about the true identity of each customer 

and beneficial owner. These procedures 

must be based on a provider’s 

assessment of the relevant risks, 

including those presented by the 

various types of service offerings 

maintained by the provider, the 

methods used to open an Account, the 

varying types of identifying information 

available to the provider, and the 

provider’s customer base. Under the 

proposed rule, the CIP must establish 

whether a provider will use 

documentary or non-documentary 

verification or a combination of both. It 

must establish how a provider will 

verify the identity of its customers when 

the customer is unable to produce the 

requested documents. The Department 

believes this flexibility would minimize 

the burden placed on providers by these 

regulations. The Department seeks 

comments on this risk-based approach 

to allow providers to form reasonable 

beliefs of the true identity of each 

customer and beneficial owner and on 

what information they would need to 

collect to accomplish this. 

Under the proposed rule, the CIP 

must include steps a provider would 

take if it is unable to verify the identity 

of any customer, including refusing to 

open an Account and/or additional 

monitoring pending attempts at 

verification. It must further set out the 

terms under which a customer may 

continue to have access to an Account 

while the provider attempts to verify the 

identity of the customer, and when a 

provider would close an Account after 

attempts to verify a customer’s identity 

have failed. Additionally, it must 

describe measures for redress and issue 

management to address situations in 

which legitimate customers may fail 

identity verification, or in which their 

information was compromised and a 

fraudulent account established. The 

Department seeks comments on whether 

to require specific verification methods, 

such as email or payment verification, 

for all prospective customers. The 

Department seeks comments on whether 

the Department should allow providers 

to grant potential customers access to 

Accounts prior to successful identity 

verification. The Department seeks 

comments on whether including 

reference to National Institute of 

Standards and Technology (NIST) 

Special Publication (SP) 800–63 

regarding digital identity guidelines 

would help IaaS providers meet 

requirements for identity verification. 

D. Recordkeeping 

The Department proposes to require 

U.S. IaaS provider and foreign reseller 

of U.S. IaaS product CIPs to include 

procedures for maintaining, protecting, 

and obtaining access to records of 

relevant customer information accessed 

in the process of verifying customer 

identities. At a minimum, this record 

must include a description of the 

identity evidence and attributes 

provided by the customer when the 

customer first attempted to open an 

Account, a description of the methods 

and results of any measures undertaken 

to verify customer identity, and a 

description of the resolution of any 

substantive discrepancy discovered 

when verifying the identifying 

information. The proposed rule leaves 

to IaaS providers the discretion to 

design their own recordkeeping 

procedures, so long as these procedures 

obtain this minimum information. 

The Department proposes to require 

that CIPs of U.S. IaaS providers and 

their foreign reseller include 

requirements to securely maintain these 

records and describe measures taken to 

ensure that the information is secure. 

The proposed regulations would require 

that IaaS providers limit access to any 

records or documents created, retained, 

or accessed pursuant to these 

regulations by any third parties or IaaS 

provider employees without a need-toknow basis for obtaining this access. 

However, no such requirement should 

be read to limit IaaS providers’ ability 

to share security best practices and 

threat information with other IaaS 

providers, relevant consortia, or the U.S. 

Government as needed and consistent 

with applicable law. The Department 

seeks comments on the feasibility of this 

approach and the costs of doing so. The 

Department further seeks comments on 

whether there currently exist best 

practices for the maintenance, storage, 

and security of customer identifying 

information. 

The Department proposes to require 

that U.S. IaaS providers retain these 

records for a period of two years after 

the date upon which an Account was 

last accessed or closed. The Department 

preliminarily determines that a two-year 

period is necessary to allow law 

enforcement the ability to gain access to 

this information should an Account be 

suspected of hosting malicious cyberenabled activity. The Department seeks 

comments on the burdens to IaaS 

providers of maintaining these records 

for two years, and whether there are 

alternative ways to allow for both 

immediate and long-term access to 

customer information should an 

Account be used for malicious cyberenabled activity. The Department seeks 

comments on whether to require that 

CIPs include procedures to address 

situations where an Account that has 

been inactive for more than two years is 

subsequently accessed by a foreign 

person, and whether to require that IaaS 

providers request that the foreign person 

provide the enumerated identifying 

information again in these 

circumstances. 


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E. Ensuring Verification for Foreign 

Resellers 

As directed in E.O. 14110, the 

Department proposes to require that U.S 

IaaS providers only initiate or continue 

a reseller relationship with foreign 

resellers of U.S. IaaS products that 

maintain and implement a CIP that 

meets the requirements for CIPs of U.S. 

IaaS providers in this proposed rule. 

The Department recognizes that it will 

take U.S. IaaS providers time to educate, 

coordinate, and collect information from 

their foreign resellers on CIP 

requirements and therefore anticipates 

allowing U.S. IaaS providers up to one 

year to implement such final provisions 

and notify the Department accordingly. 

Under this proposed rule, U.S. IaaS 

providers would be required to furnish 

a copy of any foreign reseller’s CIP to 

the Department within ten calendar 

days following a request for the same 

from the Department. The Department 

seeks comments on the potential 

challenges that U.S. IaaS providers 

would face when collecting this 

information from their foreign resellers 

of U.S. IaaS products. The proposed rule 

would also require that, upon receipt of 

evidence that indicates the failure of a 

foreign reseller to maintain or 

implement a CIP or that indicates 

malicious cyber-enabled activity, U.S. 

IaaS providers must report malicious 

cyber-enabled activity and close 

accounts associated with the activity 

and must terminate the reseller 

relationship within 30 calendar days. 

The Department seeks comments on the 

challenges U.S. IaaS providers would 

face in investigating and remediating 

malicious cyber activity by foreign 

resellers, as well as the contractual 

difficulties posed by terminating the 

relationship with a non-compliant 

foreign reseller. The Department further 

seeks comments on the extent to which 

there currently exist customer 

identification and verification practices 

which U.S. IaaS providers require their 

foreign resellers to use. 

F. Customer Identification Program 

Updates and Certifications 

The Department proposes to require 

that U.S. IaaS providers submit to the 

Department certain information about 

their CIPs and their foreign resellers’ 

CIPs, to include procedures on verifying 

customer identity and detecting 

malicious cyber activity, as well as 

information and data on their provision 

of IaaS products. The Department 

further proposes to require that U.S. 

IaaS providers and their foreign resellers 

update their CIPs annually to protect 

against new cyber threats and 

vulnerabilities, as well as to increase 

efficiency and data security, and to 

certify to the Department that such 

annual updates have occurred. The 

Department proposes that U.S. IaaS 

providers must notify the Department of 

any updates to their CIP or any CIP of 

their foreign resellers. In these annual 

certifications, providers would also 

attest to the Department that, since the 

date of last certification, they have 

reviewed their CIPs and updated their 

CIPs to account for any changes in their 

service offerings and for changes to the 

threat landscape. The certification 

would include an attestation that the 

current CIP complies with the 

provisions of the proposed rule. This 

attestation would require the provider to 

indicate the frequency with which it 

was unable to verify the identity of a 

foreign customer in the prior calendar 

year and record the resolution for each 

of those situations. The Department 

seeks comments on the usefulness and 

feasibility of such attestation and 

whether the Department should require 

additional information in these 

certifications, the procedures for 

submission of such certifications, and 

whether the Department should require 

these certifications more or less 

frequently than annually. The 

Department seeks comments on whether 

there currently exist best practices for 

customer identification and verification 

that providers can use as a model for 

their CIPs. 

G. Exemptions 

Section 1(c) of E.O. 13984 permits the 

Secretary, in accordance with such 

standards and procedures as the 

Secretary may delineate and, in 

consultation with the Secretary of 

Defense, the Attorney General, the 

Secretary of Homeland Security, and the 

Director of National Intelligence, to 

exempt any U.S. IaaS provider, or any 

specific type of Account or lessee, from 

the requirements of any regulation 

issued pursuant to the section. Such 

standards and procedures may include 

a finding by the Secretary that a 

provider, Account, or lessee complies 

with security best practices to otherwise 

deter abuse of IaaS products. Section 

4.2(d)(iii) of E.O. 14110 also provides 

that the Secretary may ‘‘exempt a 

United States IaaS Provider with respect 

to any specific foreign reseller of their 

United States IaaS Products, or with 

respect to any specific type of account 

or lessee, from the requirements of any 

regulation issued pursuant to this 

subsection,’’ that section being related 

to CIP requirements for foreign resellers 

of U.S. IaaS products. 

This NPRM proposes standards and 

procedures for exemptions from CIP 

requirements in §§ 7.302 through 7.305 

for U.S. IaaS providers and with regard 

to any of their specific foreign resellers. 

The regulations propose that providers 

seeking an exemption submit a written 

request electronically. The Department 

anticipates that the final rule would 

designate an email address to receive 

such requests. The Department seeks 

comments on these standards and 

procedures in proposed § 7.306. The 

Department seeks comment on whether 

there exist security best practices to 

deter abuse of U.S. IaaS products that 

the Secretary may reference in the 

future to authorize exemptions from 

these regulations, including but not 

limited to improving event log 

management to generate, safeguard, and 

retain logs of IaaS providers’ system and 

network events, both to improve 

incident detection and to aid in incident 

response and recovery activities. The 

Department also seeks comments on 

whether there are appropriate safe 

harbor activities that might form the 

basis of an exemption program. 

(3) Special Measures Regulations 

A. Special Measures Requirements 

The Department proposes regulations 

to implement the authority provided to 

the Secretary to take either of the special 

measures enumerated in E.O. 13984, 

should the Secretary determine that 

reasonable grounds exist for concluding 

that a jurisdiction or person outside of 

the U.S. ‘‘has any significant number of 

foreign persons offering U.S. IaaS 

products that are used for malicious 

cyber-enabled activities or any 

significant number of foreign persons 

directly obtaining U.S. IaaS products for 

use in malicious cyber-enabled 

activities.’’ The Department proposes to 

allow the Department to initiate 

investigations of its own accord or 

accept referrals from other executive 

branch agencies or providers to evaluate 

evidence about a particular foreign 

jurisdiction or person to determine 

whether to impose a special measure. 

The Department would then assess the 

information in its possession and 

information available from public and 

other sources about a foreign person or 

foreign jurisdiction to determine 

whether imposing a special measure 

would be appropriate. Should the 

Secretary determine that the evidence 

warrants the imposition of a special 

measure, the Secretary would issue a 

determination in the Federal Register, 

to take effect 30 days after publication, 

that would set out the reasonable 

grounds for this determination and 


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would indicate which special measure 

the Secretary would intend to use. 

B. Reasonable Grounds Determination 

E.O. 13984 provides that, when 

determining whether a particular 

foreign jurisdiction ‘‘has any significant 

number of foreign persons offering U.S. 

IaaS products that are used for 

malicious cyber-enabled activities or 

any significant number of foreign 

persons directly obtaining U.S. IaaS 

products for use in malicious cyberenabled activities,’’ the Secretary must 

consider, among other relevant 

information: (1) evidence that foreign 

malicious cyber actors have obtained 

U.S. IaaS products in that foreign 

jurisdiction, including whether such 

actors obtained such U.S. IaaS products 

through reseller accounts; (2) the extent 

to which that foreign jurisdiction is a 

source of malicious cyber-enabled 

activities; and (3) whether the U.S. has 

a mutual legal assistance treaty with 

that foreign jurisdiction, and the 

experience of U.S. law enforcement 

officials in obtaining information about 

activities involving U.S. IaaS products 

originating in or routed through such 

foreign jurisdiction. 

With respect to foreign persons, the 

Secretary must assess: (1) the extent to 

which a foreign person uses U.S. IaaS 

products to conduct, facilitate, or 

promote malicious cyber-enabled 

activities; (2) the extent to which U.S. 

IaaS products offered by a foreign 

person are used to facilitate or promote 

malicious cyber-enabled activities; (3) 

the extent to which U.S. IaaS products 

offered by a foreign person are used for 

legitimate business purposes in the 

jurisdiction; and (4) the extent to which 

actions short of the imposition on 

special measures are sufficient, with 

respect to transactions involving the 

foreign person offering U.S. IaaS 

products, to guard against malicious 

cyber-enabled activities. Finally, the 

Secretary may analyze any information 

gleaned through the Department’s 

existing authority to review ICTS 

transactions pursuant to its authority 

derived from Executive Order 13873 of 

May 17, 2019, ‘‘Securing the 

Information and Communications 

Technology and Services Supply 

Chains’’ (84 FR 22689). The Department 

seeks comments on any additional 

relevant factors the Secretary should 

consider. 

C. Choosing a Special Measure 

The Department proposes to require 

that the Secretary’s investigation 

process include consultation with the 

agencies referenced in E.O. 13984, 

namely the Secretary of State, the 

Secretary of the Treasury, the Secretary 

of Defense, the Attorney General, the 

Secretary of Homeland Security, the 

Director of National Intelligence, and 

other heads of other executive 

departments and agencies as the 

Secretary deems appropriate, to 

determine which special measure to 

impose. This consultation would 

include a review of the available 

evidence to determine whether to 

impose a special measure against a 

foreign jurisdiction or against a foreign 

person; a consideration of whether the 

imposition of the special measure 

would create a significant competitive 

disadvantage, including any undue cost 

or burden associated with compliance, 

for providers; and a determination of the 

extent to which the imposition of a 

special measure or the timing of the 

special measure would have a 

significant adverse effect on legitimate 

business activities involving the foreign 

jurisdiction or foreign person. Finally, 

the determination would include an 

assessment of the effect of any special 

measure on U.S. supply chains, public 

health or safety, national security, law 

enforcement investigations, or foreign 

policy. The Department seeks comments 

on whether additional considerations 

should be included before the Secretary 

would choose a special measure. 

(3) AI Training Reporting Requirements 

Section 4.2 (c)(i) of E.O. 14110 

instructs the Secretary to ‘‘propose 

regulations that require United States 

IaaS Providers to submit a report to the 

Secretary of Commerce when a foreign 

person transacts with that United States 

IaaS provider to train a large AI model 

with potential capabilities that could be 

used in malicious cyber-enabled 

activity.’’ Such report shall include, at 

a minimum, the identity of the foreign 

person and the existence of any training 

run of an AI model meeting the criteria 

set forth in E.O. 14110 or otherwise 

determined by the Secretary, and other 

information as identified by the 

Secretary. In addition, section 4.2(c)(ii) 

of E.O. 14110 directs that U.S. IaaS 

providers must be required to prohibit 

foreign resellers of their U.S. IaaS 

products from providing those products 

unless the foreign resellers submit such 

reports to the provider, which the 

provider must provide to the Secretary. 

This proposed rule would require 

such providers to report to the 

Department information on instances of 

training runs by foreign persons for 

large AI models with potential 

capabilities that could be used in 

malicious cyber-enabled activity. 

Reportable information includes the 

identifying information about the 

training run (i.e., the customer’s name, 

address, the means and source of 

payment for the customer’s Account, 

email addresses, telephone numbers, 

and IP addresses) and the existence of 

the training run. The Department 

requests comment on what additional 

information, if any, the Department 

should require providers report. 

Section 4.2(c)(iii) instructs the 

Secretary to ‘‘determine the set of 

technical conditions for a large AI 

model to have potential capabilities that 

could be used in malicious cyberenabled activity, and revise that 

determination as necessary.’’ 

The Department has proposed that a 

model meets the definition of a ‘‘large 

AI model with potential capabilities that 

could be used in malicious cyberenabled activity’’ if it meets technical 

conditions issued by the Department in 

interpretive rules published in the 

Federal Register. The Department will 

update the technical conditions, based 

on technological advancements, as 

necessary and appropriate, as directed 

by E.O. 14110, through interpretive 

rules published in the Federal Register. 

The Department seeks comment on the 

definition of a ‘‘large AI model that 

could be used in malicious cyberenabled activity,’’ and on what Red 

Flags, if any, the Department should 

adopt that would create a presumption 

that a foreign person is training a model 

with the technical conditions set out in 

E.O. 14110. 

(4) Compliance and Enforcement 

Though issued pursuant to the 

President’s authority derived from 

IEEPA, E.O. 13984 is silent as to 

penalties for noncompliance. The 

Department proposes to clarify that any 

person who commits a violation of this 

proposed rule, if finalized, may be liable 

to the United States for civil or criminal 

penalties under IEEPA. Although the 

Department currently has penalty 

provisions under 15 CFR 7.200 for 

violations of Final Determinations 

issued pursuant to the Department’s 

ICTS authorities pursuant to the IEEPA, 

the Department believes it is important 

to have a new enforcement section 

specific to violations of these IaaSrelated provisions. Accordingly, the 

Department is adding a section on 

enforcement, which lists civil and 

criminal penalties, and the acts 

particular to these IaaS-related 

provisions that will result in those 

penalties. For example, the new 

enforcement section specifies that it is 

a violation to fail to create a CIP, or to 

fail to file with the Department a CIP 

certification, or fail to seek 

reauthorization for such CIPs on an 


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1A firm is a business organization consisting of 

one or more domestic establishments in the same 

geographic area and industry that were specified 

under common ownership or control. See: https:// 

www.census.gov/programs-surveys/susb/about/ 

glossary.html. 

annual basis. It is also a violation to fail 

to inform the Department about a 

covered IaaS transaction that might 

result in a customer obtaining or using 

a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity when 

an IaaS provider knows or should know 

of such transaction. 

Regarding penalties for violations, 

whether a violation results in a civil or 

criminal penalty will depend largely on 

the nature of the offense. For example, 

intentionally or knowingly violating a 

provision of these regulations could 

result in criminal penalties, while 

unintentional violations are more likely 

to result in civil penalties. The 

Department seeks comments on this 

approach. 

V. Classification 

a. Executive Order 12866 

This rulemaking has been determined 

to be a significant action under 

Executive Order 12866, as amended by 

Executive Order 14094. 

b. Regulatory Impact Analysis 

As required by Executive Order 

12866, and the Regulatory Flexibility 

Act, 5 U.S.C. 601, et seq., the 

Department of Commerce has prepared 

the following regulatory impact analysis 

(RIA) and initial regulatory flexibility 

analysis (IRFA) for this proposed rule. 

1. Need for Regulatory Action 

The reasons for and need for this 

action are summarized in this preamble. 

This rule is being proposed pursuant to 

E.O. 13984, ‘‘Taking Additional Steps 

To Address the National Emergency 

With Respect to Significant Malicious 

Cyber-Enabled Activities,’’ and E.O. 

14110, ‘‘Safe, Secure, and Trustworthy 

Development and Use of Artificial 

Intelligence.’’ As stated in E.O. 13984, 

‘‘Foreign actors use United States IaaS 

products for a variety of tasks in 

carrying out malicious cyber-enabled 

activities, which makes it extremely 

difficult for United States officials to 

track and obtain information through 

legal process before these foreign actors 

transition to replacement infrastructure 

and destroy evidence of their prior 

activities; foreign resellers of United 

States [IaaS] products make it easier for 

foreign actors to access these products 

and evade detection.’’ Furthermore, E.O. 

14011 states that ‘‘irresponsible use 

could exacerbate societal harms such as 

fraud, discrimination, bias, and 

disinformation; displace and 

disempower workers; stifle competition; 

and pose risks to national security.’’ To 

address these threats, E.O. 13984 

requires the Secretary to propose 

regulations ‘‘that require United States 

Infrastructure as a Service (IaaS) 

providers to verify the identity of a 

foreign person that obtains an Account.’’ 

These regulations must also require U.S. 

IaaS providers to verify the identity of 

foreign customers, and the E.O. 

authorizes the Secretary to limit certain 

foreign actors’ access to U.S. IaaS 

products. E.O. 14110 adds to these 

requirements by requiring the Secretary 

to propose regulations that require U.S. 

IaaS providers to ensure that foreign 

resellers of U.S. IaaS products verify the 

identity of any foreign person that 

obtains an IaaS Account for the foreign 

reseller. These requirements are 

necessary to protect the national 

security of the United States and the 

integrity of the ICTS supply chain. 

2. Affected Entities 

The proposed rulemaking would 

apply to all U.S. providers of U.S. IaaS 

products, including resellers. 

3. Number of Affected Entities 

The Department estimated both a 

lower and upper bound for the number 

of entities affected by the proposed rule. 

To derive the lower bound estimate, the 

Department first identified a core group 

of IaaS providers that operate in the 

United States. This lower bound 

estimate assumes that all United States 

IaaS products are sold directly to the 

customer and no domestic resellers 

supply these products. Based on this 

lower bound estimate, the Department 

estimates that approximately 25 

providers in the United States would be 

potentially directly impacted by this 

rulemaking. 

The upper bound estimate of 

potentially impacted entities is based on 

the estimated number of resellers who 

participate in the sale of U.S. IaaS 

products. According to the Census 

Bureau, in 2020 there were 1,812 firms 

that owned at least one establishment 

located within the United States and 

operating in North American Industry 

Classification System (NAICS) code 

517121—Telecommunication Resellers 

in the United States.1 While most of 

these entities would not likely be 

impacted by this proposed rule as they 

do not resell IaaS products or services, 

the Department uses this figure as the 

upper bound estimate for this impact 

statement because it is possible all of 

the Telecommunications Resellers could 

engage in IaaS product resale. The 

Department therefore estimates the 

number of entities potentially affected 

by this rulemaking would be between 25 

and 1,837. Of those firms operating in 

the Telecommunications Resellers 

industry under NAICS 51721, 99 

percent, or 1,791 firms, operate an 

enterprise size of 500 or fewer 

employees. This data underscores that 

the majority of listed entities in this 

sector can be classified as small 

businesses based on this specific 

definition. 

4. Administrative Compliance Burden 

on U.S. Companies 

The Department assessed the 

administrative compliance burden on 

U.S. companies by estimating the costs 

of: (1) learning about the proposed rule; 

(2) developing CIPs; (3) implementing 

CIPs; (4) updating CIPs; (5) completing 

annual certifications; (6) educating 

foreign resellers on CIP requirements; 

and (7) processing reporting from and 

on foreign resellers and foreign 

customers. Although the rulemaking 

would provide certain regulatory 

alternatives for industry, such as the 

option to adopt the CIP of another 

provider, and exemptions from the CIP 

requirement in certain circumstances, 

the below analysis assumes that each 

company would engage in the 

development, implementation, and 

updating of a CIP. 

The Department also requests public 

comment on any of the assumptions and 

estimates in this analysis. 

i. Learning About the Proposed Rule 

The Department expects that 

businesses learning about the proposed 

rule and its requirements would largely 

be accomplished by attorneys and 

operations managers. The Department’s 

estimate for the cost to businesses of 

learning about the rulemaking is further 

derived from estimates of the number of 

firms potentially impacted by the 

rulemaking, the share of potentially 

impacted firms likely to devote time and 

resources to learning about the 

rulemaking, the number of hours 

needed to read and learn about the 

rulemaking, and the wages of the 

employees tasked with learning about 

the rulemaking. Table 1 provides a 

detailed breakdown of the framework 

for estimating these costs. 


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Table 1: Framework for Estimating Costs Associated with Learning about the Proposed 

Rule 

1 

2 

Entities potentially 

impacted by the 

proposed rule 

Share of potentially 

impacted entities likely 

to devote time and 

resources to learning 

about the proposed rule 

25 

0.5 

1,837 

0.9 

Low estimate is based 

on a supply chain 

analysis of a core 

group of companies 

directly affected by 

the proposed rule. 

High estimate is based 

on an analysis of 

industries that resell 

IaaS roducts. 

At the low end we 

estimate half of 

potentially impacted 

entities will devote 

time and resources 

towards learning about 

the proposed rule. 

This assumes a large 

number of potentially 

impacted entities 

already collect similar 

identifying 

information from their 

customers. At the high 

end we estimate nearl 
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all potentially 

impacted entities will 

devote time and 

resources towards 

learning about the 

proposed rule. 

3 Entities likely to devote 13 1,653 Line 1 * Line 2 

time and resources to 

learning about the 

proposed rule 

4 Operations manager 2 2 This is an estimate of 

hours how long it is likely to 

take an operations 

manager to read and 

understand the 

proposed rule. 

5 Operations manager 118 118 This is the Bureau of 

hourly wage, doubled to Labor Statistics (BLS) 

account for benefits and estimate for the mean 

overhead ($) hourly wage of an 

operations manager, 

doubled to reflect 

benefits and overhead. 

6 Operations manager cost 236 236 Line 4 * Line 5 

per entity ($) 

7 Lawyer hours 10 10 This is an estimate of 

how long it is likely to 

take a lawyer to read 

and understand the 

proposed rule. 

8 Lawyer hourly wage, 157 157 This is the BLS 

doubled to account for estimate for the mean 

benefits and overhead hourly wage of a 

($) lawyer, doubled to 

reflect benefits and 

overhead. 

9 Lawyer cost per entity 1,570 1,570 Line 7 * Line 8 

($) 

10 Total initial cost per 1,806 1,806 Line 6 + Line 9 

entity to learn about 

proposed rule ($) 

11 Total initial cost to learn 22,575 2,985,860 Line 3 * Line 10 

about proposed rule ($) 

12 Annualized cost per 240 240 Line 10 is a one-time 

entity over 10 years at cost per firm to learn 

7% rate($) about the proposed 

rule. Line 12 

annualizes that onetime cost over 10 
5710 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

ii. Developing a CIP 

To develop CIPs, companies would 

likely be required to assess their 

offerings of IaaS products, analyze 

relevant cybersecurity risks associated 

with these products, evaluate 

procedures for customer identity 

verification, and develop risk mitigation 

strategies. 

To estimate the financial impact to 

businesses of developing a CIP, the 

Department estimated the number of 

firms likely impacted by the proposed 

rule, the share of potentially impacted 

firms likely to devote time and 

resources to developing a CIP, the 

number of hours needed to develop a 

CIP, and the wages of the employees 

tasked with developing a CIP. A 

detailed breakdown of the framework 

for estimating these costs can be found 

in table 2. 


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13 

14 

15 

1 

years at a 7% discount 

rate. 

Annualized cost per 206 206 Line 10 is a one-time 

entity over 10 years at cost per firm to learn 

3% rate($) about the proposed 

rule. Line 13 

annualizes that onetime cost over 10 

years at a 3% discount 

rate. 

Total annualized costs at 3,004 397,308 Line 3 * Line 12 

7% discount rate ($) 

Total annualized costs at 2,569 339,839 Line 3 * Line 13 

3% discount rate ($) 

Table 2: Framework for Estimating Costs Associated with Developing a CIP 

Entities potentially 

impacted by the proposed 

rule 

25 1,837 Low estimate is 

based on a supply 

chain analysis of a 

core group of 

companies directly 

affected by the 

proposed rule. High 

estimate is based on 

an anal sis of 
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industries that resell 

IaaS products. 

2 Share of potentially 0.8 1 The Department 

impacted entities likely to estimate that some 

devote time and resources entities already 

to developing a CIP have performed the 

work needed to 

establish a CIP and 

thus will not need 

to devote time and 

resources to 

developing one. 

The high-end 

estimate assumes 

all providers will 

have to change 

their existing 

procedures to come 

into compliance 

with this proposed 

rule. 

3 Entities likely to devote 20 1,837 Line 1 * Line 2 

time and resources to 

developing a CIP 

4 Operations manager hours 80 80 This is an estimate 

of how long it is 

likely to take an 

operations manager 

to develop a CIP. 

5 Operations manager 118 118 This is the BLS 

hourly wage, doubled to estimate for the 

account for benefits and mean hourly wage 

overhead ($) of an operations 

manager, doubled 

to reflect benefits 

and overhead. 

6 Operations manager cost 9,440 9,440 Line 4 * Line 5 

per entity($) 

7 Total initial cost to 188,800 17,341,280 Line 3 * Line 6 

develop a CIP ($) 

8 Annualized cost per entity 1,256 1,256 Line 6 is a one-time 

over 10 years at 7% rate cost per firm to 

($) develop a CIP. Line 

8 annualizes that 

one-time cost over 

10 years at a 7% 

discount rate. 
5712 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

iii. Implementing the CIP 

Implementation of a CIP would likely 

entail: collecting and verifying 

identifying information of customers, 

maintaining a secure recordkeeping 

system, performing due-diligence 

checks using government lists of known 

malicious cyber actors, and providing 

annual reports to the Department. The 

proposed rule would also require 

entities to monitor aspects of 

compliance with their foreign customers 

and resellers. The costs estimated for 

implementing a CIP would be incurred 

annually. To estimate the financial 

impact to businesses of implementing a 

CIP, the Department estimated the 

number of firms potentially impacted by 

the proposed rule, the share of 

potentially impacted firms likely to 

implement a CIP, and the wages of the 

employees performing these tasks. A 

detailed breakdown of the framework 

for estimating these costs can be found 

in table 3. 


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9 

10 

11 

1 

Annualized cost per entity 1,074 1,074 Line 6 is a one-time 

over 10 years at 3% rate cost per firm to 

($) develop a CIP. Line 

9 annualizes that 

one-time cost over 

10 years at a 3% 

discount rate. 

Total annualized costs at 25,122 2,307,484 Line 3 * Line 8 

7% discount rate ($) 

Total annualized costs at 21,488 1,973,716 Line 3 * Line 9 

3% discount rate($) 

Table 3: Framework for Estimating Costs Associated with Implementing a CIP 

Entities potentially 

impacted by the proposed 

rule 

25 1,837 Low estimate is 

based on a supply 

chain analysis of a 

core group of 

companies directly 

affected by the 

proposed rule. High 

estimate is based on 
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an analysis of 

industries that resell 

IaaS products. 

2 Share of potentially 0.8 1 We expect all 

impacted entities likely to entities that develop 

devote time and resources a CIP will 

to implementing a CIP implement the CIP. 

Thus, these 

estimates are 

identical to those in 

table 2. 

3 Entities likely to devote 20 1,837 Line 1 * Line 2 

time and resources to 

implementing a CIP 

4 Number of new Accounts 100 1,000 This is an estimate 

subject to the proposed of the number of 

rule per firm per year transactions for 

each provider likely 

to be subject to CIP 

requirements in a 

given year. 

5 Operations manager hours 0.3 0.3 This is an estimate 

to perform analysis and of the number of 

due diligence per new hours we expect 

account would be needed to 

collect customer 

identification 

information and 

verify that 

information. 

6 Total Operations manager 33 330 Line 4 * Line 5 

hours to perform analysis 

and due diligence per new 

account 

7 Operations manager 118 118 This is the BLS 

hourly wage, doubled to estimate for the 

account for benefits and mean hourly wage 

overhead ($) of an operations 

manager, doubled 

to reflect benefits 

and overhead. 

8 Operations manager cost 39 39 Line 5 * Line 7 

per transaction ($) 

9 Operations manager 3,894 38,940 Line 4 * Line 8 

annual cost per entity($) 

10 Total annual cost($) 77,880 71,532,780 Line 3 * Line 9 
5714 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

iv. Updating the CIP 

The proposed rule would require that 

affected entities regularly, at least 

annually, update their CIPs to account 

for new technologies, cybersecurity 

vulnerabilities, and changes to their 

business. This would likely entail 

reviewing the threat landscape from the 

previous year and identifying system 

vulnerabilities. Table 4 details the 

estimated financial impact to businesses 

of annually updating a CIP. 


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Table 4: Framework for Estimating Costs Associated with Updating the CIP 

Line Item Low Estimate High 'Basis for estimate 

' Estimate ' 

I Entities potentially 25 1,837 Low estimate is based on 

impacted by the a supply chain analysis 

proposed rule of a core group of 

companies directly 

affected by the proposed 

rule. High estimate is 

based on an analysis of 

industries that resell IaaS 

products. 

2 Share of potentially 0.8 I We expect all entities 

impacted entities that develop a CIP will 

likely to devote conduct an annual 

time and resources update. Thus, these 

to updating a CIP estimates are identical to 

those in tables 2 and 3. 

3 Entities likely to 20 1,837 Line I * Line 2 

devote time and 

resources to 

updating a CIP 

4 Number of CIP I 3 Low estimate is based on 

updates necessary the assumption that 

annually businesses are only 

updating their CIPs once 

annually. High estimate 

is based on 2 off-cycle 

major changes in the 

business and threat 

landscape requiring 

additional updates. 

5 Operations manager 20 80 We estimate 0.5 to 2 

hours to review and weeks, depending on the 

assess service complexity of business 
Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5715 

v. Annual Certifications 

The proposed rule would require IaaS 

providers to annually certify to the 

Department that they have updated their 

CIP, that their CIP complies with the 

rulemaking, and that they have recorded 

the resolution of each situation in which 

the IaaS provider was unable to verify 

the identity of a customer since its last 

certification. 

The estimated costs of submitting 

annual certifications would occur 

annually. This estimate for costs is 

derived from estimates of the number of 

firms impacted by the proposed rule, 

the share of potentially impacted firms 

likely to submit the annual 

certifications, and the wages of the 

employees performing these tasks. A 

detailed breakdown of the framework 

for estimating these costs can be found 

in table 5. 


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offerings, threat changes, magnitude of 

landscape, and threats faced, and depth 

failure to verify of customer base. 

customer identities 

6 Operations manager 118 118 This is the BLS estimate 

hourly wage, for the mean hourly wage 

doubled to account of an operations 

for benefits and manager, doubled to 

overhead ($) reflect benefits and 

overhead. 

7 Operations manager 2,360 9,440 Line 5 * Line 6 

cost per update ($) 

8 Lawyer hours to 16 24 We estimate 

review CIP updates approximately 2-3 days 

to review updated CIPs. 

9 Lawyer hourly 157 157 This is the BLS estimate 

wage, doubled to for the mean hourly wage 

account for benefits of a lawyer, doubled to 

and overhead ($) reflect benefits and 

overhead. 

10 Lawyer cost per 2,512 3,768 Line 8 * Line 9 

update($) 

11 Total cost per 4,872 13,208 Line 7 + Line 10 

update($) 

12 Annual cost per 4,872 39,624 Line 11 * Line 4 

entity($) 

13 Total annual cost 97,440 72,789,288 Line 12 * Line 3 

($) 
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Table 5: Framework for Estimating Costs Associated with Annual Certifications 

1 Entities 25 1,837 Low estimate is based on a 

potentially supply chain analysis of a 

impacted by the core group of companies 

proposed rule directly affected by the 

proposed rule. High 

estimate is based on an 

analysis of industries that 

resell IaaS roducts. 

2 Share of 0.8 1 We expect all entities that 

potentially develop a CIP will submit 

impacted entities an Annual Certification. 

likely to devote Thus, these estimates are 

time and identical to those in tables 

resources to 2 and 3. 

submitting 

annual 

certifications. 

3 Entities likely to 20 1,837 Line 1 * Line 2 

devote time and 

resources to 

submitting 

annual 

certifications. 

4 Operations 8 24 This is an estimate of the 

manager hours to time needed to evaluate the . . review pnor year provider's customer base, 

compliance, CIP account offerings, and 

updates, and current vulnerabilities to 

submit prepare the annual 

certification. certification. 

5 Operations 118 118 This is the BLS estimate 

manager hourly for the mean hourly wage 

wage, doubled to of an operations manager, 

account for doubled to reflect benefits 

benefits and and overhead. 

overhead $ 

6 Operations 944 2,832 Line 4 * Line 5 

manager cost per 

entit $ 
Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5717 

vi. Foreign Reseller Requirements 

The burden of learning about the 

proposed rule, and developing, 

maintaining, and recertifying CIPs for 

foreign resellers would fall upon foreign 

entities (the foreign resellers 

themselves). However, the Department 

recognizes that U.S. IaaS providers 

would be part of educating foreign 

resellers on regulatory requirements. 

U.S. IaaS providers would also need to 

collect and submit CIPs from foreign 

resellers. The Department anticipates 

that foreign resellers of U.S. IaaS 

providers would comply with the 

regulatory requirements, so does not 

anticipate there to be impact beyond the 

regulatory costs of compliance (which 

will fall to foreign entities), and the 

burden on U.S. providers to educate 

foreign resellers and process foreign 

reseller CIPs. 

The Department recognizes that 

individual costs to industry would vary 

according to the number of foreign 

resellers connected to a U.S. IaaS 

provider. However, the Department is 

unable to estimate the potential number 

of foreign resellers of U.S. IaaS 

products, as this information is business 

proprietary information held by the U.S. 

IaaS providers. Following the 

implementation of CIP reporting 

requirements to the Department, the 

Department may be able to estimate a 

lower bound and upper bound on 

potential cost per CIP certification. 

However, at this time, due to the 

described limitations, the cost estimates 

have been made on a programmatic 

basis as opposed to a per CIP 

certification basis. 

vii. Educating Foreign Resellers on U.S. 

CIP Requirements 

U.S. IaaS providers would be required 

to ensure their foreign resellers comply 

with this proposed rule and to ensure 

they receive CIPs from their foreign 

resellers. This could involve notifying 

their foreign resellers of this proposed 

rule’s requirements, advising foreign 

resellers on CIP solutions or processes, 

and generally educating foreign resellers 

about this rulemaking. 

This estimate for costs is derived from 

estimates of the number of U.S. firms 

impacted by the proposed rule, the 

share of potentially impacted firms to 

educate their foreign resellers, and the 

wages of the employees performing 

these tasks. A detailed breakdown of the 

framework for estimating these costs can 

be found in table 6. 


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7 Total Annual 18,880 5,202,384 Line 3 * Line 6 

Operations 

manager cost ($) 

8 Lawyer hours to 5 5 This is an estimate of the 

review annual time needed for a lawyer to 

recertifi cations review a provider's annual 

certification prior to 

submission to the 

Department 

9 Lawyer hourly 157 157 This is the BLS estimate 

wage, doubled to for the mean hourly wage 

account for of a lawyer, doubled to 

benefits and reflect benefits and 

overhead ($) overhead. 

10 Lawyer cost per 785 785 Line 8 * Line 9 

annual 

certifications ($) 

11 Total annual 15,700 1,442,045 Line 3 * Line 10 

lawyer cost ($) 

12 Total annual cost 34,580 6,644,429 Line 7 + Line 11 

($) 
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1 

2 

Table 6: Framework for Estimating Costs for U.S. IaaS Providers to Educate 

Foreign Resellers on U.S. CIP Requirements 

Entities potentially 25 1,837 Low estimate is based on 

impacted by the proposed a supply chain analysis 

rule of a core group of 

companies directly 

affected by the proposed 

rule. High estimate is 

based on an analysis of 

industries that resell IaaS 

roducts. 

Share of potentially 0.25 0.75 The Department 

impacted entities likely to estimates that roughly 

devote time and resources half of U.S. IaaS 

to educating their foreign providers have at least 

resellers about the proposed one foreign reseller and 

rule will conse uentl devote 
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time to educating the 

reseller on the provisions 

of this proposed rule. 

Given that most foreign 

reseller arrangements are 

not public information, 

the Department seeks 

comment on this 

estimate. 

3 Entities likely to devote 6 1,378 Line 1 * Line 2 

time and resources to 

educating their foreign 

resellers about the proposed 

rule 

4 Operations manager hours 120 120 This is an estimate of the 

to educate their foreign number of hours we 

resellers about the proposed expect would be needed 

rule for an operations 

manager to educate their 

foreign resellers about 

the proposed rule and aid 

them in developing and 

running a program. We 

estimate approximately 3 

weeks, based on the 2 

weeks estimated for an 

operations manager to 

develop a CIP (table 2), 

plus an additional 1 

week. 

5 Operations manager hourly 118 118 This is the BLS estimate 

wage, doubled to account for the mean hourly wage 

for benefits and overhead of an operations 

($) manager, doubled to 

reflect benefits and 

overhead. 

6 Operations manager cost 14,160 14,160 Line 4 * Line 5 

oer entitv ($) 

7 Lawyer hours to consult 10 10 We estimate 

with operations managers approximately 10 hours 

and foreign resellers about of work spread out over 

foreign reseller CIP the course of a year. 

requirements 

8 Lawyer hourly wage, 157 157 This is the BLS estimate 

doubled to account for for the mean hourly wage 

benefits and overhead ($) of a lawyer, doubled to 

reflect benefits and 

overhead. 

9 Lawyer cost per entity ($) 1,570 1,570 Line 7 * Line 8 
5720 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

viii. Processing Reporting From Foreign 

Resellers and on AI Training Runs 

The costs to U.S. IaaS providers 

associated with processing reporting 

from foreign resellers include costs of 

collecting and submitting to the 

Department upon request the CIPs from 

any foreign resellers, as well as any 

associated miscellaneous administrative 

costs. Processing reporting also would 

include U.S. IaaS providers’ activities to 

report on any of their foreign customers 

using their U.S. IaaS products in a 

covered transaction for large AI model 

training. These would be annual costs. 

This estimate for costs is derived from 

estimates of the number of U.S. firms 

impacted by the proposed rule, the 

share of potentially impacted firms that 

need to process foreign reseller CIPs and 

reports on foreign customers using their 

U.S. IaaS products in a covered 

transaction for large AI model training, 

and the wages of the employees 

performing these tasks. A detailed 

breakdown of the framework for 

estimating these costs can be found in 

table 7. 


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10 Total initial costs per entity 15,730 15,730 Line 6 + Line 9 

to educate foreign resellers 

($) 

11 Total initial costs to educate 98,313 21,672,008 Line 3 * Line 10 

foreign resellers ($) 

12 Annualized cost per entity 2,093 2,093 Line 10 is a one-time 

over 10 years at 7% rate ($) cost per firm to learn 

about the proposed rule. 

Line 12 annualizes that 

one-time cost over 10 

years at a 7% discount 

rate. 

13 Annualized cost per entity 1,790 1,790 Line 10 is a one-time 

over 10 years at 3% rate($) cost per firm to learn 

about the proposed rule. 

Line 13 annualizes that 

one-time cost over 10 

years at a 3% discount 

rate. 

14 Total annualized costs at 13,082 2,883,744 Line 3 * Line 12 

7% discount rate ($) 

15 Total annualized costs at 11,190 2,466,622 Line 3 * Line 13 

3% discount rate ($) 
Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5721 


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1 

2 

3 

4 

5 

Table 7: Framework for Estimating Costs for U.S. IaaS Providers to Process 

Reporting from Foreign Resellers and on AI Training Runs 

Entities 25 1,837 Low estimate is based on a 

potentially supply chain analysis of a core 

impacted by the group of companies directly 

proposed rule affected by the proposed rule. 

High estimate is based on an 

analysis of industries that 

resell laaS roducts. 

Share of 0.25 0.75 The Department estimates that 

potentially roughly half of U.S. IaaS 

impacted entities providers have at least one 

likely to devote foreign reseller and will 

time and consequently dedicate time to 

resources to processing the reporting from 

processing the reseller(s) pursuant to this 

reporting from proposed rule. As such, this 

and on foreign calculation is identical to the 

resellers and one in table 6, and the 

foreign customers Department similarly seeks 

comment on this estimate. 

Entities likely to 6 1,378 Line 1 * Line 2 

devote time and 

resources to 

processmg 

reporting from 

and on foreign 

resellers and 

forei n customers 

Operations 8 40 This is an estimate of the 

manager hours to number of hours we expect 

process reporting would be needed for an 

from and on operations manager to intake, 

foreign resellers review, collate, and submit to 

and foreign the Department the reporting 

customers from foreign resellers. We 

estimate approximately 1 day 

to 1 week of work spread out 

over the course of a year, 

depending on the number of 

foreign resellers and scope of 

their business. 

Operations 118 118 This is the BLS estimate for 

manager hourly the mean hourly wage of an 

wa e, doubled to o erations mana er, doubled 
5722 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

5. Potential Economic Impact of the 

Proposed Rule 

Using the methodology described 

above, the Department has broken out 

the estimated compliance costs— 

summarized in tables 8 and 9— 

associated with the proposed rule’s 

implementation. The cumulative costs 

are estimated to be between $270,672 

and $171.7 million. 


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account for to reflect benefits and 

benefits and overhead. 

overhead ($) 

6 Operations 944 4720 Line 4 * Line 5 

manager cost per 

entitv ($) 

7 Total Annual 5,900 6,502,980 Line 3 * Line 6 

Operations 

manager cost ($) 

8 Lawyer hours to 20 40 We estimate approximately 

advise on 0.5-1 week of work spread out 

reporting from over the course of a year to 

and on foreign support operations managers in 

resellers and the review and submission to 

foreign customers the Department of foreign 

reseller reporting. 

9 Lawyer hourly 157 157 This is the BLS estimate for 

wage, doubled to the mean hourly wage of a 

account for lawyer, doubled to reflect 

benefits and benefits and overhead. 

overhead ($) 

10 Lawyer cost per 3,140 6,280 Line 8 * Line 9 

entity($) 

11 Total Annual 19,625 8,652,270 Line 3 * Line 10 

Lawver cost ($) 

12 Total annual cost 25,525 15,155,250 Line 7 + Line 11 

($) 

Table 8: Estimates for the Cost of the IaaS Proposed Rule (Annualized at 7%) 

1. Leaming about the proposed rule (annualized at 7%) 

2. Developing a CIP (annualized at 7%) 

3. Implementing the CIP 

4. Updating the CIP 

5. Annual Certifications 

6. Education on U.S. CIP Requirements (annualized at 

7% 

7. Processing Reports on and from Foreign Entities 

Total ( annualized at 7%) 

$3,004 $397,308 

$25,122 $2,307,484 

$77,880 $71,532,780 

$97,440 $72,789,288 

$34,580 $6,644,429 

$13,082 $2,883,744 

$25,525 $15,155,250 

$276,633 $171,710,283 
Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5723 

6. Benefits of the Proposed Rule 

The ICTS industry, which includes 

IaaS products, has become integral to 

the daily operations and functionality of 

U.S. critical infrastructure, to U.S. 

Government operations, and to the U.S. 

economy as a whole. As such, 

exploitation of vulnerabilities within 

the ICTS supply chain can have a 

drastic effect on the U.S. national 

security. As noted in E.O. 13984, 

‘‘foreign malicious cyber actors aim to 

harm the United States economy 

through the theft of intellectual property 

and sensitive data and to threaten 

national security by targeting United 

States critical infrastructure for 

malicious cyber-enabled activities.’’ 

U.S. entities providing IaaS products, 

such as network management or data 

storage, can create multiple 

opportunities for foreign adversaries to 

exploit potential vulnerabilities in the 

ICTS ecosystem. These potential 

vulnerabilities are often categorized 

under the general concepts of threats to 

privacy, data integrity, and denial of 

service. 

As E.O. 13984 highlights, foreign 

actors can exploit IaaS product 

vulnerabilities to steal critical 

intellectual property, health data, 

government information, or financial 

user information, potentially without 

detection. Once detected, the existence 

of such vulnerabilities may be extremely 

costly or impossible to remedy. 

Malicious foreign actors can also 

exploit U.S. networks and systems to 

facilitate data breaches, potentially 

modifying critical files or data streams, 

or otherwise impacting the availability 

of data across U.S. networks. Such 

capabilities could be exercised in areas 

as diverse as financial market 

communications, satellite control 

systems, or other sensitive sectors. 

Further, a foreign adversary could 

target vulnerable IaaS products to 

implement denial of service attacks, 

potentially causing widespread 

disruptions to critical industries. 

Without effective attribution, it is 

difficult for authorities to take 

mitigating actions to trace and prevent 

these types of attacks. 

These risks, if exploited, could carry 

significant economic and social costs to 

both the U.S. Government and 

consumers. Sophisticated cyber-attacks 

are often obfuscated, making it difficult 

to establish the exact number of attacks 

that have leveraged IaaS product 

vulnerabilities against the U.S. ICTS 

supply chain. Such attacks, however, 

are increasing in frequency, exacting 

heavy tolls on U.S. consumers and 

businesses. Not only can attacks impact 

both sales and productivity, but they 

can also enact direct costs on businesses 

that must expend significant resources 

to remedy vulnerabilities or even pay 

ransom to retrieve data lost to attackers. 

While the Department is unable to 

calculate with certainty the number of 

attacks targeting the IaaS industry, the 

potential costs from these attacks are 

undoubtedly high. Additionally, if the 

use of IaaS products is expected to 

increase in the future, so too would the 

possibility of attacks. While the 

Department lacks the data necessary to 

determine precisely the monetary 

benefits of this proposed rule to 

compare with its estimated costs, 

significant portions of the U.S. economy 

are dependent on resilient ICTS and 

IaaS supply chains to function, and any 

disruption to these supply chains will 

cause significant economic harm to 

downstream industries. 

7. Regulatory Alternatives 

The Department considered several 

alternatives to this regulation to reduce 

the costs. These are explained in detail 

in subpart C, Regulatory Flexibility 

Analysis, of this section, below. 

A. Regulatory Flexibility Act 

In compliance with section 603 of the 

Regulatory Flexibility Act (RFA), 5 

U.S.C. 601–612, the Department has 

prepared an initial regulatory flexibility 

analysis (IRFA) for this proposed rule. 

The IRFA describes the economic 

impacts the proposed action may have 

on small entities. The Department seeks 

comments on all aspects of the IRFA, 

including the categories and numbers of 

small entities that may be directly 

impacted by this proposed rule. 

(1) A description of the reasons why 

action by the agency is being 

considered. The description of the 

reasons why the proposed rule is being 

considered is contained earlier in the 

preamble and is not repeated here. 

(2) A succinct statement of the 

objectives of, and legal basis for, the 

proposed rule. The Department is 

proposing this rule to comply with 

Executive Order 13984, ‘‘Taking 

Additional Steps To Address the 

National Emergency With Respect to 

Significant Malicious Cyber-Enabled 

Activities’’ (86 FR 6387), and E.O. 

14110, ‘‘Safe, Secure, and Trustworthy 

Development and Use of Artificial 

Intelligence’’ (88 FR 75191). E.O. 13984 

directs the Secretary to propose 

regulations requiring U.S. IaaS 

providers to collect customer 

identifying information from 

prospective customers and to verify the 

identity of all foreign customers. This 

E.O. further requires the Secretary to 

propose regulations authorizing the 


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Table 9: Estimates for the Cost of the IaaS Proposed Rule (Annualized at 3%) 

1. Leaming about the proposed rule (annualized at 3%) 

2. Developing a CIP (annualized at 3%) 

3. Implementing the CIP 

4. Updating the CIP 

5. Annual Certifications 

6. Education on U.S. CIP Requirements (annualized at 3%) 

7. Processing Reports on and from Foreign Entities 

Total (annualized at 3%) 

$2,569 

$21,488 

$77,880 

$97,440 

$34,580 

$11,190 

$25,525 

$270,672 

$339,839 

$1,973,716 

$71,532,780 

$72,789,288 

$6,644,429 

$2,466,622 

$15,155,250 

$170,901,92 

3 
5724 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

Secretary to utilize one of two special 

measures to limit or prohibit specific 

IaaS Accounts should the Secretary, in 

consultation with various heads of other 

Executive agencies, determine that 

reasonable grounds exist to conclude 

the IaaS Account is being used to 

conduct malicious, cyber-enabled 

activity. E.O. 14110 also requires the 

Secretary to propose regulations that 

require U.S. IaaS providers report to the 

Department when they transact with a 

foreign reseller to train a large AI model 

with potential capabilities that could be 

used in malicious cyber-enabled 

activity. 

(3) A description of, and where 

feasible, an estimate of the number of 

small entities to which the proposed 

rule will apply. The proposed rule 

would apply to all providers of U.S. 

IaaS products, including resellers. The 

Department acknowledges that actions 

taken pursuant to this proposed rule 

may affect small entities or groups that 

are not easily categorized at present. 

The Department assesses, based on 

publicly available information, that the 

IaaS market is dominated by four large 

providers; however, it is difficult to 

ascertain how many small entities, are 

present in this market. For resellers, 

Survey of U.S. Business Data suggests 

that approximately 99 percent of the 

roughly 1,800 enterprises categorized as 

‘‘Telecommunications Resellers’’ under 

NAICS code 517911 have fewer than 

500 employees, indicating that the vast 

number of those resellers would be 

small businesses under the Small 

Business Administration (SBA) 

threshold for this NAICS code (https:// 

www.sba.gov/document/support-tablesize-standards). However, the 

Department lacks data on the number of 

these Telecommunications Resellers 

that offer IaaS products. 

(4) A description of the projected 

reporting, recordkeeping and other 

compliance requirements of the 

proposed rule, including an estimate of 

the classes of small entities that will be 

subject to the requirement and the type 

of professional skills necessary for 

preparation of the report or record. The 

proposed rule would impose on all U.S. 

IaaS providers of U.S. IaaS products a 

new requirement to identity and verify 

the identity of all foreign customers. It 

would require providers to ensure that 

foreign resellers of their U.S. IaaS 

products verify the identity of foreign 

users. It would require all U.S. IaaS 

providers of U.S. IaaS products to report 

to the Department information on 

instances of training runs by foreign 

persons for large AI model with 

potential capabilities that could be used 

in malicious cyber-enabled activity. 

Finally, it would require providers to 

submit annual certifications attesting to 

the Department that they have reviewed 

their CIPs and adjusted them to account 

for changes to the threat landscape since 

their prior certification. The Department 

believes this requirement would create 

the following recordkeeping obligations: 

(i) The proposed rule would require 

that the customer identification and 

verification requirement be satisfied by 

obtaining identification information 

from each customer. The provider 

would then be required to verify 

customer identities through 

documentary or non-documentary 

methods and to maintain in its records 

for two years a description of (i) any 

document relied on for verification, (ii) 

any such non-documentary methods 

and results of such measures 

undertaken, and (iii) the resolution of 

any substantive discrepancies 

discovered in verifying the 

identification information. The 

Department estimates that the 

identification, verification, and 

recordkeeping requirements in the 

proposed rule would require an IaaS 

provider employee twenty (20) minutes, 

on average, to fulfill. 

(ii) Annual Certifications. The 

proposed rule would require that U.S. 

IaaS providers of U.S. IaaS products 

provide to the Department annual 

certifications that indicate that the 

provider has updated their customer 

identification program to account for 

technological advances and the evolving 

threat landscape. The Department 

estimates it would require eight (8) to 

twenty-four (24) hours to review prior 

year compliance, complete CIP updates, 

and submit certification. 

(iii) The proposed rule would require 

providers to submit a report to the 

Department whenever a foreign person 

transacts with them to train a large AI 

model with potential capabilities that 

could be used in malicious cyberenabled activity. The Department 

estimates that an IaaS provider making 

a report on such a transaction could take 

on average twenty (20) minutes, 

depending on the complexity of the 

instance. 

(5) An identification, to the extent 

practicable, of all relevant Federal rules 

that may duplicate, overlap or conflict 

with the proposed rule. This rulemaking 

does not duplicate or conflict with any 

Federal rules. 

(6) A description of any significant 

alternatives to the proposed rule that 

accomplish the stated objectives of 

Executive Order 13984 and Executive 

Order 14110 and applicable statutes 

and that would minimize any 

significant economic impact of the 

proposed rule on small entities. 

• No-action alternative: Not 

implementing a rule under these 

Executive orders (E.O.s) is not a viable 

alternative because both E.O.s expressly 

direct that the Secretary ‘‘shall propose 

for notice and comment regulations’’ 

given the related national security 

concerns associated with malicious 

cyber-enabled activities through the use 

of U.S. IaaS products. 

• Alternative that would categorically 

exclude small entities or groups of small 

entities: This alternative would not 

achieve the national security objectives 

of these E.O.s. Due to the nature of ICTS 

networks, allowing even small entities 

or groups of small entities unregulated 

access to IaaS products or services can 

allow malicious actors to perpetrate 

attacks on the entire network, posing an 

undue risk to U.S. critical infrastructure 

and the U.S. economy as a whole. 

• Preferred alternative: The proposed 

rule is the preferred alternative. It 

would achieve the objectives of the 

E.O.s by requiring IaaS providers to 

verify customer identities and 

facilitating the implementation of 

special measures that would allow the 

Secretary to apply a case-by-case, factspecific process to identify, assess, and 

address any and all IaaS Accounts that 

pose an undue risk to the U.S. national 

security. The proposed rule also offers 

an exemption program that would offer 

providers an alternative to the CIP 

requirements to reduce their compliance 

burdens, as providers can decide 

whether it is less burdensome to 

implement a CIP or to apply for an 

exemption. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.) (PRA) provides 

that an agency generally cannot conduct 

or sponsor a collection of information, 

and no person is required to respond to 

nor be subject to a penalty for failure to 

comply with a collection of information 

subject to the requirements of the PRA, 

unless that collection has obtained 

Office of Management and Budget 

(OMB) approval and displays a 

currently valid OMB Control Number. 

This proposed rule contains new 

collection-of-information requirements 

subject to review and approval by OMB 

under the PRA. Specifically, this 

proposed rule would require U.S. IaaS 

providers of U.S. IaaS products to 

develop a written CIP, which dictates 

how the provider would collect 

identifying information about its 

customers, how the provider would 

verify the identity of its foreign 

customers, store and maintain 


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Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5725 

identifying information, and notify its 

customers about the disclosure of 

identifying information. Additionally, 

the proposed rule would require 

providers to report to the Department 

information on instances of training 

runs by foreign persons for large AI 

models with potential capabilities that 

could be used in malicious cyberenabled activity. The Department 

requests comment on what additional 

information, if any, the Department 

should require providers report. 

Moreover, the proposed rule would 

require that U.S. IaaS providers of U.S. 

IaaS products submit to the Department 

an initial certification, and subsequent 

annual certifications, detailing certain 

aspects of their CIPs and stating that 

they have reviewed their CIP and 

adjusted it to account for changes to the 

threat landscape since their prior 

certification. These certifications would 

also include an attestation that the 

current CIP complies with the 

provisions of the proposed rule. The 

attestations would require the provider 

to indicate the frequency with which it 

was unable to verify the identity of a 

foreign customer in the prior calendar 

year and the number of times the 

provider refused to open an Account. 

Alternatively, under the proposed 

rule, U.S. IaaS providers of U.S. IaaS 

products may seek an exemption from 

the CIP requirement by providing a 

written submission to the Secretary. 

Should the Secretary grant an 

exemption on the basis of a finding that 

the provider complies with security best 

practices to deter abuse of IaaS 

products, including that the provider 

has established an Abuse of IaaS 

Products Deterrence Program, the 

provider must thereafter submit annual 

notifications to the Department so that 

the Department could be assured that it 

continues to maintain security best 

practices to deter the abuse of U.S. IaaS 

products. 

Public reporting burden for the 

reporting and recordkeeping 

requirements are estimated to average 

245,229 hours for the initial learning, 

developing, and implementing a CIP for 

the relevant industry participants (897 

respondents * 274 hours, tables 1, 2, 

and 3). Thereafter, the Department 

estimates a public reporting burden of 

84,494 hours to update and annually 

certify with the Department a CIP once 

it has been developed, as well as 

prepare the annual certification (929 

respondents * 91 hours, tables 4 and 5). 

The Department estimates a public 

reporting burden of 127,328 hours for 

the relevant industry participants to 

educate their foreign resellers on the 

proposed rule and process reporting 

from and on foreign resellers and 

foreign customers (692 respondents * 

184 hours, tables 6 and 7). These 

estimates include the time for reviewing 

instructions, searching existing data 

sources, gathering the data needed, and 

completing and reviewing the collection 

of information. 

The total estimated cost to the U.S. 

Government is $409,200 (500 

notifications * 2 staff @GS–12 salary 

($102.30/hr) * average of 10 hours each 

to review for each notification). The 

$102.30 per hour cost estimate for this 

information collection is consistent with 

the GS-scale salary data for a GS–12 step 

5. 

The Department requests comments 

on the information collection and 

recordkeeping requirements associated 

with this proposed rule. These 

comments will help the Department: 

(i) evaluate whether the information 

collection is necessary for the proper 

performance of our agency’s functions, 

including whether the information will 

have practical utility; 

(ii) evaluate the accuracy of our 

estimate of the burden of the 

information collection, including the 

validity of the methodology and 

assumptions used; 

(iii) enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(iv) minimize the burden of the 

information collection on those who are 

to respond (such as through the use of 

appropriate automated, electronic, 

mechanical, or other technological 

collection techniques or other forms of 

information technology, e.g., permitting 

electronic submission of responses). 

C. Unfunded Mandates Reform Act of 

1995 

This proposed rule would not 

produce a Federal mandate (under the 

regulatory provisions of title II of the 

Unfunded Mandates Reform Act of 

1995) for State, local, and tribal 

governments or the private sector. 

D. Executive Order 13132 (Federalism) 

This proposed rule does not contain 

policies having federalism implications 

requiring preparations of a Federalism 

Summary Impact Statement. 

E. Executive Order 12630 

(Governmental Actions and Interference 

With Constitutionally Protected 

Property Rights) 

This proposed rule does not contain 

policies that have takings implications. 

F. Executive Order 13175 (Consultation 

and Coordination With Indian Tribes) 

The Department has analyzed this 

proposed rule under Executive Order 

13175 and has determined that the 

action would not have a substantial 

direct effect on one or more Indian 

tribes, would not impose substantial 

direct compliance costs on Indian tribal 

governments, and would not preempt 

tribal law. 

G. National Environmental Policy Act 

The Department has reviewed this 

rulemaking action for the purposes of 

the National Environmental Policy Act 

(42 U.S.C. 4321 et seq.). It has 

determined that this proposed rule 

would not have a significant impact on 

the quality of the human environment. 

List of Subjects in 15 CFR Part 7 

Administrative practice and 

procedure, Business and industry, 

Communications, Computer technology, 

Critical infrastructure, Executive orders, 

Foreign persons, Investigations, 

National security, Penalties, 

Technology, Telecommunications. 

For the reasons set out in the 

preamble, 15 CFR part 7 is proposed to 

be amended as follows: 

PART 7—SECURING THE 

INFORMATION AND 

COMMUNICATIONS TECHNOLOGY 

AND SERVICES SUPPLY CHAIN 

■ 1. The authority citation for part 7 is 

revised to read as follows: 

Authority: 50 U.S.C. 1701, et seq.; 50 

U.S.C. 1601, et seq.; E.O. 13873, 84 FR 22689, 

3 CFR, 2019 Comp., p. 317; E.O. 13984, 86 

FR 6837, 3 CFR, 2021 Comp., p. 403. 

■ 2. Add subpart D, consisting of 

§§ 7.300 through 7.310, to read as 

follows: 

Subpart D—Infrastructure as a Service 

Providers’ Responsibility To Verify the 

Identity of Their Customers, Special 

Measures, and the Use of Their 

Products for Large AI Model Training 

Sec. 

7.300 Purpose and scope. 

7.301 Definitions and application. 

7.302 Customer Identification Program. 

7.303 Foreign reseller requirements. 

7.304 Customer Identification Program 

reporting requirements. 

7.305 Compliance assessments. 

7.306 Customer Identification Program 

exemptions. 

7.307 Special measures for certain foreign 

jurisdictions or foreign persons. 

7.308 Reporting of large AI model training. 

7.309 Enforcement. 

7.310 Reporting violations. 


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5726 Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 

§ 7.300 Purpose and scope. 

Foreign actors may use United States 

Infrastructure as a Service (IaaS) 

products for a variety of malicious 

cyber-enabled activities. In light of these 

threats, it is the purpose of this subpart 

to: 

(a) Require U.S. IaaS providers of U.S. 

IaaS products to implement programs to 

maintain certain records related to IaaS 

Accounts in which foreign persons have 

an interest and verify the identity of 

such persons, and to require their 

foreign resellers to do the same, in order 

to facilitate law enforcement requests 

for such records and otherwise 

implement the provisions of Executive 

Order 13984 and Executive Order 

14110; 

(b) Prevent foreign persons from using 

U.S. IaaS products to conduct malicious 

cyber-enabled activities; and 

(c) Safeguard the national security of 

the United States. 

§ 7.301 Definitions and application. 

For the purposes of this subpart: 

Artificial intelligence or AI has the 

meaning set forth in 15 U.S.C. 9401(3). 

AI model means a component of an 

information system that implements AI 

technology and uses computational, 

statistical, or machine-learning 

techniques to produce outputs from a 

given set of inputs. 

AI system means any data system, 

software, hardware, application, tool, or 

utility that operates in whole or in part 

using AI. 

Availability means ensuring timely 

and reliable access to and use of 

information and information systems by 

an authorized person or system, 

including resources provided as part of 

a product or service. 

Beneficial owner means an individual 

who either: 

(1) Exercises substantial control over 

a customer; or 

(2) Owns or controls at least 25 

percent of the ownership interests of a 

customer. 

Confidentiality means preserving 

authorized restrictions on information 

access and disclosure, including means 

for protecting personal privacy and 

proprietary information. 

Customer means any individual or 

entity who contracts with an IaaS 

provider to create or maintain an IaaS 

Account with an IaaS provider. 

Customer Identification Program or 

CIP means a program created by a 

United States IaaS provider of U.S. IaaS 

products that dictates how the provider 

will collect identifying information 

about its customers, how the provider 

will verify the identity of its foreign 

customers, store and maintain 

identifying information, and notify its 

customers about the disclosure of 

identifying information. 

Department means the United States 

Department of Commerce. 

Disassociability means enabling the 

processing of data or events without 

association to individuals or devices 

beyond the operational requirements of 

the system. 

Dual-use foundation model means: 

(1) An AI model that is trained on 

broad data; generally uses selfsupervision; contains at least tens of 

billions of parameters; is applicable 

across a wide range of contexts; and that 

exhibits, or could be easily modified to 

exhibit, high levels of performance at 

tasks that pose a serious risk to security, 

national economic security, national 

public health or safety, or any 

combination of those matters, such as 

by: 

(i) Substantially lowering the barrier 

of entry for non-experts to design, 

synthesize, acquire, or use chemical, 

biological, radiological, or nuclear 

(CBRN) weapons; 

(ii) Enabling powerful offensive cyber 

operations through automated 

vulnerability discovery and exploitation 

against a wide range of potential targets 

of cyber attacks; or 

(iii) Permitting the evasion of human 

control or oversight through means of 

deception or obfuscation. 

(2) Models meet this definition even 

if they are provided to end users with 

technical safeguards that attempt to 

prevent users from taking advantage of 

the relevant unsafe capabilities. 

Entity means a partnership, 

association, trust, joint venture, 

corporation, group, subgroup, or other 

organization. 

Floating-point operation means any 

mathematical operation or assignment 

involving floating-point numbers, which 

are a subset of the real numbers 

typically represented on computers by 

an integer of fixed precision scaled by 

an integer exponent of a fixed base. 

Foreign beneficial owner means a 

beneficial owner that is not a United 

States person. 

Foreign customer means a customer 

that is not a United States person. 

Foreign jurisdiction means any 

country, subnational territory, or region, 

other than those subject to the civil or 

military jurisdiction of the United 

States, in which any person or group of 

persons exercises sovereign de facto or 

de jure authority, including any such 

country, subnational territory, or region 

in which a person or group of persons 

is assuming to exercise governmental 

authority whether such a person or 

group of persons has or has not been 

recognized by the United States. 

Foreign person means a person that is 

not a United States person. 

Foreign reseller or foreign reseller of 

U.S. Infrastructure as a Service products 

mean a foreign person who has 

established an Infrastructure as a 

Service Account to provide 

Infrastructure as a Service products 

subsequently, in whole or in part, to a 

third party. 

Generative AI means the class of AI 

models that emulate the structure and 

characteristics of input data in order to 

generate derived synthetic content. This 

can include images, videos, audio, text, 

and other digital content. 

Individual means any natural person. 

Infrastructure as a Service Account or 

Account means a formal business 

relationship established to provide IaaS 

products to a person in which details of 

such transactions are recorded. 

Infrastructure as a Service product or 

IaaS product means a product or service 

offered to a consumer, including 

complimentary or ‘‘trial’’ offerings, that 

provides processing, storage, networks, 

or other fundamental computing 

resources, and with which the consumer 

is able to deploy and run software that 

is not predefined, including operating 

systems and applications. The consumer 

typically does not manage or control 

most of the underlying hardware but has 

control over the operating systems, 

storage, and any deployed applications. 

The term is inclusive of ‘‘managed’’ 

products or services, in which the 

provider is responsible for some aspects 

of system configuration or maintenance, 

and ‘‘unmanaged’’ products or services, 

in which the provider is only 

responsible for ensuring that the 

product is available to the consumer. 

The term is also inclusive of 

‘‘virtualized’’ products and services, in 

which the computing resources of a 

physical machine are split between 

virtualized computers accessible over 

the internet (e.g., ‘‘virtual private 

servers’’), and ‘‘dedicated’’ products or 

services in which the total computing 

resources of a physical machine are 

provided to a single person (e.g., ‘‘baremetal servers’’). 

Integer operation means any 

mathematical operation or assignment 

involving only integers, or whole 

numbers expressed without a decimal 

point. 

Integrity means guarding against 

improper information modification or 

destruction and includes ensuring 

information non-repudiation and 

authenticity. 

Knowledge has the meaning set out in 

15 CFR 772.1. 


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Large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity means 

any AI model with the technical 

conditions of a dual-use foundation 

model or otherwise has technical 

parameters of concern, that has 

capabilities that could be used to aid or 

automate aspects of malicious cyberenabled activity, including but not 

limited to social engineering attacks, 

vulnerability discovery, denial-ofservice attacks, data poisoning, target 

selection and prioritization, 

disinformation or misinformation 

generation and/or propagation, and 

remote command-and-control of cyber 

operations. A model shall be considered 

to be a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity under 

this definition if it meets the technical 

conditions described in interpretive 

rules issued by the Department and 

published in the Federal Register. 

Machine learning means a set of 

techniques that can be used to train AI 

algorithms on data to improve 

performance at a task or tasks. 

Malicious cyber-enabled activities 

means activities, other than those 

authorized by or in accordance with 

U.S. law, that seek to compromise or 

impair the confidentiality, integrity, or 

availability of computer, information, or 

communications systems, networks, 

physical or virtual infrastructure 

controlled by computers or information 

systems, or information resident 

thereon. 

Manageability means providing the 

capability for granular administration of 

data, including alteration, deletion, and 

selective disclosure. 

Model weight means a numerical 

parameter within an AI model that 

helps determine the model’s outputs in 

response to inputs. 

Predictability means enabling reliable 

assumptions by individuals, owners, 

and operators about data and their 

processing by a system, product, or 

service. 

Person means an individual or entity. 

Privacy-preserving data sharing and 

analytics means the use of privacyenhancing technologies to achieve 

disassociability, predictability, 

manageability, and confidentiality when 

performing analytics on data. 

Red Flag means a pattern, practice, or 

specific activity that indicates the 

possible existence of malicious cyberenabled activities. 

Reseller means a person that 

maintains a Reseller Account. 

Reseller Account means an 

Infrastructure as a Service Account 

established to provide IaaS products to 

a person who will then offer those 

products subsequently, in whole or in 

part, to a third party. 

Risk-based means based on an 

appropriate assessment of the relevant 

risks, including those presented by the 

various types of service offerings 

maintained by the provider, the 

methods used to open an Account, the 

varying types of identifying information 

available to the provider, and the 

provider’s customer base. 

Secretary means the Secretary of 

Commerce or the Secretary’s designee. 

Threat landscape means the broad 

environment of geopolitical, economic, 

and technological factors that must be 

evaluated when developing risk-based 

procedures that enable the provider to 

form a reasonable belief of the true 

identity of each account owner and 

beneficial owner to deter facilitating 

significant Malicious cyber-enabled 

activities. 

Training or training run refers to any 

process by which an AI model learns 

from data using computing power. 

Transaction means any transfer of 

value including any of the following, 

whether proposed or completed: an 

exchange of value for a good or service; 

a merger, acquisition, or takeover; an 

investment; and any other transfer, 

agreement, or arrangement, the structure 

of which is designed or intended to 

evade or circumvent the application of 

§ 7.307. 

United States Infrastructure as a 

Service product or U.S. IaaS product 

means any Infrastructure as a Service 

product owned by any United States 

person or operated within the territory 

of the United States. 

United States Infrastructure as a 

Service provider or U.S. IaaS provider 

means any United States person that 

offers any Infrastructure as a Service 

product. 

United States person or U.S. person 

means any U.S. citizen, lawful 

permanent resident of the United States 

as defined by the Immigration and 

Nationality Act, entity organized under 

the laws of the United States or any 

jurisdiction within the United States 

(including foreign branches), or any 

person located in the United States. 

United States Reseller or U.S. Reseller 

means a reseller that is a United States 

person. 

§ 7.302 Customer Identification Program. 

(a) In general. Each U.S. IaaS provider 

of U.S. IaaS products must maintain and 

implement a written Customer 

Identification Program (CIP) that meets 

the requirements in this section. 

(b) Scope of CIP. The CIP must be 

appropriate for the IaaS providers’ size, 

type of IaaS products offered, and 

relevant risks (including those 

presented by the various types of service 

offerings maintained by the IaaS 

providers, the various methods of 

opening Accounts, the varying types of 

identifying information available, and 

the IaaS providers’ customer base) that, 

at a minimum, include each of the 

requirements of this section. Any IaaS 

provider who is only a reseller of U.S. 

IaaS products, may, by agreement with 

the initial U.S. IaaS provider, reference, 

use, or adopt the initial U.S. IaaS 

provider’s CIP for purposes of meeting 

the requirements of this section. 

(c) Foreign reseller CIP. As specified 

in § 7.303(a), U.S. IaaS providers of U.S. 

IaaS products must ensure that foreign 

resellers of their U.S. IaaS products 

maintain and implement a written CIP 

that meets the requirements in this 

paragraph (c) and paragraphs (d) and (e) 

of this section. 

(d) Identity verification procedures. 

The CIP must include risk-based 

procedures for verifying the identity of 

each foreign customer to the extent it 

enables the U.S. IaaS provider or foreign 

reseller of U.S. IaaS products to form a 

reasonable belief that it knows the true 

identity of each customer. 

(1) Customer information required. (i) 

The CIP must contain procedures that 

enable the U.S. IaaS provider or foreign 

reseller of U.S. IaaS products to 

determine whether a potential customer 

and all beneficial owners are U.S. 

persons. If the IaaS provider determines 

the potential customer and all beneficial 

owners are U.S. persons, this subpart 

will not apply to any IaaS Account 

opened for use by that U.S. person. U.S. 

IaaS providers and foreign resellers of 

U.S. IaaS products must exercise 

reasonable due diligence to ascertain the 

true identity of any customer or 

beneficial owner of an Account who 

claims to be a U.S. person. 

(ii) The CIP must contain procedures 

for opening an Account that specify the 

identifying information that will be 

obtained from each potential customer 

and beneficial owner(s) of an Account 

that will be used to determine whether 

they are U.S. persons. These procedures 

must provide U.S. IaaS providers or 

foreign resellers of U.S. IaaS products 

with a sound basis to verify the true 

identity of their customer and beneficial 

owners and reflect reasonable due 

diligence efforts. 

(iii) All U.S. IaaS providers and all of 

their foreign resellers of U.S. IaaS 

products must obtain, at a minimum, 

the following information from any 

potential foreign customer or foreign 

beneficial owner prior to opening an 

Account: 


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(A) Name, which shall be: 

(1) For an individual, full legal name; 

or 

(2) For an entity, business name, 

including all names under which the 

business is known to be or has been 

doing business. 

(B) Address, which shall be: 

(1) For an individual, a residential or 

business street address and the 

location(s) from which the IaaS product 

will be used. 

(2) For an individual who does not 

have a residential or business street 

address, an Army Post Office (APO) or 

Fleet Post Office (FPO) box number, and 

the location(s) from which the IaaS 

product will be used. 

(3) For an entity, a principal place of 

business, or if an entity is not a 

business, the address to which inquiries 

should be directed, and the location(s) 

from which the IaaS product will be 

used. 

(4) For a person other than an 

individual (such as a corporation, 

partnership, or trust), the jurisdiction 

under whose laws the person is 

constituted or organized; and 

(5) For a person other than an 

individual (such as a corporation, 

partnership, or trust), the name(s) of the 

beneficial owner(s) of that Account. 

(C) Means and source of payment for 

the Account including: 

(1) Credit card number; 

(2) Account number; 

(3) Customer identifier; 

(4) Transaction identifier; 

(5) Virtual currency wallet or wallet 

address identifier; 

(6) Equivalent payment processing 

information, for alternative sources of 

payment; or 

(7) Any other payment sources or 

types used. 

(D) Email address. 

(E) Telephonic contact information. 

(F) internet protocol (IP) addresses 

used for access or administration and 

the date and time of each such access or 

administrative action, related to ongoing 

verification of such foreign person’s 

ownership or control of such Account. 

(2) Customer verification. The CIP 

must contain procedures for verifying 

the identity of the potential foreign 

customer and beneficial owners of the 

Account, including by using 

information obtained in accordance 

with paragraph (d)(1) of this section, 

prior to opening the Account. The 

procedures must include a documentary 

verification method, as provided in 

paragraph (d)(2)(i) of this section, a nondocumentary verification method, as 

described in paragraph (d)(2)(ii) of this 

section or a combination of both 

methods. 

(i) Verification through documents. 

For an IaaS provider relying on 

documents, the CIP must contain 

procedures that set forth the documents 

the IaaS provider will use and its 

method for ascertaining the documents 

are valid. 

(ii) Verification through nondocumentary methods. For an IaaS 

provider relying on non-documentary 

methods, the CIP must contain 

procedures that describe the nondocumentary methods the IaaS provider 

will use. 

(iii) Additional verification for certain 

customers. The CIP must address 

situations where, based on the IaaS 

provider’s risk assessment of a new 

Account opened by an entity, the IaaS 

provider will obtain further information 

about individuals and beneficial owners 

of the Account, including signatories, in 

order to verify the potential customer’s 

identity. This verification method 

applies only when the IaaS provider 

cannot verify the potential customer’s 

identity using the verification methods 

described in paragraphs (d)(2)(i) and (ii) 

of this section or when the attempted 

verification leads the IaaS provider to 

doubt the true identity of the potential 

customer. 

(iv) U.S. person accounts. If the IaaS 

provider verifies, through the 

procedures outlined in paragraphs 

(d)(2)(i) through (iii) of this section, that 

the customer and all beneficial owners 

are U.S. persons, the Account will not 

be subject to any other regulation in this 

subpart. 

(3) Lack of verification. The CIP must 

include procedures for responding to 

circumstances in which the U.S. IaaS 

provider or foreign reseller of U.S. IaaS 

products cannot form a reasonable belief 

that it knows the identity of a customer 

or beneficial owner. These procedures 

should describe: 

(i) When the IaaS provider should not 

open an Account for the potential 

customer; 

(ii) The terms under which a customer 

may use an Account while the IaaS 

provider attempts to verify the identity 

of a customer or beneficial owner of the 

Account, such as restricted permission 

or enhanced monitoring of the Account; 

(iii) When the IaaS provider should 

close an Account or subject it to other 

measures, such as additional 

monitoring, permitted to be used under 

paragraph (d)(3)(ii) of this section, after 

attempts to verify the identity of a 

customer or beneficial owner of the 

Account have failed; and 

(iv) Other measures for account 

management or redress for customers 

whose identification could not be 

verified or whose information may have 

been compromised. 

(e) Recordkeeping. The CIP must 

include procedures for making and 

maintaining a record of all information 

obtained under the procedures 

implementing paragraph (d) of this 

section. 

(1) Required records. At a minimum, 

the record must include for any foreign 

customer or beneficial owner buying 

from a U.S. IaaS provider or foreign 

reseller of U.S. IaaS products: 

(i) All identifying information about a 

customer or beneficial owner obtained 

under paragraph (d) of this section; 

(ii) A copy or description of any 

document that was relied on under 

paragraph (d)(2)(i) of this section; 

(iii) A description of any methods and 

the results of any measures undertaken 

to verify the identity of the customer 

and beneficial owners under paragraph 

(d)(2)(ii) or (iii) of this section; and 

(iv) A description of the resolution of 

any substantive discrepancy discovered 

when verifying the identifying 

information obtained. 

(2) Retention of records. U.S. IaaS 

providers of U.S. IaaS products must 

retain the records required under 

paragraph (e)(1) of this section for at 

least two years after the date the 

Account is closed or the date the 

Account was last accessed. 

(3) Limits on third-party access to 

records created and maintained 

pursuant to this subpart. The CIP must 

include methods to ensure that records 

created and maintained pursuant to this 

subpart will not be shared with any 

third party, except insofar as such 

access is otherwise consistent with this 

subpart or lawful. Such methods should 

include methods to prevent 

unauthorized access to such records by 

a third party or employee of the IaaS 

provider without a need-to-know, 

including encryption and/or other 

methods to protect the availability, 

integrity, and confidentiality of such 

records. However, these limits need not 

apply when sharing security best 

practices or other threat information 

with other U.S. IaaS providers of U.S. 

IaaS products, or relevant consortia. 

(f) Periodic review. The CIP must 

include risk-based procedures for: 

(1) Requiring a customer to notify the 

IaaS provider when the customer adds 

beneficial owners to its account; and 

(2) Periodic continued verification of 

the accuracy of the information 

provided by a customer. 

§ 7.303 Foreign reseller requirements. 

(a) In general. U.S. IaaS providers that 

contract with, enable, or otherwise 

allow foreign resellers to resell their 


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U.S. IaaS products will be subject to 

certain requirements. Each U.S. IaaS 

provider must ensure that any foreign 

reseller of its U.S. IaaS products 

maintains and implements a written CIP 

as specified in paragraph (b) of this 

section and must furnish a foreign 

reseller’s written CIP upon request from 

the Department, as specified in 

paragraph (c) of this section. 

(b) CIP requirements. Each U.S. IaaS 

provider must require that any foreign 

reseller of its U.S. IaaS products 

maintains and implements a written CIP 

that meets the requirements set forth in 

§ 7.302(d) through (f). 

(c) Collecting and reporting on foreign 

reseller CIPs. Each U.S. IaaS provider 

must follow procedures related to 

reporting on the implementation of CIPs 

for each of the U.S. IaaS provider’s 

foreign resellers as required in § 7.304(e) 

and (f) and according to requirements 

described in § 7.304(a) through (d). 

(d) Furnishing records. Upon 

receiving a request from the Department 

for a foreign reseller’s written CIP, the 

U.S. IaaS provider of U.S. IaaS products 

must provide the foreign reseller’s 

written CIP to the Department within 

ten calendar days of the Department’s 

request. 

(e) Investigation, remediation, and 

termination of foreign reseller 

relationship. A U.S. IaaS provider must 

ensure that its foreign resellers maintain 

CIPs that comply with the requirements 

set forth in § 7.302(c) through (e). A U.S. 

IaaS provider must, upon receipt of 

evidence that indicates the failure of a 

foreign reseller to maintain or 

implement a CIP or the lack of goodfaith efforts by the foreign reseller to 

prevent the use of U.S. IaaS products for 

malicious cyber-enabled activities, take 

steps to close the foreign reseller 

account and, if relevant, to report the 

suspected or actual malicious cyberenabled activity discovered to relevant 

authorities according to the procedures 

the U.S. IaaS provider has described in 

their CIP according to § 7.304(a)(2)(v). 

The U.S. IaaS provider must terminate 

the reseller relationship within 30 

calendar days if the U.S. IaaS provider 

has knowledge that the foreign reseller 

has not remediated the issues identified 

or discovered by the U.S. IaaS provider, 

or if the continuation of the reseller 

relationship otherwise increases the risk 

its U.S. IaaS products may be used for 

malicious cyber-enabled activity. 

§ 7.304 Customer Identification Program 

reporting requirements. 

(a) Certification form. Each U.S. IaaS 

provider must notify the Department of 

implementation of its CIP and, if 

relevant, the CIPs of each foreign 

reseller of its U.S. IaaS products, 

through submission of a CIP 

certification form, which will include: 

(1) A description of: 

(i) The mechanisms, services, 

software, systems, or tools the IaaS 

provider uses to verify the identity of 

foreign persons according to criteria 

described in § 7.302(d); 

(ii) The procedures the IaaS provider 

uses to require a customer to notify the 

IaaS provider of any changes to the 

customer’s ownership—such as adding 

or removing beneficial owners—and the 

IaaS provider’s process for ongoing 

verification of the accuracy of the 

information provided by a customer; 

(iii) The mechanisms, services, 

software, systems, or tools used by the 

IaaS provider to detect malicious cyber 

activity; 

(iv) The IaaS provider’s procedures 

for requiring each foreign reseller to 

maintain a CIP; 

(v) The IaaS provider’s procedures for 

identifying when a foreign person 

transacts to train a large AI model with 

potential capabilities that could be used 

in malicious cyber-enabled activity, 

pursuant to § 7.308; and 

(vi) Name, title, email, and phone 

number of the Primary Contact 

responsible for managing the CIP; 

(2) Information pertaining to the IaaS 

provider’s provision of U.S. IaaS 

products, including: 

(i) A description of the IaaS provider’s 

service offerings and customer bases in 

foreign jurisdictions; 

(ii) The number of employees in IaaS 

provision and related services; 

(iii) The mechanisms, services, 

software, systems, or tools used by the 

IaaS provider to detect malicious cyberenabled activity, to include a 

description of how the mechanisms, 

services, software, systems, or tools are 

used; 

(iv) The mechanisms, services, 

software, systems, or tools used by the 

IaaS provider to detect a training run 

that could result in the training of a 

large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity; 

(v) The process the IaaS provider uses 

to report any suspected or actual 

malicious cyber activity discovered to 

relevant authorities; 

(vi) The number of IaaS customers; 

(vii) The number and locations of the 

IaaS provider’s foreign beneficial 

owners; 

(viii) A list of all foreign resellers of 

IaaS products; and 

(ix) The number of IaaS customer 

accounts held by foreign customers 

whose identity has not been verified, 

including details on: 

(A) The date the IaaS provider 

provisioned the account, or accounts, 

for each customer whose identity is 

unverified; 

(B) A description and timeline of 

actions the IaaS provider will take to 

verify the identity of each customer; 

(C) Any other information available to 

the IaaS provider on the nature of the 

account, or accounts, provided to each 

unverified customer; 

(D) The date the IaaS provider will 

deprovision the accounts if the identity 

of the customer continues to be 

unverified; and 

(E) Steps the IaaS provider will take 

to ensure that foreign persons who 

failed to verify their identities do not 

reestablish new accounts; and 

(3) An attestation that the written CIP 

of the IaaS provider meets the standards 

enumerated in § 7.302. 

(b) Annual certification. U.S. IaaS 

providers must submit to the 

Department certifications of their CIPs 

on an annual basis and, if relevant, the 

CIPs of each foreign reseller of its U.S. 

IaaS products. Annual certifications 

may be submitted to the Department at 

any time within one year of their 

previous notification, but no earlier than 

60 calendar days prior to that date. 

Annual certifications must include any 

updates to the information required in 

paragraph (a) of this section. Each 

annual certification must also include 

attestations that the IaaS provider has: 

(1) Reviewed its CIP since the date of 

the last certification; 

(2) Updated its CIP to account for any 

changes in its service offerings since its 

last certification; 

(3) Updated its CIP to account for any 

changes in the threat landscape since its 

last certification; 

(4) Ensured its CIP complies with this 

subpart since its last certification; 

(5) Tracked the number of times the 

IaaS provider was unable to verify the 

identity of any customer since its last 

certification; and 

(6) Recorded the resolution of each 

situation in which the IaaS provider was 

unable to verify the identity of a 

customer since its last certification. 

(c) Irregular updates. Each U.S. IaaS 

provider must notify the Department if, 

outside of the normal reporting 

schedule described in paragraphs (a) 

and (b) of this section, a significant 

change in business operations or 

corporate structure has occurred or a 

material change to a CIP has been 

implemented, to include, for example, a 

material change in the documentary or 

non-documentary methods of identity 

verification or in the procedures for 

handling unverified accounts. Each U.S. 

IaaS provider must also notify the 


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Department when there is a change in 

the Primary Contact responsible for the 

CIP, or when there is a change in the 

Primary Contact responsible for 

managing the CIP of one of its foreign 

resellers. 

(d) New providers. Prior to furnishing 

any foreign customer with an IaaS 

Account, any newly established U.S. 

IaaS provider must notify the 

Department of implementation of their 

CIP through submission of their CIP 

certification form in accordance with 

the requirements in paragraphs (a) 

through (c) of this section. U.S. IaaS 

providers must notify the Department 

according to procedures described in 

paragraphs (e) and (f) of this section 

prior to the provision of U.S. IaaS 

products to a new foreign reseller of its 

U.S. IaaS products. 

(e) Collection of information from 

foreign resellers. Each U.S. IaaS 

provider of U.S. IaaS products must 

collect from its foreign resellers the 

information necessary for the initial and 

annual reporting requirements in 

paragraphs (a) and (b) of this section. 

(f) Reporting of information from 

foreign resellers. Each U.S. IaaS 

provider of U.S. IaaS products must 

submit on an annual basis CIP 

certification forms for all foreign 

resellers’ CIPs, containing the 

information specified in paragraph (a) of 

this section. Foreign reseller 

certifications may be submitted by the 

U.S. IaaS provider—in compiled 

format—to the Department at any time 

within one year of their previous 

notification, and no earlier than 60 

calendar days prior to that date. 

§ 7.305 Compliance assessments. 

(a) Government inspection. All U.S. 

IaaS providers of U.S. IaaS products 

must maintain a written CIP and copies 

of the CIPs of any of their foreign 

resellers and must provide any copy of 

these CIPs to the Department within ten 

calendar days of a request from the 

Department. If upon inspection the 

Department finds a CIP from either a 

U.S. IaaS provider or their foreign 

reseller fails to meet the requirements in 

§ 7.302(b) through (f), then the 

Department will notify the relevant IaaS 

provider of the specific shortcomings 

identified in its CIP or, if necessary, any 

required special measures as described 

in § 7.307. The IaaS provider shall then 

resolve the identified shortcomings 

within a reasonable time period, as 

determined by the Department, and 

shall resubmit its CIP for further 

inspection. 

(b) In general. The Department will 

review information submitted to the 

Department in CIP certification forms 

and compiled foreign reseller CIP 

certification forms as described in 

§ 7.304. The Department shall, at its sole 

discretion as to time and manner, 

conduct compliance assessments of U.S. 

IaaS providers based on the 

Department’s own evaluation of risks 

associated with a given CIP, U.S. IaaS 

provider, or any of its foreign resellers. 

(c) Information available. The 

Department will evaluate risk and 

conduct compliance assessments based 

on available information, including but 

not limited to: 

(1) Any information provided by U.S. 

IaaS provider in CIP certifications; 

(2) Any additional information or 

communications provided to the 

Department; 

(3) Any publicly available information 

or communications; and 

(4) Any information otherwise 

obtained by or made available to the 

Department. 

(d) Evaluating risk. The Department 

shall maintain sole discretion to 

evaluate risks based on criteria 

including, but not limited to: 

(1) Assessing whether the services or 

products of a U.S. IaaS provider or a 

foreign reseller are being used or are 

likely to be used: 

(i) By foreign malicious cyber actors; 

or 

(ii) By a foreign person to train a large 

AI model with potential capabilities that 

could be used in malicious cyberenabled activity; or 

(2) The failure of any U.S. IaaS 

provider of U.S. IaaS products to: 

(i) Submit a CIP certification; or 

(ii) Implement measures 

recommended by the Department as the 

result of a compliance assessment. 

(e) Compliance assessments. The 

Department shall conduct compliance 

assessments of certain U.S. IaaS 

providers according to the Department’s 

evaluation of risk based on information 

described in paragraph (b) of this 

section. The Department may: 

(1) Conduct compliance assessments 

annually or as determined by the 

Department based on the Department’s 

evaluation of risk of the provider’s CIP; 

(2) Conduct follow-up compliance 

assessments of providers to ensure 

remediation of any findings or 

determinations made by the 

Department; and 

(3) Request an audit of the U.S. IaaS 

provider’s CIP processes and 

procedures. 

(f) Actions. Based on the results of 

compliance assessments, the 

Department may: 

(1) Recommend remediation measures 

to be taken by the U.S. IaaS providers 

of U.S. IaaS products, including but not 

limited to: 

(i) Measures to address any risk of 

U.S. IaaS products being used in 

support of malicious cyber activity or to 

train a foreign-owned large AI model 

with potential capabilities that could be 

used in malicious cyber-enabled 

activity; and 

(ii) Any special measures the IaaS 

provider must take in accordance with 

§ 7.307; and 

(2) Determine to review a transaction 

or class of transactions of an IaaS 

provider according to procedures 

described in subpart B of this part. 

§ 7.306 Customer Identification Program 

exemptions. 

(a) Exemptions. The Secretary, in 

accordance with such standards and 

procedures as outlined in this section, 

may exempt any U.S. IaaS provider, any 

specific type of Account or lessee, or 

any specific foreign reseller of a U.S. 

IaaS provider’s IaaS products, from the 

requirements of this subpart, except 

§§ 7.308 and 7.309. Such standards and 

procedures will include a finding by the 

Secretary that a U.S. IaaS provider, U.S. 

IaaS provider’s foreign reseller, 

Account, or lessee implements security 

best practices to otherwise deter abuse 

of IaaS products. 

(b) Abuse of IaaS Products Deterrence 

Program for IaaS providers. The 

Secretary may make a finding that an 

IaaS provider complies with security 

best practices to deter abuse of IaaS 

products, provided that the IaaS 

provider has established an Abuse of 

IaaS Products Deterrence Program (ADP) 

consistent with this paragraph (b) and 

has requested a finding in accordance 

with the procedures in paragraph (e) of 

this section. Such a finding exempts an 

IaaS provider from the CIP requirements 

in §§ 7.302 and 7.304. The Secretary 

may also make a finding that a foreign 

reseller of U.S. IaaS products complies 

with security best practices to deter 

abuse of IaaS products. Such a finding 

exempts the U.S. IaaS provider from the 

requirements in §§ 7.303 and 7.304 with 

regard to that specific foreign reseller. 

Each IaaS provider that offers or 

maintains one or more Accounts may 

develop, document, and implement an 

ADP that is designed to detect, prevent, 

and mitigate malicious cyber-enabled 

activities in connection with their 

Accounts and the IaaS Accounts of its 

foreign resellers. The ADP must be 

appropriate to the size and complexity 

of the IaaS provider and the nature and 

scope of its product offerings. A U.S. 

IaaS provider or foreign reseller ADP 

must include reasonable policies and 

procedures to: 

(1) Identify relevant Red Flags for the 

Accounts that the IaaS provider offers or 


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maintains, and incorporate those Red 

Flags into its ADP including 

considering: 

(i) Risk Factors such as: 

(A) The types of Accounts it offers or 

maintains; 

(B) The methods it implements for an 

Account to be opened; 

(C) The methods it implements for an 

Account to be accessed; 

(D) The methods it implements to 

monitor and assess activities related to 

its Accounts; or 

(E) Its current or previous experiences 

with malicious cyber-enabled activities. 

(ii) Sources of Red Flags such as: 

(A) Incidents of malicious cyberenabled activities that IaaS providers 

have experienced; 

(B) Vulnerabilities that could 

contribute to malicious cyber-enabled 

activities if left unmitigated; 

(C) Methods of malicious cyberenabled activities that IaaS providers 

have identified; or 

(D) Alerts, notifications, or other 

warnings about malicious cyber-enabled 

activities or improved analytic tools that 

the IaaS provider receives, including 

through engagement with the 

consortium under paragraph (c) of this 

section. 

(iii) Categories of Red Flags such as: 

(A) Presentation of suspicious 

personally identifiable information or 

identity evidence; 

(B) Suspicious or anomalous activity 

detected in relation to an Account; or 

(C) Notice from customers, victims of 

identity theft, law enforcement 

authorities, or other persons regarding 

possible fraud or abuse conducted in 

association with the Account, Account 

compromise, a newly identified 

vulnerability that may impact an IaaS 

product offering if exploited, or identity 

theft in connection with Accounts 

serviced by the IaaS provider. 

(2) Detect Red Flags that have been 

incorporated into the ADP, including by 

implementing privacy-preserving data 

sharing and analytics methods as 

feasible. 

(3) Respond appropriately to any Red 

Flags that are detected to prevent and 

mitigate malicious cyber-enabled 

activities, which may include: 

(i) Monitoring an Account for 

evidence of malicious cyber-enabled 

activities; 

(ii) Contacting the customer; 

(iii) Changing any passwords, security 

codes, or other security devices that 

permit access to an Account; 

(iv) Reopening an Account with a new 

account number; 

(v) Rejecting a request to open a new 

Account; 

(vi) Closing or suspending an existing 

Account; 

(vii) Allowing only certain trusted 

methods of payment; 

(viii) Notifying law enforcement; or 

(ix) Determining that no response or 

a different response is warranted under 

the particular circumstances. 

(4) Ensure the ADP (including the 

relevant Red Flags) is updated regularly 

to reflect changes in risks to Accounts, 

including factors such as: 

(i) The experiences of the IaaS 

provider with malicious cyber-enabled 

activities; 

(ii) Changes in methods of malicious 

cyber-enabled activities; 

(iii) Changes in methods to detect, 

prevent, and mitigate malicious cyberenabled activities; 

(iv) Changes in the types of accounts 

that the IaaS provider offers or 

maintains; and 

(v) Changes in the business 

arrangements of the IaaS provider 

including mergers, acquisitions, 

alliances, joint ventures, and service 

provider or foreign reseller 

arrangements. 

(5) Establish procedures for the 

ongoing administration of the ADP. 

Each IaaS provider implementing an 

ADP must provide for the continued 

administration of the ADP and must: 

(i) Obtain approval of the initial 

written ADP from either its board of 

directors, an appropriate committee of 

the board of directors, or a designated 

employee at the level of senior 

management; 

(ii) Involve the board of directors, an 

appropriate committee thereof, or a 

designated employee at the level of 

senior management in the oversight, 

development, implementation, and 

administration of the ADP; 

(iii) Train staff, as necessary, to 

effectively implement the ADP; and 

(iv) Exercise appropriate and effective 

oversight of reseller arrangements with 

respect to detecting and mitigating Red 

Flags. 

(c) Public-private sector collaboration. 

One factor to be considered by the 

Department in granting an exemption is 

the participation of U.S. IaaS providers 

or a foreign reseller of U.S. IaaS 

products in a consortium to develop and 

maintain privacy-preserving data 

sharing and analytics to enable 

improved detection and mitigation of 

malicious cyber-enabled activities. 

Before implementing privacy-preserving 

data sharing and analytics, IaaS 

providers may initially evaluate 

solutions in a test environment which 

may be established and maintained by 

either industry or the Federal 

Government. The consortium will make 

available tools and expertise to assist 

smaller IaaS providers with conducting 

privacy-preserving data sharing and 

analytics, as well as providing insights, 

policies, and practices for improving 

their ADPs under paragraph (a) of this 

section. IaaS providers must document 

their process and capabilities for 

integrating insights and responding to 

intelligence generated through 

consortium interaction within their ADP 

as described in paragraph (a) of this 

section. 

(d) Investigative cooperation. One 

factor to be considered by the 

Department in granting an exemption is 

voluntary cooperation with law 

enforcement, consistent with otherwise 

applicable law, to provide forensic 

information for investigations of 

identified malicious cyber-enabled 

activities. 

(e) Procedures for requests for 

exemptions from CIP requirements. In 

consultation with the Secretary of 

Defense, the Attorney General, the 

Secretary of Homeland Security, and the 

Director of National Intelligence, or, as 

the Secretary deems appropriate, the 

heads of other executive departments 

and agencies, the Secretary may make a 

finding exempting a U.S. IaaS provider 

from the requirements in §§ 7.302, 

7.304, and 7.305 if the finding 

determines that the U.S. IaaS provider 

complies with security best practices to 

otherwise deter the abuse of IaaS 

products. In consultation with these 

same agencies, the Secretary may also 

make a finding to exempt a U.S. IaaS 

provider with respect to any specific 

foreign reseller of their services from the 

requirements in §§ 7.303 and 7.304, if 

the finding determines that the foreign 

reseller, account, or lessee complies 

with security best practices to otherwise 

deter abuse of United States IaaS 

products. 

(1) Any U.S. IaaS provider of U.S. 

IaaS products seeking to obtain the 

Secretary’s finding exempting it or one 

of its foreign resellers from CIP 

requirements shall initiate the process 

by providing a written submission to the 

Secretary describing its establishment of 

an ADP consistent with paragraph (a) of 

this section. Such submission should be 

made electronically. 

(2) Upon receipt of a written 

submission, the Secretary will review 

the submission and may request 

additional information from the 

submitter. Prior to making a finding, the 

Secretary will consult with the 

Secretary of Defense, the Attorney 

General, the Secretary of Homeland 

Security, and the Director of National 

Intelligence, or their designees. 

(3) The Secretary will make a finding 

based on an evaluation of the following 

factors: 


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(i) Whether the ADP is an appropriate 

size and complexity commensurate with 

the nature and scope of product 

offerings; 

(ii) Whether the Program’s ability to 

deter, detect, and respond to Red Flags 

is sufficiently robust; 

(iii) Whether oversight of reseller 

arrangements is effective; 

(iv) The extent of cooperation by 

providers with law enforcement, 

consistent with otherwise applicable 

law, to provide forensic information for 

investigations of identified malicious 

cyber-enabled activities; and 

(v) Whether they participate in 

public-private collaborative efforts as 

described in paragraph (c) of this 

section. 

(f) Maintenance of exemption. U.S. 

IaaS providers of U.S. IaaS products 

have a continuing obligation to update 

their ADPs in response to the changing 

threat landscape and must notify the 

Secretary of any significant deviations 

or changes to their ADP. U.S. IaaS 

providers must also require their foreign 

resellers to do the same. All U.S. IaaS 

providers must provide information on 

such updates by submitting annual 

notifications for themselves or any of 

their exempt foreign resellers to the 

Department to ensure that exemptions 

from the CIP requirements continue to 

be warranted. 

(g) Revocation of exemption. The 

exemption from CIP requirements may 

be revoked at any time, including to 

impose special measures as described in 

§ 7.307. 

§ 7.307 Special measures for certain 

foreign jurisdictions or foreign persons. 

(a) International counter-malicious 

cyber-enabled activity requirements—(1) 

In general. The Secretary may require 

U.S. IaaS providers of U.S. IaaS 

products to take either of the special 

measures described in paragraph (b) of 

this section if the Secretary determines 

that reasonable grounds exist for 

concluding that a foreign jurisdiction or 

foreign person is conducting malicious 

cyber-enabled activities using U.S. IaaS 

products, in accordance with paragraph 

(c) of this section. 

(2) Evaluation. If the Secretary, based 

on the Secretary’s own initiative or 

upon referral from other executive 

departments and agencies or U.S. IaaS 

providers, is informed that reasonable 

grounds may exist to apply special 

measures to a particular foreign 

jurisdiction or foreign person, the 

Secretary will evaluate the relevant 

factors provided in paragraph (b) of this 

section and consult with the heads of 

other agencies as appropriate, to 

determine whether to impose either of 

the special measures described in 

paragraph (b), and which special 

measure the Secretary will impose. 

(3) Determination. Upon completion 

of the evaluation, the Secretary shall 

issue an unclassified written 

determination that summarizes the 

elements of the evaluation. The 

determination shall identify whether the 

Secretary established, through the 

investigation, that reasonable grounds 

exist to determine that: 

(i) A foreign jurisdiction has any 

significant number of foreign persons 

offering U.S. IaaS products that are used 

for malicious cyber-enabled activities or 

any significant number of foreign 

persons directly obtaining U.S. IaaS 

products for use in malicious cyberenabled activities; or 

(ii) A foreign person has established a 

pattern of conduct of offering U.S. IaaS 

products that are used for malicious 

cyber-enabled activities or directly 

obtaining U.S. IaaS products for use in 

malicious cyber-enabled activities. 

(4) Special measure. The 

determination shall also explain how it 

is consistent with the terms of Executive 

Order 13984 and this subpart. The 

special measure will be imposed as soon 

as the Secretary issues the 

determination. 

(5) Duration of special measure. Any 

determination by which a special 

measure described in paragraphs (b)(1) 

and (2) of this section is imposed may 

not remain in effect for more than 365 

calendar days, except pursuant to the 

publication in the Federal Register, on 

or before the end of the 365-day period 

beginning on the date of the issuance of 

such determination, of a notice of 

extension finding that the measure 

remains necessary for an additional 

period of time. 

(6) Effective date. No U.S. IaaS 

providers shall be required to take any 

of the special measures adopted 

pursuant to this section earlier than 180 

calendar days following the issuance of 

determinations. 

(7) No limitation on other authorities. 

This section shall not be construed as 

superseding or otherwise restricting any 

other authorities granted to the 

Secretary, or to any other agency, by this 

subpart or otherwise. 

(b) Special measures. The special 

measures referred to in paragraph (a) of 

this section, with respect to a foreign 

jurisdiction or foreign person, are as 

follows: 

(1) Prohibitions or conditions on 

customers, potential customers, or 

accounts within certain foreign 

jurisdictions. The Secretary may 

prohibit or impose conditions on the 

opening or maintaining with any U.S. 

IaaS provider of an Account, including 

a Reseller Account, by any foreign 

person located in a foreign jurisdiction 

found to have any significant number of 

foreign persons offering U.S. IaaS 

products used for malicious cyberenabled activities, or by any U.S. IaaS 

provider of U.S. IaaS products for or on 

behalf of a foreign person. 

(2) Prohibitions or conditions on 

certain foreign persons. The Secretary 

may prohibit or impose conditions on 

the opening or maintaining of an 

Account, including a Reseller Account, 

by any U.S. IaaS provider of U.S. IaaS 

products for or on behalf of a foreign 

person, if such an Account involves any 

such foreign person found to be directly 

obtaining or engaged in a pattern of 

conduct of obtaining U.S. IaaS products 

for use in malicious cyber-enabled 

activities or offering U.S. IaaS products 

used in malicious cyber-enabled 

activities. 

(3) Reasonable grounds determination 

factors. In making a determination 

described in paragraph (a) of this 

section, the Secretary shall consider, in 

addition to any and all such information 

as the Secretary determines to be 

relevant, the following potentially 

relevant factors: 

(i) Factors related to a particular 

foreign jurisdiction. (A) Evidence that 

foreign malicious cyber actors have 

obtained U.S. IaaS products from 

persons offering U.S. IaaS products in 

that foreign jurisdiction, including 

whether such actors obtained such U.S. 

IaaS products through foreign resellers; 

(B) The extent to which that foreign 

jurisdiction is a source of malicious 

cyber-enabled activities; and 

(C) Whether the United States has a 

mutual legal assistance treaty with that 

foreign jurisdiction, and the experience 

of law enforcement officials and 

regulatory officials in obtaining 

information about activities involving 

U.S. IaaS products originating in or 

routed through such foreign 

jurisdiction. 

(ii) Factors related to a particular 

foreign person. (A) The extent to which 

a foreign person uses U.S. IaaS products 

to conduct, facilitate, or promote 

malicious cyber-enabled activities; 

(B) The extent to which U.S. IaaS 

products offered by a foreign person are 

used to facilitate or promote malicious 

cyber-enabled activities; 

(C) The extent to which U.S. IaaS 

products offered by a foreign person are 

used for legitimate business purposes in 

the foreign jurisdiction; and 

(D) The extent to which actions short 

of the imposition of special measures 

pursuant to this paragraph (b) are 

sufficient, with respect to transactions 


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involving the foreign person offering 

U.S. IaaS products, to guard against 

malicious cyber-enabled activities. 

(4) Special measure determination 

factors. In selecting which special 

measure(s) to take under this section, 

the Secretary shall consider: 

(i) Whether the imposition of any 

special measure would create a 

significant competitive disadvantage, 

including any undue cost or burden 

associated with compliance, for U.S. 

IaaS providers; 

(ii) The extent to which the 

imposition of any special measure(s) or 

the timing of any special measure(s) 

would have a significant adverse effect 

on legitimate business activities 

involving the particular foreign 

jurisdiction or foreign person; and 

(iii) The effect of any special 

measure(s) on United States national 

security, law enforcement 

investigations, U.S. supply chains, 

foreign policy, or any serious effect on 

U.S. public health or safety. 

(c) Consultations and information to 

be considered in finding foreign 

jurisdictions or foreign persons to be of 

primary malicious cyber-enabled 

activity concern. In general, in making 

a determination described in paragraph 

(a) of this section, the Secretary shall 

consult with the Secretary of State, the 

Secretary of the Treasury, the Secretary 

of Defense, the Attorney General, the 

Secretary of Homeland Security, the 

Director of National Intelligence, and, as 

the Secretary deems appropriate, the 

heads of other executive departments 

and agencies. 

(d) Notification of special measures 

invoked by the Secretary. Not later than 

10 calendar days after the date of any 

determination under paragraph (a)(4) of 

this section, the Secretary shall notify, 

in writing, the Committee on Energy 

and Commerce of the U.S. House of 

Representatives and the Committee on 

Commerce, Science, and Transportation 

of the U.S. Senate of any such action. 

§ 7.308 Reporting of large AI model 

training. 

(a) Reporting requirements. (1) In 

general, each U.S. IaaS provider must 

submit a report to the Department 

whenever they have ‘‘knowledge’’ of a 

covered transaction, as specified in 

paragraph (b) of this section, at the time 

specified in paragraph (c) of this 

section. 

(2) Each U.S. IaaS provider must also 

require that their foreign resellers 

submit a report whenever they have 

‘‘knowledge’’ of a covered transaction, 

as specified in paragraph (b) of this 

section, at the time specified in 

paragraph (c) of this section to the U.S. 

IaaS provider. 

(3) Reports must be submitted to the 

Department in the form and manner 

specified in paragraph (d) of this section 

and, at a minimum, include responses 

for each of the requirements of 

paragraphs (d)(1)(i) through (ii) of this 

section. 

(b) Covered transactions. (1) 

Transactions that are covered 

transactions for the purposes of this 

section include: 

(i) A transaction by, for, or on behalf 

of a foreign person which results or 

could result in the training of a large AI 

model with potential capabilities that 

could be used in malicious cyberenabled activity (see the examples in 

paragraphs (b)(3)(i) and (ii) of this 

section); or 

(ii) A transaction by, for, or on behalf 

of a foreign person, in which the 

original arrangements provided for in 

the terms of the transaction would not 

result in a training of a large AI model 

with potential capabilities that could be 

used in malicious cyber-enabled 

activity, but a development or update in 

the arrangements means the transaction 

now does or could result in the training 

of a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity (see 

the example in paragraph (b)(3)(iii) of 

this section). 

(2) A model shall be considered to be 

a large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity under 

the definition provided in § 7.301 if it 

meets the requirements laid out by the 

Department in interpretive rules 

published in the Federal Register. 

(3)(i) Example 1. Corporation A, a 

foreign person, proposes to train a 

model on the computing infrastructure 

of Corporation B, a U.S. IaaS provider, 

and signs an agreement with 

Corporation B to train the proposed 

model. The technical specifications of 

the model that Corporation A seeks to 

train meet the technical conditions of a 

large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. The 

transaction is a covered transaction. 

(ii) Example 2. Corporation A, a U.S. 

person, makes an equity investment in 

Corporation B, a foreign person, and a 

portion of that investment is in the form 

of credits to use Corporation A’s 

computing infrastructure. Corporation A 

has reason to believe that Corporation B 

intends to use those credits to train a 

large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. The 

transaction is a covered transaction. 

(iii) Example 3. Corporation A, a U.S. 

person, agrees to train an AI model for 

Corporation B, a foreign person. At the 

outset, the agreed-upon technical 

specifications for the model do not meet 

the technical conditions of a dual-use 

foundation model or a model with 

technical conditions of concern. 

However, after training commences, 

adjustments in the training procedure or 

new insights about the model’s 

capabilities provide Corporation A with 

reason to believe that the model will in 

fact have the technical conditions of a 

large AI model with potential 

capabilities that could be used in 

malicious cyber-enabled activity. The 

transaction becomes a covered 

transaction. 

(iv) Example 4. Corporation A, a U.S. 

person, agrees to train an AI model for 

Corporation B, a foreign person, on a 

computing infrastructure co-located in a 

facility owned by Corporation C. The 

model will have the technical 

conditions of a large AI model with 

potential capabilities that could be used 

in malicious cyber-enabled activity. The 

transaction is a covered transaction, and 

Corporation A is responsible for 

reporting the training run to the 

Department. 

(c) Timing of reports—(1) Initial U.S. 

IaaS provider report. U.S. IaaS providers 

shall file with the Department a report 

within 15 calendar days of a covered 

transaction occurring or the provider or 

reseller having ‘‘knowledge’’ that a 

covered transaction has occurred. 

(2) Initial foreign reseller report. U.S. 

IaaS providers must require their foreign 

resellers to file with the U.S. IaaS 

provider a report within 15 calendar 

days of a covered transaction occurring 

or the provider or reseller having 

‘‘knowledge’’ that a covered transaction 

has occurred. The U.S. IaaS provider 

must file this report with the 

Department within 30 calendar days of 

the covered transaction. 

(3) Follow-up report. Any U.S. IaaS 

provider that receives a request from the 

Department for additional information, 

as outlined in paragraph (d) of this 

section, whether in regard to a covered 

transaction of itself or its foreign 

reseller, will file a follow-up report 

responsive to the request within 15 

calendar days of receiving the request 

for additional information. 

(4) Corrected report. If any report filed 

under this section is found to have been 

inaccurate when filed, the U.S. IaaS 

provider shall file a corrected report in 

the form and manner specified in 

paragraph (d) of this section within 15 

calendar dates after the date on which 

the U.S. IaaS provider has ‘‘knowledge’’ 

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(d) Content, form, and manner of 

reports. Each report submitted under 

this section shall be filed with the 

Department in the form and manner that 

the Department shall prescribe in the 

forms and instructions for such report, 

and each person filing such report shall 

certify that the report or application is 

true, correct, and complete. 

(1) Initial U.S. IaaS provider and 

foreign reseller report. An initial report 

of an IaaS provider shall include the 

following: 

(i) Information about the foreign 

person. (A) Name of the foreign 

customer or foreign beneficial owner of 

the customer, which shall be: 

(1) For an individual, full legal name; 

or 

(2) For an entity, business name, 

including all names under which the 

business is known to be or has been 

doing business. 

(3) For both individuals and entities, 

the ultimate beneficial owner, if it is not 

the same as the individual or entity. 

(B) Address, which shall be: 

(1) For an individual, a residential or 

business street address. 

(2) For an individual who does not 

have a residential or business street 

address, an Army Post Office (APO) or 

Fleet Post Office (FPO) box number. 

(3) For an entity, principal places of 

business, or if an entity is not a 

business, the address to which inquiries 

should be directed, and the location(s) 

from which the training request 

originates. 

(4) For a person other than an 

individual (such as a corporation, 

partnership, or trust), the jurisdiction 

under whose laws the person is 

constituted or organized; and 

(5) For a person other than an 

individual (such as a corporation, 

partnership, or trust), the name(s) of the 

beneficial owner(s) of that account, 

including the ultimate beneficial 

owner(s). 

(C) Means and source of payment for 

the account including: 

(1) Credit card number; 

(2) Account number; 

(3) Customer identifier; 

(4) Transaction identifier; 

(5) Virtual currency wallet or wallet 

address identifier; 

(6) Equivalent payment processing 

information, for alternative sources of 

payment; or 

(7) Any other payment sources or 

types used. 

(D) Email address. 

(E) Telephonic contact information. 

(F) IP addresses used for access or 

administration and the date and time of 

each such access or administrative 

action, related to ongoing verification of 

such foreign person’s ownership or 

control of such Account. 

(ii) Information about the training 

run. (A) Estimated number of 

computational operations (e.g., integer 

operations or floating-point operations) 

used in the training run. 

(B) Anticipated start date and 

completion date of the training run. 

(C) Information on training practices, 

including the model of the primary AI 

used in the training run accelerators. 

(D) Information on cybersecurity 

practices including: 

(1) Policies and procedures for 

ensuring secure storage of, and 

protecting access to, trained model 

weights; and 

(2) Any cybersecurity or insider threat 

events that have occurred in the last 

four years that have resulted in 

unauthorized access to model weights 

or model source code, or other damages 

of major concern. 

(2) Follow-up report. A follow-up 

report filed pursuant to a request for 

additional information in paragraph (c) 

of this section shall include all 

information responsive to the request. 

(3) Corrected report. A corrected 

report required to be filed pursuant to 

paragraph (c) of this section shall 

correct all inaccuracies in the 

information previously reported to BIS. 

(e) Request for additional information. 

Upon receiving an initial report, followup report, or corrected report, BIS may 

request that a U.S. IaaS provider or 

foreign reseller of U.S. IaaS products 

submit additional information 

pertaining to activities or risks that 

present concerns to U.S. national 

security. 

(f) Prohibition. No U.S. IaaS provider 

shall provide U.S. IaaS products to 

foreign resellers, unless the U.S. IaaS 

provider has made all reasonable efforts 

to ensure that the foreign reseller 

complies with the requirements of this 

section. Upon receipt of evidence, or 

upon discovery of facts and 

circumstances that indicate that a 

foreign reseller has not complied with 

the requirements of this section, the 

U.S. IaaS provider shall notify the 

foreign reseller of the alleged violation 

and request written confirmation and 

supporting evidence of compliance, 

remediation, or both. Upon subsequent 

receipt of evidence, or discovery of facts 

and circumstances that indicate the 

foreign reseller did not remediate, or 

remains out of compliance, the U.S. IaaS 

provider must suspend the provision of 

U.S. IaaS products to the foreign 

reseller, and shall resume provision of 

U.S. IaaS products only after the foreign 

reseller has provided adequate 

assurances to prevent future violations. 

§ 7.309 Enforcement. 

(a) Prohibitions. The following are 

prohibited: 

(1) Engaging in, or conspiring to 

engage in, any conduct prohibited by 

the regulations issued in this part. 

(2) Failing to submit reports, 

certifications, or recertifications, as 

appropriate, or failing to comply with 

terms of notices or orders provided by 

the Department, and as required by this 

subpart. 

(3) Failing to implement or maintain 

CIPs as required by § 7.302, or 

continuing to transact with a foreign 

reseller that fails to implement or 

maintain a CIP as set forth in § 7.303. 

(4) Providing IaaS products to a 

foreign person while failing to comply 

with any direction, determination, or 

condition issued under this part. 

(5) Aiding, abetting, counseling, 

commanding, inducing, procuring, 

permitting, approving, or otherwise 

supporting any act prohibited by any 

direction, determination, or condition 

issued under this part. 

(6) Attempting or soliciting a violation 

of any direction, determination, or 

condition issued under this part. 

(7) Failing to implement any 

prohibition or suspension as set forth in 

§ 7.308. 

(8) Making a false or misleading 

representation, statement, notification, 

or certification, whether directly or 

indirectly through any other person, or 

falsifying or concealing any material fact 

to the Department in connection with 

compliance under this part. 

(b) Additional obligations. (1) Any 

person who makes a representation, 

statement, or certification to the 

Department relating to the creation or 

maintenance of a CIP, reporting required 

under the CIP, in a written request for 

an exemption, an annual notification 

related to exemptions, or in relation to 

their own or another entities ADP shall 

notify the Department of any material 

change to the CIP or to the IaaS 

provider’s business, that renders the CIP 

unnecessary. 

(2) Any person who has been granted, 

or has had a foreign reseller granted, an 

exemption on the basis of their ADP 

shall notify the Department of any 

material change to the ADP or to the 

IaaS provider’s business that may 

impact the ADP. 

(3) For purposes of paragraph (a)(8) of 

this section, any representation, 

statement, or certification, such as 

(though not limited to) CIPs, written 

request for exemption, or written 

statements on ADPs made by any person 

shall be deemed to be continuing in 

effect until the person notifies the 


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Federal Register / Vol. 89, No. 19 / Monday, January 29, 2024 / Proposed Rules 5735 

Department in accordance with this 

part. 

(c) Maximum penalties—(1) Civil 

penalty. A civil penalty not to exceed 

the amount set forth in section 206 of 

IEEPA, 50 U.S.C. 1705, may be imposed 

on any person who violates, attempts to 

violate, conspires to violate, or 

knowingly causes any violation of 

paragraph (a) of this section. IEEPA 

provides for a maximum civil penalty 

not to exceed the greater of $250,000 per 

violation, subject to inflationary 

adjustment, or an amount that is twice 

the amount of the transaction that is the 

basis of the violation with respect to 

which the penalty is imposed. 

(i) Notice of the penalty, including a 

written explanation of the penalized 

conduct specifying the laws and 

regulations allegedly violated and the 

amount of the proposed penalty, and 

notifying the recipient of a right to make 

a written petition within 30 calendar 

days as to why a penalty should not be 

imposed, shall be served on the notified 

party or parties. 

(ii) The Secretary shall review any 

presentation and issue a final 

administrative decision within 30 

calendar days of receipt of the petition. 

(2) Criminal penalty. A person who 

willfully commits, attempts to commit, 

or conspires to commit, or aids and 

abets in the commission of a violation 

of paragraph (a) of this section shall, 

upon conviction of a violation of IEEPA, 

be fined not more than $1,000,000, or if 

a natural person, may be imprisoned for 

not more than 20 years, or both. 

(3) Civil penalty recovery. Any civil 

penalties authorized in this section may 

be recovered in a civil action brought by 

the United States in U.S. district court. 

(d) Adjustments to penalty amounts. 

(1) The civil penalties provided in 

IEEPA are subject to adjustment 

pursuant to the Federal Civil Penalties 

Inflation Adjustment Act of 1990 (Pub. 

L. 101–410, as amended, 28 U.S.C. 2461 

note). 

(2) The criminal penalties provided in 

IEEPA are subject to adjustment 

pursuant to 18 U.S.C. 3571. 

(e) Other penalities. The penalties 

available under this section are without 

prejudice to other penalties, civil or 

criminal, available under law. Attention 

is directed to 18 U.S.C. 1001, which 

provides that whoever, in any matter 

within the jurisdiction of any 

department or agency in the United 

States, knowingly and willfully falsifies, 

conceals, or covers up by any trick, 

scheme, or device a material fact, or 

makes any false, fictitious, or fraudulent 

statements or representations, or makes 

or uses any false writing or document 

knowing the same to contain any false, 

fictitious, or fraudulent statement or 

entry, shall be fined under title 18, 

United States Code, or imprisoned not 

more than 5 years, or both. 

§ 7.310 Reporting violations. 

(a) Where to report. If a person learns 

of facts or circumstances that indicate a 

violation of any of the requirements in 

this subpart may have occurred, or are 

likely to occur, that person may notify: 

Office of Information and 

Communications Technology and 

Services, Bureau of Industry and 

Security, U.S. Department of Commerce, 

14th Street and Constitution Avenue 

NW, Room A–100, Washington, DC 

20230. 

(b) Reporting distinguished. The 

reporting provisions in paragraph (a) of 

this section are not the ‘‘reporting of 

violations’’ contained within the Export 

Administration Regulations (EAR) in 15 

CFR chapter VII, subchapter C, nor the 

‘‘voluntary self-disclosure’’ within the 

same. 

Alan F. Estevez, 

Under Secretary of Commerce for Industry 

and Security, U.S. Department of Commerce. 

[FR Doc. 2024–01580 Filed 1–26–24; 8:45 am] 

BILLING CODE 3510–20–P 


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