[Federal Register Volume 89, Number 209 (Tuesday, October 29, 2024)]
[Proposed Rules]
[Pages 86116-86227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24582]



[[Page 86115]]

Vol. 89

Tuesday,

No. 209

October 29, 2024

Part II





Department of Justice





-----------------------------------------------------------------------





28 CFR Part 202





Provisions Pertaining to Preventing Access to U.S. Sensitive Personal 
Data and Government-Related Data by Countries of Concern or Covered 
Person; Proposed Rule

Federal Register / Vol. 89 , No. 209 / Tuesday, October 29, 2024 / 
Proposed Rules

[[Page 86116]]


-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

28 CFR Part 202

[Docket No. NSD 104]
RIN 1124-AA01


Provisions Pertaining to Preventing Access to U.S. Sensitive 
Personal Data and Government-Related Data by Countries of Concern or 
Covered Persons

AGENCY: National Security Division, Department of Justice.

ACTION: Proposed rule; request for comments.

-----------------------------------------------------------------------

SUMMARY: The Department of Justice proposes a rule to implement 
Executive Order 14117 of February 28, 2024 (Preventing Access to 
Americans' Bulk Sensitive Personal Data and United States Government-
Related Data by Countries of Concern), by prohibiting and restricting 
certain data transactions with certain countries or persons.

DATES: Written comments on this notice of proposed rulemaking (NPRM) 
must be received by November 29, 2024.

ADDRESSES: You may send comments, identified by Docket No. NSD 104, by 
either of the following methods:
    <bullet> Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for sending comments.
    <bullet> Mail: U.S. Department of Justice, National Security 
Division, Foreign Investment Review Section, 175 N Street NE, 12th 
Floor, Washington, DC 20002.

FOR FURTHER INFORMATION CONTACT: Email (preferred): 
<a href="/cdn-cgi/l/email-protection#337d60771d757a61601d5752475240565046415a474a734640575c591d545c45"><span class="__cf_email__" data-cfemail="4c021f08620a051e1f62282d382d3f292f393e2538350c393f282326622b233a">[email protected]</span></a>. Otherwise, please contact: Lee Licata, 
Deputy Chief for National Security Data Risks, Foreign Investment 
Review Section, National Security Division, U.S. Department of Justice, 
175 N Street NE, Washington, DC 20002; Telephone: 202-514-8648.

SUPPLEMENTARY INFORMATION: In accordance with 5 U.S.C. 553(b)(4), a 
plain language summary of the proposed rule is available at 
www.regulations.gov.

Public Participation

    Instructions: We encourage comments to be submitted via https://www.regulations.gov. Please submit comments only, include your name and 
company name (if any), and cite ``Provisions Pertaining to Preventing 
Access to U.S. Sensitive Personal Data and Government-Related Data by 
Countries of Concern or Covered Persons'' in all correspondence. Anyone 
submitting business confidential information should clearly identify 
the business confidential portion at the time of submission, file a 
statement justifying nondisclosure and referring to the specific legal 
authority claimed, and provide a non-confidential version of the 
submission. For comments submitted electronically containing business 
confidential information, the file name of the business confidential 
version should begin with the characters ``BC.'' Any page containing 
business confidential information must be clearly marked ``BUSINESS 
CONFIDENTIAL'' at the top of that page. The corresponding non-
confidential version of those comments must be clearly marked 
``PUBLIC.'' The file name of the nonconfidential version should begin 
with the character ``P.'' Any submissions with file names that do not 
begin with a ``BC'' will be assumed to be public and will be posted 
without change, including any business or personal information 
provided, such as names, addresses, email addresses, or telephone 
numbers.
    To facilitate an efficient review of submissions, the Department of 
Justice encourages but does not require commenters to: (1) submit a 
short executive summary at the beginning of all comments; (2) provide 
supporting material, including empirical data, findings, and analysis 
in reports or studies by established organizations or research 
institutions; (3) describe the relative benefits and costs of the 
approach contemplated in this NPRM and any alternative approaches; and 
(4) refer to the specific proposed subpart or defined term to which 
each comment is addressed. The Department of Justice welcomes 
interested parties' submissions of written comments discussing relevant 
experiences, information, and views. Parties wishing to supplement 
their written comments with a follow-up meeting may request to do so, 
and the Department of Justice may accommodate such requests as 
resources permit.

Table of Contents

I. Executive Summary
II. Background
III. Advance Notice of Proposed Rulemaking and Comments
IV. Discussion of the Proposed Rule
    A. Subpart C--Prohibited Transactions and Related Activities
    1. Section 202.210--Covered Data Transactions
    2. Section 202.301--Prohibited Data-Brokerage Transactions
    3. Section 202.201--Access
    4. Section 202.249--Sensitive Personal Data
    5. Section 202.212--Covered Personal Identifiers
    6. Section 202.234--Listed Identifier
    7. Section 202.242--Precise Geolocation Data
    8. Section 202.204--Biometric Identifiers
    9. Section 202.224--Human Genomic Data
    10. Other Human `Omic Data
    11. Section 202.240--Personal Financial Data
    12. Section 202.241--Personal Health Data
    13. Section 202.206--Bulk U.S. Sensitive Personal Data
    14. Section 202.205--Bulk
    15. Section 202.222--Government-Related Data
    16. Section 202.302--Other Prohibited Data-Brokerage 
Transactions Involving Potential Onward Transfer to Countries of 
Concern or Covered Persons
    17. Section 202.303--Prohibited Human Genomic Data and Human 
Biospecimen Transactions
    18. Section 202.304--Prohibited Evasions, Attempts, Causing 
Violations, and Conspiracies
    19. Section 202.305--Knowingly Directing Prohibited Transactions
    20. Section 202.215--Directing
    21. Section 202.230--Knowingly
    B. Subpart D--Restricted Transactions
    1. Section 202.401--Authorization To Conduct Restricted 
Transactions; Section 202.402--Incorporation by Reference
    2. Section 202.258--Vendor Agreement
    3. Section 202.217--Employment Agreement
    4. Section 202.228--Investment Agreement
    C. Subpart E--Exempt Transactions
    1. Section 202.501--Personal Communications; Section 202.502--
Information or Informational Materials; and Section 402.503--Travel
    2. Section 202.504--Official Business of the United States 
Government
    3. Section 202.505--Financial Services
    4. Section 202.506--Corporate Group Transactions
    5. Section 202.507--Transactions Required or Authorized by 
Federal Law or International Agreements, or Necessary for Compliance 
With Federal Law
    6. Section 202.508--Investment Agreements Subject to a CFIUS 
Action
    7. Section 202.509--Telecommunications Services
    8. Section 202.510--Drug, Biological Product, and Medical Device 
Authorizations
    9. Section 202.511--Other Clinical Investigations and Post-
Marketing Surveillance Data
    10. Other Exemptions
    D. Subpart F--Determination of Countries of Concern
    1. Section 202.601--Determination of Countries of Concern
    a. China
    b. Cuba
    c. Iran
    d. North Korea
    e. Russia
    f. Venezuela
    E. Subpart G--Covered Persons
    1. Section 202.211--Covered Person
    2. Section 202.701--Designation of Covered Persons
    F. Subpart H--Licensing

[[Page 86117]]

    1. Section 202.801--General Licenses
    2. Section 202.802--Specific Licenses
    3. Conditions on General and Specific Licenses
    G. Subpart I--Advisory Opinions
    1. Section 202.901--Inquiries Concerning Application of This 
Part
    H. Subpart J--Due Diligence and Audit Requirements
    1. Section 202.1001--Due Diligence for Restricted Transactions
    2. Section 202.1002--Audits for Restricted Transactions
    I. Subpart K--Reporting and Recordkeeping Requirements
    1. Section 202.1101--Records and Recordkeeping Requirements
    2. Section 202.1102--Reports To Be Furnished on Demand
    3. Section 202.1103--Annual Reports
    4. Section 202.1104--Reports on Rejected Prohibited Transactions
    J. Subpart M--Penalties and Finding of Violation
    1. Section 202.1301--Penalties for Violations
    2. Section 202.1305--Finding of Violation
    K. Coordination With Other Regulatory Regimes
    L. Severability
V. Analysis for Proposed Bulk Thresholds
    A. Analysis of Sensitivity of Each Category of Sensitive 
Personal Data
    1. Human Genomic Data
    2. Biometric Identifiers
    3. Precise Geolocation Data
    4. Personal Health Data
    5. Personal Financial Data
    6. Covered Personal Identifiers
    B. Grouping the Categories Into Tiers by Similar Sensitivity
    C. Proposed Bulk Thresholds for Each Tier
VI. Interpretation of ``Information or Informational Materials'' in 
IEEPA
    A. The Berman Amendment Is Intended To Protect the Free Exchange 
of Ideas
    B. The Berman Amendment Does Not Reach Transactions Involving 
Sensitive Personal Data Under This Proposed Rule
    C. Exclusion for Materials Already Created and in Existence
VII. Regulatory Requirements
    A. Executive Orders 12866 (Regulatory Planning and Review) as 
Amended by Executive Orders 13563 (Improving Regulation and 
Regulatory Review) and 14094 (Modernizing Regulatory Review)
    1. Executive Summary
    2. Introduction
    3. Market Sectors Impacted by the Proposed Regulation
    a. Sensitive Personal Data and Government-Related Data
    i. Personal Financial Data
    ii. Personal Health Data
    iii. Precise Geolocation Data
    iv. Human Genomic and Human `Omic Data
    v. Biometric Identifiers
    vi. Covered Personal Identifiers
    b. The Data-Brokerage Market
    i. Companies That May Meet the Definition of Data Brokers for 
the Purposes of the Proposed Rule
    ii. Market Size
    iii. Products Sold by Data Brokers
    iv. Price Information
    v. Customers of Data-Brokerage Products
    c. Agreements Affected by the Proposed Regulation
    i. Vendor Agreements
    ii. Employment Agreements
    iii. Investment Agreements
    iv. Security Requirements
    v. Due Diligence and Recordkeeping
    vi. Audits
    vii. Licenses
    4. Need for Regulatory Action
    5. Baseline (Without the Proposed Rule)
    a. Baseline National Security and Foreign-Policy Risks by 
Category of Data
    i. Human Genomic and Human `Omic Data
    ii. Biometric Identifiers
    iii. Precise Geolocation Data
    iv. Personal Health Data
    v. Personal Financial Data
    vi. Covered Personal Identifiers
    vii. Government-Related Data
    b. Baseline: Total Potential U.S. Population Affected by Risks
    c. Summary of Baseline (Without the Proposed Rule)
    6. Alternative Approaches
    7. Benefits of the Proposed Rule
    8. Costs of the Proposed Rule
    a. Value of Lost and Forgone Transactions
    i. Global Market Value of Genomic, Biometric, and Location Data
    ii. U.S. Exports to Relevant Specific Categories and to 
Countries of Concern
    iii. Estimates of U.S. Exports of Genomic, Biometric, and 
Location Data
    iv. Estimates of U.S. Exports of Genomic, Biometric, and 
Location Data to the Six Countries of Concern
    v. Total Estimated Value of Lost and Forgone Transactions
    vi. Alternative Methodology for Estimating the Value of Lost and 
Forgone Transactions
    b. Security Costs
    i. Similar Security Standards and Frameworks
    ii. Current Industry Compliance Level
    iii. Costs of Compliance
    c. Costs Associated With Compliance Program: Due Diligence, 
Recordkeeping, and Auditing
    i. Due Diligence Costs
    ii. Recordkeeping Costs
    iii. Executive Order on Modernizing Regulatory Review 
Recordkeeping and Related Costs
    iv. Auditing Costs
    v. Estimated Recordkeeping Costs From the Reviewed Literature
    vi. Summary of a Compliance Program: Due Diligence, 
Recordkeeping, and Auditing
    9. Summary of Regulatory Analysis
    B. Regulatory Flexibility Act
    1. Succinct Statement of the Objectives of, and Legal Basis for, 
the Proposed Rule
    2. Description of and, Where Feasible, an Estimate of the Number 
of Small Entities to Which The Proposed Rule Will Apply
    3. Description of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements of the Proposed Rule
    4. Identification of all Relevant Federal Rules That May 
Duplicate, Overlap, or Conflict With the Proposed Rule
    C. Executive Order 13132 (Federalism)
    D. Executive Order 13175 (Consultation and Coordination With 
Indian Tribal Governments)
    E. Executive Order 12988 (Civil Justice Reform)
    F. Paperwork Reduction Act
    G. Unfunded Mandates Reform Act

I. Executive Summary

    Executive Order 14117 of February 28, 2024, ``Preventing Access to 
Americans' Bulk Sensitive Personal Data and United States Government-
Related Data by Countries of Concern'' (``the Order''), directs the 
Attorney General to issue regulations that prohibit or otherwise 
restrict United States persons from engaging in any acquisition, 
holding, use, transfer, transportation, or exportation of, or dealing 
in, any property in which a foreign country or national thereof has any 
interest (``transaction''), where the transaction: involves United 
States Government-related data (``government-related data'') or bulk 
U.S. sensitive personal data, as defined by final rules implementing 
the Order; falls within a class of transactions that has been 
determined by the Attorney General to pose an unacceptable risk to the 
national security of the United States because it may enable access by 
countries of concern or covered persons to government-related data or 
Americans' bulk U.S. sensitive personal data; and meets other criteria 
specified by the Order. On March 5, 2024, the National Security 
Division of the Department of Justice (``DOJ'' or ``the Department'') 
issued an Advance Notice of Proposed Rulemaking (``ANPRM'') seeking 
public comment on various topics related to implementation of the 
Order.\1\
---------------------------------------------------------------------------

    \1\ 89 FR 15780 (Mar. 5, 2024).
---------------------------------------------------------------------------

    This Notice of Proposed Rulemaking (``NPRM'') addresses the public 
comments received on the ANPRM, sets forth a proposed rule to implement 
the Order, and seeks public comment. The proposed rule identifies 
classes of prohibited and restricted transactions; identifies countries 
of concern and classes of covered persons with whom the regulations 
would prohibit or restrict transactions involving government-related 
data or bulk U.S. sensitive personal data; establishes a process to 
issue (including to modify or rescind) licenses authorizing otherwise 
prohibited or restricted transactions and to issue advisory opinions; 
and addresses recordkeeping and reporting of transactions to inform 
investigative, enforcement, and regulatory efforts of the Department of 
Justice.

[[Page 86118]]

II. Background

    On February 28, 2024, the President issued Executive Order 14117 
(Preventing Access to Americans' Bulk Sensitive Personal Data and 
United States Government-Related Data by Countries of Concern) (``the 
Order''), pursuant to his authority under the Constitution and the laws 
of the United States, including the International Emergency Economic 
Powers Act (50 U.S.C. 1701 et seq.) (``IEEPA''); the National 
Emergencies Act (50 U.S.C. 1601 et seq.) (``NEA''); and title 3, 
section 301 of the United States Code. In the Order, the President 
expanded the scope of the national emergency declared in Executive 
Order 13873 of May 15, 2019 (Securing the Information and 
Communications Technology and Services Supply Chain), and further 
addressed with additional measures in Executive Order 14034 of June 9, 
2021 (Protecting Americans' Sensitive Data From Foreign Adversaries). 
The President determined that additional measures are necessary to 
counter the unusual and extraordinary threat to U.S. national security 
posed by the continuing efforts of certain countries of concern to 
access and exploit government-related data or Americans' bulk U.S. 
sensitive personal data.
    The Order directs the Attorney General, pursuant to the President's 
delegation of his authorities under IEEPA, to issue regulations that 
prohibit or otherwise restrict United States persons from engaging in 
certain transactions in which a foreign country of concern or national 
thereof has an interest. Restricted and prohibited transactions include 
transactions that involve government-related data or bulk U.S. 
sensitive personal data, are a member of a class of transactions that 
the Attorney General has determined poses an unacceptable risk to the 
national security of the United States because the transactions may 
enable countries of concern or covered persons to access government-
related data or bulk U.S. sensitive personal data, and are not 
otherwise exempted from the Order or its implementing regulations. The 
Order directs the Attorney General to issue regulations that identify 
classes of prohibited and restricted transactions; identify countries 
of concern and classes of covered persons whose access to government-
related data or bulk U.S. sensitive personal data poses the national 
security risk described in the Order; establish a process to issue 
(including to modify or rescind) licenses authorizing otherwise 
prohibited or restricted transactions; further define terms used in the 
Order; address recordkeeping and reporting of transactions to inform 
investigative, enforcement, and regulatory efforts of the Department of 
Justice; and to take whatever additional actions, including 
promulgating additional regulations, as may be necessary to carry out 
the purposes of the Order.
    The Order and this proposed rule fill an important gap in the 
United States Government's authorities to address the threat posed by 
countries of concern accessing government-related data or Americans' 
bulk U.S. sensitive personal data. As the President determined in the 
Order, ``[a]ccess to Americans' bulk sensitive personal data or United 
States Government-related data increases the ability of countries of 
concern to engage in a wide range of malicious activities.'' As the 
ANPRM explained, countries of concern can use their access to 
government-related data or Americans' bulk U.S. sensitive personal data 
to engage in malicious cyber-enabled activities and malign foreign 
influence activities and to track and build profiles on U.S. 
individuals, including members of the military and other Federal 
employees and contractors, for illicit purposes such as blackmail and 
espionage. And countries of concern can exploit their access to 
government-related data or Americans' bulk U.S. sensitive personal data 
to collect information on activists, academics, journalists, 
dissidents, political figures, or members of nongovernmental 
organizations or marginalized communities to intimidate them; curb 
political opposition; limit freedoms of expression, peaceful assembly, 
or association; or enable other forms of suppression of civil 
liberties.
    As the 2024 National Counterintelligence Strategy explains, ``as 
part of a broader focus on data as a strategic resource, our 
adversaries are interested in personally identifiable information (PII) 
about U.S. citizens and others, such as biometric and genomic data, 
health care data, geolocation information, vehicle telemetry 
information, mobile device information, financial transaction data, and 
data on individuals' political affiliations and leanings, hobbies, and 
interests.'' \2\ These and other kinds of sensitive personal data ``can 
be especially valuable, providing adversaries not only economic and 
[research and development] benefits, but also useful 
[counterintelligence] information, as hostile intelligence services can 
use vulnerabilities gleaned from such data to target and blackmail 
individuals.'' \3\
---------------------------------------------------------------------------

    \2\ Nat'l Counterintel. & Sec. Ctr., National 
Counterintelligence Strategy 2024 13 (Aug. 1, 2024), https://www.dni.gov/files/NCSC/documents/features/NCSC_CI_Strategy-pages-20240730.pdf [https://perma.cc/9L2T-VXSU].
    \3\ Id.
---------------------------------------------------------------------------

    Nongovernmental experts have underscored these risks. For example, 
a recent study by the MITRE Corporation summarized open-source 
reporting, highlighting the threat of blackmail, coercion, 
identification of high-risk government personnel and sensitive 
locations, and improved targeting of offensive cyber operations and 
network exploitation posed by hostile actors' access to Americans' data 
derived from advertising technology.\4\
---------------------------------------------------------------------------

    \4\ Kirsten Hazelrig, Ser. No. 14, Intelligence After Next: 
Surveillance Technologies Are Imbedded Into the Fabric of Modern 
Life--The Intelligence Community Must Respond, The MITRE Corporation 
2 (Jan. 5, 2023), https://www.mitre.org/sites/default/files/2023-01/PR-22-4107-INTELLIGENCE-AFTER-NEXT-14-January-2023.pdf [https://perma.cc/3WA2-PGM2].
---------------------------------------------------------------------------

    The development of artificial intelligence (``AI''), high-
performance computing, big-data analytics, and other advanced 
technological capabilities by countries of concern amplifies the threat 
posed by these countries' access to government-related data or 
Americans' bulk U.S. sensitive personal data. For instance, the U.S. 
National Intelligence Council assessed in 2020 that ``access to 
personal data of other countries' citizens, along with [artificial 
intelligence]-driven analytics, will enable [the People's Republic of 
China] to automate the identification of individuals and groups beyond 
China's borders to target with propaganda or censorship.'' \5\
---------------------------------------------------------------------------

    \5\ Nat'l Intel. Council, Assessment: Cyber Operations Enabling 
Expansive Digital Authoritarianism 4 (Apr. 7, 2020), https://www.dni.gov/files/ODNI/documents/assessments/NICM-Declassified-Cyber-Operations-Enabling-Expansive-Digital-Authoritarianism-20200407-2022.pdf [https://perma.cc/ZKJ4-TBU6].
---------------------------------------------------------------------------

    Countries of concern can also exploit their access to government-
related data regardless of volume to threaten U.S. national security. 
One academic study explained that ``[f]oreign and malign actors could 
use location datasets to stalk or track high-profile military or 
political targets,'' revealing ``sensitive locations--such as visits to 
a place of worship, a gambling venue, a health clinic, or a gay bar--
which again could be used for profiling, coercion, blackmail, or other 
purposes.'' \6\ The MITRE report further explained that location 
datasets could reveal ``U.S. military bases and undisclosed 
intelligence sites'' or ``be used to

[[Page 86119]]

estimate military population or troop buildup in specific areas around 
the world or even identify areas of off-base congregation to target.'' 
\7\ As another example of these data risks and the relative ease with 
which they can be exploited, journalists were able to commercially 
acquire from a data broker a continuous stream of 3.6 billion 
geolocation data points that were lawfully collected on millions of 
people from advertising IDs.\8\ The journalists were then able to 
create ``movement profiles'' for tens of thousands of national security 
and military officials, and from there, could determine where they 
lived and worked as well as their names, education levels, family 
situations, and hobbies.\9\
---------------------------------------------------------------------------

    \6\ Justin Sherman et al., Duke Sanford Sch. of Pub. Pol'y, Data 
Brokers and the Sale of Data on U.S. Military Personnel 15 (Nov. 
2023), https://techpolicy.sanford.duke.edu/wp-content/uploads/sites/4/2023/11/Sherman-et-al-2023-Data-Brokers-and-the-Sale-of-Data-on-US-Military-Personnel.pdf [https://perma.cc/BBJ9-44UH].
    \7\ Id.
    \8\ Suzanne Smalley, US Company's Geolocation Data Transaction 
Draws Intense Scrutiny in Germany, The Record (July 18, 2024), 
https://therecord.media/germany-geolocation-us-data-broker [https://perma.cc/ME9F-TAQ7] (citing joint reporting by the German public 
broadcaster Bayerische Rundfunk and digital civil rights opinion 
news site netzpolitik.org).
    \9\ Id.
---------------------------------------------------------------------------

    The Order and this proposed rule seek to mitigate these and other 
national security threats that arise from countries of concern 
accessing government-related data or Americans' bulk U.S. sensitive 
personal data.
    No current Federal legislation or rule categorically prohibits or 
imposes security requirements to prevent U.S. persons from providing 
countries of concern or covered persons access to sensitive personal 
data or government-related data through data brokerage, vendor, 
employment, or investment agreements. For example, the scope and 
structure of the Protecting Americans' Data from Foreign Adversaries 
Act of 2024 (see Pub. L. 118-50, div. I, 118th Cong. (2024)) do not 
create a comprehensive regulatory scheme that adequately and 
categorically addresses these national security risks, as explained in 
part IV.K of this preamble. Likewise, the Committee on Foreign 
Investment in the United States (``CFIUS'') has authority to assess the 
potential national security risks of certain investments by foreign 
persons in certain United States businesses that ``maintain[] or 
collect[] sensitive personal data of United States citizens that may be 
exploited in a manner that threatens national security.'' \10\ CFIUS 
only reviews certain types of investments in U.S. businesses; it does 
so on a transaction-by-transaction basis, instead of prescribing 
prospective and categorical rules regulating all such transactions; and 
its authorities do not extend to other activities that countries of 
concern may use to gain access to government-related data or Americans' 
bulk U.S. sensitive personal data, such as through purchases of such 
data on the commercial market or through vendor or employment 
agreements.\11\
---------------------------------------------------------------------------

    \10\ 50 U.S.C. 4565(a)(4)(B)(iii)(III).
    \11\ See generally Foreign Investment Risk Review Modernization 
Act of 2018, Public Law 115-232, tit. XVII, secs. 1701-28, 132 Stat. 
1636, 2173.
---------------------------------------------------------------------------

    Similarly, Executive Order 13873 prohibits any acquisition, 
importation, transfer, installation, dealing in or use of by U.S. 
persons from acquiring certain information and communication 
technologies and services (``ICTS'') designed, developed, manufactured, 
or supplied by foreign adversaries where, among other things, the 
Secretary of Commerce determines that the transaction poses an 
``unacceptable risk to the national security of the United States or 
the security and safety of United States persons.'' \12\ In building 
upon the national emergency declared in Executive Order 13873, the 
President, in Executive Order 14034, determined that connected software 
applications operating on U.S. ICTS ``can access and capture vast 
swaths of . . . personal information and proprietary business 
information,'' a practice that ``threatens to provide foreign 
adversaries with access to that information.'' \13\ However, as with 
CFIUS legal authorities, the orders do not broadly empower the United 
States Government to prohibit or otherwise restrict the sale of 
government-related data or Americans' bulk U.S. sensitive personal 
data, and the orders do not broadly restrict other commercial 
transactions, such as investment, employment, or vendor agreements, 
that may provide countries of concern access to government-related data 
or Americans' bulk U.S. sensitive personal data.
---------------------------------------------------------------------------

    \12\ E.O. 13873 of May 15, 2019, 84 FR 22689, 22690 (May 15, 
2019).
    \13\ E.O. 14034, 86 FR 31423, 31423 (June 9, 2021).
---------------------------------------------------------------------------

    The proposed rule would complement these statutory and regulatory 
authorities. It prescribes forward-looking, categorical rules that 
prevent U.S. persons from providing countries of concern or covered 
persons access to government-related data or Americans' bulk U.S. 
sensitive personal data through commercial data-brokerage transactions. 
The proposed rule also imposes security requirements on other kinds of 
commercial transactions, such as investment, employment, and vendor 
agreements, that involve government-related data or Americans' bulk 
U.S. sensitive personal data to mitigate the risk that a country of 
concern could access such data. The proposed rule would address risks 
to government-related data or Americans' bulk U.S. sensitive personal 
data that current authorities leave vulnerable to access and 
exploitation by countries of concern and provide predictability and 
regulatory certainty by prescribing categorical rules regulating 
certain kinds of data transactions that could give countries of concern 
or covered persons access to government-related data or Americans' bulk 
U.S. sensitive personal data.

III. Advance Notice of Proposed Rulemaking and Comments

    The National Security Division of the Department published an ANPRM 
on March 5, 2024 (former RIN: 1105-AB72), soliciting public comment on 
various topics related to the Order.\14\ The Department received and 
carefully reviewed 64 timely comments in response to the ANPRM from 
trade associations, public interest advocacy groups, think tanks, 
private individuals, and companies, as well as comments from several 
foreign governments. The Department also received two additional ex 
parte comments after the comment period closed, which DOJ publicly 
posted on regulations.gov.
---------------------------------------------------------------------------

    \14\ 89 FR 15780 (Mar. 5, 2024).
---------------------------------------------------------------------------

    During the comment period, the Department of Justice, both on its 
own and with other agencies, met with businesses, trade groups, and 
other stakeholders potentially interested in or impacted by the 
contemplated regulations to discuss the ANPRM. For example, the 
Department discussed the ANPRM with the Consumer Technology 
Association, the Information Industry Technology Council, 
Pharmaceutical Research and Manufacturers of America, the Biotechnology 
Innovation Organization, the Bioeconomy Information Sharing Analysis 
Center, the U.S. Chamber of Commerce, Tesla, Workday, Anthropic, and 
the Special Competitive Studies Project, and it provided briefings to 
the Secretary of Commerce and Industry Trade Advisory Committees 6, 10, 
and 12 administered by the Office of the U.S. Trade Representative and 
the Department of Commerce. The Department also discussed the Order and 
contemplated regulations with stakeholders at events open to the 
public, including ones hosted by the American Conference Institute, the 
American Bar Association, the Center for Strategic and International 
Studies, and the R Street Institute, and through other public 
engagements such as the Lawfare Podcast, ChinaTalk Podcast, CyberLaw 
Podcast, and the Center for

[[Page 86120]]

Cybersecurity Policy & Law's Distilling Cyber Policy podcast.
    After the comment period closed, the Department of Justice, along 
with the Department of Commerce, followed up with commenters who 
provided feedback regarding the bulk thresholds to discuss that topic 
in more detail, including the Council on Government Relations Industry 
Association, Association of American Medical Colleges, Airlines for 
America, Bank Policy Institute, the Business Roundtable, Information 
Technology Industry Council, Centre for Information Policy Leadership, 
Biotechnology Innovation Organization, Software and Information 
Industry Association, Cellular Telephone Industries Association, the 
internet and Television Association, US Telecom, Ford Motor Company, 
Bioeconomy Information Sharing and Analysis Center, Coalition of 
Services Industries, Enterprise Cloud Coalition, Electronic Privacy 
Information Center, Center for Democracy and Technology, Business 
Software Alliance, Global Data Alliance, Interactive Advertising 
Bureau, U.S.-China Business Council, IBM, Workday, and individuals 
Justin Sherman, Mark Febrizio, and Charlie Lorthioir. The Department 
has also discussed the Order and the ANPRM with foreign partners to 
ensure that they understood the Order and contemplated program and how 
they fit into broader national security, economic, and trade policies.
    The Department considered each comment submitted, including the ex 
parte comments that have since been publicly posted. Many of the 
comments were general in nature and supported the Department's efforts 
and approach with respect to the proposed rule. Overall, commenters 
were generally supportive of the intent of the proposed rule. However, 
several commentators representing industry questioned the effectiveness 
of the proposed rule as compared to the passage of a holistic federal 
privacy law, proposed revisions, and highlighted areas where the 
proposed rule would benefit from further clarity. The Department 
discusses comments, and any edits or revisions made in response to the 
comments, in the discussion of the proposed rule in part IV of this 
preamble.

IV. Discussion of the Proposed Rule

    The proposed rule implements the Order through categorical rules 
that regulate certain data transactions involving government-related 
data or bulk U.S. sensitive personal data that could give countries of 
concern or covered persons access or the ability to access such data 
and present an unacceptable risk to U.S. national security. The 
proposed rule (1) identifies certain classes of highly sensitive 
transactions with countries of concern or covered persons that the 
proposed rule would prohibit in their entirety (``prohibited 
transactions'') and (2) identifies other classes of transactions that 
would be prohibited except to the extent they comply with predefined 
security requirements (``restricted transactions'') to mitigate the 
risk of access to bulk U.S. sensitive personal data by countries of 
concern. The Attorney General has determined that the prohibited and 
restricted transactions set forth in the proposed rule pose an 
unacceptable risk to the national security of the United States because 
they may enable countries of concern or covered persons to access and 
exploit government-related data or bulk U.S. sensitive personal data.
    In addition to identifying classes of prohibited and restricted 
transactions that pose an unacceptable risk to national security, the 
proposed rule identifies certain classes of transactions that are 
exempt from the proposed rule. For example, the proposed rule exempts 
transactions for the conduct of the official business of the United 
States Government by employees, grantees, or contractors thereof, and 
transactions conducted pursuant to a grant, contract, or other 
agreement entered into with the United States Government, including 
those for outbreak and pandemic prevention, preparedness, and response. 
The proposed rule also defines relevant terms; identifies countries of 
concern; defines covered persons; and creates processes for the 
Department to issue general and specific licenses, to issue advisory 
opinions, and to designate entities or individuals as covered persons. 
The proposed rule also establishes a compliance and enforcement regime.
    The Department relied upon unclassified and classified sources to 
support the proposed rule. Although the unclassified record fully and 
independently supports the proposed rule without the need to rely on 
the classified record, the classified record provides supplemental 
information that lends additional support to the proposed rule. The 
proposed rule would be the same even without the classified record.
    Some commenters offered overarching comments. A few commenters made 
suggestions that addressed issues unrelated to the proposed rule, such 
as expressing views on U.S. positions in certain international 
negotiations over digital trade. No change was made in response to 
these comments. These comments addressed unrelated issues that are not 
relevant to the scope of the proposed rule and that are directed to 
other agencies and forums, and they generally did not suggest any 
specific changes to the contemplated program. To the extent that these 
comments intended to suggest that the Order's and proposed rule's 
restrictions on access to sensitive personal data are inconsistent with 
international commitments by the United States, the Department 
disagrees.
    The proposed rule's prohibitions and restrictions on access to U.S. 
sensitive personal data and government-related data by countries of 
concern are consistent with access restrictions on sensitive personal 
data that have long been imposed in other national security contexts, 
including for some transactions reviewed by CFIUS and the Committee for 
the Assessment of Foreign Participation in the United States 
Telecommunications Services Sector (``Team Telecom'').\15\ Those access 
restrictions, in turn, are consistent with or otherwise permissible 
under trade and other international agreements.\16\ For example, the 
World Trade Organization's (``WTO'') General Agreement on Trade in 
Services (``GATS''), like other trade agreements to which the United 
States is a party, includes an essential security interests exception 
that states that nothing in the agreement shall be construed to prevent 
a party to such an agreement from taking any action that it considers 
necessary for the protection of its essential security interests. As a 
result, rather than prohibiting such access restrictions, GATS and 
other relevant international agreements to which the United States is a 
party explicitly authorize national security-based restrictions on data 
access and data flows through the longstanding essential security 
exception. The proposed rule, like conditions restricting access in 
CFIUS or Team Telecom mitigation

[[Page 86121]]

agreements to address identified national security risks, is necessary 
to protect the essential security interests of the United States and is 
thus consistent with such international agreements to which the United 
States is a party.\17\ Notably, consistent with the United States 
Government's long-standing support of cross-border data flows, the 
proposed rule does not require data localization or wholly restrict 
data flows to any specific country. Rather, the proposed rule only 
limits data transfers in narrow, specifically defined circumstances 
necessary to safeguard security interests, and it is being developed 
through a process that enables stakeholder consultation and input. The 
proposed rule is also consistent with the United States' longstanding 
support for Data Free Flows Trust (``DFFT''). The categories of 
prohibited and restricted transactions in the proposed rule identify 
circumstances that present an unacceptable national security risk of 
enabling countries of concern to access and exploit Americans' 
sensitive personal data--circumstances that lack the trust required for 
free data flows.
---------------------------------------------------------------------------

    \15\ See Foreign Investment Risk Review Modernization Act of 
2018, supra note 11 (CFIUS); E.O. 13913, 85 FR 19643 (Apr. 4, 2020) 
(Team Telecom); see, e.g., FCC, New Pacific Light Cable Network GU 
Holdings-Google National Security Agreement 20-044 Enclosure 1 (Dec. 
16, 2021), https://licensing.fcc.gov/cgi-bin/ws.exe/prod/ib/forms/reports/related_filing.hts?f_key=-448225&f_number=SCLLIC2020082700038 [https://perma.cc/PD5E-BYWS].
    \16\ See, e.g., Agreement on Trade-Related Aspects of 
Intellectual Property Rights art. 73, Apr. 15, 1994, amended Jan. 
23, 2017, Marrakesh Agreement Establishing the World Trade 
Organization, Annex 1C, 1869 U.N.T.S. 299, https://www.wto.org/english/docs_e/legal_e/31bis_trips_09_e.htm [https://perma.cc/FSP4-BBZQ]; General Agreement on Tariffs and Trade art. XXI, Oct. 30, 
1947, 61 Stat. A--11, 55 U.N.T.S. 194, https://www.wto.org/english/docs_e/legal_e/31bis_trips_e.pdf [https://perma.cc/LE7M-ZM4F].
    \17\ See Press Release, Off. of the U.S. Trade Representative, 
Statements by the United States at the Meeting of the WTO Dispute 
Settlement Body (Jan. 27, 2023), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/january/statements-united-states-meeting-wto-dispute-settlement-body [https://perma.cc/CQG5-9AZ5] (emphasizing the United States' commitment to protect its 
essential security interests in the context of World Trade 
Organization disputes); General Agreement on Tariffs and Trade art. 
XXI, supra note 16.
---------------------------------------------------------------------------

    Several commenters suggested various revisions to borrow or 
incorporate aspects of international or State privacy laws into this 
proposed rule. The Department generally declines to adopt these 
suggestions, except on a discrete issue discussed in part IV.A.7 of 
this preamble. The Department supports privacy measures and national 
security measures as complementary protections for Americans' sensitive 
personal data. Despite some overlap, privacy protections and national 
security measures generally focus on different challenges associated 
with sensitive personal data. General privacy protections focus on 
addressing individual rights and preventing individual harm, such as 
protecting the rights of individuals to control the use of their own 
data and reducing the potential harm to individuals by minimizing the 
collection of data on the front end and limiting the permissible uses 
of that data on the back end. National security measures, by contrast, 
focus on collective risks and externalities that may result from how 
individuals and businesses choose to sell and use their data, including 
in lawful and legitimate ways.
    For example, some commenters suggested adding a new exemption for 
transactions in which a U.S. individual consents to the sale or 
disclosure of their data to a country of concern or covered person. The 
proposed rule declines to adopt this exemption. Such a consent-based 
exemption would leave unaddressed the threat to national security by 
allowing U.S. individuals and companies to choose to share government-
related data or Americans' bulk U.S. sensitive personal data with 
countries of concern or covered persons. It is precisely those choices 
that, in aggregate, help create the national security risk of access by 
countries of concern or covered persons, and the purpose of the Order 
and the proposed rule is to address the negative externality that is 
created by individuals' and companies' choices in the market in the 
first place. It would also be inconsistent with other national security 
regulations to leave it up to market choices to decide whether to give 
American technology, capital, or data to a country of concern or 
covered person. Export controls do not allow U.S. companies to 
determine whether their sensitive technology can be sent to a foreign 
adversary, and sanctions do not allow U.S. persons to determine whether 
their capital and material support can be given to terrorists and other 
malicious actors. Likewise, the proposed rule would not allow U.S. 
individuals to determine whether to give countries of concern or 
covered persons access to their sensitive personal data or government-
related data. One of the reasons that the public is not in a position 
to assess and make decisions about the national security interests of 
the United States is that the public typically does not have all of the 
information available to make a fully informed decision about the 
national security interests of the United States.
    Each subpart of the proposed rule, including any relevant comments 
received on the corresponding part of the ANPRM, is discussed below in 
the remaining sections of this preamble.

A. Subpart C--Prohibited Transactions and Related Activities

    The proposed rule identifies transactions that are categorically 
prohibited unless the proposed rule otherwise authorizes them pursuant 
to an exemption or a general or specific license or, for the categories 
of restricted transactions, in compliance with security requirements 
and other requirements set forth in the proposed rule.
1. Section 202.210--Covered Data Transactions
    The Order authorizes the Attorney General to issue regulations that 
prohibit or otherwise restrict U.S. persons from engaging in a 
transaction where, among other things, the Attorney General has 
determined that a transaction ``is a member of a class of transactions 
. . . [that] pose an unacceptable risk to the national security of the 
United States because the transactions may enable countries of concern 
or covered persons to access bulk sensitive personal data or United 
States Government-related data in a manner that contributes to the 
national emergency declared in this [O]rder.'' \18\ Pursuant to the 
Order, the proposed rule categorically prohibits or, for the categories 
of restricted transactions, imposes security and other requirements on 
certain covered data transactions with U.S. persons and countries of 
concern or covered persons because the covered data transactions may 
otherwise enable countries of concern or covered persons to access 
government-related data or bulk U.S. sensitive personal data to harm 
U.S. national security.
---------------------------------------------------------------------------

    \18\ 89 FR 15423.
---------------------------------------------------------------------------

    The proposed rule defines a ``covered data transaction'' as any 
transaction that involves any access to any government-related data or 
bulk U.S. sensitive personal data and that involves: (1) data 
brokerage, (2) a vendor agreement, (3) an employment agreement, or (4) 
an investment agreement. See Sec.  202.210. The Department has 
determined that these categories of covered data transactions pose an 
unacceptable risk to U.S. national security because they may enable 
countries of concern or covered persons to access government-related 
data or bulk U.S. sensitive personal data to engage in malicious cyber-
enabled activities, track and build profiles on United States 
individuals for illicit purposes, including blackmail or espionage, and 
to intimidate, curb political dissent or political opposition, or 
otherwise limit civil liberties of U.S. persons opposed to countries of 
concern, among other harms to U.S. national security. For instance, one 
study has demonstrated that foreign malign actors can purchase bulk 
quantities of sensitive personal data about U.S. military personnel 
from data brokers ``for coercion, reputational damage, and blackmail.'' 
\19\ Countries of

[[Page 86122]]

concern or covered persons could also exploit vendor, employment, or 
investment agreements to obtain access to government-related data or 
bulk U.S. sensitive personal data to harm U.S. national security.\20\
---------------------------------------------------------------------------

    \19\ Justin Sherman et al., supra note 6, at 14.
    \20\ See, e.g., Dep't of Commerce, Final Determination: Case No. 
ICTS-20121-002, Kaspersky Lab, Inc., 89 FR 52434, 52436 (June 24, 
2024), https://www.govinfo.gov/content/pkg/FR-2024-06-24/pdf/2024-13532.pdf [https://perma.cc/LAS7-S7HF] (describing how Kaspersky 
employees gained access to sensitive U.S. person data through their 
provision of anti-virus and cybersecurity software); see generally 
OFAC, U.S. Dep't of Treas., Guidance on the Democratic People's 
Republic of Korea Information Technology Workers (May 16, 2022), 
https://ofac.treasury.gov/media/923131/download?inline [https://perma.cc/8DTV-Q34S]; E.O. 14083, 87 FR 57369, 57373 (Sept. 15, 
2022).
---------------------------------------------------------------------------

    In response to the ANPRM, commenters asked that the Department 
clarify when a transaction ``involves'' government-related data or bulk 
U.S. sensitive personal data. The Department has responded to those 
comments by revising the definition of a ``covered data transaction'' 
to any transaction that involves any access to the data by the 
counterparty to a transaction (rather than any transaction that 
involves government-related data or bulk U.S. sensitive personal data).
2. Section 202.301--Prohibited Data-Brokerage Transactions
    The proposed rule prohibits any U.S. person from knowingly engaging 
in a covered data transaction involving data brokerage with a country 
of concern or a covered person. The proposed rule defines ``data 
brokerage'' as the sale of data, licensing of access to data, or 
similar commercial transactions involving the transfer of data from any 
person (``the provider'') to any other person (``the recipient''), 
where the recipient did not collect or process the data directly from 
the individuals linked or linkable to the collected or processed data. 
See Sec.  202.214.
    Because the data brokerage prohibition, along with the other 
prohibitions and restrictions, center around data transactions 
involving access to government-related data or bulk U.S. sensitive 
personal data, the Department addresses each of those key terms and 
related terms in detail in the following discussion.
3. Section 202.201--Access
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``access'' as logical or physical access, 
including the ability to obtain, read, copy, decrypt, edit, divert, 
release, affect, alter the state of, or otherwise view or receive, in 
any form, including through information systems, information technology 
systems, cloud-computing platforms, networks, security systems, 
equipment, or software.
    One commenter suggested that the Department remove the term 
``divert'' from the definition of ``access'' to avoid unintentionally 
capturing activities that do not involve actual access to data and 
that, according to the commenter, do not pose a risk to national 
security. The Department declines to do so. The definition of 
``access'' is intentionally broad. It includes the term ``divert'' to 
ensure that the proposed rule covers data transactions that would 
enable a covered person to divert government-related data or bulk U.S. 
sensitive personal data from an intended recipient to a country of 
concern or a covered person, either for their own use or for the use of 
countries of concern or other covered persons, and to prevent countries 
of concern or covered persons from amassing data (including anonymized, 
encrypted, aggregated, or pseudonymized data), as discussed in part 
IV.A.13 of this preamble.
4. Section 202.249--Sensitive Personal Data
    As previewed in the ANPRM, the proposed rule builds on the Order by 
further defining the six categories of ``sensitive personal data'' that 
could be exploited by a country of concern to harm U.S. national 
security if that data is linked or linkable to any identifiable U.S. 
individual or to a discrete and identifiable group of U.S. persons. 
These six categories are: (1) covered personal identifiers; (2) precise 
geolocation data; (3) biometric identifiers; (4) human genomic data; 
(5) personal health data; and (6) personal financial data. The proposed 
rule also categorically excludes certain categories of data from the 
definition of the term ``sensitive personal data.'' These exclusions 
include public or nonpublic data that does not relate to an individual, 
including trade secrets and proprietary information, and data that is, 
at the time of the transaction, lawfully publicly available from 
government records or widely distributed media, personal communications 
as defined in Sec.  202.239, and information or informational materials 
as defined in Sec.  202.226. Nothing in the proposed rule shall be 
construed to affect the obligations of U.S. Government departments and 
agencies under the Foundations for Evidence-Based Policymaking Act of 
2018, Public Law 115-435 (2019), 44 U.S.C. 3501 et seq.
5. Section 202.212--Covered Personal Identifiers
    The Order defines ``covered personal identifiers'' as 
``specifically listed classes of personally identifiable data that are 
reasonably linked to an individual, and that--whether in combination 
with each other, with other sensitive personal data, or with other data 
that is disclosed by a transacting party pursuant to the transaction 
and that makes the personally identifiable data exploitable by a 
country of concern--could be used to identify an individual from a data 
set or link data across multiple data sets to an individual,'' subject 
to certain exclusions.\21\ The ANPRM thus contemplated three 
subcategories of covered personal identifiers: (1) listed identifiers 
in combination with any other listed identifier; (2) listed identifiers 
in combination with other sensitive personal data; and (3) listed 
identifiers in combination with other data that are disclosed by a 
transacting party pursuant to the transaction that makes the listed 
identifier exploitable by a country of concern, if they could be used 
to identify an individual from a dataset or to link data across 
multiple datasets to an individual.\22\ The ANPRM also contemplated two 
exceptions: (1) demographic or contact data that is linked only to 
other demographic or contact data; and (2) a network-based identifier, 
account-authentication data, or call-detail data that is linked only to 
other network-based identifiers, account-authentication data, or call-
detail data as necessary for the provision of telecommunications, 
networking, or similar services. The proposed rule expands the approach 
described in the ANPRM by making the exceptions applicable to all 
subcategories of covered personal identifiers, instead of being 
applicable only to listed identifiers in combination with any other 
listed identifiers. The listed identifiers are described in more detail 
in the next section.
---------------------------------------------------------------------------

    \21\ E.O. 14117, 89 FR 15421,15428 (Feb 28, 2024).
    \22\ 89 FR 15784-85.
---------------------------------------------------------------------------

    With respect to the first subcategory, listed identifiers in 
combination with any other listed identifier: The ANPRM contemplated a 
list-based approach that would identify a comprehensive list of eight 
classes of data determined by the Attorney General to be reasonably 
linked to an individual under the Order's definition of ``covered 
personal identifiers.'' \23\
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

    With respect to the second subcategory, listed identifiers in 
combination with other sensitive

[[Page 86123]]

personal data: The ANPRM contemplated treating these combinations as 
combined data subject to the lowest bulk threshold applicable to the 
categories of data present.\24\ The proposed rule generally adopts the 
approach described in the ANPRM, but instead of addressing this 
category in the definition of ``listed identifiers,'' the proposed rule 
incorporates this category as part of the definition of ``bulk.''
---------------------------------------------------------------------------

    \24\ Id. at 15785.
---------------------------------------------------------------------------

    With respect to the third subcategory, listed identifiers in 
combination with other data that are disclosed by a transacting party 
pursuant to the transaction that makes the listed identifier 
exploitable by a country of concern: The ANPRM indicated that the 
Department did not intend to impose an obligation on transacting 
parties to independently determine whether particular combinations of 
data would be ``exploitable by a country of concern.'' \25\ The ANPRM 
provided several examples intended to be within the scope of this 
subcategory and several examples intended to be outside the scope of 
this subcategory and sought comment on ways in which this subcategory 
could be further defined.\26\ In response, multiple commenters 
suggested anchoring this subcategory to the reasonable foreseeability 
that the other data could be used to link the listed identifier to a 
U.S. individual. As these commenters explained, without the connection 
to foreseeability, nearly any public data could become covered personal 
identifiers, because it is possible that the transacting party 
receiving the data could find some way of linking any public data point 
to an individual using the listed identifier.
---------------------------------------------------------------------------

    \25\ Id.
    \26\ Id.
---------------------------------------------------------------------------

    The proposed rule largely adopts this suggestion. Rather than 
requiring companies to determine when linkage is reasonably foreseeable 
on a case-by-case basis, the proposed rule would define a category of 
data for which the Department believes it is reasonably foreseeable 
that the other data could be used to link the listed identifier to a 
U.S. individual: other data that makes the listed identifier linked or 
linkable to other listed identifiers or to other sensitive personal 
data. The proposed rule thus narrows the third subcategory to any 
listed identifier in combination with other data that is disclosed by a 
transacting party such that the listed identifier is linked or linkable 
to other listed identifiers or to other sensitive personal data. See 
Sec.  202.212(a)(2). The proposed rule also incorporates the examples 
described in the ANPRM and additional examples to illustrate how this 
subcategory would and would not apply.
6. Section 202.234--Listed Identifier
    Adopting the approach contemplated in the ANPRM,\27\ the proposed 
rule defines a ``listed identifier'' as any piece of data in any of the 
following data fields: (1) full or truncated government identification 
or account number (such as a Social Security Number, driver's license 
or State identification number, passport number, or Alien Registration 
Number); (2) full financial account numbers or personal identification 
numbers associated with a financial institution or financial-services 
company; (3) device-based or hardware-based identifier (such as 
International Mobile Equipment Identity (``IMEI''), Media Access 
Control (``MAC'') address, or Subscriber Identity Module (``SIM'') card 
number); (4) demographic or contact data (such as first and last name, 
birth date, birthplace, ZIP code, residential street or postal address, 
phone number, email address, or similar public account identifiers); 
(5) advertising identifier (such as Google Advertising ID, Apple ID for 
Advertisers, or other mobile advertising ID (``MAID'')); (6) account-
authentication data (such as account username, account password, or an 
answer to a security question); (7) network-based identifier (such as 
internet Protocol (``IP'') address or cookie data); or (8) call-detail 
data (such as Customer Proprietary Network Information (``CPNI'')). See 
Sec.  202.234.
---------------------------------------------------------------------------

    \27\ Id. at 15784.
---------------------------------------------------------------------------

    Under this definition, the term ``covered personal identifiers'' 
refers to a much narrower set of material than that covered by certain 
laws and policies aimed generally at protecting personal privacy.\28\ 
It encompasses only the types of data and combinations thereof that are 
expressly listed. For example, the proposed rule's definition of 
``covered personal identifiers'' would not include an individual's 
employment history, educational history, organizational memberships, 
criminal history, or web-browsing history. Some commenters suggested 
that the Department adopt a broader definition that aligns with the 
definition of ``personally identifiable information'' used in State or 
European Union (''EU'') privacy laws to ease the burden of compliance. 
The Department declines to adopt this approach, and the proposed rule 
retains the definition stated in the ANPRM without change. Although it 
may be true that ``personally identifiable information'' is a familiar 
term in laws and guidance addressing the privacy and security of data 
held by the private sector and government, it is such a broad term that 
adopting a definition akin to it would significantly expand the scope 
of the regulations and therefore require that the Department regulate 
more commercial transactions or relationships than seem necessary, at 
least at this time, to mitigate the highest priority national security 
risks articulated in the Order. Furthermore, the commenters supplied no 
data to suggest that any cost savings realized from adopting an 
existing definition would outweigh the added burdens of regulating a 
larger swath of transactions.
---------------------------------------------------------------------------

    \28\ C.f., e.g., California Consumer Privacy Act of 2018, Cal. 
Civ. Code sec. 1798.140(v)(1) (West 2024) (defining ``personal 
information'' in the context of a generalized privacy-focused 
regime); Regulation (EU) 2016/679 of the European Parliament and of 
the Council of Apr. 27, 2016, On the Protection of Natural Persons 
with Regard to the Processing of Personal Data and on the Free 
Movement of Such Data, and Repealing Directive 95/46/EC, art. 4(1) 
(defining ``personal data'' in the context of a generalized data 
privacy regime).
---------------------------------------------------------------------------

    Similarly, another commenter suggested broadening the definition of 
``covered personal identifiers'' to add categories of data from State 
and EU privacy laws, such as web-browsing data and data that identifies 
or could lead to inferences about membership in protected classes such 
as race, religion, and national origin. The proposed rule makes no 
change in response to this comment. As previewed in the ANPRM, the 
proposed rule's definition of ``covered personal identifiers'' is 
tailored to address the national security risks identified in the 
Order, and the Department is establishing the program by issuing 
proposed rulemakings in tranches based on priority. Also, the 
Department intends to regularly monitor the effectiveness and impact of 
the regulations once they become effective. Absent more specific 
information from commenters on this topic about the cross-border use of 
these additional kinds of identifiers by foreign governments in ways 
that could harm Americans, the proposed rule retains the definition 
stated in the ANPRM without change at this time.
    One commenter suggested that the Department remove basic contact 
information from the listed identifiers. The proposed rule maintains 
the approach in the ANPRM without change.\29\ The Order already 
contains an exception to the definition of ``covered personal 
identifiers'' for demographic or contact data that is linked only to 
other demographic or contact data. The proposed rule implements the 
exception articulated in the Order and previewed

[[Page 86124]]

in the ANPRM, which excludes such data from the definition of ``covered 
personal identifiers.'' \30\
---------------------------------------------------------------------------

    \29\ 89 FR 15784.
    \30\ Id.
---------------------------------------------------------------------------

    By contrast, another commenter recommended that ``covered personal 
identifiers'' be expanded to include demographic or contact data that 
is linked only to other demographic or contact data, because most 
Americans believe that information to be deserving of privacy 
protections. The Department declines to adopt this addition to the 
definition of ``covered personal identifiers.'' Such an expansion of 
the definition would be contrary to the Order, which specifically 
exempts this kind of data from its scope.\31\ Additionally, as the 
commenter acknowledges, a significant amount of this information is 
already publicly available to countries of concern, and therefore 
country of concern access to this type of information does not carry 
the same national security risk as access to the other covered personal 
identifiers identified in these regulations, even if it may raise 
separate privacy considerations.
---------------------------------------------------------------------------

    \31\ 89 FR 15428.
---------------------------------------------------------------------------

    A few commenters advocated removing truncated government 
identification and account numbers from the definition of ``listed 
identifiers,'' given their widescale use. One commenter supported the 
inclusion of these truncated identifiers because they are regularly 
used to identify individuals. The proposed rule continues to include 
these truncated identifiers as contemplated in the ANPRM because, as 
one commenter points out, they could be, and are, ``used to identify an 
individual from a data set or link data across multiple data sets to an 
individual[.]'' They therefore fall within the Order's definition of 
``covered personal identifiers'' when they are combined with certain 
other categories of data. Although these truncated numbers may be used 
widely, the proposed rule would not regulate how they are used in most 
transactions. Specifically, it would not regulate how these truncated 
numbers are used domestically, a company's internal use of that data 
(other than with respect to covered persons who are employees), or 
transactions abroad involving third countries (other than with respect 
to certain conditions for the data brokerage to address onward sale).
    The proposed rule also contains a non-substantive change in 
language designed to be more technically accurate and to clarify that 
any piece of data in any of the listed classes of data constitutes a 
listed identifier. See Sec.  202.234. This change remains consistent 
with the examples previewed in the ANPRM and in the proposed rule 
showing that multiple pieces of data (such as account username and 
account password) in the same data field (account-authentication data) 
each count as separate listed identifiers.\32\
---------------------------------------------------------------------------

    \32\ 89 FR 15785.
---------------------------------------------------------------------------

7. Section 202.242--Precise Geolocation Data
    The proposed rule defines ``precise geolocation data'' as data, 
whether real-time or historical, that identifies the physical location 
of an individual or a device with a precision of within 1,000 meters. 
Examples of ``precise geolocation data'' include GPS coordinates and IP 
address geolocation. To help develop this definition, the Department 
examined the settings available to software developers in Android and 
iOS, the two most popular mobile device operating systems, for the 
precision of geolocation readings. Available options included accuracy 
to within 10 meters, 100 meters, 1,000 meters, 3,000 meters, and 
10,000+ meters.\33\ The Department selected 1,000 meters as the option 
that most carefully balanced the risk that countries of concern or 
covered persons could exploit U.S. persons' precise geolocation data 
and current technology practices and standards. The Department also 
considered State privacy laws, with which companies are already 
familiar and which provide examples of the level of precision at which 
a device's location warrants protection.\34\
---------------------------------------------------------------------------

    \33\ CLLocationAccuracy, Apple Developer, https://developer.apple.com/documentation/corelocation/cllocationaccuracy 
[https://perma.cc/AZ48-VSCP]; Change Location Settings, Android 
Developer, https://developer.android.com/develop/sensors-and-location/location/change-location-settings [https://perma.cc/5BY3-P7L3].
    \34\ See, e.g., Cal. Civ. Code sec. 1798.140(w) (which uses a 
radius of 1,850 feet); Utah Consumer Privacy Act, Utah Code Ann. 
sec. 13-61-101(33)(a) (West 2024) (which uses a radius of 1,750 
feet).
---------------------------------------------------------------------------

    A few commenters suggested that the Department define ``precise 
geolocation data'' as that term is defined in the California Privacy 
Rights Act, which includes a geographic radius of 1,850 feet 
(approximately 563 meters). The Department did not accept this 
suggestion because our assessment of the relevant national security 
interests required a broader geographic area, in part due to the types 
of United States Government personnel and locations (such as military 
bases with large surrounding footprints) that are relevant to national 
security. By contrast, the California standard does not take these 
national security interests relating to Government personnel into 
account. One commenter suggested that the Department omit the phrase 
``based on electronic signals or inertial sensing units,'' which was 
included in the ANPRM definition of ``precise geolocation data,'' to 
make the term more technology-neutral as to the method of 
collection.\35\ The Department has adopted this suggestion and deleted 
that phrase from the proposed definition.
---------------------------------------------------------------------------

    \35\ 89 FR 15785.
---------------------------------------------------------------------------

8. Section 202.204--Biometric Identifiers
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``biometric identifiers'' as measurable physical 
characteristics or behaviors used to recognize or verify the identity 
of an individual, including facial images, voice prints and patterns, 
retina and iris scans, palm prints and fingerprints, gait, and keyboard 
usage patterns that are enrolled in a biometric system and the 
templates created by the system.
9. Section 202.224--Human Genomic Data
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``human genomic data'' as data representing the 
nucleic acid sequences that constitute the entire set or a subset of 
the genetic instructions found in a human cell, including the result or 
results of an individual's ``genetic test'' (as defined in 42 U.S.C. 
300gg-91(d)(17)) and any related human genetic sequencing data. The 
term ``human genomic data'' does not include non-human data, such as 
pathogen genetic sequence data, that is derived from or integrated into 
human genomic data.
10. Other Human 'Omic Data
    The Department of Justice is considering regulating, as prohibited 
or restricted transactions in the final rule, certain transactions in 
which a U.S. person provides a country of concern (or covered person) 
with access to bulk human 'omic data, other than human genomic data, as 
defined in Sec.  202.224. At a high level, the 'omics sciences examine 
biological processes that contribute to the form and function of cells 
and tissues.\36\ The categories of 'omic data that the Department is 
considering regulating could include

[[Page 86125]]

human epigenomic data, glycomic data, lipidomic data, metabolomic data, 
meta-multiomic data, microbiomic data, phenomic data, proteomic data, 
and transcriptomic data. The Department does not intend the definition 
of meta-multiomic data to include nonhuman data separated from human 
data or for the definition of microbiomics data to include data related 
to individual pathogens, even when derived from human sources. The 
Department is considering whether to include the following definitions 
of these terms in the final rule:
---------------------------------------------------------------------------

    \36\ See, e.g., Evolution of Translational Omics: Lessons 
Learned and the Path Forward 23, 33 (Christine M. Micheel et al., 
eds., 2012), https://www.ncbi.nlm.nih.gov/books/NBK202168/pdf/Bookshelf_NBK202168.pdf [https://perma.cc/Q5YE-7XLM].
---------------------------------------------------------------------------

    1. Epigenomic data: data derived from the analysis of human 
epigenetic modifications, which are changes in gene expression or 
cellular phenotype that do not involve alterations to the DNA sequence 
itself. These epigenetic modifications include modifications such as 
DNA methylation, histone modifications, and non-coding RNA regulation.
    2. Glycomic data: data derived from the analysis of the structure, 
function, and interactions of glycans (complex carbohydrates) within 
human biological systems. The field of glycomics generally aims to 
understand the roles of glycans in cell-cell communication, immune 
responses, and various diseases.
    3. Lipidomic data: data derived from a systems-level 
characterization of lipids from a human or human cell, including their 
identification, quantification, and characterization in biological 
systems. Routine clinical measurements of lipids for individualized 
patient care purposes would not be considered lipidomic data because 
such measurements would not entail a systems-level analysis of the 
complete set of lipids found in such a sample.
    4. Metabolomic data: data derived from the analysis of metabolites, 
the small molecules produced during metabolism, that aim to understand 
disease mechanisms, identify biomarkers for diagnosis, and develop 
targeted treatments by revealing the dynamic biochemical activities in 
a living system. This data provides a general snapshot of an organism, 
tissue, or cell, offering insights into physiological and pathological 
processes.
    5. Meta-multiomic data: The Department is considering the following 
options for defining meta-multiomic data:
    (i) Datasets that include two or more categories of human 'omic 
data identified in this regulation, which can include data derived from 
the human genome, proteome, transcriptome, epigenome, or metabolome; or
    (ii) Datasets that include two or more categories of human 'omic 
data identified in this regulation and that include 'omic data from 
another species.
    6. Microbiomic data: data derived from analysis of all the 
microorganisms of a given community within the human body (including a 
particular site on the human body). Microbiomic data is implicated in 
the field of metagenomics, which generally aims to investigate and 
understand genetic material of entire communities of organisms, 
including the composition of a microbial community.
    7. Phenomic data: data derived from analysis of human phenotypes, 
including physical traits, physiological parameters, and behavioral 
characteristics.
    8. Proteomic data: data derived from analysis of human proteomes, 
which refers to the entire set of proteins expressed by a human genome, 
cell, tissue, or organism. The field of proteomics generally aims to 
identify and characterize proteins and study their structures, 
functions, interactions, and post-translational modifications.
    9. Transcriptomic data: data derived from analysis of a human 
transcriptome, which is the complete set of RNA transcripts produced by 
the human genome under specific conditions or in a specific cell type. 
The field of transcriptomics generally aims to understand gene 
expression patterns, alternative splicing, and regulation of RNA 
molecules.
    The Department is considering excluding from the definition of 
other human 'omic data pathogen-specific data embedded in 'omic data 
sets.
    The Department welcomes input from commenters regarding the 
potential risks and benefits that may arise from restricting or 
prohibiting covered data transactions with a country of concern or 
covered person involving some or all of these categories of other human 
'omic data. The Department is particularly interested in comments 
addressing the health, economic, or scientific impacts of regulating 
such data transactions, as well as any national security implications. 
Specifically:
    <bullet> In what ways, if any, should the Department of Justice 
elaborate or amend the definitions of these classes of other human 
'omic data? If the definitions should be elaborated or amended, why?
    <bullet> Should bulk data transactions involving these types of 
other human 'omic data be regulated? If so, which types of human 'omic 
data--including any not listed--should be regulated, why should they be 
regulated, and how should they be regulated? Additionally, what bulk 
thresholds should apply and why?
    <bullet> To what extent would the regulation of bulk data 
transactions involving these types of other human 'omic data affect 
individuals' rights to share their own biological samples (e.g., blood, 
urine, tissue, etc.) or health, 'omic, and other data?
    <bullet> What would be the effects of prohibiting or restricting 
transactions involving these data classes in the final rule, 
particularly with respect to:
    [cir] health outcomes
    [cir] health supply chain impacts
    [cir] research and administrative costs
    [cir] economic costs due to (1) imposing these regulations, or (2) 
allowing unregulated bulk access to human 'omic data
    [cir] innovation costs
    <bullet> What additional risks should be considered if these bulk 
data transactions are not regulated, specifically as they relate to:
    [cir] risks stemming from exploitable health information
    [cir] manipulation of bulk data for strategic advantage over the 
United States
    [cir] use of bulk datasets for the creation and refinement of AI or 
other similar advanced technologies
11. Section 202.240--Personal Financial Data
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``personal financial data'' as data about an 
individual's credit, charge, or debit card, or bank account, including 
purchases and payment history; data, including assets liabilities, 
debts, and transactions in a bank, credit, or other financial 
statement; or data in a credit report or in a ``consumer report'' (as 
defined in 15 U.S.C. 1681a(d)).
    One commenter sought clarification that personal financial data 
does not include inferences based on that data, suggesting, for 
example, that hotel record transactions may be personal financial data 
but an ultimate inference that the person is interested in business 
travel should not be considered personal financial data. As set forth 
in the Order and previewed in the ANPRM, the proposed rule would 
prohibit or restrict only certain categories of transactions in 
government-related data or bulk U.S. sensitive personal data, neither 
of which include inferences on their own.\37\
---------------------------------------------------------------------------

    \37\ 89 FR 15783; 89 FR 15428-29.

---------------------------------------------------------------------------

[[Page 86126]]

12. Section 202.241--Personal Health Data
    The ANPRM contemplated defining ``personal health data'' as 
``individually identifiable health information,'' as defined under the 
Health Insurance Portability and Accountability Act of 1996 
(``HIPAA''), ``regardless of whether such information is collected by a 
`covered entity' or `business associate.' '' \38\
---------------------------------------------------------------------------

    \38\ Id.; see 42 U.S.C. 1320d(6); 45 CFR 160, 103.
---------------------------------------------------------------------------

    Several commenters supported defining personal health data as 
``individually identifiable health information.'' That definition is 
similar to how those terms are defined in HIPAA and its implementing 
regulations. However, one commenter expressed confusion as to how 
cross-referencing that definition in this program would relate to 
``covered entities'' or ``business associates'' under HIPAA. The 
proposed rule adopts much of the substance of the approach in the ANPRM 
while providing greater clarity to address this confusion. Instead of 
defining ``personal health information'' by cross referencing and 
incorporating HIPAA, the proposed rule reproduces the relevant 
substance of the HIPAA definition to provide greater clarity that the 
definition does not turn on the HIPAA-specific inquiry of whether data 
is handled by covered entities or business associates. Further, unlike 
the HIPAA definition, the proposed rule would not define health 
information in terms of whether the information identifies individuals, 
because the proposed rule applies regardless of whether data is de-
identified.
    As a result, the proposed rule defines ``personal health data'' as 
health information that relates to the past, present, or future 
physical or mental health or condition of an individual; the provision 
of healthcare to an individual; or the past, present, or future payment 
for the provision of healthcare to an individual. The term includes 
basic physical measurements and health attributes (such as bodily 
functions, height and weight, vital signs, symptoms, and allergies); 
social, psychological, behavioral, and medical diagnostic, 
intervention, and treatment history; test results; logs of exercise 
habits; immunization data; data on reproductive and sexual health; and 
data on the use or purchase of prescribed medications. The proposed 
rule would operate on a categorical basis and would determine that the 
category of personal health data generally meets the requirements of 
being ``exploitable by a country of concern to harm United States 
national security'' and ``is linked or linkable to any identifiable 
United States individual or to a discrete and identifiable group of 
United States individuals'' under section 7(l) of the Order. To be 
sure, it is possible to hypothesize a limited data set of discrete 
information related to an individual's physical or mental health 
condition that is not inherently linked or linkable to U.S. individuals 
(such as a data set of only heights or weights with no identifying 
information). But based on the information currently available, it does 
not appear that such limited datasets accurately reflect how personal 
health data is stored, transmitted, and used in the real world, and 
thus it does not appear appropriate to adjust the proposed rule to 
account for this hypothetical at this time. The Department welcomes 
comments on the extent to which such datasets exist and are the subject 
of covered data transactions between U.S. persons and countries of 
concern or covered persons.
13. Section 202.206--Bulk U.S. Sensitive Personal Data
    Adopting the approach contemplated in the ANPRM without change, the 
prohibitions and restrictions apply to ``bulk U.S. sensitive personal 
data,'' which the proposed rule defines as a collection or set of 
sensitive personal data relating to U.S. persons, in any format, 
regardless of whether the data is anonymized, pseudonymized, de-
identified, or encrypted. The bulk thresholds of data set by the 
proposed rule are addressed in detail in part V of this preamble.
    Several commenters requested that the Department align the 
categories of sensitive personal data with State data privacy laws, 
particularly to exclude encrypted, pseudonymized, de-identified, or 
aggregated data from the proposed rule's coverage. In contrast, other 
commenters supported the Department's treatment of pseudonymized, de-
identified, or encrypted data, including to prevent the data from being 
re-identified in the future and to recognize that not all techniques 
for pseudonymization, de-identification, encryption, or aggregation are 
equally effective. The Department declines to adjust the proposed rule 
to exclude anonymized, encrypted, pseudonymized, or de-identified data, 
and the proposed rule adopts the approach described in the ANPRM 
without change. As the Order emphasizes, even where types of sensitive 
personal data are ``anonymized, pseudonymized, or de-identified, 
advances in technology, combined with access by countries of concern to 
large datasets, increasingly enable countries of concern that access 
this data to re-identify or de-anonymize data,'' which could reveal 
exploitable sensitive personal information on U.S. persons.\39\ As the 
Department has recently explained, ``[o]pen-source reporting has 
repeatedly raised concern[s] that supposedly anonymized data is rarely, 
if ever, truly anonymous.'' \40\ As a recent study has explained, for 
example, ``[a]ggregated insights from location data'' could be used to 
damage national security.\41\ Examples abound. Researchers in 2024 used 
a little more than a year's worth of ``raw, `ping'-level data, a year's 
worth of location data from de-identified smartphones in 26 major 
metropolitan areas encompassing nearly every SEC office and most public 
firm headquarters to identify non-public investigations and enforcement 
actions, and glean insights about how those visits affected financial 
markets.\42\ In 2018, the publication of a global heatmap of anonymized 
users' location data collected by a popular fitness app enabled 
researchers to quickly identify and map the locations of military and 
government facilities and activities.\43\ Similarly, in 2019, New York 
Times writers were able to combine a single set of bulk location data 
collected from cell phones and bought and sold by location-data 
companies--which was anonymized and represented ``just one slice of 
data, sourced from one company, focused on one city, covering less than 
one year''--with publicly available information to identify, track, and 
follow ``military officials with security clearances as they drove home 
at night,'' ``law enforcement officers as they took their kids to 
school,'' and ``lawyers (and their guests) as they

[[Page 86127]]

traveled from private jets to vacation properties.'' \44\ A 2019 
research study concluded that ``99.98% of Americans would be correctly 
re-identified in any dataset using 15 demographic attributes,'' thus 
``suggest[ing] that even heavily sampled anonymized datasets are 
unlikely to satisfy the modern standards for anonymization set forth by 
[the EU's General Data Protection Regime] and seriously challenge the 
technical and legal adequacy of the de-identification release-and-
forget model.'' \45\ Other studies and reports have reported similar 
results.\46\ As a result, as the Department recently explained, 
``[a]dversaries can use these datasets to reverse-engineer anonymized 
data and identify people, subjects, or devices that were supposedly 
anonymized.'' \47\
---------------------------------------------------------------------------

    \39\ 89 FR 15426; see also E.O. 14083, 87 FR 57369, 57372-73 
(Sept. 15, 2022).
    \40\ In Camera, Ex Parte Classified Decl. of David Newman, 
Principal Deputy Assistant Att'y Gen., Nat'l Sec. Div., U.S. Dep't 
of Just., Doc. No. 2066897 at Gov't App. 74-75 ]] 100-01, TikTok 
Inc. v. Garland, Case Nos. 24-1113, 24-1130, 24-1183 (D.C. Cir. July 
26, 2024) (publicly filed redacted version) (hereinafter ``Newman 
Decl.'').
    \41\ Sherman et al., supra note 6, at 15.
    \42\ William C. Gerken et al., Watching the Watchdogs: Tracking 
SEC Inquiries using Geolocation Data 2-4 (Aug. 30, 2024) 
(unpublished manuscript), https://ssrn.com/abstract=4941708 [https://perma.cc/L7L9-WU3T].
    \43\ E.g., Richard Perez-Pena & Matthew Rosenberg, Strava 
Fitness App Can Reveal Military Sites, Analysts Say, N.Y. Times 
(Jan. 29, 2018), https://www.nytimes.com/2018/01/29/world/middleeast/strava-heat-map.html [https://perma.cc/FT3A-W547]; Jeremy 
Hsu, The Strava Heat Map and the End of Secrets, Wired (Jan. 29, 
2018), https://www.wired.com/story/strava-heat-map-military-bases-fitness-trackers-privacy/ [https://perma.cc/6TWD-P76B].
    \44\ Stuart A. Thompson & Charlie Warzel, Twelve Million Phones, 
One Dataset, Zero Privacy, N.Y. Times (Dec. 19, 2019), https://www.nytimes.com/interactive/2019/12/19/opinion/location-tracking-cell-phone.html [https://perma.cc/X3VB-429P].
    \45\ Luc Rocher et al., Estimating the Success of Re-
Identifications in Incomplete Datasets Using Generative Models, 10 
Nature Commc'ns, at 1 (2019), https://www.nature.com/articles/s41467-019-10933-3.pdf [https://perma.cc/SYJ7-KA95]; see also Alex 
Hern, `Anonymised' Data Can Never Be Totally Anonymous, Says Study, 
The Guardian (Jul. 23, 2019), https://www.theguardian.com/technology/2019/jul/23/anonymised-data-never-be-anonymous-enough-study-finds [https://perma.cc/5BF8-745A].
    \46\ See, e.g., Alex Hern, New York Taxi Details Can Be 
Extracted From Anonymised Data, Researchers Say, The Guardian (June 
27, 2014), https://www.theguardian.com/technology/2014/jun/27/new-york-taxi-details-anonymised-data-researchers-warn [https://perma.cc/6SYK-6ZEG] (reporting that a researcher ``discovered that 
the anonymous data'' of taxi records ``was easy to restore to its 
original, personally identifiable format,'' taking a ``matter of 
only minutes to determine which [license] numbers were associated 
with which pieces of anonymised data'' and only an hour to ``de-
anonymise the entire dataset,'' making it possible to ``figure out 
which person drove each trip'' and to determine taxi drivers' 
supposedly anonymous home addresses); Ryan Singel, Netflix Spilled 
Your Brokeback Mountain Secret, Lawsuit Claims, Wired (Dec. 17, 
2009), https://www.wired.com/2009/12/netflix-privacy-lawsuit/ 
[https://perma.cc/B96P-AY97] (reporting on researchers who de-
anonymized a Netflix dataset of movie ratings by using publicly 
available information, which revealed ``political leanings and 
sexual orientation'' in some cases, and reporters who ``quickly'' 
de-anonymized supposedly anonymous AOL search-engine logs ``to track 
down real people'').
    \47\ Newman Decl., supra note 40, at Gov't App. 33 ] 105.
---------------------------------------------------------------------------

    Similar concerns exist with respect to encrypted data. Countries of 
concern amass large quantities of encrypted data including by 
harvesting encrypted data now in order to decrypt it in the future 
should advances in quantum technologies render current standard public-
key cryptographic algorithms ineffective.\48\ Encryption keys can also 
be stolen, handed over under compulsion, and otherwise obtained for use 
in decrypting datasets.\49\
---------------------------------------------------------------------------

    \48\ David Lague, U.S. and China Race to Shield Secrets from 
Quantum Computers, Reuters (Dec. 14, 2023), https://www.reuters.com/investigates/special-report/us-china-tech-quantum/ [https://perma.cc/9HAA-46XA]; Nat'l Counterintel. & Sec. Ctr., Protecting 
Critical and Emerging U.S. Technologies From Foreign Threats 5 (Oct. 
2021), https://www.dni.gov/files/NCSC/documents/SafeguardingOurFuture/FINAL_NCSC_Emerging%20Technologies_Factsheet_10_22_2021.pdf [https://perma.cc/L6ZU-8HU7]; Nat'l Cybersec. Ctr. of Excellence, NIST SP 
1800-38B, Migration to Post-Quantum Cryptography, at 1 (drft. Dec. 
2023), https://www.nccoe.nist.gov/sites/default/files/2023-12/pqc-migration-nist-sp-1800-38b-preliminary-draft.pdf [https://perma.cc/FXF2-BJ62].
    \49\ Can Encrypted Data be Hacked?, IT Foundations (Apr. 19, 
2021), https://itfoundations.com/can-encrypted-data-be-hacked/ 
[https://perma.cc/E3TN-YAVV].
---------------------------------------------------------------------------

    A few commenters suggested that the approach contemplated in the 
ANPRM would weaken national security by failing to differentiate 
between data that is encrypted or otherwise protected and data that is 
not. In their view, encryption is an important tool to secure data from 
unauthorized access, and treating encrypted and non-encrypted data 
alike could discourage the use of encryption, weakening the overall 
security of data. Other commenters, however, supported treating 
pseudonymized, encrypted, de-identified, and aggregated data as 
sensitive personal data because of the ability to re-identify such data 
and the rapid advancements in re-identification techniques. The 
Department declines to modify the proposed rule in response to these 
comments. As contemplated in the ANPRM, the proposed rule explicitly 
recognizes and relies upon the privacy and national security-preserving 
value of high quality, effective methods of encryption, de-
identification, pseudonymization, and aggregation by specifically 
authorizing certain otherwise prohibited transactions so long as they 
meet the security requirements described in part IV.B.1 of this 
preamble, including by using data-level control(s) such as these 
techniques in combination with other security requirements. At the same 
time, as contemplated in the ANPRM, the proposed rule also recognizes 
that ineffective methods of encryption, de-identification, 
pseudonymization, and aggregation present the same unacceptable 
national security risk of access by countries of concern and covered 
persons as the risks posed by such access to identifiable data that is 
not secured through any of these techniques. The proposed rule thus 
allows otherwise prohibited employment agreements, vendor agreements, 
and investment agreements only if they use any combination of the data-
level requirements necessary to prevent access to covered data by 
covered persons or countries of concern, as requirements laid out in 
the security requirements to be published by the Department of Homeland 
Security (``DHS''), in addition to organizational- and system-level 
requirements.
    Commenters also requested that the Department use existing State 
privacy law definitions to define the categories of sensitive personal 
data, such as personal financial data. Commenters stated that many 
companies already know how to comply with State privacy laws. The 
Department has considered these comments. However, as discussed in part 
IV.A.6 of this preamble, the cited definitions do not necessarily align 
with the specific national security goals of these regulations. 
Therefore, the proposed rule adopts the approach described in the ANPRM 
without change and does not adopt the State privacy law definitions of 
the terms in the proposed rule.
14. Section 202.205--Bulk
    As previewed in the ANPRM, the proposed rule's prohibitions apply 
to bulk amounts of U.S. sensitive personal data (in addition to the 
separate category of government-related data). The proposed rule 
defines ``bulk'' as any amount of such data that meets or exceeds 
thresholds during a given 12-month period, whether through one covered 
data transaction or multiple covered data transactions involving the 
same U.S. person and the same foreign person or covered person. The 
proposed rule sets specific thresholds for each category of sensitive 
personal data. See Sec.  202.205. Certain specified data transactions 
that exceed those thresholds are ``covered data transactions'' and thus 
subject to the proposed rule's prohibitions unless they are otherwise 
authorized by the proposed rule. See Sec.  202.210. The Department has 
determined the proposed bulk thresholds based on the analysis previewed 
in the ANPRM and described in more detail in part V of this preamble.
    A few commenters expressed concerns that it would be necessary to 
decrypt data to determine whether it meets a relevant bulk threshold 
and suggested discarding the bulk thresholds as a result. They noted 
that decrypting data is generally less secure and could lead to 
unauthorized access. The proposed rule makes no change in response to 
these comments, for several reasons. First, many businesses engaging in 
the categories of prohibited and restricted transactions generally use

[[Page 86128]]

the data in the course of operating their business, rather than merely 
serving as a pass-through for encrypted data as the comments suggest. 
While encrypting data in transit and data at rest is and should be a 
standard security technique, and encrypting data in use is increasingly 
common, data is routinely decrypted while it is being actively 
accessed, processed, filtered, sorted, searched, analyzed, displayed, 
and otherwise used by a business (for example, when an authorized 
employee or user opens and searches an encrypted file or database). 
However, nothing in the proposed rule imposes a legal requirement to 
decrypt data to comply. Instead, the proposed rule requires only that 
U.S. persons implement a risk-based compliance program tailored to 
their individual risk profiles. And data may also be encrypted using 
cryptographic methods that permit some computation and analysis to be 
performed on cyphertext that ascertains the kinds and volume of data 
without decrypting the data.\50\ Businesses can map the kinds and 
volumes of their data to evaluate it against the bulk thresholds in the 
data life cycle in which it is either decrypted for access or encrypted 
in use.
---------------------------------------------------------------------------

    \50\ Abbas Acar et al., A Survey on Homomorphic Encryption 
Schemes: Theory and Implementation, 51 [No. 4] ACM Computing Survs. 
79:1, 79:2 (2018), https://dl.acm.org/doi/pdf/10.1145/3214303 
[https://perma.cc/AM69-7ZWV]. In addition, to the extent that 
businesses use emerging techniques (such as homomorphic encryption) 
that permit computations to be performed on encrypted data without 
first decrypting it, these techniques may enable businesses to map 
their data even if it remains encrypted.
---------------------------------------------------------------------------

    Second, even beyond mapping data in use, companies choosing to 
engage in these categories of data transactions can and should have 
some awareness of the volume of data they possess and in which they are 
transacting. For example, typically data-using entities maintain 
metrics, such as user statistics, that can help estimate the number of 
impacted individuals for the purposes of identifying whether a 
particular transaction meets the bulk threshold.\51\ Given that the 
bulk thresholds are built around order-of-magnitude evaluations of the 
quantity of user data, it is reasonable for entities to conduct similar 
order-of-magnitude-based assessments of their data stores and 
transactions for the purposes of regulatory compliance. Companies 
already must understand, categorize, and map the volumes of data they 
have for other regulatory requirements, such as State laws requiring 
notification of data breaches of specific kinds of data above certain 
thresholds.\52\
---------------------------------------------------------------------------

    \51\ Justin Ellingwood, User Data Collection: Balancing Business 
Needs and User Privacy, DigitalOcean (Sept. 26, 2017), https://www.digitalocean.com/community/tutorials/user-data-collection-balancing-business-needs-and-user-privacy [https://perma.cc/GCX5-RGSK]; Jodie Siganto, Data Tagging: Best Practices, Security & 
Implementation Tips, Privacy108 (Nov. 14, 2023), https://privacy108.com.au/insights/data-tagging-for-security/ [https://perma.cc/8PQA-89DA]; National Institutes of Health, Metrics for Data 
Repositories and Knowledgebases: Working Group Report 7, (Sept. 15, 
2021), https://datascience.nih.gov/sites/default/files/Metrics-Report-2021-Sep15-508.pdf [https://perma.cc/8KBQ-HWRK].
    \52\ See, e.g., Del. Code. Ann. tit. 6, sec. 12B--100 to--104 
(West 2024); N.M. Stat. Ann. sec. 57-12C-10 (LexisNexis 2024).
---------------------------------------------------------------------------

    Third, this concern appears premised on a scenario in which a U.S. 
business handles only encrypted data on which no computational 
functions can be performed to determine the kinds and volume of data, 
never accesses the decrypted data in its business, does not have other 
proxies or metrics to determine the kinds and volumes of data in which 
it is transacting, and must comply with the prohibitions and 
restrictions in the proposed rule. This scenario appears to be an edge 
case at best, and the comments do not provide a real-world example of 
this scenario or its frequency. Indeed, as discussed in some of the 
examples contained in the proposed rule, if a U.S. entity merely 
provides a platform for, or transports data between, a U.S. customer 
and a covered person or country of concern, and thus does not know or 
reasonably should not know of the kind or volume of data involved, then 
it generally would not ``knowingly'' engage in a prohibited transaction 
if the U.S. customer uses that platform or infrastructure to engage in 
a prohibited transaction with a covered person. Instead, the U.S. 
customer would generally be responsible for having ``knowingly'' 
engaged in the prohibited transaction, as illustrated in the 
clarification of the ``knowingly'' standard and the new examples 
incorporated into the proposed rule. See Sec.  202.230. Similarly, if a 
U.S. entity merely stores encrypted data on behalf of a U.S. customer 
and does not possess the encryption key, and if the U.S. entity does 
not know or reasonably should not know the kind or volume of data 
involved, the U.S. entity generally would not meet the ``knowingly'' 
standard of the proposed rule.
    Fourth, to the extent that there is a U.S. business that handles 
only encrypted data on which no computational functions can be 
performed to determine the kinds and volume of data, never accesses the 
decrypted data in its business, does not have other proxies or metrics 
to determine the kinds and volumes of data it is transacting, and is 
subject to the prohibitions and restrictions in the proposed rule, that 
U.S. business would have choices under the proposed rule. It would be 
able to engage with the Department and seek an advisory opinion or a 
specific license tailored to its business. Similarly, it would have 
choices about how best to comply as part of its individualized, risk-
based compliance program. For example, it can choose not to engage in 
prohibited or restricted transactions with countries of concern or 
covered persons as part of its individualized risk-based compliance 
program. If the U.S. business chooses to engage in categories of 
transactions potentially subject to the proposed rule, it can conduct 
reasonable due diligence on the source of its encrypted data (such as 
engaging with and obtaining contractual commitments from its customers) 
to determine the volume and kinds of data in which it is transacting. 
Or, if it chooses to engage in restricted transactions with countries 
of concern or covered persons, it can assume that its transactions 
involve bulk volumes of sensitive personal data and comply with the 
security requirements and other applicable conditions out of an 
abundance of caution.
    Even if this hypothetical U.S. business were to choose to engage in 
categories of transactions potentially subject to the proposed rule, 
and it voluntarily decided to briefly decrypt the data to determine the 
kinds and volume of its data as part of its risk-based compliance 
program, commentors have not provided evidence that such a brief 
decryption would meaningfully increase the risks of unauthorized access 
relative to the risks involved in routine decryption for business use. 
Encryption is one security tool designed to mitigate the risk of 
unauthorized access to data.\53\ Entities should use encryption as a 
tool whenever possible, including when data is at rest, in transit, and 
in use. However, using encryption does not eliminate risk or the 
requirement to perform appropriate due diligence. If an entity is using 
data at any point or has access to both encrypted data and the 
encryption key, that entity has full se into and control over the data 
on its systems for the

[[Page 86129]]

purposes of this regulation.\54\ Entities are responsible for balancing 
risks within their systems, with encryption serving as one available 
tool for achieving risk management goals alongside other tools like 
data governance and data minimization plans, role-based and least-
privilege access controls, and identity management through multifactor 
authentication.\55\
---------------------------------------------------------------------------

    \53\ What Is Encryption?, Cloudflare, https://www.cloudflare.com/learning/ssl/what-is-encryption/ [https://perma.cc/T3KT-BURX]; Cybersec. & Infrastructure Sec. Agency, Zero 
Trust Maturity Model 5, 27 (v. 2.0 Apr. 2023), https://www.cisa.gov/sites/default/files/2023-04/zero_trust_maturity_model_v2_508.pdf 
[https://perma.cc/F9LB-JVL9].
    \54\ Clare Stouffer, What Is Encryption? How It Works + Types of 
Encryption, Norton: Blog (July 18, 2023), https://us.norton.com/blog/privacy/what-is-encryption [https://perma.cc/RC3D-NS95].
    \55\ Nat'l Sec. Agency & Cybersec. & Infrastructure Sec. Agency, 
Recommended Best Practices for Administrators: Identity and Access 
Management (n.d.), https://media.defense.gov/2023/Mar/21/2003183448/-1/-1/0/ESF%20identity%20and%20access%20management%20recommended%20best%20practices%20for%20administrators%20pp-23-0248_508c.pdf [https://perma.cc/B7VP-4RWF]; Mohammed Khan, Data Minimization--A Practical 
Approach, ISACA (Mar. 29, 2021), https://www.isaca.org/resources/news-and-trends/industry-news/2021/data-minimization-a-practical-approach [https://perma.cc/8APH-5E5A]; Cybersec. & Infrastructure 
Sec. Agency, Protecting Sensitive and Personal Information From 
Ransomware-Caused Data Breaches (n.d.), https://www.cisa.gov/sites/default/files/publications/CISA_Fact_Sheet-Protecting_Sensitive_and_Personal_Information_from_Ransomware-Caused_Data_Breaches-508C.pdf [https://perma.cc/Q7TN-NLR4].
---------------------------------------------------------------------------

    It is the responsibility of the regulated entity to manage risk 
that already exists, which includes making choices about the best way 
to manage its own particular risk and tradeoffs between various data 
risk management strategies, including technical measures like 
encryption, organizational policies, and access management. Other 
options include altering commercial activities to minimize the size and 
scope of covered data transactions and utilizing a strong data 
governance regime to minimize the type and quantity of data collected. 
If data cannot remain encrypted while in use, the risk of temporarily 
decrypting data to comply with regulations can be offset by measures 
such as well-designed data collection, data management, and data 
security programs. Given these factors, any risk associated with a 
hypothetical U.S. business' decision to temporarily decrypt data that 
would otherwise remain encrypted at all times in the business' life 
cycle would appear to be much more remote and attenuated than the risk 
that accrues by allowing the U.S. business to engage in a transaction 
that grants a country of concern or covered person access to encrypted 
government-related data or bulk U.S. sensitive personal data.
15. Section 202.222--Government-Related Data
    As set forth in Sec.  202.222, the proposed rule would not impose 
any bulk threshold requirements on transactions involving government-
related data. The proposed rule defines subcategories of government-
related data for locations and personnel, as contemplated in the ANPRM. 
For the location subcategory, the proposed rule defines ``government-
related data'' as any precise geolocation data, regardless of volume, 
for any location within any area enumerated on the Government-Related 
Location Data List in Sec.  202.1401 that the Attorney General has 
determined poses a heightened risk of being exploited by a country of 
concern to reveal insights to the detriment of national security about 
locations controlled by the Federal Government, including insights 
about facilities, activities, or populations in those locations, 
because of the nature of those locations or the personnel who work 
there. The purpose of this list is to prevent countries of concern from 
exploiting the geolocation data in these locations, such as by using 
aggregated geolocation data to draw inferences about facilities, 
activities, or populations located there that could undermine U.S. 
national security or foreign policy or to conduct intelligence or 
counterintelligence operations against government employees or 
contractors, or against government facilities, as discussed in parts 
II, IV(D) and V(A) of this preamble. As set forth in the proposed rule, 
the locations that the Department might add to this list may include 
the worksites or duty stations of Federal Government employees or 
contractors who occupy national security positions, as that term is 
defined in 5 CFR 1400.102(a), wherever they are located. The locations 
may also include military installations, embassies or consulates, or 
other facilities worldwide that support the Federal Government in 
achieving its national security, defense, intelligence, law 
enforcement, or foreign policy missions. The proposed rule thus 
modifies the definition contemplated in the ANPRM by setting forth more 
details about the types of locations that will be listed on the 
Government-Related Location Data List.\56\
---------------------------------------------------------------------------

    \56\ 89 FR 15787.
---------------------------------------------------------------------------

    The proposed rule also proposes a format for the Government-Related 
Location Data List and proposes some areas for inclusion on that List. 
See Sec.  202.1401. This is not yet a comprehensive list of locations. 
The Department anticipates that the final rule will include additional 
locations associated with military, other Government, or other 
sensitive facilities or locations that meet the criteria in the 
definition. These locations may include, for example, military bases, 
embassies, or law enforcement facilities.
    For the personnel subcategory, the proposed rule adopts the ANPRM's 
contemplated definition without change by defining ``government-related 
data'' as any sensitive personal data, regardless of volume, that a 
transacting party markets as linked or linkable to current or recent 
former employees or contractors, or former senior officials, of the 
United States Government, including the military and intelligence 
community.\57\
---------------------------------------------------------------------------

    \57\ Id.
---------------------------------------------------------------------------

    Commenters were generally supportive of the proposed rule's 
protections for government-related data. A few commenters requested 
that the proposed rule provide clarity as to what constitutes a 
``former senior official'' and a ``recent former employee.'' The 
proposed rule defines ``recent former employees or contractors'' as 
employees or contractors who have worked for or provided services to 
the United States Government, in a paid or unpaid status, within the 2 
years preceding a proposed covered data transaction. See Sec.  202.245. 
The proposed rule defines a ``former senior official'' as either a 
``former senior employee'' or ``former very senior employee,'' as those 
terms are defined in the ethics regulations pertaining to post-
employment conflicts of interest for former Executive Branch or 
independent agency employees. 5 CFR 2641.104. See Sec.  202.220.
    One commenter expressed concern that, with respect to the personnel 
subcategory, companies will have to ask individuals whether they are 
former government employees when collecting their data and retain that 
information to ensure they can comply with the regulations. The 
commenter argued that this could have the unintended consequence of 
inadvertently creating a database of sensitive information that bad 
actors could target. While the Department appreciates that concern and 
agrees that this unintended consequence should be avoided, the 
Department has designed the proposed rule to specifically avoid this 
problem by defining the personnel subcategory based on how the U.S. 
person markets the data, not on whether a particular dataset contains 
data on former government employees or contractors. In other words, the 
personnel subcategory applies only to transactions in which the U.S. 
person has already identified and described sensitive personal data as 
being about certain government personnel. This subcategory does not 
apply on the basis of the presence or absence of data linked to

[[Page 86130]]

certain government personnel in the underlying sensitive personal data.
    One commenter suggested removing the qualifier that data had to be 
``marketed'' as data about members of the military or intelligence 
community because certain data can still be ``linked or linkable'' to 
members of the military through geolocation without being explicitly 
marketed as such. As the Order's second category of government-related 
data confirms, sensitive personal data that is linked to categories of 
data that could be used to identify current or certain former 
government personnel can present a national security risk, even if a 
transacting party does not market it as linked or linkable to those 
personnel.\58\ The Department is still considering how to address this 
issue, specifically whether to include, and how to define, this 
category of information in the proposed rule while minimizing the 
unintended consequence described above in this section. The Department 
appreciates any views from the public.
---------------------------------------------------------------------------

    \58\ 89 FR 15429.
---------------------------------------------------------------------------

16. Section 202.302--Other Prohibited Data-Brokerage Transactions 
Involving Potential Onward Transfer to Countries of Concern or Covered 
Persons
    As previewed in the ANPRM, the proposed rule also includes a 
prohibition specific to data brokerage to address transactions 
involving the onward transfer or resale of government-related data or 
bulk U.S. sensitive personal data to countries of concern and covered 
persons.\59\ See Sec.  202.302. The proposed rule defines ``data 
brokerage'' as the sale of data, licensing of access to data, or 
similar commercial transactions involving the transfer of data from any 
person (``the provider'') to any other person (``the recipient''), 
where the recipient did not collect or process the data directly from 
the individuals linked or linkable to the collected or processed data. 
See Sec.  202.214. The proposed rule prohibits any U.S. person from 
knowingly engaging in a covered data transaction involving data 
brokerage with any foreign person that is not a covered person unless 
the U.S. person contractually requires that the foreign person refrain 
from engaging in a subsequent covered data transaction involving that 
data with a country of concern or covered person. This narrow 
circumstance is the only instance in which the proposed rule's 
regulation of covered data transactions could impact transactions 
involving third countries (i.e., U.S. persons' covered data 
transactions in which a country of concern or covered person is not a 
party).
---------------------------------------------------------------------------

    \59\ 89 FR 15792.
---------------------------------------------------------------------------

    Commenters generally supported the feasibility of using contractual 
requirements to address the resale of data as contemplated in the 
ANPRM. They noted, however, that it may be difficult for U.S. persons 
to enforce those requirements or to ensure that the data is not 
subsequently resold in violation of those provisions. Several aspects 
of the proposed rule are designed to address these concerns. First, in 
addition to requiring a contractual commitment from the foreign person 
not to engage in a subsequent covered data transaction with a country 
of concern or covered person, as contemplated in the ANPRM, the 
proposed rule adds a requirement for U.S. persons engaged in such 
transactions to report any known or suspected violations of the 
required contractual provision. This requirement creates a mechanism to 
provide the necessary information for the Department to investigate and 
take appropriate action to address any violations of the proposed rule. 
Second, relying on both its own investigations and its investigations 
of any known or suspected violations reported by private parties, the 
Department intends to exercise the designation authority under the 
proposed rule to designate as covered persons, as appropriate, foreign 
third parties that violate the contractual provisions required by this 
prohibition. See Sec.  202.701. Third, consistent with the overall 
approach to compliance and enforcement under the proposed rule, the 
Department expects U.S. persons engaged in these kinds of data 
brokerage transactions to take reasonable steps to evaluate whether 
their foreign counterparties are complying with the contractual 
provision as part of implementing risk-based compliance programs under 
the proposed rule. Absent indications of evasion, conspiracy, or 
knowingly directing prohibited transactions, U.S. persons that conduct 
adequate due diligence as part of a risk-based compliance program would 
not have engaged in a prohibited transaction if the foreign 
counterparty later violates the required contractual provision or if 
the U.S. person fails to detect such violations. Depending on the 
circumstances, a U.S. person's failure to conduct adequate due 
diligence may subject the U.S. person to enforcement actions if that 
failure would constitute an evasion of the regulations, such as 
repeatedly knowing of violations by a foreign person and continuing to 
engage in data-brokerage transactions with that foreign person. The 
Department welcomes public input on any additional measures that should 
be considered as part of the final rule. In addition, after the final 
rule goes into effect, the Department intends to monitor the 
effectiveness of the measures to address the risk of onward sale and 
make any appropriate adjustments.
    Although not specifically raised by commenters, the Department is 
considering the specific language used to describe the contractual 
requirement. As previewed in the ANPRM,\60\ the proposed rule frames 
the contractual requirement as an obligation to provide that the 
foreign party ``refrain from engaging in a subsequent covered data 
transaction involving the same data with a country of concern or 
covered person.'' See Sec.  202.302(a)(1). The Department invites 
public comment on this language, including whether any alternative 
language (such as inserting ``knowingly'' before ``refrain'' or 
``contractually requires that the foreign person use best efforts not 
to engage'') would be more appropriate.
---------------------------------------------------------------------------

    \60\ Id.
---------------------------------------------------------------------------

    Commenters expressed varying views about the contemplated 
definition of ``data brokerage.'' Several commenters expressed concerns 
about the breadth of the definition of ``data brokerage'' in the 
ANPRM.\61\ Some commenters suggested that the proposed term, and in 
particular the phrase ``or similar commercial transactions,'' creates 
uncertainty as to its scope and fails to distinguish between selling 
data for monetary purposes and transferring data pursuant to normal 
business operations. Some commenters urged the Department to limit the 
scope of the proposed rule to ``data brokers'' by adopting the 
definition used in existing State privacy laws, such as 
California's.\62\ Others proposed ways that the Department should 
narrow the definition, including by requiring that the data be sold in 
exchange for monetary or other valuable consideration; that the data 
must be the object of the transaction and not shared incident to the 
development, testing, or sale of a product or service; or that the data 
must be knowingly transferred or sold. Other commenters suggested that 
the Department amend the definition of ``sale'' to exclude the 
disclosure of sensitive personal data to service providers processing 
data on behalf of a U.S. company, to third parties for providing 
products or services requested by a U.S. company, or for

[[Page 86131]]

disclosures or transfers to subsidiaries or affiliates of U.S. 
companies. Still other commenters supported the approach contemplated 
by the ANPRM for defining data brokerage by reference to transactions, 
not the identities of the parties, noting that the ANPRM's approach is 
stronger than existing State privacy laws, and encouraged the adoption 
of a broad definition.
---------------------------------------------------------------------------

    \61\ See 89 FR 15788.
    \62\ See Cal. Civ. Code 1798.99.80 (West 2024).
---------------------------------------------------------------------------

    The Department declines to revise the definition of ``data 
brokerage'' in response to these comments. The definition of ``data 
brokerage'' in the proposed rule is intentionally designed to address 
the activity of data brokerage that gives rise to the national security 
risk, regardless of the kind of entity that engages in it. Both first-
party data brokerage (i.e., by the person that directly collected the 
U.S. person's data) and third-party data brokerage (i.e., by a person 
that did not directly collect the U.S. person's data, such as a 
subsequent reseller) present similar national security risks: the 
outright sale and transfer of sensitive personal data to a country of 
concern or covered person. For this reason, the proposed definition 
intentionally regulates data transactions, including transactions that 
transfer data to entities in countries of concern for product 
development, an issue raised by numerous commenters, because those 
transactions give rise to the risks discussed in the Order. In 
addition, commenters did not provide any specific evidence that the 
proposed definition of data brokerage would have any measurable 
economic impact related to product development or testing.\63\ 
Consequently, the proposed rule maintains the approach described in the 
ANPRM without change.
---------------------------------------------------------------------------

    \63\ See infra note 418 and accompanying text.
---------------------------------------------------------------------------

    A few commenters expressed concern about how this provision might 
affect the ability of biomedical and pharmaceutical manufacturers to 
share clinical trial data with drug and device regulators in countries 
of concern. Relatedly, a few commenters expressed concerns that the 
proposed rule's inclusion of aggregated and anonymized data would 
prohibit companies from using clinical trial data to launch clinical 
trials in countries of concern or sharing safety and efficacy data 
obtained from clinical trials in the United States with countries of 
concern. The proposed rule includes two exemptions responsive to these 
comments, in sections 202.510 and 202.511. These exemptions allow 
certain transactions relevant to medical research, marketing, and 
safety, as explained in more detail below.
17. Section 202.303--Prohibited Human Genomic Data and Human 
Biospecimen Transactions
    As previewed in the ANPRM, the proposed rule includes a prohibition 
to specifically address the risks posed by covered data transactions 
involving access by countries of concern to U.S. persons' bulk human 
genomic data and human biospecimens from which that bulk data can be 
derived, such as covered data transactions that give access to bulk 
human genomic data to laboratories owned or operated by covered persons 
or provide them with human biospecimens from which such data can be 
derived. The proposed rule prohibits any U.S. person from knowingly 
engaging in any covered data transaction involving human genomic data 
that provides a country of concern or covered person with access to 
bulk U.S. sensitive personal data that consists of human genomic data 
or human biospecimens from which such data could be derived, where the 
number of U.S. persons in the dataset is greater than the applicable 
bulk threshold at any point in the preceding 12 months, whether in a 
single covered data transaction or aggregated across covered data 
transactions. This prohibition applies to any of the categories of 
covered data transactions that involve access to bulk human genomic 
data or human biospecimens from which bulk human genomic data can be 
derived, even when the transactions involve an employment, investment, 
or vendor agreement. In other words, transactions falling within the 
scope of proposed Sec.  202.303 are never treated as restricted 
transactions under the proposed rule. Relatedly, and as discussed in 
more detail with respect to the categories of exempt transactions, the 
proposed rule exempts (1) transactions for the conduct of the official 
business of the United States Government by employees, grantees, or 
contractors thereof, or transactions conducted pursuant to a grant, 
contract, or other agreement entered into with the United States 
Government, including those for outbreak and pandemic prevention, 
preparedness, and response; and (2) data transactions, including the 
sharing of human biospecimens from which human genomic data may be 
derived, that are required or authorized by certain specified 
international arrangements addressing global and pandemic preparedness.
    One commenter sought clarification that vendor, employment, and 
investment agreements involving access to bulk human genomic data, or 
human biospecimens from which such data could be derived, are 
prohibited transactions under subpart C of the proposed rule rather 
than restricted transactions under subpart D of the proposed rule. The 
commenter suggested that the proposed rule should clarify that such 
vendor, employment, and investment agreements are prohibited because 
they present the same policy concerns as other categories of 
transactions involving access to this kind of data. The Department 
agrees. As shown by Example 49 in the ANPRM, vendor, employment, and 
investment agreements involving access to this kind of sensitive 
personal data are prohibited rather than restricted.\64\ For the 
avoidance of doubt, Sec.  202.303 of the proposed rule clarifies that 
the authorization for restricted transactions, see Sec. Sec.  202.401-
202.402, does not apply to any transactions involving access to bulk 
human genomic data or bulk human biospecimens.
---------------------------------------------------------------------------

    \64\ 89 FR 15794.
---------------------------------------------------------------------------

18. Section 202.304--Prohibited Evasions, Attempts, Causing Violations, 
and Conspiracies
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule prohibits any transactions that have the purpose of 
evading or avoiding the proposed rule's prohibitions, or that cause a 
violation of or attempt to violate the proposed rule's prohibitions. 
The proposed rule also prohibits conspiracies formed to violate the 
proposed rule's prohibitions.
    One commenter suggested expanding the scope of the regulations to 
prohibit transactions involving algorithms or artificial intelligence 
models that are trained and developed using bulk U.S. sensitive 
personal data in certain circumstances. The commenter described a 
scenario in which the transfer of such an algorithm or model provides a 
means to evade the prohibitions--for example, where a transaction gives 
a country of concern or covered person access to the model, and the 
model makes the underlying bulk U.S. sensitive personal data on which 
it was trained available to that country of concern or covered person. 
According to the commenter, this access could occur by querying the 
model in such a way that results in it sharing all of or a highly 
relevant component of the underlying data on which it was trained, such 
as a query that resulted in identification of people with a particular 
medical condition.\65\ Apart

[[Page 86132]]

from concerns over access to the underlying data, a model could also 
provide insights into counter-intelligence targeting that would not 
otherwise be observable from the underlying sensitive personal data. 
The Department shares these concerns. In response to the comment, the 
proposed rule includes Examples 5 and 6 in Sec.  202.304(b) 
highlighting how these regulations would apply in certain scenarios 
where bulk U.S. sensitive personal data would be licensed or sold to 
support algorithmic development, including cases of evasion, or where 
sensitive personal data could be extracted from artificial intelligence 
models. The Department will continue to evaluate the national-security 
risks in this emerging area as it considers the effectiveness of this 
regulation. To the extent that there are broader concerns about 
national-security risks from the export of artificial intelligence 
models or algorithms regardless of the access they provide to sensitive 
personal data (such as their ability to provide insights that would not 
otherwise be observable from the data on which they are trained), the 
Department believes that other authorities, such as export controls and 
Executive Order 13859 of February 11, 2019 (Maintaining American 
Leadership in Artificial Intelligence),\66\ are more appropriate in the 
first instance to address those concerns.
---------------------------------------------------------------------------

    \65\ Tim Johansson & Balder Janryd, Preventing Health Data from 
Leaking in a Machine Learning System 4-6 (2024) (First Cycle 15 
credits, KTH Royal Institute of Technology), https://kth.diva-portal.org/smash/get/diva2:1865596/FULLTEXT01.pdf [https://perma.cc/S5S8-M3DJ]; see, e.g., Anuj Mudaliar, ChatGPT Leaks Sensitive User 
Data, OpenAI Suspects Hack, Spiceworks (Feb. 1, 2024), https://www.spiceworks.com/tech/artificial-intelligence/news/chatgpt-leaks-sensitive-user-data-openai-suspects-hack/ [https://perma.cc/AS5E-FATZ].
    \66\ E.O. 13859, 84 FR 3967 (Feb. 11, 2019).
---------------------------------------------------------------------------

19. Section 202.305--Knowingly Directing Prohibited Transactions
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule prohibits U.S. persons from knowingly directing any 
covered data transaction that would be a prohibited transaction 
(including restricted transactions that do not comply with the security 
requirements) if engaged in by a U.S. person.
20. Section 202.215--Directing
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``directing'' to mean that the U.S. person has 
any authority (individually or as part of a group) to make decisions on 
behalf of a foreign entity and exercises that authority. For example, a 
U.S. person would direct a transaction by exercising their authority to 
order, decide to engage, or approve a transaction that would be 
prohibited under these regulations if engaged in by a U.S. person.
21. Section 202.230--Knowingly
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule defines ``knowingly'' to mean, with respect to conduct, a 
circumstance, or a result, that the U.S. person had actual knowledge 
of, or reasonably should have known about, the conduct, circumstance, 
or result. To determine what an individual or entity reasonably should 
have known in the context of prohibited transactions, the Department 
will take into account the relevant facts and circumstances, including 
the relative sophistication of the individual or entity at issue, the 
scale and sensitivity of the data involved, and the extent to which the 
parties to the transaction at issue appear to have been aware of and 
sought to evade the application of these proposed rules. As a result of 
the knowledge standard, the regulations incorporating the word 
``knowingly'' do not adopt a strict liability standard.
    The ``knowingly'' language is also not intended to require U.S. 
persons, in engaging in vendor agreements and other classes of data 
transactions with foreign persons, to conduct due diligence on the 
employment practices of those foreign persons to determine whether the 
foreign persons' employees qualify as covered persons. For instance, as 
illustrated by Examples 37 and 38 in the ANPRM, which are incorporated 
into the proposed rule, it would not be a prohibited transaction for a 
U.S. person to enter into a vendor agreement to have bulk U.S. 
sensitive personal data processed or stored by a foreign person that is 
not a covered person, even if that foreign person then employs covered 
persons and grants them access to the data (absent any indication of 
evasion or knowing direction).\67\ In those circumstances, the U.S. 
person would not be expected to conduct due diligence on the foreign 
person's employment practices as part of its risk-based compliance 
program.
---------------------------------------------------------------------------

    \67\ 89 FR 15792.
---------------------------------------------------------------------------

    Several commenters sought clarity about liability where service 
providers have little or no knowledge of the data that customers keep 
or transact on their infrastructure. They also requested that the 
Department distinguish between data controllers and data processers. In 
response to these comments, the proposed rule has provided additional 
examples to clarify the function of the ``knowingly'' standard. See 
Sec.  202.230(b)(2)-(6). As the examples demonstrate, if a U.S. entity 
merely provides a software platform or owns or operates infrastructure 
for a U.S. customer, and thus does not know or reasonably should not 
know of the kind or volume of data involved, then the U.S. entity 
generally would not ``knowingly'' engage in a prohibited transaction if 
the U.S. customer uses their platform or infrastructure to engage in a 
prohibited transaction. Instead, the U.S. customer would generally be 
responsible for having ``knowingly'' engaged in the prohibited 
transaction. Likewise, if a U.S. entity merely stores encrypted data on 
behalf of a U.S. customer and does not have access to the encryption 
key (or has access only to an emergency backup encryption key usable 
only at the customer's explicit request), and if the U.S. entity is 
reasonably unaware of the kind or volume of data involved, the U.S. 
entity generally would not meet the ``knowingly'' standard of the 
proposed rule.
    The Department declines, however, to draw a categorical distinction 
between processors and controllers in the proposed rule. Inserting a 
categorical distinction based on the kind of entity would be 
inconsistent with the structure and overall approach of the proposed 
rule, which addresses activities that present an unacceptable national 
security risk. In addition, as the new examples illustrate, the same 
kinds of entities can engage in different kinds of activities, some of 
which (such as merely providing a software platform) raise different 
risks than others (such as providing a software platform and services 
to handle and process the data). The ``knowingly'' standard provides 
the requisite flexibility to address the national security risks while 
providing a basis to distinguish responsibility based on the activities 
and roles that particular entities may have. The proposed rule thus 
adopts the approach described in the ANPRM with the additional examples 
described above in this section to illustrate the ``knowingly'' 
standard.
    Similarly, one comment sought clarification that the proposed rule 
would apply only to U.S. persons that have or maintain control over the 
bulk U.S. sensitive personal data involved in a prohibited or 
restricted transaction. As the commenter explained, an automobile 
manufacturer should not have compliance obligations with respect to 
bulk U.S. sensitive personal data that is transferred via an 
aftermarket device that was installed in a vehicle fleet by the owner. 
As

[[Page 86133]]

previewed in the ANPRM, the proposed rule imposes prohibitions and 
restrictions only on U.S. persons that are engaged in covered data 
transactions that meet certain criteria. In the commenter's example, 
the U.S. automobile manufacturer has not engaged in a covered data 
transaction with respect to the aftermarket device. As a result, no 
change was made to the proposed rule in response to this comment.

B. Subpart D--Restricted Transactions

1. Section 202.401--Authorization To Conduct Restricted Transactions; 
Section 202.402--Incorporation by Reference
    The proposed rule sets forth three classes of transactions (vendor 
agreements, employment agreements, and investment agreements) that are 
prohibited unless the U.S. person entering into the transactions 
complies with the ``security requirements'' referenced in section 
202.248. The goal of the proposed security requirements is to address 
national security and foreign-policy threats that arise when countries 
of concern and covered persons access government-related data or bulk 
U.S. sensitive personal data that may be implicated by the categories 
of restricted transactions. The security requirements have been 
developed and proposed by the Cybersecurity and Infrastructure Security 
Agency (``CISA'') in coordination with the Department. CISA has 
published the proposed requirements--the CISA Proposed Security 
Requirements for Restricted Transactions--on its website, as announced 
via a Federal Register notice requesting comment on those proposed 
security requirements issued concurrently with this proposed rule. The 
proposed security requirements require U.S. persons engaging in 
restricted transactions to comply with organizational and system-level 
requirements, such as ensuring that basic organizational cybersecurity 
policies, practices, and requirements are in place, as well as data-
level requirements, such as data minimization and masking, encryption, 
or privacy-enhancing techniques. After CISA receives and considers 
public input, it will revise as appropriate and publish the final 
security requirements. The Department of Justice will then incorporate 
by reference the published final security requirements in the final 
rule that the Department issues. Interested parties can view CISA's 
proposed security requirements on CISA's website at https://www.cisa.gov/ and can review CISA's notice requesting comments on the 
proposed security requirements in the notice docketed as CISA-2024-0029 
(October 29, 2024).
    The proposed rule also clarifies that restricted transactions are 
not prohibited only if they comply with the security requirements and 
other applicable requirements for conducting restricted transactions. 
The proposed rule includes a new example that makes it clear that U.S. 
persons engaging in restricted transactions may not, absent a license, 
use measures other than the security requirements and other applicable 
conditions to mitigate the risk posed by country-of-concern or covered-
person access.
    Some commenters provided feedback on the security requirements that 
would govern restricted transactions. As explained in the ANPRM, CISA 
will be soliciting comments on the proposed security requirements as 
part of a separate notice-and-comment process in parallel with this 
NPRM, and the Department urges commenters to provide any comments on 
the security requirements through that process.
2. Section 202.258--Vendor Agreement
    The proposed rule defines a ``vendor agreement'' as any agreement 
or arrangement, other than an employment agreement, in which any person 
provides goods or services to another person, including cloud-computing 
services, in exchange for payment or other consideration. The ANPRM 
contemplated defining the term ``cloud-computing services'' as that 
term is defined in NIST Special Publication (``SP'') 800-145.\68\ NIST 
SP 800-145 describes cloud computing in a way that includes different 
essential characteristics, deployment models, and service models, such 
as ``Infrastructure as a Service (IaaS),'' ``Platform as a Service 
(PaaS),'' and ``Software as a Service (SaaS).'' \69\ Because cloud 
computing is just one example of several types of services that may be 
involved in a vendor agreement, it does not appear useful to separately 
or specially define that term in the proposed rule at this time. The 
Department may consider issuing guidance in the future that describes 
cloud computing in reference to the NIST definition.
---------------------------------------------------------------------------

    \68\ 89 FR 15788.
    \69\ See Peter Mell & Timothy Grance, The NIST Definition of 
Cloud Computing (NIST, SP 800-145, Sept. 2011), https://nvlpubs.nist.gov/nistpubs/Legacy/SP/nistspecialpublication800-145.pdf [https://perma.cc/HUJ5-B2JS].
---------------------------------------------------------------------------

3. Section 202.217--Employment Agreement
    The proposed rule defines an ``employment agreement'' as any 
agreement or arrangement in which an individual, other than as an 
independent contractor, performs work or performs job functions 
directly for a person in exchange for payment or other consideration, 
including employment on a board or committee, executive-level 
arrangements or services, and employment services at an operational 
level.
4. Section 202.228--Investment Agreement
    The proposed rule defines an ``investment agreement'' as any 
agreement or arrangement in which any person, in exchange for payment 
or other consideration, obtains direct or indirect ownership interests 
in or rights in relation to (1) real estate located in the United 
States or (2) a U.S. legal entity. The proposed rule categorically 
excludes certain passive investments that do not pose an unacceptable 
risk to national security because they do not give countries of concern 
or covered persons a controlling ownership interest, rights in 
substantive decision-making, or influence through a non-controlling 
interest that could be exploited to access government-related data or 
bulk U.S. sensitive personal data. Specifically, the proposed rule 
excludes from ``investment agreement'' investments (1) in any publicly 
traded security, in any security offered by any investment company that 
is registered with the United States Securities and Exchange 
Commission, such as index funds, mutual funds, exchange-traded funds, 
or made as limited partners (or equivalent) into a venture capital 
fund, private equity fund, fund of funds, or other pooled investment 
fund, if the limited partner's contributions and influence are 
circumscribed as set forth in the proposed rule; (2) that give the 
covered person less than 10 percent of total voting and equity interest 
in a U.S. person; and (3) that do not give a covered person rights 
beyond those reasonably considered to be standard minority shareholder 
protections.
    With respect to the requirement of a de minimis percentage of total 
voting and equity interest, the Department is considering a range of 
different proposals. The proposed rule's definition of ``investment 
agreement'' would apply to investments that give a covered person a 
certain percentage or more of total voting and equity interest in a 
U.S. person, even where that investment is not accompanied by other

[[Page 86134]]

formal rights beyond standard minority shareholder protections. The 
proposed rule would include this de minimis threshold to account for 
the unacceptable national security risk posed by otherwise passive 
investments that may provide investors with meaningful economic 
leverage or informal influence over access to a company's assets (like 
sensitive personal data) even when the investors do not obtain formal 
rights, control, or access beyond standard minority shareholder 
protections. The proposed rule would tentatively set this threshold 
number at 10 percent to exclude truly passive investments while also 
capturing investments that informally may provide covered persons with 
influence that presents unacceptable national security risks. The 
Department is also considering de minimis thresholds that are 
significantly lower and higher than this percentage, such as the 5 
percent threshold above which investors must publicly report their 
direct or indirect beneficial ownership of certain covered securities 
under the Securities Exchange Act of 1934, 15 U.S.C. 78m(d). As a 
result, the final figure in the proposed rule could potentially cover 
passive investments that provide less (or more) than 10-percent voting 
and equity interests in a U.S. person. The Department invites public 
comment on the specific de minimis threshold that should be used in 
this exception for passive investments.

C. Subpart E--Exempt Transactions

    As previewed in the ANPRM, the proposed rule exempts several 
classes of data transactions from the scope of the proposed rule's 
prohibitions.
1. Section 202.501--Personal Communications; Section 202.502--
Information or Informational Materials; and Section 402.503--Travel
    The proposed rule exempts three classes of data transactions to the 
extent that they involve data that is statutorily exempt from 
regulation under IEEPA: personal communications, information or 
informational materials, and data that is ordinarily incident to travel 
to or from another country.
    One comment suggested clarifying that the exemption for personal 
communications that do ``not involve a transfer of anything of value'' 
under 50 U.S.C. 1702(b)(1) is ``inclusive of business and commercial 
transactions.'' The proposed rule makes no change in response to this 
comment, as the clarification does not seem necessary at this time, 
given the scope of the statutory exemption and the proposed rule. 
Section 1702(b)(1) applies to any ``personal communication,'' so it 
would be inappropriate to rely on that statutory language to exempt, as 
this comment suggests, ``business and commercial transactions.'' 
Further, the categories of sensitive personal data encompassed by the 
proposed rule do not include any personal communications. For example, 
fingerprints and other biometric identifiers, human genetic testing 
results, and data about financial assets and liabilities are not 
``communications'' from one person to another. Any clarification of the 
phrase ``a transfer of anything of value,'' therefore, does not appear 
necessary. To the extent the commenters, a group of trade associations 
representing telecommunications providers, are concerned that personal 
communications between individuals that do not involve a transfer of 
anything of value are business transactions from their perspective, as 
purveyors of telecommunications services, the Department refers the 
commenters to the qualified exemption for telecommunications services 
in proposed Sec.  202.509.
    The Department discusses the exemption for information or 
informational materials in part VI of this preamble.
    Although not raised by commenters, the proposed rule also adds a 
separate exemption for data transactions that are ordinarily incident 
to travel to or from another country, such as arranging travel or 
importing baggage for personal use. This exemption implements and 
tracks the statutory exemption in 50 U.S.C. 1702(b)(4).
2. Section 202.504--Official Business of the United States Government
    Adopting the approach contemplated in the ANPRM without change, the 
proposed rule exempts data transactions to the extent that they are for 
(1) the conduct of the official business of the United States 
Government by its employees, grantees, or contractors; (2) any 
authorized activity of any United States Government department or 
agency (including an activity that is performed by a Federal depository 
institution or credit union supervisory agency in the capacity of 
receiver or conservator); or (3) transactions conducted pursuant to a 
grant, contract, or other agreement entered into with the United States 
Government. Most notably, this exemption would exempt grantees and 
contractors of Federal departments and agencies, including the 
Department of Health and Human Services, the Department of Veterans 
Affairs, the National Science Foundation, and the Department of 
Defense, so that those agencies can pursue grant-based and contract-
based conditions to address risks that countries of concern can access 
sensitive personal data in transactions related to their agencies' own 
grants and contracts, as laid out in section 3(b) of the Order--without 
subjecting those grantees and contractors to dual regulation.
3. Section 202.505--Financial Services
    Section 2(a)(v) of the Order exempts any transaction that is 
``ordinarily incident to and part of the provision of financial 
services, including banking, capital markets, and financial insurance 
services, or required for compliance with any Federal statutory or 
regulatory requirements, including any regulations, guidance, or orders 
implementing those requirements.'' \70\ The proposed rule defines these 
exempt transactions in further detail. Notably, the proposed rule 
exempts the transfer of personal financial data or covered personal 
identifiers incidental to the purchase and sale of goods and services 
(such as the purchase, sale, or transfer of consumer products and 
services through online shopping or e-commerce marketplaces, while 
still prohibiting these marketplaces from conducting data transactions 
that involve data brokerage), as well as exempting the transfer of 
personal financial data or covered personal identifiers for the 
provision or processing of payments or funds transfers.
---------------------------------------------------------------------------

    \70\ 89 FR 15423.
---------------------------------------------------------------------------

    Numerous commenters expressed support for the financial-services 
exemption. Commenters expressed appreciation for the exemption's 
careful scoping to enable business and commercial transactions. 
Commenters sought specific edits to the payment-processing part of the 
exemption to ensure that it covers operations involving payment dispute 
resolution, payor authentication, tokenization, payment gateway, 
payment fraud detection, payment resiliency, mitigation and prevention, 
and payment-related loyalty point program administration. The 
Department appreciates these suggested clarifications, and the proposed 
rule incorporates these proposed edits by explicitly adding the 
provision of services ancillary to processing payments and funds 
transfers, with the suggested examples, to the list of exempt financial 
services transactions.\71\ The financial-services exemption aims to 
identify the low-risk business and

[[Page 86135]]

commercial transactions that should continue unimpeded while also 
ensuring that the Order and its implementing regulations do not serve 
as a broader economic decoupling from countries of concern. These edits 
are consistent with that purpose.
---------------------------------------------------------------------------

    \71\ 89 FR 15794.
---------------------------------------------------------------------------

    Another commenter also suggested that investment-management 
services be included in the financial-services exemption. The 
Department does not intend to impede activities that are ordinarily 
incident to and part of the provision of investment-management services 
that manage or provide advice on investment portfolios or individual 
assets for compensation (such as devising strategies and handling 
financial assets and other investments for clients) or provide services 
ancillary to investment-management services (such as broker-dealers 
executing trades within a securities portfolio based upon instructions 
from an investment advisor). For further clarity, the proposed rule 
explicitly adds investment-management services to the financial-
services exemption set out in Sec. Sec.  202.505(a)(1) and 
202.505(a)(6).
    One commenter requested an exemption for cargo-related information 
containing listed identifiers. The Department believes this comment is 
focused on scenarios in which bulk personal identifiers are transferred 
as part of shipping purchased goods internationally. The Department 
declines to adopt a separate exemption, or an expansion of the scope of 
the exemption for transfers of data required by or authorized by 
Federal law or international agreement, for cargo-related information 
because the proposed rule already exempts the transfer of personal 
financial data or covered personal identifiers incidental to the 
purchase and sale of goods and services. This existing exemption 
appears to adequately address the scenario raised by the commenter. 
Thus, the proposed rule adopts the approach described in the ANPRM.
    Although not raised by any commenters, the Department is also 
considering whether and how the financial-services exemption should 
apply to employment and vendor agreements between U.S. financial-
services firms and covered persons where the underlying financial 
services provided do not involve a country of concern. Under this 
exemption, U.S. persons would be required to evaluate whether a 
particular data transaction (such as a transaction involving data 
brokerage or a vendor, employment, or investment agreement) is 
``ordinarily incident to and part of'' the provision of financial 
services such that it is treated as an exempt transaction.\72\ At one 
end of the spectrum, and as previewed by Example 53 in the ANPRM, if a 
U.S. financial institution or financial-services company uses a data 
center operated by a covered person in a country of concern to 
facilitate payments to U.S. persons in that country of concern, the 
proposed rule would treat that vendor agreement as ``ordinarily 
incident to and part of'' the facilitation of those payments--and thus 
exempt.\73\ See Sec.  202.505(b)(3). On the other end of the spectrum, 
and as previewed by Example 27 in the ANPRM, if a U.S. financial 
institution or financial-services company hires a covered person as a 
data scientist with access to its U.S. customers' bulk personal 
financial data to develop a new app that could be sold as a standalone 
product to the company's customers, the proposed rule would treat this 
employment agreement as not ``ordinarily incident to and part of'' the 
financial services provided by the U.S. company--and thus not 
exempt.\74\ See Sec.  202.217(b)(4).
---------------------------------------------------------------------------

    \72\ Cf., e.g., 31 CFR 560.405(c) (discussing OFAC exemption for 
transactions ``ordinarily incident to a licensed transaction'' as 
applied to scenarios involving the provision of transportation 
services to or from Iran), 515.533 n.1 (discussing OFAC exemption 
for transactions ``ordinarily incident to'' a licensed transaction 
as applied to scenarios involving the licensed export of items to 
any person in Cuba); Letter from R. Richard Newcomb, Director, U.S. 
Dep't of Treas., Off. of Foreign Assets Control, Re: Iran: Travel 
Exemption (Nov. 25, 2003), https://ofac.treasury.gov/media/7926/download?inline [https://perma.cc/3VRL-X886] (discussing the OFAC 
exemption for transactions ``ordinarily incident to'' travel as 
applied to scenarios involving the use of airline-service providers 
from a sanctioned jurisdiction).
    \73\ 89 FR 15794.
    \74\ 89 FR 15789.
---------------------------------------------------------------------------

    Between those two ends of the spectrum, the Department is 
considering whether the transactions in the following new examples 
should be treated as exempt transactions or as restricted transactions:
    <bullet> New example in Sec.  202.505(b)(4). Same as Example 3 (see 
Sec.  202.505(b)(3)), but the underlying payments are between U.S. 
persons in the United States and do not involve a country of concern: A 
U.S. bank or other financial institution, to facilitate payments that 
do not involve a covered person or country of concern (e.g., between 
U.S. persons in the United States), stores and processes the customers' 
bulk financial data using a data center operated by a third-party 
service provider in a country of concern, which is a covered person. 
Should the vendor agreement with the covered person, which is otherwise 
a restricted transaction, be treated as ``ordinarily incident to and 
part of'' the U.S. financial institution's facilitation of payments 
that do not involve a covered person or country of concern?
    <bullet> New example in Sec.  202.505(b)(12). A U.S. company 
provides wealth-management services and collects bulk personal 
financial data on its U.S. clients. The U.S. company appoints a citizen 
of a country of concern, who is located in a country of concern, to its 
board of directors. In connection with the board's data security and 
cybersecurity responsibilities, the director could access the bulk 
personal financial data. Should the employment agreement with the 
covered person as a board director, which is otherwise a restricted 
transaction, be treated as ``ordinarily incident to and part of'' the 
U.S. company's provision of wealth-management services to its U.S. 
clients?
    The Department is tentatively considering treating the transactions 
in both examples as restricted transactions because it does not believe 
that an employment agreement (including the hiring of board members) or 
a vendor agreement that gives a covered person access to U.S. persons' 
bulk sensitive personal data is a reasonable and typical practice in 
providing the underlying financial services that do not otherwise 
involve covered persons or a country of concern. These transactions 
therefore appear to pose the same unacceptable national security risk 
regardless of the kinds of underlying services provided by the U.S. 
person. The Department welcomes public comment to inform its resolution 
of this issue, including the extent to which it is reasonable, 
necessary, and typical practice for U.S. financial-services firms to 
hire covered persons as employees or vendors with access to U.S. 
persons' bulk sensitive personal data as part of providing financial 
services that do not involve a country of concern; why U.S. financial-
services firms hire covered persons instead of non-covered persons in 
those circumstances; and any additional compliance costs that would be 
incurred if the transactions in these examples were treated as 
restricted transactions. In addition, after issuance of the final rule, 
the Department intends to consult the Department of the Treasury and 
Federal financial regulatory agencies as part of issuing any guidance 
or advisory opinions regarding the application of the financial-
services exemption.
4. Section 202.506--Corporate Group Transactions
    As previewed in the ANPRM, the proposed rule exempts covered data 
transactions to the extent that they are (1) between a U.S. person and 
its

[[Page 86136]]

subsidiary or affiliate located in (or otherwise subject to the 
ownership, direction, jurisdiction, or control of) a country of 
concern; and (2) ordinarily incident to and part of administrative or 
ancillary business operations (such as sharing employees' covered 
personal identifiers for human-resources purposes; payroll transactions 
like the payment of salaries and pensions to overseas employees or 
contractors; paying business taxes or fees; purchasing business permits 
or licenses; sharing data with auditors and law firms for regulatory 
compliance; and risk management). The ANPRM called this exemption 
``intra-entity transactions.'' \75\ For greater clarity and accuracy, 
the proposed rule revises the name of this exemption to ``corporate 
group transactions.''
---------------------------------------------------------------------------

    \75\ 89 FR 15794.
---------------------------------------------------------------------------

    Some commenters requested that the Department broaden the corporate 
group transactions exemption to include routine business activities 
performed by third-party service providers. Similarly, commenters 
proposed augmenting the same exemption to include suppliers and other 
third-party vendors who are contractually bound to maintain privacy 
requirements and who engage in product and services development, 
research, and improvement activities for U.S. companies. The Department 
declines to incorporate these suggestions because they would not 
adequately mitigate the threats posed by access to government-related 
data or bulk U.S. sensitive personal data by a country of concern or 
covered person. Thus, the proposed rule adopts the approach described 
in the ANPRM without change, permitting restricted transactions 
involving vendor agreements to proceed as long as they comply with the 
proposed rule's security requirements designed to mitigate access to 
the sensitive personal data by countries of concern and covered 
persons.
    One commenter requested clarification that it would not be a 
prohibited transaction for a U.S. company to provide access to a global 
company staff directory to its business office and employees located in 
a country of concern. Consistent with the approach contemplated in the 
ANPRM, this scenario would not be a prohibited or restricted 
transaction under the proposed rule for two independent reasons. First, 
a company directory containing only contact or demographic data linked 
to other contact or demographic data would not fall within the 
definition of ``covered personal identifiers'' and thus would not 
constitute government-related data or bulk U.S. sensitive personal 
data. As a result, there would be no covered data transaction in 
providing such a directory. Second, the U.S. company's sharing of the 
directory would not be a prohibited or restricted transaction, 
regardless of whether the business office is a foreign branch or a 
subsidiary or affiliate: if the business office in the country of 
concern is a branch of the U.S. company, the branch is part of the same 
``U.S. person'' as the U.S. company, and the U.S. company has not 
engaged in any transaction with a foreign person in the first place. 
If, by contrast, the business office is a subsidiary or affiliate of 
the U.S. company, the sharing is an exempt corporate group transaction 
because a transaction within a corporate group granting its employees 
access to a company directory is ordinarily incident to ancillary or 
administrative business operations. (In different circumstances where 
that exemption is not applicable, a transaction within a corporate 
group that gives an employee who is a covered person access to 
government-related data or bulk U.S. sensitive personal data would 
generally be a restricted employment agreement.)
5. Section 202.507--Transactions Required or Authorized by Federal Law 
or International Agreements, or Necessary for Compliance With Federal 
Law
    As previewed in the ANPRM, the proposed rule exempts covered data 
transactions to the extent that they are required or authorized by 
Federal law, international agreements or specified global health and 
pandemic preparedness measures, or necessary for compliance with 
Federal law.
    Some commenters requested clarity about whether the exemption for 
regulatory compliance (which the ANPRM contemplated as part of the 
financial-services exemption) applies to compliance with all Federal 
law, not just financial laws.\76\ The Department acknowledges that this 
is a correct understanding of this exemption. To improve clarity and 
reflect this understanding, the proposed rule moves the exemption for 
compliance with Federal law from the financial-services exemption to a 
standalone subpart of the exemption for transactions required or 
authorized by Federal law or international agreements.
---------------------------------------------------------------------------

    \76\ 89 FR 15794-95.
---------------------------------------------------------------------------

    The proposed rule clarifies that, with respect to international 
agreements authorizing or requiring data transactions, the exemption 
applies only to international agreements to which the United States is 
a party. Some commenters requested a non-exhaustive list of 
international agreements to which this exemption applies. The proposed 
rule adds an illustrative list of specific international agreements to 
which this exemption applies.
    One commenter sought clarification on whether transactions required 
or authorized by international agreements include transactions in 
accordance with arrangements that facilitate international commercial 
data flows, such as the Global Cross-Border Privacy Rules (``G-CBPR'') 
and Global Privacy Recognition for Processors (``G-PRP'') Systems of 
the Global Cross-Border Privacy Rules Forum (``Global CBPR Forum'') and 
the Asia-Pacific Economic Cooperation (``APEC'') Cross-Border Privacy 
Rules (``APEC CBPR'') and APEC Privacy Recognition for Processors 
Systems. These arrangements are outside the scope of the exemption for 
international agreements. These arrangements consist of frameworks for 
coordinating national regulatory measures, and they do not facilitate 
the sharing of data between the U.S. and a country of concern. Thus, 
data transactions covered by this proposed rule would not be ``pursuant 
to these arrangements as necessary to meet the definitional 
requirements of the exemption. The Department further declines to 
expand the scope of the exemption to incorporate these arrangements, 
which are designed to address general privacy concerns and other issues 
rather than the national security risks detailed in the Order. The same 
commenter also sought clarity as to whether the EU-U.S. Data Privacy 
Framework (``DPF'') would be such an international agreement. The EU-
U.S. DPF is similarly an arrangement that falls outside the scope of 
the exemption. The EU-U.S. DPF fulfills different objectives than the 
proposed rule and does not facilitate the sharing of information 
between a U.S. person and a country of concern or covered person. For 
example, under the EU-U.S. DPF and pursuant to Executive Order 14086 of 
October 7, 2022 (Enhancing Safeguards for United States Signals 
Intelligence Activities), the Attorney General determined that the laws 
of EU/European Economic Area countries require appropriate safeguards 
for signals intelligence activities affecting U.S. persons' personal 
data.\77\

[[Page 86137]]

Furthermore, while DPF- and APEC CBPR-certified companies are subject 
to domestic law, including the Order, no DPF or APEC CBPR countries or 
jurisdictions are currently designated as countries of concern under 
this Executive Order. As such, the provisions of the Order would not 
apply to transfers conducted in reliance on the DPF or APEC CBPR, and 
any data transactions that the proposed rule does cover would not be 
``pursuant to'' such arrangements as required for this exemption. 
Therefore, the proposed rule adopts the approach contemplated by the 
ANPRM without change.
---------------------------------------------------------------------------

    \77\ E. O. 14086, 87 FR 62283 (Oct. 7, 2022); Dep't of Just., 
Attorney General Designations of the European Union, Iceland, 
Liechtenstein, and Norway as ``Qualifying States'', 88 FR 44844 
(July 13, 2023).
---------------------------------------------------------------------------

6. Section 202.508--Investment Agreements Subject to a CFIUS Action
    Adopting the approach contemplated by the ANPRM, the proposed rule 
exempts investment agreements to the extent that they are the subject 
of a ``CFIUS action'' as defined in section 202.207 (i.e., CFIUS has 
suspended a proposed or pending transaction, or entered into or imposed 
mitigation measures to address a national security risk involving 
access to sensitive personal data by countries of concern or covered 
persons). The rationale for this approach is discussed separately in 
part IV.K of this preamble.
7. Section 202.509--Telecommunications Services
    The proposed rule exempts transactions that are ordinarily incident 
to and part of telecommunications services.
    Multiple commenters requested that the proposed rule include an 
additional exemption for data that is incidental to the provision and 
delivery of communications services. They asked that this kind of data 
be carved out from the scope of any restrictions on sensitive personal 
data for consumers, enterprises, and governments, including but not 
limited to international calling, mobile voice, and data roaming. 
Commenters also requested that communications service providers be able 
to use, disclose, or permit access to covered data obtained from their 
customers, either directly or indirectly through agents, to initiate, 
render, bill, and collect for communications services. These commenters 
assert that global commerce relies on effective and efficient global 
communications, that restrictions on such bulk U.S. sensitive personal 
data could hinder the ability of Americans to communicate globally, and 
that the United States Government has long held a policy of ensuring 
that communications are enabled even with countries subject to U.S. 
sanctions.
    The Department appreciates the need to ensure Americans' ability to 
communicate globally, including with and in countries of concern, and 
does not intend for these regulations to impede the ability of U.S. 
telecommunications service providers to operate. Accordingly, the 
Department has included in the proposed rule an exemption that seeks to 
address this concern. The proposed exemption is intended to be narrowly 
tailored to ensure that U.S. telecommunications service providers 
retain the ability to operate unimpeded while also continuing to 
mitigate the national security risk associated with data brokerage 
(i.e., the sale of or leasing of access to customer data) to countries 
of concern and covered persons.
8. Section 202.510--Drug, Biological Product, and Medical Device 
Authorizations
    Under the proposed rule, certain data transactions necessary to 
obtain and maintain regulatory approval to market a drug, biological 
product, medical device, or combination product in a country of concern 
would be exempt from the prohibitions in the proposed rule. This 
exemption balances the need to mitigate the risks to U.S. national 
security from the unrestricted transfer of bulk U.S. sensitive personal 
data to countries of concern against the scientific, humanitarian, and 
economic interests in enabling the sale of medicines in those 
countries. The proposed rule includes reporting requirements that will 
allow the Department to maintain visibility on the type and amount of 
data that is being transmitted to countries of concern under this 
exemption.
    This exemption is limited to data that is de-identified; required 
by a regulatory entity to obtain or maintain authorization or approval 
to research or market a drug, biological product, device, or 
combination product (i.e., covered product); and reasonably necessary 
to evaluate the safety and effectiveness of the covered product. For 
example, de-identified data that is gathered in the course of a 
clinical investigation and would typically be required for Food and 
Drug Administration (``FDA'') approval of a covered product would 
generally fall within the exemption. Conversely, clinical participants' 
precise geolocation data, even if required by a country of concern's 
regulations, would fall outside the scope of the exemption because such 
data is not reasonably necessary to evaluate safety or effectiveness.
    The Department recognizes that data collection and submission 
continue beyond the initial regulatory approval process, and it intends 
the term ``regulatory approval data'' to include data from post-market 
clinical investigations (conducted under applicable FDA regulations, 
including 21 CFR parts 50 and 56), clinical care data, and post-
marketing surveillance, including data on adverse events.\78\ For 
example, where continued approval to market a drug in a country of 
concern is contingent on submission of data from ongoing product 
vigilance or other post-market requirements, the exemption applies.
---------------------------------------------------------------------------

    \78\ See U.S. Food & Drug Admin., What Is a Serious Adverse 
Event? (May 18, 2023), https://www.fda.gov/safety/reporting-serious-
problems-fda/what-serious-adverse-
event#:~:text=An%20adverse%20event%20is%20any,medical%20product%20in%
20a%20patient [https://perma.cc/9Q23-HRWY] (``An adverse event is 
any undesirable experience associated with the use of a medical 
product in a patient'').
---------------------------------------------------------------------------

    The exemption applies even where FDA authorization for a product 
has not been sought or obtained. The Department does not, in these 
regulations, intend to require U.S. companies to first seek 
authorization to market a product in the United States before seeking 
regulatory approval from a country of concern.
    The exemption is limited to transactions that are necessary to 
obtain or maintain regulatory approval in the country of concern. The 
Department specifically invites comments on the types of transactions 
that are necessary to that end. By way of illustration, Example 3 of 
Sec.  202.510, as proposed, would not exempt a vendor or employment 
agreement with a covered person to prepare data for submission to a 
country of concern's regulatory entity because the Department does not 
currently believe that such transactions are necessary to obtain 
regulatory approval. The Department seeks comments on whether, and why, 
such a vendor or employment agreement with a covered person to prepare 
data for submission is necessary and should be exempt.
    As Example 3 reflects, the Department does not currently believe 
that it is reasonably necessary to use a covered person--as opposed to 
services provided by the U.S. company itself or by a non-covered 
person--to prepare data for regulatory submission. Although the 
marginal risk to national security from granting additional covered 
persons access to the submission data may be low, given that the 
submission data is ultimately being transferred directly to the 
government of

[[Page 86138]]

a country of concern, the Department believes that a third-party vendor 
in this scenario may require access to a broader set of data than the 
regulatory body itself. At the same time, the Department recognizes 
that regulatory and legal expertise relevant to a country of concern is 
likely to be concentrated in the country of concern. Employment and 
vendor transactions in this context would be restricted, not 
prohibited, transactions, and generally could proceed if the 
requirements applicable to restricted transactions were followed. The 
Department welcomes comments that address this scenario and other 
similar transactions, including the potential impacts to clinical 
research, medical product development and authorizations, and 
companies' business practices and operations, as well as the 
feasibility of obtaining regulatory approval without engaging covered 
persons to access bulk U.S. sensitive personal data or if such 
engagements are subject to the security, recordkeeping, and reporting 
requirements applicable to restricted transactions.
    The exemption requires that parties engaged in transactions 
involving regulatory approval data with countries of concern 
nonetheless comply with the recordkeeping and reporting requirements 
otherwise applicable to U.S. persons engaged in restricted 
transactions, because of the heightened national security risk that 
arises from transmitting U.S. sensitive personal data or government-
related data directly to a government entity in a country of concern.
    The Department seeks comment on the proposed scope of this 
exemption, including on the definition of regulatory approval data and 
the extent to which data submissions to regulatory entities in 
countries of concern may involve personally identifiable data.
9. Section 202.511--Other Clinical Investigations and Post-Marketing 
Surveillance Data
    A few commenters expressed concerns that the proposed rule's 
inclusion of aggregated and anonymized data would prohibit companies 
from launching clinical investigations in countries of concern. 
Commenters also noted the possibility that overly restrictive 
prohibitions might harm biopharmaceutical innovation. The Department 
has considered these comments and agrees that some exemption or 
accommodation for clinical research may be appropriate. The Department 
proposed the exemption in Sec.  202.511 for that purpose. To help 
inform the appropriate contours of the proposed provision, the 
Department invites additional comments that illustrate the scope of 
transactions that might be subject to the proposed rule's restrictions 
and prohibitions and the consequences for clinical research if the 
proposed prohibitions and restrictions were applied to that context.
    The United States has a national security interest in the 
development, authorization, and availability of medical products, 
including medical countermeasures to diagnose, treat, or prevent 
serious or life-threatening diseases or conditions that may be 
attributable to biological, chemical, radiological, or nuclear agents. 
The Department seeks to mitigate the national security risk described 
in the Order without unduly burdening the biomedical innovation that 
benefits U.S. persons. The Department is considering how to effectively 
strike that balance and how to scope an exemption for transactions 
related to or supporting FDA-regulated research to meet that goal.
    The Department is considering the scope of a possible exemption 
along three axes. First, in terms of the types of data that would be 
within the exemption; second, in terms of the types of transactions 
involving that data that would be exempted; and third, in terms of the 
duration of any exemption.
    On the first axis, the Department anticipates that any exemption 
would concern data obtained in the course of clinical investigations 
related to drugs, biological products, devices, and combination 
products, as those terms are defined in the Federal Food, Drug, and 
Cosmetic Act (``FD&C Act'') and FDA regulations. The Department 
believes that these products raise the most significant countervailing 
economic, health, and scientific concerns that might outweigh the 
national security interests otherwise at stake. The Department seeks 
comment on whether the exemption should exempt clinical investigations 
data related to other products, such as foods (including dietary 
supplements) that bear a nutrient content claim or a health claim, food 
and color additives, and electronic products, as those terms are 
defined in the FD&C Act.
    The Department also recognizes the existing regulatory framework in 
these contexts and is evaluating whether these provisions adequately 
reduce the national security risk associated with the transfer of bulk 
U.S. sensitive personal data to a country of concern or covered person. 
The FD&C Act and FDA regulations provide a robust framework to protect 
the confidentiality and privacy of data collected from subjects in 
clinical investigations. This current framework of statutory and 
regulatory requirements protects the rights and safety of human 
subjects, ensuring that their private information is handled securely. 
For example, section 505(i) (21 U.S.C. 355(i)) and section 520(g) (21 
U.S.C. 360j(g)) of the FD&C Act address the use of investigational new 
drugs and investigational devices, respectively, in clinical 
investigations and require that informed consent be obtained from 
subjects, with certain exceptions.
    The implementing regulations established by the FDA in 21 CFR parts 
50, 56, 312, and 812 include various requirements, including related to 
informed consent of human subjects and Institutional Review Boards 
(``IRBs''). For example, 21 CFR part 56 details requirements for IRB 
review, approval, and ethical oversight of FDA-regulated clinical 
investigations. Information about the confidentiality of records must 
be given to prospective subjects as part of informed consent (21 CFR 
50.25(a)(5)), and to approve research, an IRB must determine that, 
where appropriate, there are adequate provisions to protect the privacy 
of subjects and to maintain the confidentiality of data (21 CFR 
56.111(a)(7)). In addition, FDA regulations in 21 CFR part 11 establish 
requirements to ensure the authenticity, integrity, and, when 
appropriate, confidentiality of certain electronic records (21 CFR 
11.10, 11.30). The FDA further issued a proposed rule in September 2022 
proposing to require that certain information about future secondary 
use of subjects' information or biospecimens be provided to prospective 
subjects.\79\
---------------------------------------------------------------------------

    \79\ Protection of Human Subjects and Institutional Review 
Boards, 87 FR 58733 (proposed Sept. 28, 2022).
---------------------------------------------------------------------------

    These regulations are principally focused on patient privacy, 
however, and do not directly address the national security concerns 
that animate the Order. As the Department has explained elsewhere in 
this preamble, privacy protections, in general, focus on addressing 
individual rights and preventing individual harm by protecting 
individuals' right to control the use of their own data and reducing 
the potential harm to individuals by minimizing the collection of data 
on the front end and limiting the permissible uses of that data on the 
back end. National security measures, by contrast, focus on collective 
risks and externalities that may result from how individuals and 
businesses choose to sell and use their data, including in lawful and 
legitimate ways. But the

[[Page 86139]]

Department is evaluating whether these existing regulations--for 
example, the requirements for informed consent under 21 CFR part 50--
could offer sufficiently robust protection to also mitigate national 
security concerns.
    The exemption would also apply to clinical care data indicating 
real-world performance or safety of products, or post-marketing 
surveillance data (including pharmacovigilance and post-marketing 
safety monitoring), where necessary to support or maintain 
authorization by the FDA. These submissions to FDA involve deidentified 
data and the exemption arising under proposed Sec.  202.511(a)(2) would 
apply only to deidentified data.
    On the second axis, the Department is considering what kinds of 
transactions to exempt when they involve data that implicates the 
exemption--such as, hypothetically, bulk U.S. sensitive personal data 
collected in the course of an FDA-regulated clinical investigation to 
develop a drug. One possibility would be to exempt all transactions 
that are part of the conduct of the investigation. Another possibility 
would be to limit an exemption to only certain types of transactions 
that are especially important to the conduct of a clinical 
investigation and that cannot feasibly be avoided without jeopardizing 
the clinical investigation.
    The Department does not intend to categorically preclude clinical 
investigations from being conducted in a country of concern and does 
not believe that the proposed rule, even without a clinical 
investigation-focused exemption, does so. The proposed rule generally 
does not prohibit or restrict the flow of data from a country of 
concern to the United States and does not apply to data unrelated to 
U.S. persons. The Department seeks additional comments on whether, why, 
and to what extent it would be necessary for U.S. persons to transmit 
bulk U.S. sensitive personal data to a covered person in order to 
support a clinical investigation taking place in a country of concern.
    For example, the Department has considered the following 
hypothetical:
    <bullet> A U.S. sponsor conducts a clinical investigation to 
determine the safety and effectiveness of an investigational drug 
product. The clinical investigation involves a multinational trial with 
both U.S. citizens and non-U.S. citizens enrolled in the trial at 
different sites across the world, including in a country of concern, to 
support authorization of the product in the intended use populations. 
As part of the investigation, and pursuant to an employment or vendor 
agreement, the sponsor transmits bulk U.S. sensitive personal data to 
covered persons in the country of concern to conduct a data analysis of 
the product's safety and effectiveness across different population 
groups. This clinical investigation supports an application for a 
marketing permit for a product regulated by the FDA (i.e., a drug for 
human use). The trial in this example is subject to the FDA's 
regulatory framework for clinical investigations.
    The Department believes that, absent an exemption, the employment 
or vendor agreement described in this hypothetical would be a 
restricted transaction (or a prohibited transaction, if it involves the 
transfer of bulk human genomic data or biospecimens from which such 
data could be derived). The Department seeks comments on whether such a 
vendor agreement should be considered to be ``ordinarily incident to 
and part of'' a clinical investigation; how prevalent and important the 
practice of sending bulk U.S. sensitive personal data to a covered 
person in a country of concern is; and the potential impacts to 
clinical research, medical product development and authorization, and 
industry if such transactions were restricted or prohibited.
    The Department also seeks comments on how these concerns apply in 
post-marketing scenarios, such as pharmacovigilance and post-marketing 
safety monitoring necessary to support or maintain authorization. For 
example, the Department has considered the following hypothetical:
    <bullet> A U.S. pharmaceutical company is required to submit 
reports to the FDA of adverse events related to its FDA-approved drug 
for human use, consistent with the requirements under 21 CFR 
314.80.\80\ The firm markets many other drug products; has a wide 
global distribution, including in a country of concern; and receives 
thousands of reports per year for its various marketed products. Under 
a vendor agreement, the firm may outsource processing of these reports 
to entities outside of the United States, including in a country of 
concern. The firm may also need to exchange adverse event information 
about its FDA-approved drug product with its distributors in a country 
of concern to pool the data and identify any adverse events trends 
across different population groups or conditions of use and submit 
those data to the FDA.
---------------------------------------------------------------------------

    \80\ An adverse event report describes the experience of an 
individual who has experienced an adverse event associated with the 
use of a drug.
---------------------------------------------------------------------------

    As in the context of the clinical investigation, the Department 
believes that, absent an exemption, the vendor agreements described in 
this hypothetical would be restricted or prohibited. The Department 
seeks comments on how pervasive and important the practice of 
outsourcing the processing of adverse event reports to a covered person 
is, as well as on how pervasive and important it is to share adverse 
event information concerning U.S. persons with drug distributors in a 
country of concern. The Department seeks comments on the potential 
impacts to patient safety, industry, and the feasibility of obtaining 
or maintaining regulatory authorizations if such transactions were to 
be prohibited.
    The Department is also aware that, as appropriate and required, 
certain data related to post-marketing surveillance are made available 
to global public health authorities, such as the World Health 
Organization Vigibase. Submissions by the United States Government 
itself, such as FDA submissions to Vigibase, would be exempt under 
proposed Sec.  202.504. The Department expects that similar data 
transactions by U.S. persons, even if such data transactions were 
considered to be with a country of concern or a covered person so as to 
fall within the scope of the restrictions and prohibitions, would 
nonetheless be exempt under proposed Sec.  202.507. The Department 
seeks specific comments on the nature and type of such submissions and 
a list of such global health authorities. The Department also notes 
that, if it is lawfully available to the public from a Federal, State, 
or local government record or in widely distributed media, such data 
would not meet the definition of sensitive personal data under Sec.  
202.249(b)(2).
    FDA regulations include recordkeeping provisions such that FDA 
investigators can gather information about any data transactions, 
including to countries of concern. See 21 CFR part 312.62. However, in 
general, FDA's regulations related to clinical investigations do not 
require sponsors to report data transactions to the FDA in the manner 
proposed in the recordkeeping and reporting requirements set forth in 
Sec. Sec.  202.1101(a) and 202.1102. The Department is considering 
requiring reporting even for transactions within any exemption to 
better evaluate the national security risks going forward and seeks 
comments on the cost and feasibility for industry of also complying 
with the recordkeeping and reporting requirements set forth in 
Sec. Sec.  202.1101(a) and 202.1102 with respect to

[[Page 86140]]

transactions related to clinical investigations.
    The Department recognizes that U.S. companies employing covered 
persons--such as foreign persons primarily resident in a country of 
concern to support a clinical investigation there--may have to adjust 
data access policies or protocols to limit covered persons' access to 
bulk U.S. sensitive personal data. The Department seeks comment on this 
issue, including the costs and feasibility of adopting such policies or 
protocols and the likely effect of such policies on medical product 
research and development, as well as obtaining or maintaining 
regulatory authorization.
    The Department also notes that, under Sec.  202.504, covered data 
transactions that occur as part of federally funded research would be 
exempt from the proposed rule's prohibitions (although possibly subject 
to separate restrictions applicable to a Federal grantee, to include 
requirements established pursuant to section 3(b)(i) of the Order). The 
Department invites comment on the proportion of pharmaceutical research 
that would not be exempt under that exemption, the cost and feasibility 
of complying with different regulatory requirements depending on the 
source of funding, and the impact on medical product research and 
development.
    If the Department were to implement an exemption for clinical 
investigations, clinical data, and post-marketing surveillance as 
described in this section, it could potentially do so through one or 
more general licenses as opposed to including the exemption in the 
final rule. General licenses may be a more flexible regulatory tool 
that can be adjusted to varying circumstances. Preliminarily, however, 
the Department believes that a codified exemption would provide more 
clarity and certainty for relevant entities. The Department also 
invites comments on the best mechanism to implement an exemption for 
such data transactions.
    Finally, on the third axis, the Department is considering whether 
any exemption, or parts of it, could feasibly be time-limited to allow 
industry to shift existing processes and operations out of countries of 
concern over a transition period. The Department is cognizant of the 
long planning times and high costs associated with clinical research. 
If the Department does not broadly exempt clinical research from the 
scope of the prohibitions, it may consider delaying the effective date 
of the proposed rule with respect to such research to enable affected 
entities to complete ongoing or imminent trials without disruption or 
delay, while transitioning planning and policies for future trials. The 
Department could potentially implement such a delay by general or 
specific licenses, and could use a set period of time or could limit 
the exemption to studies already past a certain stage, such as 
submission of an Investigational New Drug application to the FDA by a 
set date. The Department seeks comment--taking into account other 
exemptions, such as for federally funded research--on the number of 
clinical investigations that would be disrupted, and the extent of such 
disruption, if the prohibitions were immediately applicable; how long 
and how to structure any delay to minimize disruption without inviting 
misplaced reliance; and the best mechanism for implementing such a 
delay.
10. Other Exemptions
    The Department is considering whether it is necessary or 
appropriate to adopt a tailored exemption that would permit covered 
data transactions involving the export to countries of concern or 
transfer or sale to covered persons of certain human biospecimens, like 
blood plasma, intended for direct medical use that the proposed rule 
would otherwise prohibit. The Department welcomes views about the 
specific types of biospecimens exported to countries of concern, or 
transferred or sold to covered persons for direct medical use that the 
Department should consider exempting from the prohibition on bulk 
transfers of human genomic data or biospecimens from which bulk human 
genomic data could be derived. Important considerations could include 
the importance of the biospecimens for direct medical use; the relative 
ease with which a country of concern or covered person could derive 
bulk human genomic data from the biospecimens; the economic and 
humanitarian value of permitting such transactions; and any other 
national security concerns the Department should consider.
    A few commenters requested that the Department create a new 
exemption for data processed by a covered person on behalf of a U.S. 
person for product research, development, or improvement where the U.S. 
person directs the manner of data processing and contractually binds 
the covered person to maintain the privacy and security of the data. 
These comments were too vague to be addressed or implemented. For 
example, they did not identify the kinds of products that the U.S. 
person would seek to develop or the kinds of data that would be 
required for that development. In any case, as the Department discusses 
in part IV.D.1 of this preamble, countries of concern have the legal 
authority and political systems to force, coerce, and influence 
entities in their jurisdictions to share their data and access with the 
government. Entities operating in these jurisdictions may be legally 
compelled to comply with these requests, regardless of their 
trustworthiness or contractual commitments. The Department assesses 
that the kind of contractual provisions contemplated by these 
commenters would not adequately mitigate the risk that countries of 
concern could compel these covered persons to provide them access to 
government-related data or Americans' bulk U.S. sensitive personal 
data. Further, other commenters expressed concern about relying on 
private parties to monitor and enforce contractual provisions on their 
own, as discussed in part IV.A.16 of this preamble.

D. Subpart F--Determination of Countries of Concern

1. Section 202.601--Determination of Countries of Concern
    As explained in the ANPRM and above in part II of this preamble, 
countries of concern could exploit government-related data or bulk U.S. 
sensitive personal data for a range of activities detrimental to U.S. 
national security, including coercion, blackmail, surveillance, 
espionage, malicious cyber-enabled activities, malign foreign 
influence, curbing political dissent and opposition, and tracking and 
building profiles on potential targets.
    The Order instructs the Attorney General to ``identify, with the 
concurrence of the Secretary of State and the Secretary of Commerce, 
countries of concern.'' \81\ In the proposed rule, the Attorney General 
has determined, with the concurrence of the Secretaries of State and 
Commerce, that the governments of six countries--the People's Republic 
of China (``China'' or ``PRC''), along with the Special Administrative 
Region of Hong Kong and the Special Administrative Region of Macau; the 
Russian Federation (``Russia''); the Islamic Republic of Iran 
(``Iran''); the Democratic People's Republic of Korea (``North 
Korea''); the Republic of Cuba (``Cuba''); and the Bolivarian Republic 
of Venezuela (``Venezuela'')--have engaged in a long-term pattern or 
serious instances of conduct significantly adverse to the national 
security of the United States or the security and safety of U.S. 
persons, and pose a significant risk of exploiting government-related 
data or bulk U.S.

[[Page 86141]]

sensitive personal data to the detriment of the national security of 
the United States or the security and safety of U.S. persons.
---------------------------------------------------------------------------

    \81\ 89 FR 15424.
---------------------------------------------------------------------------

    In determining that a country has engaged in a long-term pattern or 
serious instances of conduct significantly adverse to the national 
security of the United States or the security and safety of U.S. 
persons, the proposed rule accounts for a range of conduct, including 
transnational repression; malicious cyber activities; sanctions 
evasion; theft of intellectual property, trade secrets, and technology; 
foreign malign influence; \82\ and human-rights abuses. Even where 
human-rights abuses do not directly involve U.S. persons, the 
Department considers human-rights abuses to be significantly adverse to 
national security because of their indirect effects. For example, by 
developing, testing, and using sophisticated surveillance technology on 
their own populations or conducting surveillance on their own 
populations, countries can expand the use of those methods and 
potentially deploy them directly against U.S. persons or U.S. interests 
in the future.\83\ Furthermore, a country that commits human-rights 
violations shows its disregard for international norms and its 
intention to use the coercive power of the state to accomplish its 
policy goals. For example, countries that commit human-rights 
violations may also attempt to surveil or coerce their citizens in the 
United States, including through transnational repression.\84\ Based on 
its experience, the Department believes that such factors demonstrate 
that a country presents a risk that, if provided access, it would 
exploit government-related data or bulk U.S. sensitive personal data to 
the detriment of the national security of the United States or the 
security and safety of U.S. persons.
---------------------------------------------------------------------------

    \82\ See 50 U.S.C. 3059(f)(2).
    \83\ Nat'l Counterintel. & Sec. Ctr., China's Collection of 
Genomic and Other Healthcare Data from America: Risks to Privacy and 
U.S. Economic and National Security 3-4 (Feb. 2021), https://www.dni.gov/files/NCSC/documents/SafeguardingOurFuture/NCSC_China_Genomics_Fact_Sheet_2021revision20210203.pdf [https://perma.cc/BL4H-WJSW].
    \84\ Press Release, U.S. Dep't of Just., Two Arrested for 
Operating Illegal Overseas Police Station of the Chinese Government 
(Apr. 17, 2023), https://www.justice.gov/opa/pr/two-arrested-operating-illegal-overseas-police-station-chinese-government 
[https://perma.cc/XM9B-2BU7].
---------------------------------------------------------------------------

    During the ANPRM's comment period, commenters requested that the 
proposed rule include criteria and a transparent process for the 
Department of Justice to designate countries of concern, including by 
conducting robust interagency discussion and soliciting public comment. 
The proposed rule makes no change in response to this comment. The 
Order already requires that prior to amending the list of countries of 
concern, the Department must obtain concurrence by the Secretary of 
State and the Secretary of Commerce and undertake a rulemaking that is 
subject to the ordinary process of robust interagency review and notice 
and public comment. In addition to the opportunity for notice and 
public comment on this proposed rule's identification of countries of 
concern, the Department took the optional step of issuing an ANPRM to 
permit an additional opportunity for public comment on the contemplated 
countries of concern.
    One commenter supported aligning the list of countries of concern 
with the list established by the Department of Commerce in 15 CFR 
791.4, which was adopted pursuant to Executive Order 13873. The ANPRM 
already contemplated identifying the same countries as countries of 
concern under the Order as the Department of Commerce identified as 
foreign adversaries under Executive Order 13873. The proposed rule 
adopts that approach and identifies those same countries for reasons 
explained further in this part.
    Other commenters expressed concerns that the list of six countries 
of concern contemplated in the ANPRM is too narrow and does not 
adequately address entities based in third countries that engage in or 
facilitate surveillance on U.S. citizens. The proposed rule makes no 
change in response to this comment. As the ANPRM described, the 
Department intends to establish this program by issuing proposed 
rulemakings in tranches based on priority and effective administration 
of the program. The Department intends to continue working closely with 
the Department of State, Department of Commerce, and other agencies to 
monitor the effectiveness of the regulations and the need for any 
changes. Similarly, one commenter suggested that the Department 
consider designating a larger group of countries as countries of 
concern based upon those countries' lack of privacy laws or lack of 
enforcement of their privacy laws. The Department declines to adopt 
this approach at this time. The Order's focus is addressing the 
national security risk posed by country of concern access to 
government-related data or Americans' bulk U.S. sensitive personal 
data. The Order does not establish a general data privacy regime. The 
proposed rule thus maintains the country of concern framework described 
in the ANPRM without change.
    Informed by the ANPRM comments and the Department's independent 
research and analysis, which are summarized in part IV.D of this 
preamble, the Department proposes identifying the same countries of 
concern as those identified by the Department of Commerce in 
implementing Executive Order 13873. The proposed rule's definition of 
each of these countries includes political subdivisions, agencies, or 
instrumentalities of those countries. In addition, the Order 
specifically defines a ``country of concern,'' and the Department has 
determined that every country included on the list of countries of 
concern meets that definition.
    The Department seeks comment from the public on the proposed 
countries of concern. The proposed rule identifies these six countries 
as countries of concern for the following reasons.
a. China
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that China has engaged in a long-
term pattern of conduct significantly adverse to the national security 
of the United States and the security and safety of U.S. persons. Among 
other conduct significantly adverse to the national security of the 
United States and the security and safety of U.S. persons, China 
engages in transnational repression; \85\ steals trade secrets and 
intellectual property; \86\ conducts foreign malign influence; \87\ 
commits human rights abuses that could help it develop the capability 
to surveil, manipulate, or extort U.S. persons; \88\ and conducts 
extensive malicious cyber activities.\89\
---------------------------------------------------------------------------

    \85\ Press Release, U.S. Dep't of Just., Seven Hackers 
Associated with Chinese Government Charged with Computer Intrusions 
Targeting Perceived Critics of China and U.S. Businesses and 
Politicians (Mar. 25, 2024), https://www.justice.gov/opa/pr/seven-hackers-associated-chinese-government-charged-computer-intrusions-targeting-perceived [https://perma.cc/YQC7-JDCU].
    \86\ Id.; Off. of the Dir. of Nat'l Intel., Annual Threat 
Assessment of the U.S. Intelligence Community, at 12 (Feb. 5, 2024), 
https://www.dni.gov/files/ODNI/documents/assessments/ATA-2024-Unclassified-Report.pdf [https://perma.cc/FX84-ZR7E].
    \87\ Off. of the Dir. of Nat'l Intel., supra note 86, at 12.
    \88\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 3-4.
    \89\ Off. of the U.S. Trade Rep., Four-Year Review of Actions 
Taken in the Section 301 Investigation: China's Acts, Policies, and 
Practices Related to Technology Transfer, Intellectual Property, and 
Innovation, at 15-33 (May 14, 2024), https://ustr.gov/sites/default/files/05.14.2024%20Four% 
20Year%20Review%20of%20China%20Tech%20Transfer%20Section%20301%20(Fin
al).pdf [https://perma.cc/W6FN-4C38].

---------------------------------------------------------------------------

[[Page 86142]]

    According to the Office of the Director of National Intelligence 
(``ODNI''), China is ``the most active and persistent cyber threat to 
U.S. Government, private-sector, and critical infrastructure 
networks.'' \90\ China's cyber espionage operations have included 
``compromising telecommunications firms, providers of managed services 
and broadly used software, and other targets potentially rich in 
follow-on opportunities for intelligence collection, attack, or 
influence operations.'' \91\ China ``conducts cyber intrusions that are 
targeted to affect U.S. and non-U.S. citizens beyond its borders--
including journalists, dissidents, and individuals it views as 
threats--to counter views it considers critical of [Chinese Communist 
Party] narratives, policies and actions.'' \92\ It also conducts malign 
influence operations to ``sow doubts about U.S. leadership, undermine 
democracy, and extend [China's] influence.'' \93\
---------------------------------------------------------------------------

    \90\ Off. of the Dir. of Nat'l Intel., supra note 86, at 12.
    \91\ Off. of the Dir. of Nat'l Intel., Annual Threat Assessment 
of the U.S. Intelligence Community 10 (Feb. 6, 2023), https://www.odni.gov/files/ODNI/documents/assessments/ATA-2023-Unclassified-Report.pdf [https://perma.cc/4B2Y-7NVD].
    \92\ Id.
    \93\ Id.
---------------------------------------------------------------------------

    Because China aggressively obtains and exploits data on U.S. 
persons through both commercial means and theft, and has growing 
artificial intelligence capabilities, it poses a significant risk of 
exploiting government-related data or Americans' bulk U.S. sensitive 
personal data to the detriment of the national security of the United 
States and the security and safety of U.S. persons.
    China aggressively obtains and exploits data on U.S. persons via 
commercial and illicit means. The National Counterintelligence and 
Security Center (``NCSC'') has warned that China ``views bulk personal 
data, including healthcare and genomic data, as a strategic commodity 
to be collected and used for its economic and national security 
priorities.'' \94\ As ODNI has also explained, China ``has engaged in 
extensive and years-long efforts to accumulate structured datasets, in 
particular on U.S. persons, to support its intelligence and 
counterintelligence operations,'' \95\ and is ``rapidly expanding and 
improving its artificial intelligence and big data analytics 
capabilities for intelligence operations.'' \96\ China ``uses a number 
of methods to obtain data.'' \97\ For example, China engages in the 
``wholesale theft'' of sensitive personal data of U.S. persons.\98\ The 
following are some examples of the PRC's aggressive campaign to steal 
and exploit government-related data or bulk U.S. sensitive personal 
data: \99\
---------------------------------------------------------------------------

    \94\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 1.
    \95\ In Camera, Ex Parte Classified Decl. of Casey Blackburn, 
Assistant Dir. of Nat'l Intel., Doc. No. 2066897 at Gov't App. 10 ] 
31, TikTok Inc. v. Garland, Case Nos. 24-1113, 24-1130, 24-1183 
(D.C. Cir. July 26, 2024) (publicly filed redacted version) 
(hereinafter ``Blackburn Decl.'').
    \96\ Id. at Gov't App. 10 ] 30.
    \97\ Id. at Gov't App. 10 ] 32.
    \98\ The Strategic Competition Between the U.S. and the Chinese 
Communist Party: Hearing Before the H. Select Comm., 108th Cong. 
(2024) (statement of Christopher Wray, Director, Fed. Bureau of 
Investig.), https://www.fbi.gov/news/speeches/director-wrays-opening-statement-to-the-house-select-committee-on-the-chinese-communist-party [https://perma.cc/89CA-DPHQ]; see also Nat'l Intel. 
Council, supra note 5, at 3.
    \99\ Nat'l Intel. Council, supra note 5, at 3; Wray, supra note 
98.
---------------------------------------------------------------------------

    <bullet> In 2024, a Federal grand jury returned an indictment 
against hackers working for Chinese intelligence services for, among 
other things, targeting high-ranking United States Government officials 
and staffers for a presidential campaign by sending thousands of 
malicious emails.\100\ The hackers potentially compromised the email 
and cloud storage accounts and telephone records belonging to millions 
of Americans.\101\
---------------------------------------------------------------------------

    \100\ Press Release, U.S. Dep't of Just., supra note 85; 
Indictment, United States v. Gaobin, No. 24-cr-43 (E.D.N.Y. filed 
Jan. 30, 2024).
    \101\ Indictment ] 15, Gaobin, 24-cr-43.
---------------------------------------------------------------------------

    <bullet> In 2020, a Federal grand jury returned an indictment 
against four members of the PRC's People's Liberation Army for hacking 
U.S. credit-reporting agency Equifax in 2017.\102\ The hackers stole 
the data of approximately 145 million victims, obtaining, ``in a single 
breach, . . . the sensitive personally identifiable information for 
nearly half of all American citizens.'' \103\
---------------------------------------------------------------------------

    \102\ Indictment ]] 2-3, United States v. Zhiyong, No. 20-cr-046 
(N.D. Ga. filed Jan. 28, 2020); see also Press Release, U.S. Dep't 
of Just., Chinese Military Personnel Charged with Computer Fraud, 
Economic Espionage and Wire Fraud for Hacking into Credit Reporting 
Agency Equifax (Feb. 10, 2020), https://www.justice.gov/opa/pr/chinese-military-personnel-charged-computer-fraud-economic-espionage-and-wire-fraud-hacking [https://perma.cc/2TW4-2HGP].
    \103\ Indictment ] 3, Zhiyong, No. 20-cr-046; see also Nat'l 
Intel. Council, supra note 5, at 4; Christopher Wray, Dir., Fed. 
Bureau of Investig., The Threat Posed by the Chinese Government and 
the Chinese Communist Party to the Economic and National Sec. of the 
United States, Address at the Hudson Institute Event on China's 
Attempt to Influence U.S. Institutions (July 7, 2020), https://www.fbi.gov/news/speeches/the-threat-posed-by-the-chinese-government-and-the-chinese-communist-party-to-the-economic-and-national security-of-the-united-states [https://perma.cc/LMJ6-882S].
---------------------------------------------------------------------------

    <bullet> In 2015, PRC hackers stole the health records of 78.8 
million persons from U.S. health insurance provider Anthem, Inc.,\104\ 
and stole the background investigation records of 21.5 million 
prospective, current, and former Federal employees and contractors from 
the Office of Personnel Management.\105\
---------------------------------------------------------------------------

    \104\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 3.
    \105\ U.S. Off. of Pers. Mgmt., Cybersecurity Incidents, https://www.opm.gov/cybersecurity-resource-center/#url=Cybersecurity-Incidents [https://perma.cc/V87Q-2K6W]; Nat'l Counterintel. & Sec. 
Ctr., supra note 83.
---------------------------------------------------------------------------

    <bullet> In 2021, a Federal grand jury returned an indictment 
against four Chinese nationals working for PRC intelligence services 
for hacking into the computer systems of dozens of companies, 
universities, and government entities between 2011 and 2018 to steal 
sensitive technical technology and data, including material related to 
genetic sequencing.\106\
---------------------------------------------------------------------------

    \106\ See Press Release, U.S. Dep't of Just., Four Chinese 
Nationals Working with the Ministry of State Security Charged with 
Global Computer Intrusion Campaign Targeting Intellectual Property 
and Confidential Business Information, Including Infectious Disease 
Research (July 19, 2021), https://www.justice.gov/opa/pr/four-chinese-nationals-working-ministry-state-security-charged-global-computer-intrusion [https://perma.cc/KJ76-KRKS]; Indictment ] 4, 
United States v. Xiaoyang, No. 21-cr-01622 (S.D. Cal. filed May 28, 
2021).
---------------------------------------------------------------------------

    <bullet> In 2021, cyber actors linked to China's intelligence 
services exploited previously undisclosed vulnerabilities in Microsoft 
Exchange Server, compromising tens of thousands of computers and 
networks, including those in the United States, in a massive 
operation.\107\
---------------------------------------------------------------------------

    \107\ Press Release, The White House, The United States, Joined 
by Allies and Partners, Attributes Malicious Cyber Activity and 
Irresponsible State Behavior to the People's Republic of China (July 
19, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/19/the-united-states-joined-by-allies-and-partners-attributes-malicious-cyber-activity-and-irresponsible-state-behavior-to-the-peoples-republic-of-china/ [https://perma.cc/5ESU-43VY].
---------------------------------------------------------------------------

    <bullet> In 2018, a Federal grand jury returned an indictment 
against two PRC intelligence-affiliated officials for conducting a 
campaign targeting the computer networks and systems of technology and 
cloud-service companies in at least a dozen U.S. States, as well as 
United States Government agencies, to access their customers' 
data.\108\ At least eight major

[[Page 86143]]

managed service providers were compromised, as well as the National 
Aeronautics and Space Administration and the Department of Energy.\109\ 
Over 12 years, hackers stole hundreds of gigabytes of data, including 
the personally identifiable information of over 100,000 U.S. Navy 
personnel.\110\
---------------------------------------------------------------------------

    \108\ See Press Release, U.S. Dep't of Just., Two Chinese 
Hackers Associated with the Ministry of State Security Charged with 
Global Computer Intrusion Campaigns Targeting Intellectual Property 
and Confidential Business Information (Dec. 20, 2018), https://www.justice.gov/opa/pr/two-chinese-hackers-associated-ministry-state-security-charged-global-computer-intrusion [https://perma.cc/5M68-677J]; see also Indictment ]] 3-5, United States v. Zhu, No. 
18-cr-891 (S.D.N.Y. filed Dec. 17, 2018).
    \109\ Indictment ]] 5-6, Zhu, No. 18-cr-891.
    \110\ Indictment ] 10, Zhu, No. 18-cr-891.
---------------------------------------------------------------------------

    As ODNI has explained, China ``also tries to leverage access 
through its relationships with Chinese companies, strategic investments 
in foreign companies, and by purchasing large data sets.'' \111\ China 
and Chinese companies ``have sought to acquire sensitive health and 
genomic data on U.S. persons through, for example, investment in U.S. 
firms that handle such data or by partnering with healthcare or 
research organizations in the United States to provide genomic 
sequencing services.'' \112\ China also strategically acquires 
sensitive personal data on U.S. persons through commercial means, such 
as by investing in U.S. firms through Chinese companies and engaging in 
partnerships with hospitals, universities, and research 
organizations.\113\ China employs a wide array of means to ensure that 
the Chinese government benefits from Chinese companies' relationships 
with U.S. companies. Not only do direct investments by Chinese 
companies facilitate China's strategic objectives,\114\ but those 
direct investments also promote a strategy of ``military-civil fusion'' 
that ensures that China's military can ``acquire advanced technologies 
and expertise developed by [Chinese] companies, universities, and 
research programs that appear to be civilian entities.'' \115\
---------------------------------------------------------------------------

    \111\ Blackburn Decl., supra note 95, at Gov't App. 11 ] 33.
    \112\ Id. at Gov't App. 11 ] 33(a).
    \113\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 2.
    \114\ Off. of the U.S. Trade Representative, Exec. Off. Of the 
Pres., Findings of the Investigation into China's Acts, Policies, 
and Practices Related to Technology Transfer, Intellectual Property, 
and Innovation Under Section 301 of the Trade Act of 1974 63 (Mar. 
22, 2018), https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF [https://perma.cc/SAS4-JSNK].
    \115\ Press Release, U.S. Dep't of Def., DOD Releases List of 
People's Republic of China (PRC) Military Companies in Accordance 
with Section 1260H of the National Defense Authorization Act for 
Fiscal Year 2021 (Jan. 31, 2024), https://www.defense.gov/News/Releases/Release/Article/3661985/dod-releases-list-of-peoples-republic-of-china-prc-military-companies-in-accord/ [https://perma.cc/S7HA-384R].
---------------------------------------------------------------------------

    These commercial means of obtaining sensitive personal data on U.S. 
persons are paired with China's national-security laws that compel 
companies to share data they have collected on U.S. persons with the 
Chinese government.\116\ As the Department has explained, ``China has 
enacted the world's most comprehensive set of laws, regulations, and 
national plans to broadly define its national and public security 
interests in data and to govern data collection, sales, sharing, and 
storage.'' \117\ Given ``the authoritarian structures and laws of the 
PRC regime, Chinese companies lack meaningful independence from the 
PRC's agenda and objectives,'' and ``even putatively `private' 
companies based in China do not operate with independence from the 
government and cannot be analogized to private companies in the United 
States.'' \118\ This regime includes ``several laws that, in concert, 
allow the Chinese government to access sensitive personal data 
possessed by Chinese companies,'' \119\ such as the following:
---------------------------------------------------------------------------

    \116\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 4.
    \117\ Newman Decl., supra note 40, at Gov't App. 49 ] 16.
    \118\ Id. at Gov't App. 49 ] 17.
    \119\ Id. at Gov't App. 19 ] 18.
---------------------------------------------------------------------------

    <bullet> The National Security Law of the People's Republic of 
China (promulgated by the Standing Committee of the National People's 
Congress, July 1, 2015, effective July 1, 2015), which ``imposes broad 
obligations on corporations as well as citizens to assist and cooperate 
with the Chinese government in protecting what it defines as national 
security'' and to ``assist military agencies and relevant departments 
with national security efforts.'' \120\
---------------------------------------------------------------------------

    \120\ Id. at Gov't App. 49-50 ] 19; see Exh. A to Newman Decl., 
supra note 40.
---------------------------------------------------------------------------

    <bullet> The Cybersecurity Law of the People's Republic of China 
(promulgated by the Standing Committee of the National People's 
Congress, Nov. 7, 2016, effective June 1, 2017), which ``requires 
Chinese companies to store their data within China, to cooperate with 
crime and security investigations, and to allow full access to data to 
Chinese authorities.'' \121\
---------------------------------------------------------------------------

    \121\ Newman Decl., supra note 40, at Gov't App. 50-51 ] 20; see 
Exh. B to Newman Decl., supra note 40.
---------------------------------------------------------------------------

    <bullet> The Anti-Terrorism Law of the People's Republic of China 
(promulgated by the Standing Committee of the National People's 
Congress, Dec. 27, 2015, effective Jan. 1, 2016, amended Apr. 27, 
2018), which authorizes the Chinese government to conduct ``electronic 
monitoring,'' ``irregular inspections,'' and ```terrorism' 
investigations and requires individuals and organizations to comply, in 
secret, with such investigations''; broadly ``defines `terrorism' as 
``propositions and actions that . . . create social panic, endanger 
public safety, infringe on personal and property rights, or coerce 
state organs or international organizations to achieve their political, 
ideological, and other objectives''; and imposes on all organizations 
and individuals ``the obligation to assist and cooperate with relevant 
departments in anti-terrorism work.'' \122\
---------------------------------------------------------------------------

    \122\ Newman Decl., supra note 40, at Gov't App. 51 ] 21; see 
Exh. C. to Newman Decl., supra note 40.
---------------------------------------------------------------------------

    <bullet> The Counter-Espionage Law of the People's Republic of 
China (promulgated by the Standing Committee of the National People's 
Congress, Nov. 1, 2014, amended Apr. 26, 2023, effective July 1, 2023), 
which authorizes ``national security agency staff'' to ``enter 
restricted areas, locations, and units'' and to ``inspect the 
electronic devices, facilities, and relevant procedures and tools of 
concerned individuals and organizations,'' and also requires ``citizens 
and organizations'' to ``support and assist'' such efforts.\123\
---------------------------------------------------------------------------

    \123\ Newman Decl., supra note 40, at Gov't App. 51-52 ] 23; see 
Exh. E to Newman Dec., supra note 40.
---------------------------------------------------------------------------

    These laws all ``contain provisions that prohibit individuals and 
organizations from revealing when and if the Chinese government has 
requested any assistance or information from them.'' \124\ As a result, 
China can covertly obtain data on U.S. persons in the possession of 
Chinese companies without meaningful due process and independent 
judicial oversight. China's commercial acquisitions of data also 
contribute to the government's growing repository of data on U.S. 
persons.\125\
---------------------------------------------------------------------------

    \124\ Newman Decl., supra note 40, at Gov't App. 52 ] 24.
    \125\ Lisa Monaco, Deputy Att'y Gen., U.S. Dep't of Just., 
Remarks on Disruptive Technologies at Chatham House (Feb. 16, 2023), 
https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-disruptive-technologies-chatham [https://perma.cc/NW6D-HM6Q] (``So if a company operating in China collects 
your data, it is a good bet that the Chinese government is accessing 
it.'').
---------------------------------------------------------------------------

    China's access to bulk U.S. sensitive personal data--whether via 
commercial means or outright theft--fuels its development of artificial 
intelligence capabilities, which China believes will drive the next 
revolution in military affairs.\126\ The Office of the Director of 
National Intelligence assesses that China is ``rapidly expanding and 
improving its

[[Page 86144]]

AI and big data analytics capabilities for intelligence operations'' 
\127\ and ``increasing [its] ability to analyze and manipulate large 
quantities of personal information in ways that will allow [it] to more 
effectively target and influence, or coerce, individuals and groups in 
the United States.'' \128\ In turn, China's advances in artificial 
intelligence ``deepen[] the threats posed by cyberattacks and 
disinformation campaigns'' that China is using ``to infiltrate [U.S.] 
society, steal [U.S.] data and interfere in [U.S.] democracy.'' \129\
---------------------------------------------------------------------------

    \126\ Elsa B. Kania, ``AI Weapons'' in China's Military 
Innovation, Brookings Inst. (Apr. 2020), https://www.brookings.edu/wp-content/uploads/2020/04/FP_20200427_ai_weapons_kania_v2.pdf 
[https://perma.cc/JPM7-YHV5].
    \127\ Off. of the Dir. of Nat'l Intel., supra note 86, at 12.
    \128\ Nat'l Intel. Council, supra note 5, at 3.
    \129\ Nat'l Counterintel. & Sec. Ctr., supra note 48, at 4; 
Wray, supra note 98.
---------------------------------------------------------------------------

b. Cuba
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that Cuba has engaged in a long-term 
pattern of conduct significantly adverse to the national security of 
the United States and the security and safety of U.S. persons. The 
United States has long recognized that the Cuban government presents a 
national security threat to the United States. Among other conduct 
significantly adverse to the national security of the United States and 
the security and safety of U.S. persons, Cuba conducts intelligence 
operations against the United States; commits human-rights abuses that, 
among other effects, contribute to a significant increase in migration 
into the United States and its neighbors; \130\ and sponsors 
terrorism.\131\ Because of the Cuban government's actions, the United 
States has imposed some form of economic sanctions on Cuba since the 
early 1960s, including under the Trading with the Enemy Act of 1917. 
The United States currently maintains a comprehensive economic embargo 
on Cuba.\132\
---------------------------------------------------------------------------

    \130\ Press Release, U.S. Dep't of Treas., Treasury Sanctions 
Senior Cuban Officials in Response to Violence Against Peaceful 
Demonstrators (Aug. 19, 2021), https://home.treasury.gov/news/press-releases/jy0327 [https://perma.cc/TQP2-U79G]; Press Statement, The 
White House, Fact Sheet: Biden Harris Administration Measures on 
Cuba (July 22, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/22/fact-sheet-biden-harris-administration-measures-on-cuba/ [https://perma.cc/J7H7-BAA8]; Eric 
Bazail-Eimil, Record-Breaking Numbers of Cuban Migrants Entered the 
U.S. in 2022-23, Politico (Oct. 24, 2023), https://www.politico.com/news/2023/10/24/record-breaking-numbers-of-cuban-migrants-entered-the-u-s-in-2022-23-00123346 [https://perma.cc/ZQ6C-KCC4].
    \131\ Press Release, U.S. Embassy in Cuba, U.S. Announces 
Designation of Cuba as a State Sponsor of Terrorism (Jan. 11, 2021), 
https://cu.usembassy.gov/u-s-announces-designation-of-cuba-as-a-state-sponsor-of-terrorism/ [https://perma.cc/6GE4-5JJS].
    \132\ Cuba Sanctions, U.S. Dep't of State, https://www.state.gov/cuba-sanctions/ [https://perma.cc/Q7S9-9XA6].
---------------------------------------------------------------------------

    Because Cuba has engaged in long-standing efforts to target the 
United States Government and United States Government personnel for 
intelligence purposes, Cuba poses a significant risk of exploiting 
government-related data or Americans' bulk U.S. sensitive personal data 
to the detriment of the national security of the United States and the 
security and safety of U.S. persons. According to ODNI, Cuba's 
intelligence capabilities pose a ``significant threat[ ]'' to the 
United States.\133\ For decades, Cuban intelligence services have 
sought to obtain information about the United States Government and to 
target U.S. persons to pursue Cuba's interests, including espionage. 
For example, in 2024, a former U.S. Department of State employee who 
served as U.S. Ambassador to Bolivia admitted to secretly acting as an 
agent of Cuba for decades and received a 15-year prison sentence.\134\ 
In another example, in 2010, a U.S. Department of State official and 
his wife were sentenced to lengthy prison sentences for participating 
in a ``nearly 30-year conspiracy to provide highly classified U.S. 
national defense information'' to Cuba.\135\ In 2004, a Federal grand 
jury returned an indictment against an individual for conspiring to 
share information related to U.S. national defense with Cuba, including 
helping Cuban intelligence services ``spot, assess, and recruit U.S. 
citizens who occupied sensitive national security positions or had the 
potential of occupying such positions in the future to serve as Cuban 
agents.'' \136\ In 2002, an employee at the Defense Intelligence Agency 
was sentenced to 25 years in prison for spying on behalf of Cuba, 
including sharing the identities of American undercover intelligence 
officers working in Cuba with the Cuban government.\137\ In 2022, Team 
Telecom recommended that the Federal Communications Commission 
(``FCC'') deny an application for a license for a subsea 
telecommunications cable that would have directly connected the United 
States to Cuba.\138\ Team Telecom highlighted Cuba's history of 
espionage and intelligence activities targeting the United States.\139\ 
Because Cuba's state-owned telecommunications monopoly would control 
the cable, Team Telecom concluded that the cable would give the Cuban 
government the ability and opportunity to access U.S. persons' internet 
traffic, data, and communications transiting the cable, and make the 
Cuban government an even greater counterintelligence threat to the 
United States.\140\
---------------------------------------------------------------------------

    \133\ Nat'l Counterintel. & Sec. Ctr., National 
Counterintelligence Strategy of the United States 2020-2022, at 2 
(Jan. 7, 2020), https://www.dni.gov/files/NCSC/documents/features/20200205-National_CI_Strategy_2020_2022.pdf [https://perma.cc/V8NU-PN23].
    \134\ Press Release, U.S. Dep't of Just., Former U.S. Ambassador 
and National Security Council Official Admits to Secretly Acting as 
Agent of the Cuban Government and Receives 15-Year Sentence (Apr. 
12, 2024), https://www.justice.gov/opa/pr/former-us-ambassador-and-national security-council-official-admits-secretly-acting-agent 
[https://perma.cc/NU9F-6NUS]; Complaint, United States v. Rocha, No. 
23-mj-04368 (S.D. Fla. filed Dec. 4, 2023).
    \135\ Press Release, U.S. Dep't of Just., Former State 
Department Official Sentenced to Life in Prison for Nearly 30-Year 
Espionage Conspiracy (July 16, 2010), https://www.justice.gov/opa/pr/former-state-department-official-sentenced-life-prison-nearly-30-year-espionage-conspiracy [https://perma.cc/622F-Y6NR].
    \136\ Press Release, U.S. Dep't of Just., Unsealed Indictment 
Charges Former U.S. Federal Employee with Conspiracy to Commit 
Espionage for Cuba (Apr. 25, 2013), https://www.justice.gov/opa/pr/unsealed-indictment-charges-former-us-federal-employee-conspiracy-commit-espionage-cuba [https://perma.cc/ZSW8-7A4R]; Indictment ]] 
14-34, United States v. Velazquez, No. 04-cr-044 (D.D.C. filed Feb. 
5, 2004), ECF No. 1.
    \137\ Ana Montes: Cuban Spy, Famous Cases and Criminals, Fed. 
Bureau of Investig., https://www.fbi.gov/history/famous-cases/ana-montes-cuba-spy [https://perma.cc/MJJ5-WG9X].
    \138\ Press Release, U.S. Dep't of Just., Team Telecom 
Recommends the FCC Deny Application to Directly Connect the United 
States to Cuba Through Subsea Cable (Nov. 30, 2022), https://www.justice.gov/opa/pr/team-telecom-recommends-fcc-deny-application-directly-connect-united-states-cuba-through [https://perma.cc/J7RF-HM6U]; see generally ARCOS-1 USA, Inc., File No. SCL-MOD-202100928-
0039 (Fed. Commc'ns Comm'n Nov. 29, 2022) (committee recommendation 
to deny application), https://www.justice.gov/opa/file/1555196/dl?inline [https://perma.cc/F9SV-7U98].
    \139\ ARCOS-1 USA, Inc., supra note 138, at 11-12.
    \140\ ARCOS-1 USA, Inc., supra note 138, at 14-15.
---------------------------------------------------------------------------

    Cuba also has strong ties to both China and Russia and might share 
any information it obtains on U.S. persons with either of those 
countries.\141\ For example, in 2018, The Diplomat noted that the Cuban 
government ``has been reported to sell its intercept data from U.S. 
communications to third-party buyers, particularly military adversaries 
of the [United States],'' including China.\142\ Team Telecom has also 
found that Cuba's relationships with China and Russia--which include 
extensive economic, military and intelligence cooperation--heighten the 
risk that Cuba could share U.S. sensitive

[[Page 86145]]

personal data that it obtains with China or Russia.\143\
---------------------------------------------------------------------------

    \141\ Id. at 17-25.
    \142\ Victor Robert Lee, Satellite Images: A (Worrying) Cuban 
Mystery, Diplomat (June 8, 2018), https://thediplomat.com/2018/06/satellite-images-a-worrying-cuban-mystery [https://perma.cc/H6ZF-P3QU].
    \143\ ARCOS-1 USA, Inc., supra note 138, at 17-25.
---------------------------------------------------------------------------

c. Iran
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that Iran has engaged in a long-term 
pattern of conduct significantly adverse to the national security of 
the United States and the security and safety of U.S. persons. Iran 
engages in transnational repression; \144\ commits human-rights abuses, 
including against U.S. persons; \145\ smuggles U.S. technology; \146\ 
evades U.S. sanctions; \147\ sponsors terrorism; \148\ and conducts 
malicious cyber activities, among other conduct.
---------------------------------------------------------------------------

    \144\ Press Statement, Matthew Miller, Spokesperson, Dep't of 
State, Taking Actions to Combat the Iranian Regime's Transnational 
Repression (Jan. 29, 2024), https://www.state.gov/taking-actions-to-combat-the-iranian-regimes-transnational-repression/ [https://perma.cc/VS2Z-VA32].
    \145\ Press Statement, Antony J. Blinken, Sec'y, Dep't of State, 
Designating Iranian Persons Connected to Wrongful Detentions (Sept. 
18, 2023), https://www.state.gov/designating-iranian-persons-connected-to-wrongful-detentions/ [https://perma.cc/2CFT-YQWB].
    \146\ Press Statement, Matthew Miller, Spokesperson, Dep't of 
State, Designating Persons Tied to Network Smuggling U.S. Technology 
to Central Bank of Iran (Feb. 14, 2024), https://www.state.gov/designating-persons-tied-to-network-smuggling-u-s-technology-to-central-bank-of-iran/ [https://perma.cc/XD7P-JKNU].
    \147\ Press Release, U.S. Dep't of Treas., Treasury Targets 
Sanctions Evasion Network Moving Billions for Iranian Regime (Mar. 
9, 2023), https://home.treasury.gov/news/press-releases/jy1330 
[https://perma.cc/U8J2-NZ5Y]; Press Release, U.S. Dep't of Just., 
Justice Department Announces Terrorism and Sanctions-Evasion Charges 
and Seizures Linked to Illicit, Billion-Dollar Global Oil 
Trafficking Network that Finances Iran's Islamic Revolutionary Guard 
Corps and Its Malign Activities (Feb. 2, 2024), https://www.justice.gov/opa/pr/justice-department-announces-terrorism-and-sanctions-evasion-charges-and-seizures-linked [https://perma.cc/AXS4-63QM]; Indictment ] 2, United States v. Shahriyari, No. 24-cr-
44 (S.D.N.Y. filed Jan. 25, 2024), ECF No. 1, https://www.justice.gov/opa/media/1336966/dl?inline [https://perma.cc/T664-3F6U].
    \148\ U.S. Dep't of Just., supra note 147.
---------------------------------------------------------------------------

    Because Iran has growing cyber expertise and aggressively seeks to 
obtain and exploit data on U.S. persons, it poses a significant risk of 
exploiting government-related data or Americans' bulk U.S. sensitive 
personal data to the detriment of the national security of the United 
States and the security and safety of U.S. persons. According to ODNI, 
``Iran's growing expertise and willingness to conduct aggressive cyber 
operations make it a major threat to the security of U.S. and allied . 
. . networks and data.'' \149\ Individuals linked to the Iranian 
government engage in advanced cyber activities that target U.S. 
infrastructure,\150\ conduct cyber espionage,\151\ and steal data from 
U.S. persons, companies, and government agencies. For example, in 2018, 
a Federal grand jury returned an indictment against nine Iranians for 
stealing ``more than 31 terabytes of documents and data from more than 
140 American universities, 30 American companies, [and] five American 
government agencies,'' in part at the behest of the Iranian 
government.\152\
---------------------------------------------------------------------------

    \149\ Off. of the Dir. of Nat'l Intel., supra note 86, at 20.
    \150\ Cybersec. & Infrastructure Sec. Agency, AA21-321A, 
Cybersecurity Advisory: Iranian Government-Sponsored APT Cyber 
Actors Exploiting Microsoft Exchange and Fortinet Vulnerabilities in 
Furtherance of Malicious Activities (Nov. 19, 2021), https://www.cisa.gov/news-events/cybersecurity-advisories/aa21-321a [https://perma.cc/9F3H-KY7F].
    \151\ Cybersec. & Infrastructure Sec. Agency, Iranian 
Government-Sponsored Actors Conduct Cyber Operations Against Global 
Government and Commercial Networks (Feb. 24, 2022), https://www.cisa.gov/news-events/cybersecurity-advisories/aa22-055a [https://perma.cc/46ZR-MDVN].
    \152\ Press Release, U.S. Dep't of Just., Nine Iranians Charged 
with Conducting Massive Cyber Theft Campaign on Behalf of the 
Islamic Revolutionary Guard Corps (Mar. 23, 2018), https://www.justice.gov/opa/pr/nine-iranians-charged-conducting-massive-cyber-theft-campaign-behalf-islamic-revolutionary [https://perma.cc/F3BP-GJP7].
---------------------------------------------------------------------------

    In particular, Iranian hackers ``have engaged in widespread theft 
of personal information . . . to track targets of interest to the 
Iranian regime'' \153\ and influence U.S. persons. During the 2020 U.S. 
elections, ``Iranian cyber actors obtained or attempted to obtain U.S. 
voter information, sent threatening emails to voters, and disseminated 
disinformation about the election.'' \154\ According to ODNI, those 
same Iranian actors have developed new cyber and influence techniques 
that Iran could deploy during the 2024 election cycle.\155\ Iran-
associated individuals also target U.S. persons for assassinations. For 
example, in 2023, a Federal grand jury returned an indictment against 
three individuals for plotting the murder of a U.S. citizen targeted by 
Iran for speaking out against the regime's human-rights abuses.\156\ In 
another example of Iran's exploitation of sensitive personal data, 
Iranian cyber threat actors engaged in ``widespread theft'' of personal 
information, ``probably to support surveillance operations that enable 
Iran's human-rights abuses.'' \157\ Iranian threat actors also 
``employed a years-long malware campaign'' that targeted Iranian 
citizens, dissidents, journalists, and foreign organizations, including 
U.S.-based travel services companies that possess personal information 
on millions of travelers.\158\
---------------------------------------------------------------------------

    \153\ Nat'l Intel. Council, supra note 5, at 4.
    \154\ Off. of the Dir. of Nat'l Intel., supra note 86, at 20.
    \155\ Id. at 20.
    \156\ Press Release, U.S. Dep't of Just., Justice Department 
Announces Charges and New Arrest in Connection with Assassination 
Plot Directed from Iran (Jan. 27, 2023), https://www.justice.gov/opa/pr/justice-department-announces-charges-and-new-arrest-connection-assassination-plot-directed [https://perma.cc/WW34-K9AH]; 
Iran Sanctions, U.S. Dep't State, https://www.state.gov/iran-sanctions/ [https://perma.cc/MH6Z-EFV7]; see also Press Release, 
U.S. Dep't of Just., One Iranian and Two Canadian Nationals Indicted 
in Murder-for-Hire Scheme (Jan. 29, 2024), https://www.justice.gov/opa/pr/one-iranian-and-two-canadian-nationals-indicted-murder-hire-scheme [https://perma.cc/2DDC-Q7VQ]; Press Release, U.S. Dep't of 
Treas., The United States and United Kingdom Target Iranian 
Transnational Assassinations Network (Jan. 29, 2024), https://home.treasury.gov/news/press-releases/jy2052 [https://perma.cc/SE4A-7G4U].
    \157\ Press Release, U.S. Dep't of Treas., Treasury Sanctions 
Iranian Ministry of Intelligence and Minister for Malign Cyber 
Activities (Sept. 9, 2022), https://home.treasury.gov/news/press-releases/jy0941 [https://perma.cc/98LB-5XYJ].
    \158\ Press Release, Fed. Bureau of Investig., FBI Releases 
Cybersecurity Advisory on Previously Undisclosed Iranian Malware 
Used to Monitor Dissidents and Travel and Telecommunications 
Companies (Sept. 17, 2020), https://www.fbi.gov/contact-us/field-offices/boston/news/press-releases/fbi-releases-cybersecurity-advisory-on-previously-undisclosed-iranian-malware-used-to-monitor-dissidents-and-travel-and-telecommunications-companies [https://perma.cc/K8V5-LA6U].
---------------------------------------------------------------------------

d. North Korea
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that North Korea has engaged in a 
long-term pattern of conduct significantly adverse to the national 
security of the United States and the security and safety of U.S. 
persons. Among other conduct significantly adverse to the national 
security of the United States and the security and safety of U.S. 
persons, it develops weapons of mass destruction; \159\ commits human-
rights abuses, including against U.S. persons; \160\ evades U.S. 
sanctions; \161\ and conducts malicious cyber activities.
---------------------------------------------------------------------------

    \159\ Press Statement, Antony J. Blinken, Sec'y, Dep't of State, 
Designation of Two DPRK Individuals Supporting the DPRK's Unlawful 
Weapons of Mass Destruction and Missile Programs (June 15, 2023), 
https://www.state.gov/designation-of-two-dprk-individuals-supporting-the-dprks-unlawful-weapons-of-mass-destruction-and-missile-programs/ [https://perma.cc/EV6L-3TCL].
    \160\ Press Release, U.S. Dep't of Treas., Treasury Sanctions 
Over 40 Individuals and Entities Across Nine Countries Connected to 
Corruption and Human Rights Abuse (Dec. 9, 2022), https://home.treasury.gov/news/press-releases/jy1155 [https://perma.cc/Y6ST-UVSP]; Bernd Debusmann Jr., What Happened to US Citizens Like Otto 
Warmbier Detained in North Korea, BBC News (July 18, 2023), https://www.bbc.com/news/world-us-canada-66236989 [https://perma.cc/MTL8-D425].
    \161\ Press Statement, Antony J. Blinken, Sec'y, Dep't of State, 
The Democratic People's Republic of Korea's Illicit Activities and 
Sanctions Evasion (May 6, 2022), https://www.state.gov/the-democratic-peoples-republic-of-koreas-illicit-activities-and-sanctions-evasion/ [https://perma.cc/LQ9B-9Z22].

---------------------------------------------------------------------------

[[Page 86146]]

    Regarding North Korea's malicious cyber activities, ODNI has 
concluded that North Korea's cyber program poses a ``sophisticated and 
agile espionage, cybercrime, and attack threat,'' and that North 
Korea's cyber forces are ``fully capable of achieving a variety of 
strategic objectives against diverse targets'' in the United 
States.\162\
---------------------------------------------------------------------------

    \162\ Off. of the Dir. of Nat'l Intel., supra note 86, at 22.
---------------------------------------------------------------------------

    Because North Korea has sophisticated cyber capabilities and 
attempts to obtain and exploit data on U.S. persons, it poses a 
significant risk of exploiting government-related data or Americans' 
bulk U.S. sensitive personal data to the detriment of the national 
security of the United States and the security and safety of U.S. 
persons. North Korea conducts cyber-enabled attacks and steals personal 
information to influence and target U.S. persons. For example, in 2014, 
North Korea-affiliated hackers attacked U.S. company Sony Pictures 
Entertainment in retaliation for an American film depicting the North 
Korean leader.\163\ They stole proprietary information, personally 
identifiable information, and confidential communications; rendered 
Sony Pictures Entertainment's computers inoperable; and threatened the 
company's executives and employees.\164\ North Korea and North Korea-
affiliated hacker groups have repeatedly targeted military networks, 
critical infrastructure, and other corporate networks to ``steal data 
and conduct disruptive and destructive cyber activities.'' \165\ For 
example, in 2017, North Korea was responsible for a massive ransomware 
attack that infected hundreds of thousands of computers in more than 
150 countries.\166\ North Korea also ``uses cyber capabilities to steal 
from financial institutions'' and ``generate revenue for its weapons of 
mass destruction and ballistic missile programs.'' \167\ North Korea's 
cyber actors use a range of tactics ``to further their larger espionage 
and financial goals,'' including conducting spear phishing, abusing 
privileged access to networks while working as information technology 
contractors, exploiting software vulnerabilities, and attacking supply 
chains.\168\ North Korea is also trying to use AI to further its 
offensive cyber capabilities.\169\
---------------------------------------------------------------------------

    \163\ Press Release, U.S. Dep't of Just., North Korean Regime-
Backed Programmer Charged with Conspiracy to Conduct Multiple Cyber 
Attacks and Intrusions (Sept. 6, 2018), https://www.justice.gov/opa/pr/north-korean-regime-backed-programmer-charged-conspiracy-conduct-multiple-cyber-attacks-and [https://perma.cc/WXQ3-YMQA].
    \164\ Press Release, Fed. Bureau of Investig., Update on Sony 
Investigation (Dec. 19, 2014), https://www.fbi.gov/news/pressrel/press-releases/update-on-sony-investigation [https://perma.cc/5H4K-5EFV].
    \165\ Cybersec. & Infrastructure Sec. Agency, Guidance on the 
North Korean Cyber Threat (June 23, 2020), https://www.cisa.gov/news-events/cybersecurity-advisories/aa20-106a [https://perma.cc/X8CJ-TAYV].
    \166\ U.S. Dep't of Just., supra note 163.
    \167\ Cybersec. & Infrastructure Sec. Agency, supra note 165.
    \168\ Off. of the Dir. of Nat'l Intel., North Korean Tactics, 
Techniques and Procedures for Revenue Generation (July 2023), 
https://www.dni.gov/files/CTIIC/documents/products/North-Korean-TTPs-for-Revenue-Generation.pdf [https://perma.cc/Y949-JJW4]; Press 
Release, U.S. Dep't of Just., Justice Department Announces Court-
Authorized Action to Disrupt Illicit Revenue Generation Efforts of 
Democratic People's Republic of Korea Information Technology Workers 
(Oct. 18, 2023), https://www.justice.gov/opa/pr/justice-department-announces-court-authorized-action-disrupt-illicit-revenue-generation 
[https://perma.cc/3JHY-UH5K].
    \169\ Anne Neuberger, Deputy Nat'l Sec. Advisor for Cyber & 
Emerging Tech., Nat'l Sec. Council, U.S. Dep't of State, Digital 
Press Briefing (Oct. 18, 2023), https://www.state.gov/digital-press-briefing-with-anne-neuberger-deputy-nationalsecurity-advisor-for-cyber-and-emerging-technologies/ [https://perma.cc/GK88-FW8H].
---------------------------------------------------------------------------

e. Russia
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that Russia has engaged in a long-
term pattern of conduct significantly adverse to the national security 
of the United States and the security and safety of U.S. persons. 
According to ODNI, Russia poses ``an enduring global cyber threat'' and 
views ``cyber disruptions as a foreign policy lever to shape other 
countries' decisions.'' \170\ Russia has launched a ``full-scale war 
against Ukraine;'' \171\ commits human-rights abuses, including against 
U.S. persons; \172\ conducts malign influence campaigns; \173\ evades 
U.S. sanctions; \174\ and conducts malicious cyber activities.\175\ 
Russia ``continuously refines and employs its espionage, influence, and 
attack capabilities'' against a variety of targets, including critical 
infrastructure in the United States.\176\ For example, in 2019, Russian 
intelligence services perpetrated a ``broad-scope cyber espionage 
campaign'' that exploited the SolarWinds Orion platform and compromised 
both United States Government agencies and private-sector 
organizations.\177\ The campaign gave Russian intelligence ``the 
ability to spy on or potentially disrupt more than 16,000 computer 
systems worldwide.'' \178\ Russian intelligence ultimately used the 
attack to target United States Government agencies and employees for 
espionage.\179\
---------------------------------------------------------------------------

    \170\ Off. of the Dir. of Nat'l Intel., supra note 86, at 16; 
see also Press Statement, The White House, Fact Sheet: Imposing 
Costs for Harmful Foreign Activities by the Russian Government (Apr. 
15, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/15/fact-sheet-imposing-costs-for-harmful-foreign-activities-by-the-russian-government/ [https://perma.cc/MD56-GD27]; 
Nat'l Counterintel. & Sec. Ctr., SolarWinds Orion Software Supply 
Chain Attack (Aug. 19, 2021), https://www.dni.gov/files/NCSC/documents/SafeguardingOurFuture/SolarWinds%20Orion%20Software%20Supply%20Chain%20Attack.pdf [https://perma.cc/TS3M-MQQ7].
    \171\ Press Statement, Antony J. Blinken, Sec'y, Dep't of State, 
Responding to Two Years of Russia's Full-Scale War Against Ukraine 
and Aleksey Navalny's Death (Feb. 23, 2024), https://www.state.gov/responding-to-two-years-of-russias-full-scale-war-against-ukraine-and-aleksey-navalnys-death/ [https://perma.cc/K3SL-LHFF].
    \172\ Press Statement, Vedant Patel, Principal Deputy 
Spokesperson, Dep't of State, Russia's Wrongful Detention of 
Journalist Evan Gershkovich (Apr. 10, 2023), https://www.state.gov/russias-wrongful-detention-of-journalist-evan-gershkovich/ [https://perma.cc/XE2R-93RE].
    \173\ Press Release, U.S. Dep't of Treas., Treasury Sanctions 
Actors Supporting Kremlin-Directed Malign Influence Efforts (Mar. 
20, 2024), https://home.treasury.gov/news/press-releases/jy2195 
[https://perma.cc/TB2X-YRPN]; Press Release, U.S. Dep't of Treas., 
Treasury Targets the Kremlin's Continued Malign Political Influence 
Operations in the U.S. and Globally (July 29, 2022), https://home.treasury.gov/news/press-releases/jy0899 [https://perma.cc/FXN8-J748].
    \174\ Press Release, U.S. Dep't of Treas., Treasury Targets 
Sanctions Evasion Networks and Russian Technology Companies Enabling 
Putin's War (Mar. 31, 2022), https://home.treasury.gov/news/press-releases/jy0692 [https://perma.cc/ERD6-ARTE].
    \175\ Press Statement, Matthew Miller, Spokesperson, Dep't of 
State, U.S. Takes Action to Further Disrupt Russian Cyber Activities 
(Dec. 7, 2023), https://www.state.gov/u-s-takes-action-to-further-disrupt-russian-cyber-activities/ [https://perma.cc/AW9F-E8BP].
    \176\ Off. of the Dir. of Nat'l Intel., supra note 86, at 16.
    \177\ White House, supra note 170.
    \178\ Id.
    \179\ SolarWinds Cyberattack Demands Significant Federal and 
Private-Sector Response (infographic), U.S. Gov't Accountability 
Off. (Apr. 22, 2021), https://www.gao.gov/blog/solarwinds-cyberattack-demands-significant-federal-and-private-sector-response-infographic [https://perma.cc/3A2V-6S59].
---------------------------------------------------------------------------

    Because Russia has advanced cyber capabilities and aggressively 
seeks to obtain and exploit data on U.S. persons, including to conduct 
influence campaigns in the United States, it poses a significant risk 
of exploiting government-related data or Americans' bulk U.S. sensitive 
personal data to the detriment of the national security of the United 
States and the security and safety of U.S. persons. Russia engages in 
the large-scale theft of sensitive personal data and is ``increasing 
[its] ability to analyze and manipulate large quantities of personal 
information,'' enabling it ``to more effectively target and influence, 
or coerce, individuals and groups in the

[[Page 86147]]

United States.'' \180\ For example, in 2013, Russian intelligence 
services sponsored the theft of information associated with at least 
500 million accounts from U.S. web services company Yahoo!\181\ and 
used some of that stolen information to obtain unauthorized access to 
the email accounts of United States Government officials, among 
others.\182\ In 2020, Russian cyber operations targeted and compromised 
U.S. State and local government networks and exfiltrated some voter 
data.\183\ In another example, in 2023, a Federal grand jury returned 
an indictment against two Russian individuals for obtaining 
unauthorized access to the computers and email accounts of current and 
former United States Government employees and stealing intelligence 
related to defense, security policies, and nuclear energy technology 
from the victims' accounts.\184\ In 2024, Russian intelligence services 
used compromised routers to conduct ``spearphishing and similar 
credential harvesting campaigns against targets of intelligence 
interest to the Russian government, such as U.S. and foreign 
governments and military, security, and corporate organizations.'' 
\185\
---------------------------------------------------------------------------

    \180\ Nat'l Intel. Council, supra note 5, at 3.
    \181\ Press Release, U.S. Dep't of Just., U.S. Charges Russian 
FSB Officers and Their Criminal Conspirators for Hacking Yahoo and 
Millions of Email Accounts (Mar. 15, 2017), https://www.justice.gov/opa/pr/us-charges-russian-fsb-officers-and-their-criminal-conspirators-hacking-yahoo-and-millions [https://perma.cc/44UK-XM7P].
    \182\ U.S. Dep't of Just., supra note 181; Indictment ] 34, 
United States v. Dokuchaev, No. 17-cr-103 (N.D. Cal. filed Feb. 28, 
2017).
    \183\ Nat'l Intel. Council, ICA 2020-00078D, Intelligence 
Community Assessment on Foreign Threats to the 2020 US Federal 
Elections 3 (Mar. 10, 2021), https://www.dni.gov/files/ODNI/documents/assessments/ICA-declass-16MAR21.pdf [https://perma.cc/R8LM-KEUX].
    \184\ Indictment ]] 3-5, United States v. Aleksandrovic, No. 23-
cr-447 (N.D. Cal. filed Dec. 5, 2023).
    \185\ Press Release, U.S. Dep't of Just., Justice Department 
Conducts Court-Authorized Disruption of Botnet Controlled by the 
Russian Federation's Main Intelligence Directorate of the General 
Staff (GRU) (Feb. 15, 2024), https://www.justice.gov/opa/pr/justice-department-conducts-court-authorized-disruption-botnet-controlled-russian [https://perma.cc/8M8Z-C3SM].
---------------------------------------------------------------------------

    Russia also has a legal regime that gives it the capability to 
covertly access and exploit data through companies subject to its 
jurisdiction. As the Department of Commerce has explained, ``Russian 
laws compel companies subject to Russian jurisdiction to cooperate with 
Russian intelligence and law enforcement efforts, to include requests 
from the Russian Federal Security Service (``FSB'').'' \186\ These laws 
include the following:
---------------------------------------------------------------------------

    \186\ Kaspersky Lab, Inc., supra note 20, 89 FR 52435.
---------------------------------------------------------------------------

    <bullet> Federal Law No. 40-FZ of April 3, 1995, ``On the Federal 
Security Service,'' ``requires FSB bodies to carry out their activities 
in collaboration with various entities in Russia'' and places private 
enterprises ``under a legal obligation to assist FSB bodies in the 
execution of the duties assigned to FSB bodies,'' including 
intelligence and counterintelligence activities.\187\
---------------------------------------------------------------------------

    \187\ Report of Peter B. Maggs to the U.S. Dep't of Homeland 
Sec. ]] 14-18 (Dec. 2, 2017), https://www.internetgovernance.org/wp-content/uploads/12-7-Exhibit-AR-Part-6-Maggs-report.pdf [https://perma.cc/US4P-VMCP] (hereinafter ``Maggs Report'') (supporting the 
Department of Homeland Security's Dec. 4, 2017 Final Decision on 
Binding Operational Directive 17-01, Removal of Kaspersky-Branded 
Products).
---------------------------------------------------------------------------

    <bullet> Federal Law No. 144-EZ of August 12, 1995 (as amended), 
``On Operational-Investigative Activity,'' requires persons subject to 
Russian jurisdiction to ``assist the FSB with operational-investigative 
activities undertaken in the performance of FSB duties, such as by 
installing equipment supplied by the FSB for use in obtaining 
information stored on computers.'' \188\ This law ``makes it clear 
that, as a general rule, operational-investigative activities may be 
carried out against anyone anywhere'' and ``makes it clear that 
operational-search activities include obtaining computer information.'' 
\189\
---------------------------------------------------------------------------

    \188\ Kaspersky Lab, Inc., supra note 20, 89 FR 52435 n.13; 
Maggs Report, supra note 187, ]] 24-25.
    \189\ Maggs Report, supra note 187, ]] 24-29.
---------------------------------------------------------------------------

    <bullet> Federal Law No. 149-FZ of July 27, 2006, ``On Information, 
Information Technologies, and Protection of Information,'' imposes 
several ``obligations on any entity that qualifies as `an organizer of 
the dissemination of information on the internet,' '' which is broadly 
defined to include any ``person who carries out activities to ensure 
the operation of information systems and/or programs for electronic 
computers that are designed and/or used to receive, transmit, deliver 
and/or process electronic messages of users of the internet.'' \190\ 
These obligations include giving the FSB and other Russian agencies in 
the field of security ``the information necessary to decode'' encrypted 
data.\191\
---------------------------------------------------------------------------

    \190\ Id. ] 21.
    \191\ Id. ]] 13(f), 31.
---------------------------------------------------------------------------

    In short, persons subject to Russia's jurisdiction must ``assist 
the FSB in its counterintelligence and intelligence functions,'' which 
``includes a duty to assist the FSB in operational-investigative 
activity, in support of FSB counterintelligence and intelligence 
functions'' such as ``collecting information from U.S. computers,'' 
``with no need for the FSB to have obtained a court order.'' \192\
---------------------------------------------------------------------------

    \192\ Id. ] 30.
---------------------------------------------------------------------------

    Finally, Russia also poses a ``serious foreign influence threat 
because of its wide-ranging efforts to . . . sow domestic discord, 
including among voters inside the United States.'' \193\ In July 2018, 
a Federal grand jury returned an indictment against Russian 
intelligence officers after they conducted a spear phishing campaign 
against volunteers and employees of a presidential campaign and 
political committees.\194\ The actors hacked into computers, stole 
emails, covertly monitored the computer activity of campaign employees, 
and released the hacked information to the public in an attempt to 
interfere with the 2016 U.S. presidential election.\195\
---------------------------------------------------------------------------

    \193\ Off. of the Dir. of Nat'l Intel., supra note 86, at 17.
    \194\ Press Release, U.S. Dep't of Just., Grand Jury Indicts 12 
Russian Intelligence Officers for Hacking Offenses Related to the 
2016 Election (July 13, 2018), https://www.justice.gov/opa/pr/grand-jury-indicts-12-russian-intelligence-officers-hacking-offenses-related-2016-election [ https://perma.cc/RG2P-SJLQ]; Indictment ]] 
2-5, United States v. Netyksho, No. 18-cr-215 (D.D.C. filed July 13, 
2018).
    \195\ U.S. Dep't of Just., supra note 194; Indictment ]] 2-5, 
Netyksho, No. 8-cr-215.
---------------------------------------------------------------------------

f. Venezuela
    The Department has determined, with the concurrence of the 
Secretaries of State and Commerce, that Venezuela has engaged in a 
long-term pattern of conduct significantly adverse to the national 
security of the United States and the security and safety of U.S. 
persons. Among other conduct significantly adverse to the national 
security of the United States and the security and safety of U.S. 
persons, Venezuela commits human-rights abuses, including against U.S. 
persons; \196\ evades U.S. sanctions; \197\ has concerning 
relationships with other

[[Page 86148]]

countries of concern; \198\ and fosters widespread corruption.\199\
---------------------------------------------------------------------------

    \196\ U.S. Dep't of State, 2022 Country Reports on Human Rights 
Practices: Venezuela (2022), https://www.state.gov/wp-content/uploads/2023/02/415610_VENEZUELA-2022-HUMAN-RIGHTS-REPORT.pdf 
[https://perma.cc/7TM9-P87S]; see also, e.g., E.O. 13692, 80 FR 
12747 (Mar. 8, 2015).
    \197\ Press Release, U.S. Att'ys Off. DC, U.S. Dep't of Just., 
Largest U.S. Seizure of Iranian Fuel from Four Tankers (Aug. 14, 
2020), https://www.justice.gov/usao-dc/pr/largest-us-seizure-iranian-fuel-four-tankers [https://perma.cc/66EF-42CD]; Fin. Crimes 
Enf't Network, U.S. Dep't of Treas., FIN-2019-A002, Updated Advisory 
on Widespread Public Corruption in Venezuela, 8 (May 3, 2019), 
https://www.fincen.gov/sites/default/files/advisory/2019-05-03/Venezuela%20Advisory%20FINAL%20508.pdf [https://perma.cc/X5VL-HH69].
    \198\ U.S. Dep't of Just., supra note 197; Off. of the Dir. of 
Nat'l Intel., supra note 86, at 29.
    \199\ Press Release, U.S. Dep't of Just., Former Venezuelan 
National Treasurer and Her Husband Sentenced in Money Laundering and 
International Bribery Scheme (Apr. 19, 2023), https://www.justice.gov/opa/pr/former-venezuelan-national-treasurer-and-her-husband-sentenced-money-laundering-and [https://perma.cc/AU8N-C9UD]; 
Fin. Crimes Enf't Network, supra note 197, at 7.
---------------------------------------------------------------------------

    Because Venezuela exploits its demonstrated and systematic 
relationships with other countries of concern to degrade U.S. national 
security; aggressively surveils its own population to target perceived 
government critiques, including with the help of other countries of 
concern; and, according to credible reports, commits human-rights 
abuses, including against U.S. citizens, Venezuela's access to 
government-related data or Americans' bulk U.S. sensitive personal data 
poses a significant risk to the national security of the United States 
and the security and safety of U.S. persons. Regarding Venezuela's 
human-rights abuses, Venezuela surveils its domestic population through 
telecommunications providers to target perceived opponents, including 
with the help of other countries of concern.\200\ Venezuela's misuse of 
private telecommunications capabilities for expansive surveillance 
poses risks to U.S. persons, as the regime has the capability to access 
data on U.S. persons in Venezuela. For example, in 2021, a report by 
Spanish telecommunications company Telefonica revealed that Venezuela 
monitored the communications of nearly 1.5 million of its users, which 
represents over 20 percent of Telefonica's Venezuela-based 
customers.\201\ In addition to surveillance, there are credible reports 
that Venezuela perpetrates extensive human-rights abuses, such as 
torture, extrajudicial killings, and enforced disappearances. 
Venezuelan security forces detain individuals, including U.S. citizens, 
for long periods without due process.\202\ According to the State 
Department, the United States Government is not generally notified of 
the detention of U.S. citizens in Venezuela or granted access to U.S. 
citizen prisoners in Venezuela.\203\
---------------------------------------------------------------------------

    \200\ U.S. Dep't of State, supra note 196, at 19; Mar[iacute]a 
Luisa Pa[uacute]l, Venezuela Tapped 1.5 Million Phone Lines. It's 
Just the Start, Experts Warn., Wash. Post (June 28, 2022), https://www.washingtonpost.com/nation/2022/06/28/telefonica-wiretapping-venezuela-phone/ [https://perma.cc/T8YV-A9TW].
    \201\ U.S. Dep't of State, supra note 196, at 19; Pa[uacute]l, 
supra note 200.
    \202\ U.S. Dep't of State, Venezuela Travel Advisory (May 13, 
2024), https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/venezuela-travel-advisory.html [https://perma.cc/5F26-GNRM]; Clare Ribando Seelke et al., Cong. Rsch. Serv., R44841, 
Venezuela: Background and U.S. Relations 7 (Dec. 6, 2022), https://crsreports.congress.gov/product/pdf/R/R44841 [https://perma.cc/T8ZW-4RRA].
    \203\ U.S. Dep't of State, supra note 196.
---------------------------------------------------------------------------

    Venezuela maintains close relationships with other countries of 
concern that, as described in part IV.D of this preamble, possess 
sophisticated surveillance capabilities and pose a significant risk of 
exploiting government-related data or Americans' bulk U.S. sensitive 
personal data. Given the nature of these relationships, Venezuela might 
use technology provided by these countries of concern to obtain access 
to government-related data or bulk U.S. sensitive personal data, or 
share any access to government-related data or bulk U.S. sensitive 
personal data with these countries of concern. For example, Venezuela 
uses equipment provided by Chinese technology company Zhongxing 
Telecommunication Equipment (``ZTE'') Corporation, which the FCC has 
designated a national security threat to the U.S. communications 
network and supply chain, to monitor Venezuelan citizens' social, 
political, and economic activities.\204\ The company has provided 
Venezuela with identity cards, referred to as ``carnet de la patria'' 
or ``fatherland cards,'' that the regime can use to track citizen 
behavior.\205\ Additionally, Venezuelan and Russian state-owned 
companies jointly own Evrofinance Mosnarbank, a bank that has financed 
Venezuela's efforts to use digital currencies to circumvent U.S. 
financial sanctions.\206\ Evrofinance Mosnarbank also provides 
financial support to Petroleos de Venezuela, a Venezuelan state-owned 
oil company that has been used to embezzle and launder billions of 
dollars.\207\ Venezuela also has concerning military and intelligence 
ties with other countries of concern. For example, Russia provides 
military support to Venezuela.\208\ Cuba provides training to 
Venezuelan intelligence and military personnel, and the two nations 
support each other's intelligence operations.\209\
---------------------------------------------------------------------------

    \204\ FCC, Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs--ZTE Designation, 
35 FCC Rcd. 6633 (2020), https://docs.fcc.gov/public/attachments/DA-20-691A1.pdf [https://perma.cc/MK3W-SYEN].
    \205\ Angus Berwick, How ZTE Helps Venezuela Create China-Style 
Social Control, Reuters (Nov. 14, 2018), https://www.reuters.com/investigates/special-report/venezuela-zte/ [https://perma.cc/66X9-FBWD]; see also U.S. Dep't of State, supra note 196.
    \206\ Fin. Crimes Enf't Network, supra note 197, at 4-5.
    \207\ Id.; Press Release, U.S. Dep't of Treas., Treasury 
Sanctions Venezuela's State-Owned Oil Company Petroleos de 
Venezuela, S.A. (Jan. 28, 2019), https://home.treasury.gov/news/press-releases/sm594 [https://perma.cc/375J-DR47].
    \208\ Regina Garcia Cano, Venezuela's Leader Pledges Military 
Cooperation with Russia, AP News (Feb. 16, 2022), https://apnews.com/article/europe-russia-venezuela-vladimir-putin-south-america-fc9e01895f52f8d9f52e501a93b2f089 [https://perma.cc/M59U-SRUU]; Russia in the Western Hemisphere: Assessing Putin's Malign 
Influence in Latin America and the Caribbean: Hearing Before the H. 
Foreign Affs. Subcomm. on W. Hemisphere, Civilian Sec., Migration, & 
Int'l Econ. Pol'y, 117th Cong. 1-3 (2022) (statement of Evan Ellis, 
Senior Associate, Ctr. for Strategic & Int'l Stud.), https://csis-website-prod.s3.amazonaws.com/s3fs-public/congressional_testimony/ts220720_Ellis.pdf [https://perma.cc/K9VG-ZFW2].
    \209\ Moises Rendon & Claudia Fernandez, Ctr. for Strategic & 
Int'l Stud., The Fabulous Five: How Foreign Actors Prop Up the 
Maduro Regime in Venezuela 7 (2020), https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/201019_Rendon_Venezuela_Foreign_Actors.pdf [https://perma.cc/39AG-LAAX].
---------------------------------------------------------------------------

E. Subpart G--Covered Persons

1. Section 202.211--Covered Person
    The proposed rule identifies a ``covered person'' as an individual 
or entity that falls into one of the classes of covered persons or that 
the Attorney General has designated as a covered person. An entity is a 
covered person if it is a foreign person that: (1) is 50 percent or 
more owned, directly or indirectly, by a country of concern; (2) is 
organized or chartered under the laws of a country of concern; or (3) 
has its principal place of business in a country of concern. An entity 
is also a covered person if it is a foreign person that is 50-percent 
or more owned, directly or indirectly, by a covered person. Any foreign 
individual who is an employee or a contractor of such an entity or of 
the country of concern itself is also a covered person. Any foreign 
person who is primarily a resident in the territorial jurisdiction of a 
country of concern is also a covered person.
    The proposed rule would not categorically treat citizens of 
countries of concern located in third countries (i.e., not located in 
the United States and not primarily resident in a country of concern) 
as covered persons. Instead, it treats only a subset of country of 
concern citizens in third countries categorically as covered persons: 
those working for the government of a country of concern or for an 
entity that is a covered person. All other country of concern citizens 
located in third countries would not qualify as covered persons except 
to the extent that the Attorney General designates them.
    Some commenters believed that it would be difficult for U.S. 
persons

[[Page 86149]]

subject to the proposed rule to determine whether entities are 50 
percent or more owned by countries of concern, particularly where the 
foreign companies are publicly traded companies. However, this 
provision is not unique to the proposed rule. It is similar to 
sanctions regulations issued by the Office of Foreign Assets Control 
(``OFAC'') within the Department of the Treasury. Such regulations 
treat any entity owned in the aggregate, directly or indirectly, 50-
percent or more by one or more blocked persons as itself a blocked 
person, regardless of whether the entity itself is designated pursuant 
to an Executive Order or otherwise identified on OFAC's Specially 
Designated Nationals and Blocked Persons List.\210\ The proposed rule 
also uses higher ownership thresholds than some regulatory regimes, 
such as those related to anti-money laundering, which generally require 
certain companies to identify beneficial owners with 25 percent or more 
(and, in some cases, 10 percent or more) direct or indirect legal 
interest in an entity and to collect, verify, and report specific 
information about them.\211\ As other commenters pointed out, 
businesses and third-party service providers have developed tools and 
services to assist with screening and due diligence based on corporate 
ownership in the sanctions, anti-money laundering, and other regulatory 
contexts. Consequently, the proposed rule adopts the approach described 
in the ANPRM without change.
---------------------------------------------------------------------------

    \210\ See generally OFAC, U.S. Dep't of Treas., Revised Guidance 
on Entities Owned by Persons Whose Property and Interests in 
Property Are Blocked (Aug. 13, 2014), https://ofac.treasury.gov/media/6186/download?inline [https://perma.cc/Q87V-VZJQ].
    \211\ See generally Beneficial Ownership Information: Frequently 
Asked Questions, Fin. Crimes Enf't Network, https://www.fincen.gov/boi-faqs [https://perma.cc/Z7KQ-PN79].
---------------------------------------------------------------------------

    One commenter recommended that the Department clarify how the 
proposed rule would apply to companies headquartered outside a country 
of concern but with business operations in a country of concern. The 
proposed rule maintains the framework described in the ANPRM without 
change, and the Department has provided some additional examples in the 
proposed rule to demonstrate how the proposed rule treats foreign 
branches and subsidiaries located in countries of concern. See Sec.  
202.256(b)(5)(8). The proposed rule also exempts corporate group 
transactions that are ordinarily incident to and part of administrative 
or ancillary business operations, such as human resources, including 
between U.S. entities and their foreign subsidiaries or affiliates.
    Several commenters suggested that the Department rely solely on 
designations and adopt an exclusively list-based approach to the 
identification of covered persons (similar to OFAC's Specially 
Designated Nationals and Blocked Persons List or the Bureau of Industry 
and Security's (``BIS'') Entity List) rather than applying the 
prohibitions and restrictions to categories of covered persons 
supplemented by a non-exhaustive list. The Department declines to adopt 
the exclusively list-based approach. Such an approach would be 
inconsistent with the Order, as well as with the national security risk 
associated with country of concern access to government-related data or 
bulk U.S. sensitive personal data. Specifically, the national security 
risk identified in the Order exists with respect to any entity that is 
subject to the ownership, direction, jurisdiction, or control of a 
country of concern due to the fact that each of the listed countries of 
concern in the proposed rule have legal or political systems that allow 
the countries to obtain sensitive personal data (and access to such 
data) from persons subject to their ownership, direction, jurisdiction, 
or control without due process or judicial redress.\212\ That risk 
exists with respect to any person that is meaningfully subject to their 
ownership, direction, jurisdiction, or control--not only to specific 
entities designated on a case-by-case basis. Entities that are 
meaningfully subject to the ownership, direction, jurisdiction, or 
control of a country of concern are, as the FBI has described, hybrid 
commercial threats. As the FBI has explained, ``[h]ybrid [c]ommercial 
[t]hreats are businesses whose legitimate commercial activity can 
facilitate foreign government access to U.S. data, critical 
infrastructure, and emerging technologies that enable adversaries to 
conduct espionage, technology transfer, data collection, and other 
disruptive activities under the disguise of an otherwise legitimate 
commercial activity.'' \213\
---------------------------------------------------------------------------

    \212\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 1; 
Justin Sherman, Russia Is Weaponizing Its Data Laws Against Foreign 
Organizations, Brookings Inst. (Sept. 27, 2022), https://www.brookings.edu/articles/russia-is-weaponizing-its-data-laws-against-foreign-organizations/ [https://perma.cc/ATU2-SU3G]; U.S. 
Dep't of State, supra note 196, at 19; see generally Freedom in the 
World 2024: North Korea, Freedom House, https://freedomhouse.org/country/north-korea/freedom-world/2024 [https://perma.cc/5PAA-YMQ4]; 
Freedom on the Net 2022: Cuba, Freedom House, https://freedomhouse.org/country/cuba/freedom-net/2022 [https://perma.cc/FFF6-ALCB]; Data Security Business Advisory, Risks and 
Considerations for Businesses Using Data Services and Equipment from 
Firms Linked to the People's Republic of China, U.S. Dep't of 
Homeland Sec. (Dec. 22, 2020), https://www.dhs.gov/sites/default/files/publications/20_1222_data-security-business-advisory.pdf 
[https://perma.cc/B6XM-8G9V]; Anna Borshchevskaya, `Brave New 
World': Russia's New Anti-Terrorism Legislation, Wash. Inst. (July 
8, 2016), https://www.washingtoninstitute.org/policy-analysis/brave-new-world-russias-new-anti-terrorism-legislation [https://perma.cc/2XXZ-UTC7]; Combating the Iranian Cyber Threat: Republic at the 
Center of Cyber Crime Charges in Three Cases, Fed. Bureau of 
Investig. (Sept. 18, 2020), https://www.fbi.gov/news/stories/iran-at-center-of-cyber-crime-charges-in-three-cases-091820 [https://perma.cc/DYL5-WXUC]; Amelia Williams, Cuba: New data protection 
law--what you need to know, Data Guidance (Sept. 2022), https://www.dataguidance.com/opinion/cuba-new-data-protection-law-what-you-need-know [https://perma.cc/JH83-6P7S]; Joanna Robin, Maduro regime 
doubles down on censorship and repression in lead-up to Venezuelan 
election, ICIJ (July 24, 2024), https://www.icij.org/inside-icij/2024/07/maduro-regime-doubles-down-on-censorship-and-repression-in-lead-up-to-venezuelan-election/ [https://perma.cc/6TBD-4J28]; U.S. 
Dep't of State, Bureau of Democracy, H.R. and Lab., 2021 Country 
Reports on Human Rights Practices: North Korea (2021), https://www.state.gov/wp-content/uploads/2022/03/313615_KOREA-DEM-REP-2021-HUMAN-RIGHTS-REPORT.pdf [https://perma.cc/GF5Z-25UG]; Freedom on the 
Net 2024: Iran, Freedom House, at C4 and C6, https://freedomhouse.org/country/iran/freedom-net/2024 [https://perma.cc/2QKR-9E7C].
    \213\ In Camera, Ex Parte Classified Decl. of Kevin Vorndran, 
Assistant Dir., Counterintel. Div., Fed. Bureau of Invest., Doc. No. 
2066897 at Gov't App. 33 ] 6, TikTok Inc. v. Garland, Case Nos. 24-
1113, 24-1130, 24-1183 (D.C. Cir. July 26, 2024) (publicly filed 
redacted version).
---------------------------------------------------------------------------

    As such, trying to apply a list-based approach would be 
insufficient to mitigate the national security risk identified in the 
Order and the proposed rule. The categories of covered persons defined 
in the Order and defined further in the proposed rule identify 
categories of persons that are meaningfully subject to the ownership, 
direction, jurisdiction of a country of concern, or control of a 
country of concern or covered person, and thus present this risk. 
Processes like those used by OFAC to add blocked persons to the 
Specially Designated Nationals and Blocked Persons List or by BIS to 
add entities to the Entity List, which are generally based on a 
particularized inquiry into whether the target meets the applicable 
legal criteria for designation,\214\ would thus be

[[Page 86150]]

insufficient by themselves to address the national security risk 
identified in the Order. An exclusively list-based approach could 
present considerable compliance and enforcement challenges. It also 
poses potential evasion risks, similar to those encountered by OFAC, 
and circumvention threats that could compromise national security. The 
Department has determined not to exclusively implement a list-based 
program to mitigate the risk that listed entities, such as 
corporations, would rename or reorganize themselves in a manner that 
avoids being subject to the framework. Therefore, the proposed rule 
adopts the approach described in the ANPRM without change.
---------------------------------------------------------------------------

    \214\ See 15 CFR 744.16 (1996) (``The Entity List (supplement 
No. 4 to [part 744]) identifies persons . . . reasonably believed to 
be involved, or to pose a significant risk of being or becoming 
involved, in activities contrary to the national security or foreign 
policy interests of the United States.''); see also, 31 CFR 
589.201(a) (2022) (blocking the property of ``any person determined 
by the Secretary of the Treasury'' to, among other things, ``be 
responsible for or complicit in, or to have engaged in, directly or 
indirectly,'' actions or policies ``that undermine democratic 
processes or institutions in Ukraine'' or ``that threaten the peace, 
security, stability, sovereignty, or territorial integrity of 
Ukraine'' or ``[m]isappropriation of state assets of Ukraine or of 
an economically significant entity in Ukraine'').
---------------------------------------------------------------------------

    One commenter suggested that the Department should not treat 
trustworthy entities located in countries of concern as covered 
persons. The Department declines to do so, and the proposed rule 
retains the framework described in the ANPRM without change. Regardless 
of the trustworthiness of entities, as explained in part IV.E.1 of this 
preamble, countries of concern have the legal authority or political 
systems to force, coerce, or influence entities in their jurisdictions 
to share their data and access with the government.\215\
---------------------------------------------------------------------------

    \215\ See sources cited infra note 212.
---------------------------------------------------------------------------

    One commenter urged the Department to narrow the definition of 
``covered persons'' to exclude individuals who are temporarily in the 
United States but are otherwise residents of a country of concern. The 
proposed rule adopts the approach described in the ANPRM without 
change. As described in the ANPRM, including its Example 33, anyone in 
the United States (including temporarily in the United States) would be 
considered a U.S. person, and no U.S. persons (including those 
temporarily in the United States) would be categorically treated as 
covered persons.\216\ A U.S. person (including a temporary traveler to 
the United States) would be a covered person only if they had been 
designated by the Department. The proposed rule adopts this proposal 
unchanged from the ANPRM.
---------------------------------------------------------------------------

    \216\ 89 FR 15790-91.
---------------------------------------------------------------------------

    Two related commenters expressed identical concerns that the 
definition of ``covered persons'' would require companies to 
discriminate based on nationality or race, particularly with respect to 
employees who are primarily resident in countries of concern. No change 
was made in response to these comments. As the Order makes clear, 
status as a covered person does not depend on the nationality or race 
of an individual, and the Order and proposed rule are directed at 
persons of any nationality or race who are subject to the ownership, 
direction, jurisdiction, or control of a country of concern. The 
definition of ``covered person'' categorically includes any foreign 
person that is primarily resident in a country of concern, regardless 
of their nationality or race. Likewise, the definition of ``covered 
person'' categorically includes any foreign person abroad who is an 
employee or contractor of a country of concern or a covered person that 
is an entity, regardless of their nationality or race. Similarly, the 
Department's authority to designate a specific individual as a 
``covered person'' turns on a determination that the individual is 
subject to the control, jurisdiction, or direction of a country of 
concern, or is acting on behalf of or purporting to act on behalf of a 
country of concern or covered person, or has knowingly caused or 
directed a violation of the proposed rule. The definition of ``U.S. 
person'' is also not dependent on a person's nationality or race; it 
includes, for example, any person in the United States and any U.S. 
citizen or lawful permanent resident. For example, under the proposed 
rule, a country of concern citizen located in the United States is a 
U.S. person (unless individually designated). As a result, a U.S. 
person of any particular race or nationality would not be categorically 
treated as a covered person, and the only circumstance in which a U.S. 
person would be treated as a covered person is by individual 
designation. Consequently, the proposed rule adopts the approach 
described in the ANPRM without change.
    Several commenters sought clarification that any U.S. subsidiary of 
a covered person is considered a U.S. person for purposes of these 
regulations. The proposed rule would not treat any U.S. person, 
including a U.S. subsidiary of a covered person, as a covered person 
unless the Department has designated the U.S. subsidiary as a covered 
person pursuant to the process described in the proposed rule. No U.S. 
person, including the U.S. subsidiary of a covered person, would be 
categorically treated as a covered person under the proposed rule. The 
proposed rule includes additional examples highlighting the differences 
in treatment between a U.S. subsidiary and its foreign owner, as well 
as between U.S. companies and their foreign branches.
2. Section 202.701--Designation of Covered Persons
    The proposed rule provides for the Attorney General to publicly 
designate a person, whether an individual or entity, as a covered 
person with whom U.S. persons may not knowingly engage in a prohibited 
transaction, or a restricted transaction that fails to comply with the 
requirements of subpart D of the proposed rule, except as otherwise 
authorized under the proposed rule. The Department intends generally to 
model this process on the processes for designation under the various 
sanctions lists maintained by OFAC. Inclusion on the Department's 
Covered Persons List would have no effect on a person's inclusion on 
other United States Government designation lists, including lists 
maintained by OFAC.
    The Department expects that, in many cases, designation will be 
unnecessary because a person will be automatically deemed a covered 
person by operation of the definition of ``covered person'' discussed 
in part IV.E.1 of this preamble. For example, an entity that is 
majority-owned by a country of concern would be a covered person by 
definition, regardless of whether the entity itself is designated by 
the Attorney General and included on the Department's Covered Persons 
List. Designation is not necessary in that circumstance and, except as 
otherwise authorized under the proposed rule, a U.S. person would be 
prohibited from knowingly engaging in a prohibited transaction, or a 
restricted transaction that fails to comply with the requirements of 
subpart D, with such an entity.
    Even in these circumstances, however, the Attorney General may 
nonetheless designate such an entity and identify that entity as a 
covered person in the Federal Register and on a Department website. 
Such designation may serve to provide broader notice to U.S. persons 
that the entity is a covered person under the Order and the 
regulations. For example, the definition of ``covered person'' includes 
entities that are majority-owned directly or indirectly by a country of 
concern. In some circumstances, indirect ownership may not be readily 
apparent, and Attorney General designation, published in the Federal 
Register, will provide notice that the entity is a covered person. Even 
in the case of instances in which the covered person status of an 
entity is clear--such as companies that are openly organized or 
chartered under the laws of a country of concern or that have their 
principal place of business in a country of concern--designation and 
publication in the Federal Register may facilitate compliance with the 
prohibitions and restrictions under the Order and the regulations. 
Importantly, however, the public list would not

[[Page 86151]]

exhaustively include all covered persons, as any person that satisfies 
the criteria of the relevant definitions will be considered a covered 
person under the proposed rule, regardless of whether the person is 
also specifically identified on the public list. Under the proposed 
rule, for example, every company with its principal place of business 
in any country of concern is a ``covered person''; the Department does 
not intend to individually designate all such companies.
    The proposed rule also authorizes the Department to designate as 
covered persons other individuals or entities that are not already 
captured by other elements of the definition. This process is modeled 
after other IEEPA-related designation processes and contemplates 
designation based on interagency consultation and consideration of any 
relevant sources of information (which may include classified 
information). Under the proposed rule, and consistent with the Order, 
the Department could designate as a covered person any person that is 
owned or controlled by or subject to the jurisdiction or direction of a 
country of concern, is acting on behalf of or purporting to act on 
behalf of a country of concern or other covered person, or is knowingly 
causing or directing a violation of these regulations. For example, 
individual citizens of a country of concern primarily residing in a 
third country are not generally considered to be covered persons. In 
specific cases, however, covered data transactions with such 
individuals may present an unacceptable national security risk because, 
for example, the individual may be subject to the direction of a 
country of concern. The proposed rule provides for the Attorney General 
to designate such an individual--or any other individual or entity that 
satisfies the substantive criteria in the proposed rule--as a covered 
person.
    Under the proposed rule, designation as a covered person is 
effective upon the Department's announcement; a U.S. person with actual 
knowledge of the designated person's status would be prohibited from 
knowingly engaging in a covered data transaction with that person 
(except as otherwise authorized under the proposed rule). After 
publication in the Federal Register, the Department would infer 
knowledge of the designated person's status on the part of any U.S. 
person engaging in a covered data transaction with that person. As in 
the context of asset flight, designations must be immediately effective 
to prohibit the irreversible transfer of regulated data--and the 
attendant risk to national security--once a designation is announced. 
If there were delay, unscrupulous actors could rush to complete 
transactions that would soon become prohibited, thus inviting precisely 
the national security risk that the Order, and the designation, is 
intended to mitigate. Like the OFAC processes on which it is modeled, 
the proposed rule includes a mechanism for a person designated as a 
covered person to seek administrative reconsideration of the 
designation or removal from the list of designated covered persons on 
the basis of changed circumstances.
    Designation as a covered person reflects the risk to national 
security that attaches to the designated person's relationship--whether 
voluntary or involuntary--with a country of concern. The definition of 
``covered person,'' for example, includes any foreign person who is 
primarily resident in the territorial jurisdiction of a country of 
concern or any person who is an employee or contractor of an entity 
with its principal place of business in a country of concern. As a 
general matter, the national security risk from concluding a covered 
data transaction with such persons arises primarily from the potential 
actions of the government of the country of concern in relation to that 
person, not from the intent or personal characteristics of the 
individual.
    A few commenters expressed concern that it will be difficult for 
businesses subject to the proposed rule to identify entities controlled 
by or subject to the jurisdiction of countries of concern. However, 
neither the ANPRM nor the proposed rule would require companies to 
determine whether entities are subject to the control or jurisdiction 
of a country of concern. Whether an entity is controlled by or subject 
to the jurisdiction or direction of a country of concern is part of the 
criteria applied by the Attorney General in designating individuals and 
entities as covered persons; it is not a standard to be applied by the 
private sector. If the Attorney General determines that an individual 
or entity meets the criteria for designation, the Attorney General will 
specifically and publicly designate that person, as addressed in the 
foregoing discussion, and the private sector can screen counterparties 
against that public list. For entities not so designated, the private 
sector need only consult the four other categories of covered persons 
discussed in part IV.E.1 of this preamble; the private sector need not 
conduct any inquiry into whether such an entity is controlled by or 
subject to the jurisdiction or direction of a country of concern. 
Therefore, the proposed rule adopts the approach described in the ANPRM 
without change.

F. Subpart H--Licensing

    The Order authorizes the Attorney General, in concurrence with the 
Departments of State, Commerce, and Homeland Security and in 
consultation with other relevant agencies, to issue (including to 
modify or rescind) licenses authorizing a transaction that would 
otherwise be a prohibited transaction or a restricted transaction. The 
proposed rule implements this provision of the Order by providing 
processes for regulated parties to seek, and for the Attorney General 
to issue, general and specific licenses. The Department anticipates 
that licenses will be issued only in rare circumstances as the Attorney 
General deems appropriate.
1. Section 202.801--General Licenses
    General licenses would be published in the Federal Register and 
could be relied upon by all relevant parties affected by a particular 
element of these regulations. As deemed appropriate, the Attorney 
General, in concurrence and consultation with other departments as 
required by the Order, may issue a general license permitting otherwise 
prohibited transactions, including pursuant to conditions specified in 
the license. In those instances, otherwise prohibited transactions that 
satisfy any applicable conditions would be permitted; there would be no 
requirement for a party to seek further authorization prior to 
concluding a transaction covered by such a license. General licenses 
could be issued to ease industry's transition once the proposed rules 
become effective by potentially, for example, authorizing orderly wind-
down conditions for covered data transactions that would otherwise be 
prohibited by the proposed rules.
2. Section 202.802--Specific Licenses
    Specific licenses, on the other hand, would cover only parties who 
apply to the Department for such a license and disclose the facts and 
circumstances of the covered data transaction they seek to engage in. 
Specific licenses would authorize only the transactions described in 
the license; a specific license might authorize one or more 
transactions that would otherwise be prohibited.
3. Conditions on General and Specific Licenses
    Both general licenses and specific licenses could include a range 
of requirements or obligations as the Department deems appropriate. For 
example, a license might be conditioned

[[Page 86152]]

on additional disclosure requirements, ongoing reporting obligations, 
recordkeeping obligations, due diligence requirements, certification 
requirements, cybersecurity requirements, or inclusion of certain 
contractual terms. The Department believes, as a general matter, that 
imposing uniform requirements across licenses to the greatest extent 
possible will encourage adoption of those practices as a matter of 
course and will facilitate compliance for parties operating under more 
than one license. For example, recordkeeping requirements for one 
license might be identical to those of another license. Nonetheless, 
the Department believes that it is important to retain flexibility in 
crafting applicable requirements--especially in the context of specific 
licenses--to account for varying contexts of the contemplated 
transactions and other aspects of the license at issue. The proposed 
rule reflects that flexibility.
    The authorization provided by a license is contingent on satisfying 
all conditions of the license. Transactions not conducted in compliance 
with a license's conditions would be subject to the regulation's 
restrictions and prohibitions and may result in violations of the 
proposed rule and subject the transacting parties to enforcement 
action. Misrepresentations in the application process may render the 
license void from the date of issuance and may subject parties to 
enforcement action. The proposed rule contains provisions authorizing 
the Department to require applicants for specific licenses to use 
specific forms and procedures published by the Department. The proposed 
rule also establishes a process to allow applicants and other parties-
in-interest to request reconsideration of the denial of a license based 
on new facts or changed circumstances.
    Under subpart D of the proposed rule, governing restricted 
transactions, parties may engage in certain otherwise-prohibited 
transactions if they satisfy the specified security requirements. These 
provisions operate functionally as a general license to engage in 
certain prohibited transactions when specific conditions--the security 
requirements--are met. The Department does not anticipate issuing 
licenses in the ordinary course to relieve parties from complying with 
the security requirements for restricted transactions but may do so in 
unusual or unique circumstances as necessary or appropriate. The 
Department retains the discretion, however, to issue general or 
specific licenses that would apply to otherwise restricted 
transactions.

G. Subpart I--Advisory Opinions

1. Section 202.901--Inquiries Concerning Application of This Part
    The proposed rule creates a system for the Attorney General to 
provide guidance on this part in the form of official guidance or 
written advisory opinions. The Department may issue official guidance 
at any time, including to address recurring or novel issues. The 
Department may also issue guidance in response to specific inquiries 
received through advisory opinion procedures.
    Under the proposed rule, the Department may publish general forms 
of interpretive guidance, such as Frequently Asked Questions posted 
online. The Department plans to make any official guidance publicly 
available to help potentially regulated parties better understand the 
regulations and the Department's interpretation of the regulations and 
the Order.
    The proposed rule also creates a mechanism for potentially 
regulated parties to seek opinions about the application of the 
regulations or the Order to specific transactions. The proposed rule 
would permit a U.S. person engaging in a transaction potentially 
regulated by the program to request an interpretation of any provision 
of this part. Advisory opinions could cover, for example: (1) whether a 
particular transaction is a prohibited transaction or restricted 
transaction; and (2) whether a person is a U.S. person, foreign person, 
or covered person. The proposed rule requires that advisory opinions 
only be requested regarding actual--not hypothetical--transactions.
    The proposed rule sets out procedural and administrative 
requirements for submitting a request for any advisory opinion, 
including: (1) that the request be made in writing, see Sec.  202.1201; 
(2) that the request identify all participants in the transaction for 
which the opinion is being sought (i.e., anonymous requests will not be 
accepted); and (3) that the request describe the actual, not 
hypothetical, conduct giving rise to the request for an advisory 
opinion. Advisory opinions issued in response to a party's request may 
be published as appropriate. A determination regarding whether an 
advisory opinion or portions of that opinion are appropriate for 
publication will include consideration of whether publication complies 
with applicable laws and regulations (e.g., regarding the protection of 
confidential business information). In addition, the proposed rule 
makes clear that each advisory opinion can be relied upon only to the 
extent that the disclosures made in obtaining the advisory opinion were 
accurate and complete, and to the extent that those disclosures 
continue to accurately and completely reflect the circumstances after 
the advisory opinion is issued. Advisory opinions will reflect the view 
of the Department of Justice and will not bind any other agency; an 
advisory opinion does not affect obligations under provisions not 
specifically discussed in the opinion.
    Commenters supported the Department's proposal to provide 
interpretive guidance to the public. They also requested that the 
Department publish the decisions for the public's benefit. As stated 
above, advisory opinions may be published as appropriate in compliance 
with applicable laws and regulations. One commenter requested that 
trade associations be allowed to request interpretive guidance on 
behalf of their members. The proposed rule would allow trade 
associations to seek guidance on behalf of their members, so long as 
the guidance sought relates to a specific transaction and identifies 
the parties to the transaction. Although one commenter requested the 
ability to seek guidance related to hypothetical transactions, the 
Department declines to extend the interpretive guidance provision to 
such transactions to ensure that any such guidance is based on 
specific, factual circumstances so that it is as helpful to the public 
as possible. Consequently, the proposed rule adopts the approach 
described in the ANPRM without change.

H. Subpart J--Due Diligence and Audit Requirements

    The Order delegates to the Attorney General, in consultation with 
relevant agencies, the full extent of the authority granted to the 
President by IEEPA as may be necessary or appropriate to carry out the 
purposes of the Order,\217\ and it expressly states that the proposed 
rules will ``address the need for, as appropriate, recordkeeping and 
reporting of transactions to inform investigative, enforcement, and 
regulatory efforts.'' \218\ The Department of Justice wishes to achieve 
widespread compliance with the proposed rule, and to gather the 
information necessary to administer and enforce the program, without 
unduly burdening U.S. persons or discouraging data transactions that 
the program is not intended to address.
---------------------------------------------------------------------------

    \217\ E.O. 14117 sec. 2(b), 89 FR 15423.
    \218\ Id. sec. 2(c)(viii), 89 FR 15424.
---------------------------------------------------------------------------

    The Department will encourage U.S. persons subject to the proposed 
rule to

[[Page 86153]]

develop, implement, and update compliance programs as appropriate. The 
compliance program suitable for a particular U.S. person would be based 
on that person's individualized risk profile and would vary depending 
on a variety of factors, including the U.S. person's size and 
sophistication, products and services, customers and counterparties, 
and geographic locations. The Department may issue guidance on this 
topic to assist U.S. persons to develop and implement compliance 
programs. The Department may also consider the adequacy of a compliance 
program in any enforcement action.
    The proposed rule does not impose affirmative due diligence and 
recordkeeping requirements on every U.S. person engaging in a covered 
data transaction with a covered person or country of concern. As 
discussed in part IV.H.1 of this preamble, the proposed rule only 
imposes affirmative due diligence and recordkeeping requirements as a 
condition of engaging in a restricted transaction.
    Two related commenters expressed concerns that the proposed rule 
would require U.S. companies to surveil their employees' communications 
to comply with the prohibitions and restrictions. No changes have been 
made in response to this comment. The proposed rule does not, on its 
face or in practice, require surveillance of employees to achieve 
compliance. Any U.S. person engaging in activities relevant to the 
proposed rule should take a risk-based approach to their compliance 
program and ensure that it aligns with their business profile. Like 
sanctions, export controls, and other national security regulations, 
any compliance program may include a mix of policies, processes, 
resources, and technologies to ensure compliance. Important aspects of 
an effective compliance program may include, for example, senior 
management support and buy-in (including adequate resources); a routine 
and ongoing assessment of the business' risk profile to identify 
potential issues under the regulations that the business is likely to 
encounter; internal controls informed by that risk assessment, 
including policies and procedures to identify and address data 
transactions that may trigger obligations under the regulations, 
appointing and empowering responsible compliance personnel, integrating 
these controls into the company's daily operations, and ensuring that 
employees have adequate training and job-specific knowledge regarding 
the proposed rule and internal controls; and testing these controls and 
remediating any weaknesses or gaps.\219\ The Department is considering 
providing separate guidance on implementing effective risk-based 
compliance programs.
---------------------------------------------------------------------------

    \219\ See generally OFAC, U.S. Dep't of Treas., A Framework for 
OFAC Compliance Commitments (May 2, 2019), https://ofac.treasury.gov/media/16331/download?inline [https://perma.cc/6EQY-MD3L]; Bureau of Indus. & Sec., U.S. Dep't of Com., Export 
Compliance Guidelines: The Elements of an Effective Export 
Compliance Program (2017), https://www.bis.doc.gov/index.php/documents/pdfs/1641-ecp/file [https://perma.cc/KXT2-TMQ5].
---------------------------------------------------------------------------

1. Section 202.1001--Due Diligence for Restricted Transactions
    As discussed in part IV.H of this preamble, the Order delegates to 
the Attorney General, in consultation with relevant agencies, the full 
extent of the authority granted to the President by IEEPA as may be 
necessary or appropriate to carry out the purposes of the Order.\220\ 
In accordance with that delegation, and adopting the approach 
contemplated in the ANPRM, the proposed rule imposes and details 
affirmative due diligence requirements as a condition of engaging in a 
restricted transaction. The proposed rule imposes know-your-data 
requirements, which specifically require that U.S. persons engaging in 
restricted transactions develop and implement data compliance programs 
with risk-based procedures for verifying data flows, including the 
types and volumes of data involved in the transactions, the identity of 
the transaction parties, and the end-use of the data. The Order also 
requires that the proposed rule address the need for recordkeeping, as 
appropriate.\221\ The proposed rule imposes affirmative recordkeeping 
requirements as a condition of engaging in a restricted transaction, 
and requires U.S. persons subject to these affirmative requirements to 
maintain documentation of their due diligence to assist in inspections 
and enforcement, and to maintain the results of annual audits that 
verify their compliance with the security requirements and, where 
relevant, the license conditions to which the U.S. persons may be 
subject.
---------------------------------------------------------------------------

    \220\ E.O. 14117 sec. 2(b), 89 FR 15424.
    \221\ E.O. 14117 sec. 2(c)(viii), 89 FR 15423.
---------------------------------------------------------------------------

2. Section 202.1002--Audits for Restricted Transactions
    Adopting the approach contemplated in the ANPRM, the proposed rule 
would impose and details an annual audit requirement as a condition of 
engaging in a restricted transaction to verify and improve compliance 
with the security requirements.

I. Subpart K--Reporting and Recordkeeping Requirements

1. Section 202.1101--Records and Recordkeeping Requirements
    Adopting the approach contemplated in the ANPRM, the proposed rule 
would require any U.S. person engaging in a restricted transaction to 
keep full and accurate records of each restricted transaction and to 
keep the records available for examination for at least 10 years after 
the date of such transaction (the length of the statute of limitations 
for violations of IEEPA). The proposed rule describes the required 
records in detail, which include a written policy describing the 
compliance program, a written policy documenting implementation of the 
security measures for restricted transactions, the results of any 
audits to evaluate compliance with the security measures, documentation 
of the due diligence conducted to verify the data flow involved in any 
restricted transaction, and other pertinent information regarding each 
transaction.
2. Section 202.1102--Reports To Be Furnished on Demand
    Adopting the approach contemplated in the ANPRM, the proposed rule 
includes provisions to assist the Department in investigating potential 
noncompliance with the proposed rules of this program. These include 
requiring any U.S. person to furnish under oath, from time to time and 
at any time as may be required by the Attorney General, complete 
information relative to any covered data transaction subject to a 
prohibition or restriction.
3. Section 202.1103--Annual Reports
    Adopting the approach contemplated in the ANPRM, the proposed rule 
would require reporting by U.S. persons who engage in certain 
restricted transactions or, in certain narrow circumstances, to 
identify attempts to engage in prohibited transactions. Specifically, 
the proposed rule requires annual reports from U.S. persons engaged in 
restricted transactions involving cloud-computing services where 25 
percent or more of that U.S. person's equity interests are owned 
(directly or indirectly, through any contract, arrangement, 
understanding, relationship, or otherwise) by a country of concern or 
covered person.
    The Department may impose similar reporting requirements on U.S. 
persons engaging in licensed transactions as conditions of specific or 
general licenses. Those requirements may vary depending on the nature 
of the licenses, will be set forth in the licenses

[[Page 86154]]

themselves, and are not part of the proposed rule.
4. Section 202.1104--Reports on Rejected Prohibited Transactions
    Adopting the approach contemplated in the ANPRM, the proposed rule 
also requires that any U.S. person that has received and affirmatively 
rejected an offer from another person to engage in a prohibited 
transaction must submit a report to the Department within 14 business 
days of rejecting it. These reports will help the Department identify 
instances in which potential countries of concern or covered persons 
seek to enter into prohibited transactions with U.S. persons in 
contravention of the proposed rule, including through evasion. The 
information submitted by these reports will thus assist the Department 
in monitoring U.S. persons' compliance with the proposed rule, 
identifying matters for potential investigation, undertaking 
enforcement actions, and identifying ways in which to refine the 
proposed rule in the future.

J. Subpart M--Penalties and Finding of Violation

1. Section 202.1301--Penalties for Violations
    Adopting the approach contemplated in the ANPRM, the proposed rule 
also includes a process for imposing civil monetary penalties similar 
to those used in other IEEPA-based regimes. See 31 CFR part 501, 
Appendix A; 15 CFR part 764. The proposed rule includes mechanisms for 
pre-penalty notice, an opportunity to respond, and a final decision. 
Under the proposed rule, penalties may be based on noncompliance with 
the proposed rules of this program, material misstatements or omissions 
in connection with this program, false certifications or submissions 
pursuant to the proposed rules of this program, or other actions and 
factors. The proposed rule stipulates that, consistent with due process 
requirements, the Department of Justice will give the alleged violator 
any relevant non-classified information that forms the basis of any 
enforcement action and a meaningful opportunity to respond.
    As part of this proposed rulemaking, the Department is adjusting 
for inflation the civil monetary penalty that can be imposed under 
IEEPA in accordance with section four of the Federal Civil Penalties 
Inflation Adjustment Act of 1990 (Pub. L. 101-410, 104 Stat. 890; 28 
U.S.C. 2461 note), as amended by the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015 (Pub. L. 114-74, tit. VII, sec. 
701, 129 Stat. 584, 599, 28 U.S.C. 2461 note) (``FCPIA Act''), for 
penalties assessed after the effective date of this proposed part with 
respect to violations occurring after November 2, 2015.
    For consistency with the civil monetary penalties imposed in other, 
more widely known IEEPA-based regimes administered by the Department of 
the Treasury's OFAC, the Department of Justice proposes incorporating 
OFAC's prior annual adjustments to IEEPA's maximum civil monetary 
penalty as an initial catch-up adjustment applicable to this part. 
Those adjustments by OFAC occurred on August 1, 2016 (Implementation of 
the Federal Civil Penalties Inflation Adjustment Act, 81 FR 43070 (July 
1, 2016)), February 10, 2017 (Inflation Adjustment of Civil Monetary 
Penalties, 82 FR 10434 (Feb. 10, 2017)); March 19, 2018 (Inflation 
Adjustment of Civil Monetary Penalties, 83 FR 11876 (Mar. 19, 2018)); 
June 14, 2019 (Inflation Adjustment of Civil Monetary Penalties, 84 FR 
27714 (June 14, 2019)); April 9, 2020 (Inflation Adjustment of Civil 
Monetary Penalties, 85 FR 19884 (Apr. 9, 2020)); March 17, 2021 
(Inflation Adjustment of Civil Monetary Penalties, 86 FR 14534 (Mar. 
17, 2021)); February 9, 2022 (Inflation Adjustment of Civil Monetary 
Penalties, 87 FR 7369 (Feb. 9, 2022)); January 13, 2023 (Inflation 
Adjustment of Civil Monetary Penalties, 88 FR 2229 (Jan. 13, 2023)); 
and January 12, 2024 (Inflation Adjustment of Civil Monetary Penalties, 
89 FR 2139 (Jan. 12, 2024)).
    The proposed maximum civil monetary penalty for violations of this 
part after its effective date would therefore be the greater of 
$368,136 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.\222\ The Department of Justice proposes making annual 
adjustments to the civil monetary penalty on an annual basis after the 
effective date of this part consistent with the FCPIA Act.
---------------------------------------------------------------------------

    \222\ See 50 U.S.C. 1705(b); Inflation Adjustment of Civil 
Monetary Penalties, 89 FR 2139 (Jan. 12, 2024).
---------------------------------------------------------------------------

2. Section 202.1305--Finding of Violation
    The proposed rule also provides a process in which the Department 
might issue a finding of violation where the Department determines that 
a party has violated the regulations and that an administrative 
response short of a civil monetary penalty is warranted. As with civil 
penalties, the proposed rule also provides that, consistent with due 
process requirements, the Department will give the alleged violator any 
relevant non-classified information that forms the basis of any finding 
of violation and a meaningful opportunity to respond.

K. Coordination With Other Regulatory Regimes

    The Order requires the Department of Justice to address, as 
appropriate, coordination with other United States Government entities, 
such as CFIUS, OFAC, agencies that operate export-control programs, and 
other entities implementing relevant programs, including those 
implementing Executive Order 13873; Executive Order 14034 of June 9, 
2021 (Protecting Americans' Sensitive Data from Foreign Adversaries); 
and Executive Order 13913 of April 4, 2020 (Establishing the Committee 
for the Assessment of Foreign Participation in the United States 
Telecommunications Services Sector).\223\ The Department does not 
currently intend or anticipate that this new program will significantly 
overlap with existing programs. As explained in the ANPRM, existing 
programs do not provide prospective, categorical rules to address the 
national security risks posed by transactions between U.S. persons and 
countries of concern (or persons subject to their ownership, direction, 
jurisdiction, or control) that pose an unacceptable risk of providing 
those countries with access to government-related data or bulk U.S. 
sensitive personal data.
---------------------------------------------------------------------------

    \223\ E.O. 14117, sec. 2(c)(vii), 89 FR 15424.
---------------------------------------------------------------------------

    The Department has identified and considered three potential areas 
of overlap between this proposed rule and existing regulatory regimes.
    First, the Department has considered the potential interaction 
between this proposed rule's application to investment agreements and 
CFIUS's authority to review ``covered transactions,'' see generally 50 
U.S.C. 4565. Some ``investment agreements,'' as defined in the proposed 
rule, would also be covered transactions or covered real estate 
transactions subject to CFIUS's jurisdiction. See Sec.  202.228; 50 
U.S.C. 4565(a)(4). The ANPRM contemplated an approach in which the 
proposed rule would independently regulate, as a restricted 
transaction, an investment agreement that is also a covered transaction 
or covered real estate transaction subject to review by CFIUS unless 
and until a ``CFIUS action'' occurs in which CFIUS imposes an order or 
condition or enters into a mitigation agreement to resolve the

[[Page 86155]]

national security risk arising from the transaction.\224\ As explained 
in the ANPRM, this approach would preserve CFIUS's authority to develop 
bespoke protections to mitigate risks arising from covered transactions 
or covered real estate transactions--or recommend that the President 
prohibit a transaction--where CFIUS concludes that such action is 
necessary to address the national security risk arising from the 
transaction. To implement this approach, the ANPRM contemplated an 
exemption in the proposed rule that would apply categorically for all 
covered transactions that are subject to CFIUS actions, rather than 
requiring the Department to issue a specific license for each 
investment agreement subject to a CFIUS action.
---------------------------------------------------------------------------

    \224\ 89 FR 15798-99.
---------------------------------------------------------------------------

    The proposed rule adopts the approach described in the ANPRM and 
implements that approach by adding a corresponding exemption for any 
investment agreement that is subject to a ``CFIUS action,'' defining 
that term, and providing examples. See Sec.  202.508. Under the 
proposed rule, if a CFIUS action occurs with respect to an investment 
agreement, that investment agreement would become exempt from the 
proposed rule and would be subject only to CFIUS's authority going 
forward. The Department, in close coordination with the Department of 
the Treasury, as chair of CFIUS, would retain enforcement authority 
with respect to any violations of the proposed rule before the 
effective date of the CFIUS action. Alternatively, in some instances, 
CFIUS may not review a particular transaction at all or may conclude 
its review or assessment of a transaction without taking a CFIUS 
action. Because CFIUS's authority to mitigate transactions is limited 
to risks that ``arise[s] as a result'' of the particular transaction, 
see 50 U.S.C. 4565(l)(3)(A)(i), the fact that CFIUS takes no action 
does not mean that the transaction poses no national security risk. For 
example, the transaction may implicate pre-existing national security 
risks that do not arise from the particular transaction CFIUS can 
review.'' In those scenarios, any obligations under the proposed rule 
would continue to apply with respect to the transaction. Similarly, if 
CFIUS requests information from parties about a transaction for which 
no filing has been submitted to CFIUS under 31 CFR 800.504(b) or 31 CFR 
802.501(b), the Department will closely coordinate with the Department 
of the Treasury with respect to any enforcement action under the 
proposed rule with respect to that investment agreement. CFIUS may also 
refer a covered transaction or covered real estate transaction to the 
President, in which case any obligations under the proposed rule would 
continue to apply and the Department would closely coordinate with the 
Department of the Treasury on any enforcement actions under the 
proposed rule. The same would be true after any Presidential order 
under 50 U.S.C. 4565(d) following a referral from CFIUS, absent any 
accompanying CFIUS action. The Department, in consultation with CFIUS 
member agencies, continues to evaluate alternative approaches, such as 
regulating investment agreements as restricted transactions regardless 
of whether they are ``covered transactions'' subject to a CFIUS action. 
The Department welcomes comments on this potential alternative 
approach, as well as any other proposed alternatives.
    Second, the Department has considered, in consultation with the 
Federal Trade Commission (``FTC'') and other agencies, the potential 
interaction between this proposed rule's application to data-brokerage 
transactions and the Protecting Americans' Data from Foreign 
Adversaries Act of 2024 (``PADFAA''). See Public Law 118-50, div. I 138 
Stat. 895, 960 (2024). The PADFAA generally makes it unlawful for a 
``data broker to sell'' or ``otherwise make available personally 
identifiable sensitive data of a United States individual'' to any 
foreign adversary country or any entity that is controlled by a foreign 
adversary and authorizes the FTC to bring civil enforcement actions for 
any violations. The proposed rule would generally prohibit U.S. persons 
from engaging in covered data transactions involving data brokerage 
with countries of concern or covered persons.
    Following consultation with the FTC, the Department does not 
believe that it would be appropriate to alter the proposed rule's scope 
in light of the PADFAA for several reasons. There are significant 
differences in scope between the PADFAA and the proposed rule. The 
PADFAA's prohibition applies to entities that meet the statutory 
definition of ``data broker.'' \225\ By contrast, the proposed rule 
would regulate certain transactions involving ``data brokerage,'' a 
term that is broader and covers activities that present the national 
security risk of allowing countries of concern access to sensitive 
personal data, regardless of the kinds of entities that engage in that 
activity. In addition, the proposed rule would reach any U.S. persons--
including individuals, not just entities--who engage in the regulated 
categories of activities. Similarly, the PADFAA applies to a narrower 
category of activities than the proposed rule. Unlike the PADFAA, the 
proposed rule expressly addresses the re-export or resale of data by 
third parties and indirect sales through intermediaries. The PADFAA 
excludes from the definition of ``data broker'' any entity that 
transmits a U.S. individual's data at that individual's request or 
direction, whereas the proposed rule would not contain any such 
exception in light of the national security threat posed even in such 
instances. In addition, the PADFAA does not provide any mechanisms for 
affected parties to seek clarification or redress, such as the advisory 
opinions, general licenses, and specific licenses available to parties 
under the proposed rule. Similarly, the PADFAA provides general 
contours for entities and businesses to determine whether a 
counterparty is ``subject to the direction or control'' of either: (1) 
a person that is domiciled in, headquartered in, has its principal 
place of business in, or is organized under the laws of a foreign 
adversary country; or (2) an entity that is 20-percent or more owned by 
such a person.\226\ The proposed rule provides different criteria for 
determining whether a person is ``covered'' under the regulatory 
program, and it contemplates a designation process, which the PADFAA 
lacks.
---------------------------------------------------------------------------

    \225\ Protecting Americans' Data from Foreign Adversaries Act of 
2024, Pub. L. 118-50, div. I, sec. 2(c)(3) 138 Stat. 895, 960 
(2024).
    \226\ Id. at sec. 2(c)(2).
---------------------------------------------------------------------------

    Given the PADFAA's structure and the significant differences in 
scope, the Department declines to alter the proposed rule's scope in 
light of the PADFAA. The Department and the FTC intend to coordinate 
closely to ensure that these authorities are exercised in a harmonized 
way to minimize any conflicting obligations or duplicative enforcement. 
For example, the Department and the FTC intend to coordinate, as 
appropriate, on licensing decisions and on any potential enforcement 
actions under the PADFAA with respect to activities that may be 
authorized, exempt, or licensed under the proposed rule. Thus, the 
proposed rule adopts the approach described in the ANPRM without 
change.
    Third, the Department has considered the potential interaction 
between this proposed rule's application to vendor agreements and any 
actions taken by the Secretary of Commerce under Executive Orders 13873 
and 14034. Some vendor agreements, as defined in this proposed

[[Page 86156]]

rule, could also be the subject of an action by the Secretary of 
Commerce regarding an information and communications technology and 
services (``ICTS'') transaction that involves ICTS that is designed, 
developed, manufactured, or supplied by persons owned by, controlled 
by, or subject to the jurisdiction or direction of a foreign adversary 
and presents the types of unacceptable national security risks 
described in Executive Orders 13873 and 14034. Even so, the Department 
does not believe that it would be appropriate to alter the scope of 
this proposed rule for several reasons. While these two authorities 
could potentially address some of the same national security risks 
related to vendor agreements, they would do so in different ways and by 
focusing on different vectors of risk. Executive Order 14117 and this 
proposed rule seek to address this risk by addressing transactions 
involving the export of U.S. sensitive personal data, such as 
restricting a U.S. person's ability to enter into a vendor agreement 
that grants access to government-related data or bulk U.S. sensitive 
personal data to a country of concern or covered person. Executive 
Orders 13873 and 14034, on the other hand, seek to address transactions 
involving the acquisition, import, or use, among other actions, of 
technology or services developed or otherwise sourced from a foreign 
adversary by U.S. persons or in the United States. For that reason, the 
ICTS authority addresses a broader range of potential national security 
risks than access to Americans' bulk sensitive personal data.
    In addition, this proposed rule (through the incorporation by 
reference of the CISA security requirements for restricted 
transactions, including vendor agreements) creates a floor for the 
security of all government-related data or Americans' bulk U.S. 
sensitive personal data involved in a restricted transaction. Only by 
complying with these requirements (or operating under an applicable 
license) could a U.S. person engage in a proposed restricted 
transaction. Executive Order 13873 and its implementing regulations do 
not establish a baseline set of mitigation measures to protect this 
data across all of types of vendors that could be subject to 
prohibition or restriction. Rather, the Department of Commerce will 
exercise that authority by taking an action with respect to 
transactions involving a specific vendor \227\ or proposing regulation 
of a sector-specific set of ICTS.\228\ Nothing in this proposed rule 
would prevent the Department of Commerce from exercising its ICTS 
authorities to take vendor-specific actions or promulgate sector-
specific rules. At this time, any overlap between these two authorities 
is hypothetical, and the Department does not believe that there will be 
any substantial impact. The Department is, however, considering 
approaches to address any potential overlap that might arise between 
the requirements of this proposed rule and any ICTS actions undertaken 
by the Department of Commerce, whether through an understanding between 
the Department of Commerce and Department of Justice or a more formal 
licensing process that could apply where the Department of Commerce has 
taken action under its ICTS authorities. The Department welcomes 
comments on the identified approaches, or any others, to address any 
potential overlap that might arise.
---------------------------------------------------------------------------

    \227\ See Kaspersky Lab, Inc., 89 FR 52435 n.13; Maggs Report, 
supra note 187.
    \228\ See Securing the Information and Communications Technology 
and Services Supply Chain: Connected Vehicles, 89 FR 15066 (Mar. 1, 
2024) (to be codified at 15 CFR pt. 7), https://www.federalregister.gov/documents/2024/03/01/2024-04382/securing-the-information-and-communications-technology-and-services-supply-chain-connected-vehicles [https://perma.cc/PV7Y-998V].
---------------------------------------------------------------------------

L. Severability

    The Department intends for the provisions of this proposed rule to 
be severable from each other. In short, if a court holds that any 
provision in a final 28 CFR part 202 is invalid or unenforceable, the 
Department intends that the remaining provisions of a final 28 CFR part 
202, as relevant, would continue in effect to the greatest extent 
possible. In addition, if a court holds that any such provision is 
invalid or unenforceable as to a particular person or circumstance, the 
Department intends that the provision would remain in effect as to any 
other person or circumstance. Depending on the circumstances and the 
scope of the court's order, remaining provisions of a final rule likely 
could continue to function sensibly independent of any provision or 
application held invalid or unenforceable. For example, the 
prohibitions and restrictions related to transactions involving access 
to personal health data could continue to apply even if a court finds 
that the restrictions or prohibitions on transactions involving access 
to biometric data are invalid. Similarly, the proposed rule could be 
applied with respect to North Korea even if a court finds its 
application with respect to Russia is invalid.

V. Analysis for Proposed Bulk Thresholds

    The Department of Justice proposes volume-based thresholds for each 
category of sensitive personal data and for combined datasets. The bulk 
thresholds are based on a risk-based assessment that accounts for the 
characteristics of datasets that affect the data's vulnerability to 
exploitation by countries of concern and that affect the consequences 
of exploitation. In conducting this assessment, the Department 
considered numerous ways that a country of concern might exploit each 
category of sensitive personal data. In general, bulk U.S. sensitive 
personal data is useful for deriving additional information about 
individuals or subpopulations, such as demography, geography, and 
interests, that can be used to identify vulnerabilities.\229\ The 
advertising industry has long recognized that such data is useful for 
predicting and influencing behavior.\230\ Influencing behavior is 
similarly at the root of intelligence recruitment.\231\ The Department 
assessed how a foreign intelligence service might use bulk U.S. 
sensitive personal data as part of the agent recruitment cycle--a 
``systematic method for finding agents who will meet national 
intelligence information needs''--among other potential malign 
uses.\232\ While the categories of sensitive personal data may have a 
variety of applications for foreign intelligence services or foreign 
governments, they may be especially useful to parts of the first three 
steps of agent recruitment:
---------------------------------------------------------------------------

    \229\ What Is Targeted Advertising, and How Does It Work?, RTB 
House (May 13, 2024), https://blog.rtbhouse.com/what-is-targeted-advertising-and-how-does-it-work/ [https://perma.cc/EQ5Q-M6KD].
    \230\ See The Role of Data in the Targeted Advertising Industry, 
New Am., https://www.newamerica.org/oti/reports/special-delivery/the-role-of-data-in-the-targeted-advertising-industry/ [https://perma.cc/LMX7-B93Q]; Ben Collier, Targeted Social Media Ads Are 
Influencing Our Behaviour--and the Government Uses Them Too, 
Conversation (Feb. 27, 2024), https://theconversation.com/targeted-social-media-ads-are-influencing-our-behaviour-and-the-government-uses-them-too-223576 [https://perma.cc/YGA8-YKF9].
    \231\ See id.; Randy Burkett, An Alternative Framework for Agent 
Recruitment: From MICE to RASCLS, 57 Stud. Intel. 7, 13 (2013), 
https://www.cia.gov/resources/csi/static/9ccc45dc156271d11769e5205ec49c29/Alt-Framework-Agent-Recruitment-1.pdf [https://perma.cc/9GQU-UTET]; Collier, supra note 230.
    \232\ Burkett, supra note 231, at 13.
---------------------------------------------------------------------------

    <bullet> ``spotting (or identifying) individuals who can meet 
intelligence needs'';
    <bullet> ``assessing whether the spotted individuals have the 
placement and access to provide desired information''; and

[[Page 86157]]

    <bullet> ``developing a relationship with the individual to . . . 
explore whether they will be responsive to . . . tasking for 
intelligence information.'' \233\
---------------------------------------------------------------------------

    \233\ Id.
---------------------------------------------------------------------------

    The Department's subject-matter experts identified seven 
characteristics relevant to the exploitability and national security 
harm posed by any particular type of data: purpose (i.e., how the data 
can be used), changeability (i.e., how easy it would be for an 
individual to deliberately change or falsify the data in question), 
control (i.e., who tracks and manages the data), availability (i.e., 
how easily the data can be obtained), volume (i.e., the number of data 
points in a dataset), velocity (i.e., how quickly the dataset evolves), 
and quality (i.e., how much processing is required to use the data). 
These characteristics help describe the national security risk of each 
type of sensitive personal data by providing a methodology for 
analyzing their value to an adversary. For example, availability and 
control focuses on the ease with which an adversary may be able to 
acquire this data using licit or illicit means. Quality and 
changeability examine the ease and speed with which an adversary can 
use the data. Volume, velocity, and purpose are other important 
attributes of these datasets that focus on how valuable a particular 
data may be to an adversary and how long it is likely to remain 
valuable.
    Using this framework of characteristics, the Department evaluated 
the relative sensitivity of each of the seven categories of bulk U.S. 
sensitive personal data and ranked them based on their potential value 
to enable foreign governments and foreign intelligence services engaged 
in agent recruitment to: (1) identify or spot individuals within bulk 
datasets for intelligence needs; (2) group individuals into specific 
categories to assess their value for intelligence purposes; and (3) 
characterize the behaviors and vulnerabilities of individuals to 
identify ways to develop and exploit relationships. The Department then 
considered how close in sensitivity each category was to the other, 
grouped them into tiers of similar sensitivity (resulting in four 
tiers), and then set proposed numerical thresholds for each tier.
    To conduct the analysis, the Department considered use cases from 
each category of bulk U.S. sensitive personal data based on widely 
available information about commercial practices around data,\234\ news 
reports of past incidents involving data with national security 
implications,\235\ and a survey of covered transactions reviewed by 
CFIUS that implicated sensitive personal data. The Department also 
considered how future changes in technology could affect the utility 
and value of each category of data.\236\
---------------------------------------------------------------------------

    \234\ See, e.g., Max Freedman, How Businesses Are Collecting 
Data (And What They're Doing With It), Bus. News Daily (Oct. 20, 
2023), https://www.businessnewsdaily.com/10625-businesses-collecting-data.html [https://perma.cc/944W-ZC4M].
    \235\ See, e.g., Hsu, supra note 43; Garrett M. Graff, China's 
Hacking Spree Will Have a Decades-Long Fallout, Wired (Feb. 11, 
2020), https://www.wired.com/story/china-equifax-anthem-marriott-opm-hacks-data/ [https://perma.cc/48WK-M9AM]; Press Release, U.S. 
Dep't of Just., Member of Sophisticated China-Based Hacking Group 
Indicted for Series of Computer Intrusions, Including 2015 Data 
Breach of Health Insurer Anthem Inc. Affecting Over 78 Million 
People (May 9, 2019), https://www.justice.gov/opa/pr/member-sophisticated-china-based-hacking-group-indicted-series-computer-intrusions-including [https://perma.cc/84YH-CVA5].
    \236\ See, e.g., Steve Van Kuiken, Tech at the Edge: Trends 
Reshaping the Future of IT and Business, McKinsey Digital (Oct. 21, 
2022), https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/tech-at-the-edge-trends-reshaping-the-future-of-it-and-business [https://perma.cc/HW2S-N464]; Adam D. Nahari & Dimitris 
Bertsimas, External Data and AI Are Making Each Other More Valuable, 
Harv. Bus. Rev. (Feb. 26, 2024), https://hbr.org/2024/02/external-data-and-ai-are-making-each-other-more-valuable [https://perma.cc/2ZAS-8VBB].
---------------------------------------------------------------------------

A. Analysis of Sensitivity of Each Category of Sensitive Personal Data

1. Human Genomic Data
    The Department of Justice assesses that human genomic data is the 
most sensitive category of sensitive personal data. To conduct the 
analysis, the Department considered human genetic testing data, which 
sequences only specific portions of the human genome for a specific 
purpose (e.g., identifying ancestry, diagnosing a specific disease); 
and sequencing of a complete human genome, a still-emerging capability 
with a wide variety of potential applications.\237\ Based on the 
multiple characteristics that were considered of high sensitivity, and 
especially noting that the velocity of this data has very high 
sensitivity, human genomic data is highly sensitive:
---------------------------------------------------------------------------

    \237\ Luca Bonomi et al., Privacy Challenges and Research 
Opportunities for Genomic Data Sharing, 52 Nature Genetics 646 
(2020), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7761157/ 
[https://perma.cc/2J8T-BLLF].
---------------------------------------------------------------------------

    <bullet> Purpose: High sensitivity. Human genomic data has unique 
purposes among the categories of bulk U.S. sensitive personal data. It 
is not only useful for identifying traits such as health, emotional 
stability, mental capacity, appearance, and physical abilities that 
might be useful in intelligence recruitment; countries of concern may 
also use this data to develop military capabilities such as 
bioweapons.\238\ Because human genomic data includes the unique genetic 
code of an individual, it is exceptionally useful in identifying 
individuals.\239\ For example, an adversary with access to an 
individual's genomic data may be able to predict physical features, 
such as eye, hair, and skin color, and vocal and facial 
characteristics.\240\ As technology develops further, analysts may also 
be able to use such genomic data to determine an individual's 
propensity toward certain behaviors, such as aggression or risky 
activities.\241\ Finally, foreign adversaries could potentially use 
human genomic data to conduct or support surveillance, oppression, 
extortion, and influence operations; and could potentially use this 
data to inform biological weapons development.\242\
---------------------------------------------------------------------------

    \238\ Ken Dilanian, Congress Wants to Ban China's Largest 
Genomics Firm from Doing Business in the U.S. Here's Why, NBC News 
(Jan. 25, 2024), https://www.nbcnews.com/politics/nationalsecurity/congress-wants-ban-china-genomics-firm-bgi-from-us-rcna135698 
[https://perma.cc/T2Y2-R7RZ]; Ron Pulivarti et al., Nat'l Inst. of 
Standards & Tech., NIST IR 8432, Cybersecurity of Genomic Data 9 
(2023), https://nvlpubs.nist.gov/nistpubs/ir/2023/NIST.IR.8432.pdf 
[https://perma.cc/5D3G-BEEZ].
    \239\ Bonomi et al., supra note 237.
    \240\ Christopher Lippert et al., Identification of Individuals 
by Trait Prediction Using Whole-Genome Sequencing Data, 114 PNAS 
10166 (Sept. 5, 2017), https://www.pnas.org/doi/full/10.1073/pnas.1711125114 [https://perma.cc/CM4L-GPE4].
    \241\ J.C. Barnes et al., The Propensity for Aggressive Behavior 
and Lifetime Incarceration Risk: A Test for Gene-Environment 
Interaction (G x E) Using Whole-Genome Data, 49 Aggr. & Violent 
Behav. (Nov.-Dec. 2019), https://www.sciencedirect.com/science/article/abs/pii/S1359178919300631 [https://perma.cc/3GVF-MPKF]; 
Heather Buschman, Large Study Identifies Genetic Variants Linked to 
Risk Tolerance and Risky Behaviors, UC San Diego Health (Jan. 2019), 
https://health.ucsd.edu/news/press-releases/2019-01-14-large-study-identifies-genetic-variants-linked-to-risk-tolerance-risky-behaviors/ [https://perma.cc/FMV2-GKYE].
    \242\ Pulivarti et al., supra note 238, at 9.
---------------------------------------------------------------------------

    <bullet> Changeability: High sensitivity. Human genomic data is 
difficult to deliberately alter. While certain technologies, such as 
Clustered Regularly Interspaced Short Palindromic Repeats (``CRISPR''), 
can alter or edit the human genome in extremely targeted, localized 
ways, larger-scale alterations remain technologically impossible.\243\ 
As a result, human genomic data is largely immutable over an 
individual's lifetime.
---------------------------------------------------------------------------

    \243\ What Are Genome Editing and CRISPR-Cas9?, MedlinePlus 
(updated Mar. 22, 2022), https://medlineplus.gov/genetics/understanding/genomicresearch/genomeediting/ [https://perma.cc/42K9-765F].
---------------------------------------------------------------------------

    <bullet> Control: High sensitivity. Corporate entities such as 
healthcare laboratories usually process and control human

[[Page 86158]]

genomic data.\244\ Because human genomic data is tied to an individual 
at a biological level, it is basically immutable. Additionally, 
biological residue such as saliva, blood, and hair can contain human 
genomic data, and this residue is difficult for an individual to 
completely control.\245\
---------------------------------------------------------------------------

    \244\ Bonomi et al., supra note 237, at Table 2; Genomic & 
Infrastructure Services, Quest Diagnostics, https://www.questdiagnostics.com/business-solutions/life-sciences/biotech/genomic-infrastructure-services [https://perma.cc/WD2E-2YXA].
    \245\ Am. Bar Ass'n, ABA Standards for Criminal Justice: DNA 
Evidence at 25 (3d ed. 2007), https://www.americanbar.org/content/dam/aba/publications/criminal_justice_standards/dna_evidence.pdf 
[https://perma.cc/3CSA-Q6J9]; Alexia Ramirez, Police Need a Warrant 
to Collect DNA We Inevitably Leave Behind, ACLU (Mar. 10, 2020), 
https://www.aclu.org/news/privacy-technology/police-need-a-warrant-to-collect-dna-we-inevitably-leave-behind [https://perma.cc/9MGJ-LDZP].
---------------------------------------------------------------------------

    <bullet> Availability: High sensitivity. Bulk human genomic data is 
difficult to obtain in the commercial marketplace, as it remains an 
emerging capability. For example, the crucial technologies that formed 
the foundation for scaled commercial applications of genomic sequencing 
are still less than 20 years old.\246\ In addition, medical systems 
tightly control access to and distribution of this information through 
privacy regulations and general scientific ethics.\247\ Because this 
data is currently hard to acquire but has myriad potential 
applications, it is highly valued.
---------------------------------------------------------------------------

    \246\ Joseph Wilson, Sequencing--The Next Generation, Nature 
(Feb. 10, 2021), https://www.nature.com/articles/d42859-020-00103-7 
[https://perma.cc/PY2Q-GKNY].
    \247\ Privacy in Genomics, Nat'l Hum. Genome Rsch Inst. (Feb. 6, 
2024), https://www.genome.gov/about-genomics/policy-issues/Privacy 
[https://perma.cc/2YU5-GBRZ].
---------------------------------------------------------------------------

    <bullet> Volume: Varied sensitivity. A complete human nuclear 
genome contains about 3.2 billion base pairs, with each base pair 
representing a unique data point.\248\ This human genome can be divided 
into codons of three base pairs each, each of which codes for a unique 
amino acid.\249\ This human genome can also be divided into tens of 
thousands of genes, each of which code for the production of specific 
proteins and other cellular activity and each of which can have 
multiple variants.\250\ Data sets containing human genomic data will be 
of different sizes--for example, a data set including the complete 
genome of an individual will be much larger than the data set just 
identifying specific genes present that may affect the chances of a 
specific cancer. A larger data set is more sensitive. Thus, the volume 
sensitivity of genomic information may vary because the datasets 
containing human genomic data are likely to vary widely in size.
---------------------------------------------------------------------------

    \248\ Terence A. Brown, The Human Genome, in Genomes (2d ed. 
2002), https://www.ncbi.nlm.nih.gov/books/NBK21134/ [https://perma.cc/Q9EW-FB7E].
    \249\ Codon, Nat'l Cancer Inst., https://www.cancer.gov/publications/dictionaries/genetics-dictionary/def/codon [https://perma.cc/GDB6-T32U].
    \250\ See Steven L. Salzberg, Open Questions: How Many Genes Do 
We Have?, 16 BMC Biology (Aug. 20, 2018), https://bmcbiol.biomedcentral.com/articles/10.1186/s12915-018-0564-x 
[https://perma.cc/89MV-J6HU].
---------------------------------------------------------------------------

    <bullet> Velocity: Very high sensitivity. Human genomic data 
remains largely stable over an individual's lifetime, and while the 
ability to interpret that data may evolve over time, the underlying 
information will not change.\251\ Furthermore, the value of human 
genomic data will likely increase significantly in the future as 
technology develops.\252\ It requires protection now to prevent future 
exploitation.\253\
---------------------------------------------------------------------------

    \251\ Kate Lyle et al., Immortal Data: A Qualitative Exploration 
of Patients' Understandings of Genomic Data, 31 Eur. J. Hum. 
Genetics 681 (Mar. 31, 2023), https://doi.org/10.1038/s41431-023-01325-9 [https://perma.cc/V6BM-NEE8].
    \252\ Genomic Data Science, Nat'l Hum. Genome Rsch Inst. (Apr. 
5, 2022), https://www.genome.gov/about-genomics/fact-sheets/Genomic-Data-Science [https://perma.cc/8YD2-MQZJ]; Nat'l Counterintel. & 
Sec. Ctr., supra note 83.
    \253\ Pulivarti et al., supra note 238, at 7-10.
---------------------------------------------------------------------------

    <bullet> Quality: Varied sensitivity. Processing a single sample of 
human genomic data can take as long as 48 hours. As a result, computing 
power continues to limit analysts' ability to use fully sequenced but 
unevaluated human genomic data.\254\ However, analysts will be 
increasingly able to take advantage of public databases and open-source 
tools to evaluate sequenced and analyzed data, reducing the 
computational power required to evaluate such processed datasets.\255\
---------------------------------------------------------------------------

    \254\ See Nathan Eddy, High-Performance Computing Breaks the 
Genomics Bottleneck, HealthTech (Feb. 13, 2023), https://healthtechmagazine.net/article/2023/02/high-performance-computing-breaks-genomics-bottleneck [https://perma.cc/LCD5-X3K2].
    \255\ See, e.g., Genome, Nat'l Libr. Med., https://www.ncbi.nlm.nih.gov/genome/ [https://perma.cc/XEV9-FRYH].
---------------------------------------------------------------------------

2. Biometric Identifiers
    The Department of Justice assesses that biometric identifiers are 
the second most sensitive category of sensitive personal data. To 
conduct the analysis, the Department considered physical biometrics 
measurements (e.g., eye patterns, fingerprints, facial features) as 
well as behavioral biometrics measurements (e.g., gait, keystroke 
recognition, signature).\256\ Biometric data is moderately to highly 
sensitive overall based primarily on the purpose, changeability, and 
control characteristics below:
---------------------------------------------------------------------------

    \256\ Sterling Miller, The Basics, Usage, and Privacy Concerns 
of Biometric Data, Thomsons Reuters (July 20, 2022), https://legal.thomsonreuters.com/en/insights/articles/the-basics-usage-and-privacy-concerns-of-biometric-data [https://perma.cc/92HR-4YMX]; 
Types of Biometrics, Biometrics Inst., https://www.biometricsinstitute.org/what-is-biometrics/types-of-biometrics/ 
[https://perma.cc/W7FD-5P6B].
---------------------------------------------------------------------------

    <bullet> Purpose: High sensitivity. Biometric data is specifically 
intended to identify specific individuals based on distinguishing 
biological or behavioral characteristics.\257\ In addition, analysts 
can identify certain categorizing characteristics from this data--for 
example, inferring gender from facial features.\258\ Finally, biometric 
information can be used to authenticate users, either alone or as part 
of a multi-factor authentication protocol. Fingerprints, voiceprints, 
and facial scans provide useful reference points for identifying 
individuals for intelligence recruitment, espionage, and influence 
based on their patterns of life. Searches through video footage, police 
records, and intelligence databases using biometrics could provide 
points of leverage for coercion, blackmail, and influence.
---------------------------------------------------------------------------

    \257\ Int'l Org. for Standardization, ISO/IEC TR 24741:2018, 
Information Technology--Biometrics--Overview and Application (2018), 
https://www.iso.org/obp/ui/#iso:std:iso-iec:tr:24741:ed-2:v1:en 
[https://perma.cc/P3RB-56RM]; see What Is Biometrics?, Biometrics 
Inst., https://www.biometricsinstitute.org/what-is-biometrics/ 
[https://perma.cc/2APY-5WBM].
    \258\ D. Gowtami Annapurna et al., Gender Identification from 
Facial Features, 15 Int'l J. Innovations Eng'g & Tech. 5 (2020), 
https://ijiet.com/wp-content/uploads/2020/03/21.pdf [https://perma.cc/9M69-GXZ8].
---------------------------------------------------------------------------

    <bullet> Changeability: Moderate-to-high sensitivity. Biometric 
data is generally difficult to deliberately change or falsify because 
it is linked to the physical characteristics of an individual. However, 
it can evolve as individuals age or be altered through activities such 
as limb loss or amputation, long-term manual labor, or physical 
retraining.\259\
---------------------------------------------------------------------------

    \259\ See, e.g., Jesse M. Charlton et al., Learning Gait 
Modifications for Musculoskeletal Rehabilitation: Applying Motor 
Learning Principles to Improve Research and Clinical Implementation, 
101 Physical Therapy, Feb. 2021, at 2, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7899063/ [https://perma.cc/JJ9W-CKDA]; Javier 
Galbally et al., A Study of Age and Ageing in Fingerprint 
Biometrics, 14 IEEE Transactions on Info. Forensics & Sec. 1351 
(2019), https://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=8509614 [https://perma.cc/FK88-THWY]; 
Physiological and Behavioural Biometrics, Biometrics Inst., https://www.biometricsinstitute.org/physiological-and-behavioural-biometrics/ [https://perma.cc/8QE4-LW74].
---------------------------------------------------------------------------

    <bullet> Control: Moderate-to-high sensitivity. Physical biometric 
information is largely beyond the ability of an individual to control 
or conceal. If an individual's fingerprint or other

[[Page 86159]]

physiological biometric measurement is compromised, it can be 
impossible to change.\260\ Additionally, covert or passive measures 
such as surveillance cameras or latent fingerprints can capture 
biometric data without the targeted individual's knowledge.\261\ 
However, certain types of behavioral biometric information, such as 
gait and voice, may be possible to change, though it may be difficult.
---------------------------------------------------------------------------

    \260\ See Off. of the Victorian Info. Comm'r, Biometrics and 
Privacy--Issues and Challenges (July 2019), https://ovic.vic.gov.au/privacy/resources-for-organisations/biometrics-and-privacy-issues-and-challenges/ [https://perma.cc/ME8R-XWJU]; Is Biometric 
Information Protected by Privacy Laws?, Bloomberg L. (June 20, 
2024), https://pro.bloomberglaw.com/insights/privacy/biometric-data-privacy-laws/ [https://perma.cc/56EZ-69HK].
    \261\ Id.
---------------------------------------------------------------------------

    <bullet> Availability: Moderate sensitivity. Certain types of 
biometric data could be widely available in certain records, such as 
facial features derived from photographs on the internet.\262\ Others, 
such as gait, are not widely available. Reliable bulk biometric 
databases remain difficult enough to assemble that they are seen as 
important national security assets.\263\
---------------------------------------------------------------------------

    \262\ Katherine Tangalakis-Lippert, Clearview AI Scraped 30 
Billion Images from Facebook and Other Social Media Sites and Gave 
Them to Cops: It Puts Everyone into a `Perpetual Police Line-Up', 
Bus. Insider (Apr. 2, 2023), https://www.businessinsider.com/clearview-scraped-30-billion-images-facebook-police-facial-recogntion-database-2023-4 [https://perma.cc/6LZG-NBUT].
    \263\ Kelsey Atherton, The Enduring Risks Posed by Biometric 
Identification Systems, Brookings Inst. (Feb. 9, 2022), https://www.brookings.edu/articles/the-enduring-risks-posed-by-biometric-identification-systems/ [https://perma.cc/65DW-832R].
---------------------------------------------------------------------------

    <bullet> Volume: Varied sensitivity. Video surveillance footage, 
which could be used to derive biometric information from tens or 
hundreds of individuals walking by the camera, collects up to 30 frames 
of potentially high-definition photo images per second.\264\ In 
contrast, a single human face can be represented by approximately 80 
distinct nodal points, each of which could be represented as a single 
number.\265\
---------------------------------------------------------------------------

    \264\ Optiview, A Practical Guide to CCTV Video Resolutions, 
https://optiviewusa.com/cctv-video-resolutions/ [https://perma.cc/K24Y-MJA5].
    \265\ Chris De Silva et al., NEC Corp., It's All About the Face: 
Face Recognition (2013), https://www.nec.com/en/global/solutions/safety/pdf/NEC-FR_white-paper.pdf [https://perma.cc/P5PJ-8LQ2].
---------------------------------------------------------------------------

    <bullet> Velocity: Moderate sensitivity. Certain types of biometric 
information can change, for example as individuals age or change 
weight.\266\ However, because biometrics are physical, many will remain 
substantially the same over a person's lifetime. For example, 
fingerprints are constant over a lifetime, and iris patterns remain 
largely stable even as children grow.\267\
---------------------------------------------------------------------------

    \266\ Joel R. McConvey, How Aging, Injury and Capture Impact the 
Challenge of Change in Biometric Identifiers, Biometric Update (Dec. 
25, 2023), https://www.biometricupdate.com/202312/how-aging-injury-and-capture-impact-the-challenge-of-change-in-biometric-identifiers 
[https://perma.cc/285T-5L2E].
    \267\ Justin Lee, New Research Proves that Fingerprint Accuracy 
Remains Unchanged Over Time, Biometric Update (June 30, 2015), 
https://www.biometricupdate.com/201506/new-research-proves-that-fingerprint-accuracy-remains-unchanged-over-time [https://perma.cc/C95U-DSSS]; Priyanka Das et al., Iris Recognition Performance in 
Children: A Longitudinal Study, 3 IEEE Transactions on Biometrics, 
Behav. & Identity Sci. 138 (Jan. 13, 2021), https://ieeexplore.ieee.org/document/9321488 [https://perma.cc/X2KJ-G4EE].
---------------------------------------------------------------------------

    <bullet> Quality: Varied sensitivity. Factors including the quality 
of sensors and environmental conditions can affect the reliability of 
readings stored in databases.\268\ The complex nature of most biometric 
data systems means data quality can be further affected by obscured or 
degraded characteristics, subject behavior, data collection, 
compression and sampling efforts, feature extraction issues, matching 
errors, and administrative and database problems.\269\ As a result, the 
value of a bulk biometric data source to an analyst will depend on the 
quality of the underlying dataset.
---------------------------------------------------------------------------

    \268\ Off. of the Victorian Info. Comm'r, supra note 260.
    \269\ Austin Hicklin & Rajiv Khanna, Mitretek Sys., The Role of 
Data Quality in Biometric Systems (Feb. 9, 2006), https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=a892c6e2cf2fdd94bab672a987940f2bb6996119 [https://perma.cc/4YWP-KDWH].
---------------------------------------------------------------------------

3. Precise Geolocation Data
    The Department of Justice assesses that precise geolocation data is 
the third most sensitive category of sensitive personal data. To 
conduct the analysis, the Department considered geolocation 
measurements obtained by a variety of means, including Global 
Positioning Systems (``GPS''), cell tower proximity, Wi-Fi networks, 
Bluetooth signals, and IP geolocation.\270\ It considered use cases 
where sets of geolocation points were linked to a specific device and 
included timestamps; were linked to a specific device but did not 
include timestamps; and were not linked to either specific devices or 
timestamps but instead represented an aggregate picture of where 
individuals were taking devices. In many--but not all--instances across 
these use cases, precise geolocation data is moderately to highly 
sensitive based primarily on the purpose, changeability, volume, and 
quality characteristics below:
---------------------------------------------------------------------------

    \270\ Paige M. Boshell, The Power of Place: Geolocation Tracking 
and Privacy, Bus. L. Today (Mar. 25, 2019), https://businesslawtoday.org/2019/03/power-place-geolocation-tracking-privacy/ [https://perma.cc/MWB2-7BWN]; Daniel Ionescu, Geolocation 
101: How It Works, the Apps, and Your Privacy, PCWorld (Mar. 29, 
2010), https://www.pcworld.com/article/511772/geolo.html [https://perma.cc/C28D-XYXU].
---------------------------------------------------------------------------

    <bullet> Purpose: High sensitivity. Analysts can use geolocation 
data to derive detailed information about patterns of life, as well as 
other types of sensitive personal data such as home address and place 
of work.\271\ They may use it to identify influential individuals for 
blackmail and coercion, physically map and target sensitive sites and 
high-risk personnel, create near-real-time situational awareness, and 
target offensive cyber operations.\272\ They may also use it to 
identify a specific person, such as who goes to a residence, as well as 
large numbers of people, such as everyone who goes to the 
Pentagon.\273\
---------------------------------------------------------------------------

    \271\ Hsu, supra note 43.
    \272\ Hazelrig, supra note 4.
    \273\ Alex Hern, Fitness Tracking App Strava Gives Away Location 
of Secret US Army Bases, The Guardian (Jan. 28, 2018), https://www.theguardian.com/world/2018/jan/28/fitness-tracking-app-gives-away-location-of-secret-us-army-bases [https://perma.cc/J7N3-BHKU]; 
Hsu, supra note 43.
---------------------------------------------------------------------------

    <bullet> Changeability: Moderate sensitivity. Geolocation data is 
technically collected (i.e., derived from signals and electronic 
devices). As a result, individuals can spoof or alter this data with 
some effort. One common way to affect the apparent location of a device 
is through a Virtual Private Network (``VPN''), which can affect the 
apparent location of a device based on its IP address, while connected 
applications that can spoof a GPS location on a cellphone are readily 
available online.\274\ More complicated spoofing techniques require 
transmission of a false radio signal to override a legitimate GPS 
signal.\275\
---------------------------------------------------------------------------

    \274\ See, e.g., Shweta, What a VPN Hides (And What It Doesn't), 
Forbes Advisor (June 5, 2024), https://www.forbes.com/advisor/business/software/what-does-vpn-hide/ [https://perma.cc/MF23-SYK7]; 
Tim Fisher, How to Fake a GPS Location on Your Phone, Lifewire (June 
18, 2024), https://www.lifewire.com/fake-gps-location-4165524 
[https://perma.cc/ZB8S-X3ZB].
    \275\ What Is GPS Spoofing and How Do You Defend Against It?, 
Okta (Aug. 16, 2023), https://www.okta.com/identity-101/gps-spoofing/ [https://perma.cc/ZM7K-4349].
---------------------------------------------------------------------------

    <bullet> Control: Moderate sensitivity. Precise geolocation data is 
collected from electronic devices, which an individual can typically 
leave behind or be separated from. However, these devices usually 
collect geolocation data in the background, often beyond the control or 
visibility of the individual, using software services built into device 
operating systems.\276\ These sensors are

[[Page 86160]]

present in an increasing number of devices, including phones, cars, and 
smartwatches.\277\
---------------------------------------------------------------------------

    \276\ See, e.g., Build Location-Aware Apps, Google for 
Developers (July 1, 2024), https://developer.android.com/develop/sensors-and-location/location[https://perma.cc/LVM6-TZGK].
    \277\ Rob Gabriele, 170 Million Americans Own GPS Tracking 
Devices; Market to Grow Over Next Six Months, SafeHome.org (July 15, 
2024), https://www.safehome.org/gps-industry-outlook-statistics/
[https://perma.cc/C3ZY-2WCA]; Securing the Information and 
Communications Technology and Services Supply Chain: Connected 
Vehicles, supra note 228.
---------------------------------------------------------------------------

    <bullet> Availability: Moderate sensitivity. Commercial companies 
collect geolocation data in large volumes and consider it valuable for 
identifying consumers and evaluating their behavior.\278\ It is subject 
to increasing regulatory protection, with laws passed in California and 
Virginia to regulate precise geolocation data, and Massachusetts 
considering a law that would ban the sale of user location data as of 
the date of the proposed rule.\279\ These restrictions make the date 
more sensitive because it is less generally available.
---------------------------------------------------------------------------

    \278\ Robert Archacki et al., Unlocking Value with Location 
Intelligence, Bos. Consulting Grp. (Feb. 4, 2021), https://www.bcg.com/publications/2021/leveraging-location-intelligence-across-industries [https://perma.cc/XM6A-NQRG].
    \279\ BCLP, Precise Geolocation: Recent Trends and Enforcement, 
JD Supra (Mar. 30, 2023), https://www.jdsupra.com/legalnews/precise-geolocation-recent-trends-and-8834493/ [https://perma.cc/4YMR-J8NE]; 
Will Shanklin, Massachusetts Weighs Outright Ban on Selling User 
Location Data, Engadget (July 10, 2023), https://www.engadget.com/massachusetts-weighs-outright-ban-on-selling-user-location-data-191637974.html [https://perma.cc/X43U-Q35P].
---------------------------------------------------------------------------

    <bullet> Volume: High sensitivity. Technically, geolocation is 
often a combination of latitude and longitude, along with related 
fields such as timestamps, accuracy measurements, device identifiers, 
and IP addresses.\280\ This string of information requires relatively 
little space to store and is simple, and geolocation information is 
often collected in very large quantities to be meaningful for 
commercial or research purposes at scale. For example, one provider of 
geolocation data advertised a dataset covering 1 year with 214 million 
daily data points, suggesting the relatively small amount of 
information contained in each data point.\281\ In general, geolocation 
data is sold in many differently sized sets and different ways, ranging 
from small, precisely targeted geofenced areas using ads to global 
datasets containing records on billions of devices.\282\
---------------------------------------------------------------------------

    \280\ Geolocation Data 101: A Guide to Powerful Place-Based 
Insights, Zartico, https://www.zartico.com/blog/guide-to-using-geolocation-data#where-does-geolocation-come-from [https://perma.cc/M6SG-5PRF]; see Amended Complaint ]] 27-28, Fed. Trade Comm'n v. 
Kochava, Inc., No. 22-cv-00377 (D. Idaho 2023), ECF No. 26, https://www.ftc.gov/system/files/ftc_gov/pdf/26AmendedComplaint%28unsealed%29.pdf [https://perma.cc/4KWL-ZEJE].
    \281\ Factori Products, Datarade, https://datarade.ai/data-providers/lifesight/data-products [https://perma.cc/3XEP-9BVH].
    \282\ See Jon Keegan & Alfred Ng, There's a Multibillion-Dollar 
Market for Your Phone's Location Data, Markup (Sept. 30, 2021), 
https://themarkup.org/privacy/2021/09/30/theres-a-multibillion-dollar-market-for-your-phones-location-data [https://perma.cc/3TUV-HHGV].
---------------------------------------------------------------------------

    <bullet> Velocity: Low sensitivity. Commercially available 
geolocation datasets typically offer 1 to 5 years of data.\283\ This 
indicates a relatively limited lifespan and may vary. Compared to other 
types of data under consideration, this data is less valuable and 
useful over long time periods due to other factors such as volume.
---------------------------------------------------------------------------

    \283\ See, e.g., What Is Mobile Location Data? Definition, Uses, 
Datasets, & Providers, Datarade (Sept. 23, 2024), https://datarade.ai/data-categories/mobile-location-data [https://perma.cc/X8FH-GY9Y].
---------------------------------------------------------------------------

    <bullet> Quality: Moderate sensitivity. Analysts can purchase 
geolocation data in a variety of formats, including real-time and 
historical data, over a variety of geographic locations.\284\ Analysts 
can determine valuable information about patterns of life from this 
information.\285\ However, this data is generally provided as raw, 
unprocessed ``pings,'' which require machine analysis to derive useful 
insights.
---------------------------------------------------------------------------

    \284\ Sherman et al., supra note 6.
    \285\ See, e.g., Thompson & Warzel, supra note 44.
---------------------------------------------------------------------------

4. Personal Health Data
    The Department of Justice assesses that personal health data is the 
fourth most sensitive category of sensitive personal data. In 
conducting the analysis, the Department considered personal health 
records as well as claims and billing information. Unlike the three 
categories discussed in parts V.A.1, V.A.2, and V.A.3 of this preamble, 
personal health data contains a much more heterogeneous set of data, 
with sensitivity varying across the evaluated characteristics. Based 
primarily on the purpose, control, and availability characteristics 
described below, the Department assesses personal health data to be 
moderately sensitive overall:
    <bullet> Purpose: Moderate sensitivity. Personal health records 
contain a variety of information, including information on medical 
history, medications, treatments, tests, immunizations, implanted 
devices, and associated data.\286\ They may also contain financial 
information (where related to billing), and covered personal 
identifiers.\287\ As a result, analysts could use them for a variety of 
identifying, characterizing, and categorizing activities, including 
identifying vulnerabilities in an individual's background that could be 
leveraged to coerce that individual into recruitment by a foreign 
intelligence service. For example, healthcare records can reveal 
healthcare providers and embarrassing or expensive medical conditions 
that help our adversaries target individuals and groups for 
intelligence recruitment, espionage, and influence. Severe injuries, 
chronic medical conditions, and mental health information provide 
points of leverage for coercion, blackmail, and influence. In extreme 
circumstances, countries of concern could even exploit information 
gathered from personal health records to target individuals using 
certain medical devices or taking certain prescriptions.\288\
---------------------------------------------------------------------------

    \286\ See, e.g., The Guide to Getting & Using Your Health 
Records, Off. Nat'l Coordinator for Health Info. Tech., https://www.healthit.gov/how-to-get-your-health-record/ [https://perma.cc/K2ZH-7VTW]; Dick Cheney Feared Assassination Via Medical Device 
Hacking: `I Was Aware of the Danger,' ABC News (Oct. 19, 2023), 
https://abcnews.go.com/US/vice-president-dick-cheney-feared-pacemaker-hacking/story?id=20621434 [https://perma.cc/Q779-MESR].
    \287\ See Trisha Torrey, How to Get Your Medical Records, 
Verywell Health (May 11, 2023), https://www.verywellhealth.com/how-to-get-copies-of-your-medical-records-2615505 [https://perma.cc/2VY5-PXJA].
    \288\ See, e.g., Dick Cheney Feared Assassination Via Medical 
Device Hacking, supra note 286.
---------------------------------------------------------------------------

    <bullet> Changeability: Moderate sensitivity. Many medical records 
contain objective information, such as laboratory test results and 
physical measurements. They also contain information that an individual 
could falsify by providing an inaccurate medical history, describing 
false symptoms, and hiding certain behaviors or habits to avoid 
negative consequences, get access to medication or insurance, or for 
simple emotional reasons such as guilt or shame.\289\
---------------------------------------------------------------------------

    \289\ John J. Palmieri & Theodore A. Stern, Lies in the Doctor-
Patient Relationship, 11 Prim. Care Companion J. Clinical Psychiatry 
163, 165 (2009), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2736034/ [https://perma.cc/AH9L-FD5K].
---------------------------------------------------------------------------

    <bullet> Control: Moderate sensitivity. Personal health records are 
often based on information provided by an individual and subject to 
strict privacy laws that help ensure individual control of this 
data.\290\ As a result, this data may not be available without an 
individual's permission. However, it is typically maintained by third 
parties, such as doctors, hospitals, and insurance systems, placing it 
in record systems outside an individual's direct control.\291\
---------------------------------------------------------------------------

    \290\ Health Information Privacy Law and Policy, Off. Nat'l 
Coordinator for Health Info. Tech., https://www.healthit.gov/topic/health-information-privacy-law-and-policy [https://perma.cc/2XHZ-UPFE].
    \291\ Trisha Torrey, Who Can Access Your Medical Records? 
VeryWell Health (Mar. 11, 2022), https://www.verywellhealth.com/who-has-access-to-your-medical-records-2615502 [https://perma.cc/BX52-5URC].

---------------------------------------------------------------------------

[[Page 86161]]

    <bullet> Availability: High sensitivity. Personal health data is 
considered highly private and is well protected by privacy legislation. 
Data is shared as part of clinical trials, but access to such data is 
recognized as a continuing challenge within the healthcare 
community.\292\ Furthermore, health data remains highly valuable to 
cyber criminals on the dark web, as compared to data such as credit 
card numbers and Social Security numbers, pointing to the general 
difficulty in obtaining this information in bulk quantities.\293\
---------------------------------------------------------------------------

    \292\ Sonali Kochhar et al., Clinical Trial Data Sharing: Here's 
the Challenge, 9 BMJ Open (2019), https://bmjopen.bmj.com/content/9/8/e032334 [https://perma.cc/392P-PVKN].
    \293\ Sanjay Cherian, Healthcare Data: The Perfect Storm, Forbes 
(Jan. 14, 2022), https://www.forbes.com/sites/forbestechcouncil/2022/01/14/healthcare-data-the-perfect-storm [https://perma.cc/DR6V-D7QY].
---------------------------------------------------------------------------

    <bullet> Volume: Varied sensitivity. As discussed, personal health 
data generally contains large amounts of data of varying formats and 
structures, ranging from the highly structured and technical 
information in lab results, to the more unstructured data, such as x-
ray images and magnetic resonance imaging scans. Such variation means 
the amount of information may range from very small, such as the 
results of a single test, to very voluminous, such as a complete 
medical history. The volume of elements such as progress notes is also 
increasing, further expanding variability.\294\
---------------------------------------------------------------------------

    \294\ Adam Rule et al., Length and Redundancy of Outpatient 
Progress Notes Across a Decade at an Academic Medical Center, 4 JAMA 
Network Open (July 19, 2021), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8290305/ [https://perma.cc/7NA8-7Y9N].
---------------------------------------------------------------------------

    <bullet> Velocity: Moderate-to-low sensitivity. As discussed, 
personal health data contains a variety of different types of 
information, but many of these records are lab tests, diagnostics, and 
other treatment information that may be less useful to analysts. 
However, certain pieces of information of enduring value--such as 
information on chronic disease and hereditary conditions--may be mixed 
in with other pieces of information, somewhat raising the overall 
sensitivity.
    <bullet> Quality: Low sensitivity. Personal health records vary 
widely in terms of data type, quantity, precision, and 
consistency,\295\ making personal health data less suitable for 
automated machine analysis than other types of data. Analysts or 
automated systems may not be able to draw useful conclusions without a 
great deal of context surrounding highly technical diagnostic data. 
``Note bloat''--unnecessarily lengthy information--is a recognized 
issue within the medical community, indicating the ongoing challenge of 
obtaining quality, valuable information.\296\ Much of the useful 
information may be contained in generalized diagnostics, particularized 
forms, and images that analysts may not be able to easily transform 
into useful conclusions, particularly if patients are not being 
truthful.\297\
---------------------------------------------------------------------------

    \295\ See, e.g., Alex Roehrs et al., Personal Health Records: A 
Systematic Literature Review, 19 J. Med. Internet Rsch. under 
sections titled Overview, Electronic Health Records, and Personal 
Health Records (Jan. 6, 2017), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5251169/ [https://perma.cc/T6MA-29VB].
    \296\ See Cures for Note Bloat, ForeSee Medical (June 9, 2023), 
https://www.foreseemed.com/blog/note-bloat-cures [https://perma.cc/AB34-CYGL].
    \297\ Palmieri & Stern, supra note 289.
---------------------------------------------------------------------------

5. Personal Financial Data
    The Department of Justice assesses that personal financial data is 
the fifth most sensitive category of sensitive personal data. To 
conduct the analysis, the Department considered data linked directly 
with personal financial accounts (e.g., records with account numbers 
and names), data included in financial applications such as data used 
to apply for mortgages or loans (e.g., credit history), and related 
data routinely exchanged during a transaction (e.g., account numbers, 
routing numbers). Personal financial data includes records that are 
confidential (e.g., complete bank account information, including name). 
Personal financial data includes a variety of data types with varying 
sensitivity and moderate sensitivity overall based primarily on the 
purpose, changeability, availability, and quality characteristics 
below:
    <bullet> Purpose: Moderate sensitivity. Financial institutions must 
uniquely identify and verify the identity of individuals both to track 
financial flows and to comply with regulations such as anti-money 
laundering.\298\ In order to do this, they store a mix of data that is 
useful for identifying individuals. Other categories of financial data, 
such as credit or consumer reports, provide data that can be useful for 
characterizing behavior or grouping individuals into categories.\299\ 
Today, most individuals leave a digital trail through their purchases 
and other financial activities, revealing behaviors, activities, and 
patterns of life.\300\ They provide insight into their financial 
condition, personal preferences, habits, and concerns through brokerage 
activity, savings account information, and insurance records. Foreign 
intelligence services could derive other sensitive personal data, such 
as workplace and daily life habits, including vulnerabilities in an 
individual's personal life that may be leveraged to coerce that 
individual into recruitment by a foreign intelligence service, from 
financial transaction data.\301\ Use of a financial instrument to 
purchase products or services reveals spending habits and patterns of 
life that help our adversaries target individuals and groups for 
intelligence recruitment, espionage, and influence. Debt, 
creditworthiness, and financial troubles provide points of leverage for 
coercion, blackmail, and influence.
---------------------------------------------------------------------------

    \298\ Frequently Asked Questions (FAQ) Regarding Anti-Money 
Laundering (AML), FINRA, https://www.finra.org/rules-guidance/key-topics/aml/faq [https://perma.cc/Z9TK-WBRW].
    \299\ Barry Paperno, How Credit Scores Predict Your Behavior, 
Yahoo! Finance (May 24, 2013), https://finance.yahoo.com/news/credit-scores-predict-behavior-113006994.html [https://perma.cc/GC4S-6H67].
    \300\ Nicholas Anthony, Policy Analysis No. 945, The Right to 
Financial Privacy, CATO Inst. (May 2, 2023), https://www.cato.org/policy-analysis/right-financial-privacy#conclusion [https://perma.cc/5K3E-BUPF] (``Today, technology is an integral part of 
modern life: Americans use credit or debit cards for nearly all 
purchases, acquire loans directly on their phones, and leave a 
digital trail nearly everywhere they go.'').
    \301\ Carola Westermeier, Money Is Data--The Platformization of 
Financial Transactions, 23 Info., Commc'n & Soc'y 2047, 2050-52 
(2020), https://www.tandfonline.com/doi/full/10.1080/1369118X.2020.1770833 [https://perma.cc/TD9J-UF9U].
---------------------------------------------------------------------------

    <bullet> Changeability: Moderate-to-high sensitivity. Financial 
information on an individual is recorded and maintained by financial 
institutions, which depend on possessing reliable and accurate 
information. However, individuals do have some ability to change their 
financial identifiers by, for example, closing one account and opening 
another. Additionally, the continued existence of money laundering as a 
law enforcement issue demonstrates that financial information can be, 
to some extent, controlled or manipulated by an individual.\302\
---------------------------------------------------------------------------

    \302\ Examples of Money Laundering Techniques, LexisNexis (May 
4, 2023), https://www.lexisnexis.com/blogs/gb/b/compliance-risk-due-diligence/posts/examples-money-laundering [https://perma.cc/6MHE-U83S].
---------------------------------------------------------------------------

    <bullet> Control: Moderate sensitivity. Financial information and 
records are managed and maintained by centralized financial 
institutions. Credit cards and checks leave a history with the 
financial institution, but individuals have the power to pay in cash or 
other anonymized methods and not reveal transactions to these financial 
institutions.\303\ Ultimately, this

[[Page 86162]]

information reflects the activity of individuals, leaving it partly in 
their control.
---------------------------------------------------------------------------

    \303\ See, e.g., Edvardas Mikalauskas, The Ultimate Guide to 
Safe and Anonymous Online Payment Methods in 2024, Cybernews (Dec. 
12, 2023), https://cybernews.com/resources/the-ultimate-guide-to-safe-and-anonymous-online-payment-methods/ [https://perma.cc/5EX5-8YFC].
---------------------------------------------------------------------------

    <bullet> Availability: Moderate sensitivity. The sharing of certain 
types of information maintained by financial institutions is controlled 
by privacy regulations.\304\ However, credit card, debit card, and bank 
account numbers, and other financial identifiers and information, are 
routinely exchanged as a matter of course in commercial transactions; 
credit reports are regularly used by financial institutions and 
businesses as part of background checks; and transaction data is 
provided to marketing and third-party data analytics 
organizations.\305\ Credit cards and online financial account 
credentials can command between $15 and $200 on the dark web, as 
compared with Social Security numbers, which command less than 
$10.\306\
---------------------------------------------------------------------------

    \304\ See, e.g., Gramm-Leach-Bliley Act tit. V, 15 U.S.C. 6801-
09; Privacy Rule Handbook, Fed. Deposit Ins. Corp. (Aug. 11, 2023), 
https://www.fdic.gov/regulations/examinations/financialprivacy/handbook/index.html [https://perma.cc/NK9U-MVFY].
    \305\ See, e.g., R.J. Cross, How Mastercard Sells Its `Gold 
Mine' of Transaction Data, U.S. PIRG (June 17, 2024), https://pirg.org/edfund/resources/how-mastercard-sells-data/ [https://perma.cc/N4T8-P3ZG].
    \306\ Paul Bischoff, Dark Web Prices for Stolen PayPal Accounts 
Up, Credit Cards Down: Report, Comparitech (Aug. 12, 2023), https://www.comparitech.com/blog/vpn-privacy/dark-web-prices/ [https://perma.cc/88HM-2VZK].
---------------------------------------------------------------------------

    <bullet> Volume: Moderate-to-low sensitivity. Over 100 million 
credit card transactions occur in the United States each day.\307\ 
While each transaction contains a small amount of information, this 
total transaction volume represents a massive dataset that analysts 
must mine to achieve useful results. Other types of information, such 
as data in credit reports, can contain information in a wide variety of 
formats that may be bulkier to manage and store.
---------------------------------------------------------------------------

    \307\ Erica Sandberg, The Average Number of Credit Card 
Transactions per Day & Year, iMerchant Direct (Nov. 5, 2020), 
https://www.imerchantdirect.com/news/number-of-credit-card-transactions-per-day-year [https://perma.cc/NVZ8-M3PR].
---------------------------------------------------------------------------

    <bullet> Velocity: Varied sensitivity. Analysts can use certain 
pieces of data, such as long-term loans, for a very long time. However, 
other pieces of information, such as information on individual 
transactions, may lose their value to an analyst over a short period of 
time.
    <bullet> Quality: Moderate sensitivity. Analysts usually value 
personal financial data not for the information itself, but for what it 
can reveal about an individual's behavior.\308\ As a result, some 
analysis is usually required to make it useful. Additionally, financial 
records such as credit reports can contain inaccurate information or 
make erroneous connections between individuals and assets.\309\
---------------------------------------------------------------------------

    \308\ Alessio Balduini et al., Combining Financial and 
Behavioral Information to Predict Defaults for Small and Medium-
Sized Enterprises: A Dynamic Weighting Approach, Moody's Analytics 
(Sept. 2017), https://www.moodysanalytics.com/articles/2017/combining-financial-and-behavioral-information [https://perma.cc/X8DS-WPZB]; Luke Goldsten, Rollups: The Big Data Machine Driving 
Online Sports Betting, Am. Prospect (Apr. 4, 2022), https://prospect.org/power/rollups-big-data-machine-driving-online-sports-betting/ [https://perma.cc/AZ97-H4TW].
    \309\ Is My Credit Report Accurate? For Over 40 Million 
Americans, the Answer Is No, Am. Bankr. Inst., https://www.abi.org/feed-item/is-my-credit-report-accurate-for-over-40-million-americans-the-answer-is-no [https://perma.cc/462F-UMEN].
---------------------------------------------------------------------------

6. Covered Personal Identifiers
    The Department of Justice assesses that covered personal 
identifiers are the sixth most sensitive category of sensitive personal 
data. Covered personal identifiers come from a variety of contexts and 
are of varying quality. For example, people have used certain types of 
covered personal identifiers (e.g., Social Security numbers) for 
decades, and numerous entities collect them, making them more available 
than other categories of data. Other types of covered personal 
identifiers (e.g., advertising IDs) are distributed widely and only 
useful when collected in very large volumes and linked to other pieces 
of data.\310\ The variety and variability of this category makes it 
inherently more difficult to characterize across the board than other 
categories. Based primarily on the purpose, changeability, and velocity 
characteristics below, the Department assesses covered personal 
identifiers to have low sensitivity relative to the other categories of 
sensitive personal data:
---------------------------------------------------------------------------

    \310\ Priv. Int'l, Examples of Data Points Used in Profiling, 3-
12 (2018), https://privacyinternational.org/sites/default/files/2018-04/data%20points%20used%20in%20tracking_0.pdf [https://perma.cc/LF63-XUDT].
---------------------------------------------------------------------------

    <bullet> Purpose: Moderate sensitivity. As stated in the proposed 
rule, covered personal identifiers are pieces of data that can be 
useful for identifying individuals, making them inherently sensitive. 
However, covered personal identifiers include pieces of information 
that are uniquely identifying (e.g., Social Security numbers) as well 
as those that are deliberately designed to be anonymous (e.g., 
advertising identifiers).\311\ Covered personal identifiers and unique 
IDs can be used to link other datasets containing more directly 
exploitable information.\312\ For example, they can help link databases 
of habitual visitors to gambling sites with debt collection records or 
a database of government records. They could link advertising IDs, IP 
addresses, and SIM card numbers to personal mobile devices, home 
addresses, and government mobile devices. However, in general, covered 
personal identifiers are primarily useful as identifiers, reducing 
their overall sensitivity because they themselves reveal little 
information.
---------------------------------------------------------------------------

    \311\ Are Advertising Unique IDs Anonymous?, Panda Sec. (July 
21, 2021), https://www.pandasecurity.com/en/mediacenter/advertising-ids/ [https://perma.cc/ANA8-JE2H].
    \312\ Priv. Int'l, supra note 310.
---------------------------------------------------------------------------

    <bullet> Changeability: Moderate-to-low sensitivity. As a category, 
they cover a range of data points that differ in terms of ease of 
change. For example, Social Security numbers are difficult to change, 
requiring evidence that an individual is in danger from domestic 
violence, other abuse, or identity theft.\313\ In contrast, account 
identifiers and passwords can be changed at a user's discretion. Many 
covered personal identifiers, including passport numbers, device IMEIs, 
and addresses, do change on a semi-regular basis as passports are 
reissued, devices are replaced, and individuals move.
---------------------------------------------------------------------------

    \313\ Is It Possible to Get a New Social Security Number?, AARP 
(Apr. 8, 2022), https://www.aarp.org/retirement/social-security/questions-answers/new-number.html [https://perma.cc/X759-P6LF].
---------------------------------------------------------------------------

    <bullet> Control: Moderate-to-low sensitivity. Some covered 
personal identifiers--particularly government-issued identifiers such 
as Alien Registration Numbers and Social Security numbers or financial 
identifiers such as account information--are fully outside the control 
of an individual. Others are fully controlled by an individual, 
including email addresses and account identifiers. Still other covered 
personal identifiers such as phone numbers may be issued by a third 
party, but an individual can change them at will.
    <bullet> Availability: Low sensitivity. Covered personal 
identifiers such as phone numbers and home addresses have been used as 
unique identifiers in a variety of systems, ranging from customer 
loyalty trackers to tax records. Many are available as part of the 
public record.\314\ Technical covered personal

[[Page 86163]]

identifiers such as IP addresses are necessarily widely available as a 
matter of technical necessity.
---------------------------------------------------------------------------

    \314\ See, e.g., Brian Fung, DC Makes It Shockingly Easy to 
Snoop on Your Fellow Voters, Wash. Post (June 14, 2016), https://www.washingtonpost.com/news/the-switch/wp/2016/06/14/d-c-s-board-of-elections-makes-it-shockingly-easy-to-snoop-on-your-fellow-voters/ 
[https://perma.cc/5A2J-VNAZ]; How Your Phone Number is Exposed: 
Phone Number Leaks, Nat'l. Cybersec. All. (Aug. 25, 2023), https://staysafeonline.org/online-safety-privacy-basics/how-your-phone-number-is-exposed/ (https://perma.cc/4CL3-9WRW).
---------------------------------------------------------------------------

    <bullet> Volume: Low sensitivity. Online data-brokerage firms 
advertise datasets of mobile advertising IDs containing hundreds of 
millions to billions of records.\315\ Tens of millions of Social 
Security numbers are routinely found on the dark web, suggesting the 
large volumes in which these data points are stored and shared by 
companies.\316\ Companies such as Twitter (now X) hold the phone 
numbers and email addresses of more than 100 million individuals.\317\ 
As these examples demonstrate, covered personal identifiers are 
routinely held and used in massive volumes. At such large volumes, this 
type of data tends to be less sensitive because it reduces the ability 
of an adversary to identify a specific individual (such as 
distinguishing between people who have the same name, have lived at the 
same address, etc.), absent other data that can be used to narrow down 
and link the identifiers to individuals.
---------------------------------------------------------------------------

    \315\ See, e.g., MAID--PII Data: Best MAID--PII Datasets & 
Databases, Datarade, https://datarade.ai/search/products/maid-pii-data [https://perma.cc/6NWA-YEBK].
    \316\ See Chloe Veltman, Millions of Customers' Data Found on 
Dark Web in Latest AT&T Data Breach, NPR (Mar. 30, 2024), https://www.npr.org/2024/03/30/1241863710/att-data-breach-dark-web [https://perma.cc/GAD6-R9KU].
    \317\ See Complaint ] 29, United States v. Twitter, Inc., No. 
22-cv-03070 (N.D. Cal. May 25, 2022), ECF No. 1, https://www.ftc.gov/system/files/ftc_gov/pdf/2023062TwitterFiledComplaint.pdf [https://perma.cc/4Z9J-5N3H].
---------------------------------------------------------------------------

    <bullet> Velocity: Moderate-to-low sensitivity. Covered personal 
identifiers such as Social Security numbers and names can be quite 
persistent, changing infrequently or not at all over an individual's 
lifetime. Covered personal identifiers like mobile advertising IDs 
cease to be useful in as little as 7 to 8 months.\318\ In general, the 
useful lifespan of many covered personal identifiers is limited. Only a 
few covered personal identifiers follow an individual over a lifetime, 
while many have lifespans measured in weeks to months, reducing the 
overall sensitivity of the category.
---------------------------------------------------------------------------

    \318\ 3 Uses for Mobile Advertising IDs to Copy Today, 
FullContact (Feb. 21, 2022), https://www.fullcontact.com/blog/2022/02/21/mobile-advertising-id/ [https://perma.cc/RR89-25HL].
---------------------------------------------------------------------------

    <bullet> Quality: Low sensitivity. For example, an individual user 
may have multiple mobile advertising IDs across multiple devices. 
Advertising specialists assert that 91 percent of companies have data 
quality issues, including from outdated data and user-error 
mistakes.\319\ Individuals may also make and use throwaway email 
accounts to avoid spam.\320\ Major technology companies, such as Apple, 
offer the ability to create relay emails specifically to obfuscate 
certain underlying covered personal identifiers.\321\
---------------------------------------------------------------------------

    \319\ Barley Laing, Why Customer Loyalty Starts with Clean Data, 
Advert. Week, https://advertisingweek.com/why-customer-loyalty-starts-with-clean-data/ [https://perma.cc/LJ3G-9M7F].
    \320\ Vivian McCall, How to Make a Throwaway Email Account to 
Avoid Spam from the websites You Sign up for, Bus. Insider (Dec. 22, 
2020), https://www.businessinsider.com/guides/tech/how-to-make-a-throwaway-email-account [https://perma.cc/27C4-DQJQ].
    \321\ Communicating Using the Private Email Relay Service, Apple 
Dev., https://developer.apple.com/documentation/sign_in_with_apple/sign_in_with_apple_js/communicating_using_the_private_email_relay_service [https://perma.cc/62AC-K9HK].
---------------------------------------------------------------------------

B. Grouping the Categories Into Tiers by Similar Sensitivity

    Based on this ranking, the Department grouped the categories of 
sensitive personal data into four tiers based on how similar or 
dissimilar, in terms of sensitivity, each category is compared to the 
other. Human genomic data, the most sensitive category, is unique and 
substantially more sensitive than biometric data due to its lower 
changeability and velocity. As a result, the Department placed human 
genomic data on its own in the first tier. While not as sensitive as 
human genomic data, biometric identifiers and precise geolocation data 
are generally more sensitive than either personal health or personal 
financial data because the data is more structured, making it more 
useful for machine-based analysis. Biometric identifiers and precise 
geolocation data also identify individuals with more precision than 
personal health data or personal financial data, making the results of 
machine-based analysis more valuable to human analysts. As a result, 
the Department grouped biometric identifiers and precise geolocation 
data together into the second tier and grouped personal financial data 
and personal health data together into the third tier. Finally, 
compared to personal financial data or personal health data, covered 
personal identifiers are more varied in terms of use, making them less 
useful to foreign intelligence services. As a result, the Department 
grouped covered personal identifiers into the fourth tier.
    To help verify the relative sensitivities and tiered groupings 
yielded by the seven-factor analysis, the Department compared the 
results of this analysis to other circumstances in which the Federal 
Government or state governments have treated these categories of data 
as sensitive. To start, the Department examined over 50 transactions 
reviewed by CFIUS in which the government identified, and took action 
to address, a risk to national security posed by access to data by 
countries of concern or persons subject to their ownership, direction, 
jurisdiction, or control. The Department examined the types and volumes 
of data involved in each CFIUS transaction to identify the lowest 
volumes of data that the government identified as a risk to national 
security posed by each of these transactions, which served as proxy for 
how sensitive CFIUS has generally considered each category of data with 
respect to identified national security risks relating to that data.
    In the case of personal financial data, personal health data, and 
covered personal identifiers, the Department was able to identify 
enough CFIUS transactions to present a reasonable sample. It identified 
the following approximate numbers as the lowest volumes identified by 
CFIUS as presenting a national security risk warranting action in the 
context of the specific transactions involving sensitive personal data 
that CFIUS reviewed:
    <bullet> Personal financial data: 16,000 individuals
    <bullet> Personal health data: 85,000 individuals
    <bullet> Covered personal identifiers: 100,000 individuals
    Based on these data points, the Department confirmed that its 
sensitivity analysis of these three categories was consistent with 
previous CFIUS national security assessments, at least in the specific 
contexts of those case-by-case CFIUS reviews.
    Because there was not a sufficiently large sample of CFIUS matters 
for human genomic data, biometric data, or precise geolocation data, 
and because there does not appear to be another national security 
program with relevant quantitative or qualitative data on this topic, 
the Department examined how the Federal Government and States treat 
these three remaining categories under privacy laws to help verify the 
results of its seven-factor assessment. While privacy laws and national 
security laws generally address different challenges associated with 
sensitive personal data, as explained in part IV of this preamble, 
there is some overlap in the ultimate harms that both seek to address. 
These privacy-based analogues thus help provide some indication of the 
relative capability of each category of sensitive personal data to be 
exploited and used to cause harm.

[[Page 86164]]

    In the case of human genomic data, the Department confirmed its 
assessment that this category of data is more sensitive than the three 
previously mentioned categories of data (covered personal identifiers, 
personal financial data, and personal health data) by evaluating 
comparative data from the FTC. The FTC has taken action against 
companies making deceptive privacy claims on cases involving the human 
genetic data of as few as 2,600 individuals.\322\ In doing so, the 
FTC's complaint alleged that the company's ``disregard for the basic 
security'' of this data caused it to be ``publicly exposed online,'' 
\323\ revealing, among other things, ``the level of risk for having or 
developing certain health conditions.'' \324\ The FTC also explained 
that this kind of ``DNA data is sensitive because it's about who'' a 
person is and is ``so sensitive there's a law to protect you from 
discrimination based on genetic information when you're trying to get 
work or health insurance.'' \325\ In contrast, eight other FTC cases 
between 2021 and 2023 involving only covered personal identifiers, 
personal financial data, or personal health data involved data on one 
million or more individuals. The fact that the FTC took action in a 
case involving a significantly lower amount of compromised human 
genomic data supports the Department's assessment that human genomic 
data is substantially more sensitive than other data types.
---------------------------------------------------------------------------

    \322\ Complaint ] 28, 1Health.io, Inc., No. C-4798 (F.T.C. Sept. 
6, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/1Health-Complaint.pdf [https://perma.cc/W5SZ-CE3A].
    \323\ Id.
    \324\ Id. <greek-a> 9.
    \325\ Jim Kreidler, Keep People's Sensitive DNA Information 
Private, Fed. Trade Comm'n (June 16, 2023), https://consumer.ftc.gov/consumer-alerts/2023/06/keep-peoples-sensitive-dna-information-private [https://perma.cc/VLC4-JYKM].
---------------------------------------------------------------------------

    In the case of biometric data, the Department confirmed its 
assessment with reference to State legislation. Three States--
Washington,\326\ Texas,\327\ and Illinois \328\--have prohibited the 
sale, lease, or disclosure of biometric identifiers for purposes other 
than the provision of a specific commercial service, such as confirming 
a consumer-requested financial transaction. Massachusetts is also 
contemplating such a law at the time of this proposed rule.\329\ The 
legislative action in these cases supports the Department's assessment 
that the transfer of even very small amounts of biometric data could 
prove highly damaging and thus that this data should be subject to a 
lower threshold.
---------------------------------------------------------------------------

    \326\ Biometric Identifiers, Wash. Rev. Code 19.375, https://app.leg.wa.gov/RCW/default.aspx?cite=19.375&full=true [https://perma.cc/2GZM-6FEG].
    \327\ Biometric Identifiers, Tex. Bus. & Com. Code 503.001, 
https://statutes.capitol.texas.gov/Docs/BC/htm/BC.503.htm [https://perma.cc/F2WW-ZNR7].
    \328\ Biometric Information Privacy Act, 740 Ill. Comp. Stat. 14 
(2008), https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3004&ChapterID=57 [https://perma.cc/KMD8-QP8D].
    \329\ Act to Protect Biometric Information, H. 63, 193d. Gen. 
Ct. (Mass. 2003), https://malegislature.gov/Bills/193/H63 [https://perma.cc/26GH-JTCZ].
---------------------------------------------------------------------------

    In the case of geolocation data, the Department confirmed its 
assessment with reference to other government actions and reporting 
suggesting that even small amounts of geolocation data could be 
sensitive. The FTC charged two companies with causing injury to 
consumers by selling geolocation data that did not exclude information 
on sensitive locations, such as reproductive health clinics, places of 
worship, and addiction recovery facilities, and issued an order banning 
one of those companies from selling data without consumer consent.\330\ 
It also noted a data breach that involved 2,200 customers as part of 
its action against a company that harvested and shared data on people's 
physical movements.\331\ The FCC has also levied fines for selling 
location data without customer consent.\332\ The National Security 
Agency has noted the importance of limiting location data 
exposure.\333\ Congressional testimony has highlighted how commercial 
datasets can be used to precisely identify individuals in sensitive 
national security roles.\334\ The Massachusetts State legislature is 
considering a bill at the time of this proposed rule that would ban the 
sale of phone location data.\335\ These comparisons all support the 
Department's assessment that this type of data is relatively more 
sensitive than other types of data, such as personal identifiers.
---------------------------------------------------------------------------

    \330\ Press Release, Fed. Trade Comm'n, FTC Sues Kochava for 
Selling Data that Tracks People at Reproductive Health Clinics, 
Places of Worship, and Other Sensitive Locations (Aug. 29, 2022), 
https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-sues-kochava-selling-data-tracks-people-reproductive-health-clinics-places-worship-other [https://perma.cc/G6L6-G6XL].
    \331\ Press Release, Fed. Trade Comm'n, FTC Bans SpyFone and CEO 
from Surveillance Business and Orders Company to Delete All Secretly 
Stolen Data (Sept. 1, 2021), https://www.ftc.gov/news-events/news/press-releases/2021/09/ftc-bans-spyfone-ceo-surveillance-business-orders-company-delete-all-secretly-stolen-data [https://perma.cc/SG4B-P6SV].
    \332\ Derek B. Johnson, FCC Takes $200 Million Bite Out of 
Wireless Carriers for Sharing Location Data, CyberScoop (Apr. 29, 
2024), https://cyberscoop.com/fcc-fines-wireless-carriers-200-million/ [https://perma.cc/9UKR-4KXY].
    \333\ Nat'l Sec. Agency, PP-20-0535, Limiting Location Data 
Exposure (Aug. 2020), https://media.defense.gov/2020/Aug/04/2002469874/-1/-1/0/CSI_limiting_location_data_exposure_final.pdf 
[https://perma.cc/763S-8D5T].
    \334\ Data Brokerage, the Sale of Individuals' Data, and Risks 
to Americans' Privacy, Personal Safety, and National Security: 
Hearing Before the Subcomm. on Oversight & Investigations of the H. 
Comm. on Energy & Com., 118th Cong. (2023) (statement of Justin 
Sherman, Senior Fellow and Research Lead, Data Brokerage Project, 
Sanford School of Public Policy), https://d1dth6e84htgma.cloudfront.net/Sherman_Testimony_4_19_23_b40d947a8e.pdf [https://perma.cc/9ACJ-ZT8R].
    \335\ Shanklin, supra note 279.
---------------------------------------------------------------------------

C. Proposed Bulk Thresholds for Each Tier

    The Department of Justice developed numerical thresholds using the 
four tiers of sensitivity based on the number of individuals included 
in a dataset. In the ANPRM, the Department set the overall upper limit 
for these thresholds at one million individuals.\336\ As explained in 
the ANPRM, within each group, the Department set a potential upper and 
lower limit for each of the bulk thresholds, relying on orders-of-
magnitude differences to develop preliminary judgments.
---------------------------------------------------------------------------

    \336\ 89 FR 15786; cf. 31 CFR 800.241(a) (defining sensitive 
personal data to include ``identifiable data'' that a U.S. business 
collects or maintains ``on greater than one million individuals'' 
during a relevant 12-month period).
---------------------------------------------------------------------------

    The Department sought input on the thresholds from the public in 
response to the ANPRM. Commenters expressed a wide variety of general 
concerns regarding the ranges of the potential bulk thresholds. Some 
commenters stated that the potential thresholds were too high, some 
that they were too low, some that the thresholds should be zero, and 
some that relying on thresholds was objectionable for other reasons. 
None of the comments, however, provided any actionable data points, use 
cases, or evidence that would support an alternative analytical 
framework or support adopting one particular threshold over another. 
Given that lack of specificity, the Department (along with the 
Department of Commerce) followed up individually with each commenter on 
this topic to seek any additional information available that informed 
their comments, as described in part III of this preamble. Those 
engagements did not yield any substantially new qualitative or 
quantitative information to reliably inform the selection of the 
proposed bulk thresholds.
    Based on this analysis and public comment, the proposed rule would 
set the following bulk thresholds:
    <bullet> Human genomic data: More than 100 U.S. persons.

[[Page 86165]]

    <bullet> Biometric identifiers and precise geolocation data: More 
than 1,000 U.S. persons.
    <bullet> Personal health data and personal financial data: More 
than 10,000 U.S. persons.
    <bullet> Covered personal identifiers: More than 100,000 U.S. 
persons.
    The proposed bulk thresholds for all the categories of sensitive 
personal data except human genomic data are approximately the middle 
order of magnitude of the preliminary ranges identified in the ANPRM 
(e.g., the proposed threshold of 1,000 U.S. persons for biometric 
identifiers is the middle order of magnitude in the ANPRM's range of 
100 to 10,000).\337\ Given the high sensitivity of human genomic data 
and the significant additional national security risks posed by human 
genomic data beyond counterintelligence risks, the proposed bulk 
threshold for human genomic data is the lowest order of magnitude in 
the preliminary range identified in the ANPRM. These proposed bulk 
thresholds are generally consistent with the order of magnitude of the 
minimum number of individuals in a dataset that the United States 
Government and other actors have treated as presenting a national 
security risk or as otherwise sensitive in the use cases and 
comparisons described in part V.B of this preamble.
---------------------------------------------------------------------------

    \337\ 89 FR 15786.
---------------------------------------------------------------------------

    The Department has considered whether the potential economic impact 
should affect our choice of thresholds for the purpose of defining 
``bulk'' in these regulations and has determined it should not. First, 
the Department expects that the proposed rule will likely have some 
economic impact with respect to the prohibitions and restrictions on 
covered data transactions that have been determined to pose an 
unacceptable national security risk. The Department seeks to avoid and 
minimize unintended economic impacts on activities that do not present 
such national security risk. Neither the Department nor commenters have 
identified any actionable data or analysis suggesting that the choice 
of thresholds above zero is reasonably likely to result in unintended 
downstream impacts, as explained further in part VII.A of this 
preamble.
    Second, based on the information provided to the Department and the 
Department's own analysis to date, it seems unlikely that the data or 
analysis would be detailed and representative enough to reasonably 
affect the choice of any specific thresholds within the ranges 
identified in the ANPRM. While it is theoretically possible that 
choosing a higher (or lower) threshold would correspondingly affect 
both the numbers of captured transactions and the resultant costs, it 
is also possible that a meaningfully significant sample size of U.S. 
persons conducting prohibited and restricted transactions at volumes 
that generally exceed the upper end of the ranges in the ANPRM. There 
is no known, reliable qualitative or quantitative data that objectively 
favors adopting one of those likely possibilities at this time. For 
example, the average volume and distribution of volumes of human 
genomic data in covered data transactions between U.S. persons and 
countries of concern (or covered persons) is unknown. Because there is 
no data available to determine how often, for example, U.S. persons 
engage in such transactions at volumes above 1,000 U.S. persons as 
compared to 100, there is insufficient data to support a conclusion 
that the choice between 100 and 1,000 will meaningfully impact the 
number of transactions subject to the proposed rule. Accordingly, the 
Department declines to deviate from the risk-based analysis at this 
time.

VI. Interpretation of ``Information or Informational Materials'' in 
IEEPA

    The Department proposes exercising its delegated statutory 
authority to define ``information or informational materials'' in 50 
U.S.C. 1702(b)(3). Under IEEPA, ``[t]he President may issue such 
regulations, including regulations prescribing definitions, as may be 
necessary for the exercise of the authorities granted by this 
chapter.'' \338\ As courts have held, this provision explicitly 
``authorize[s] the Executive Branch to define the statutory terms of 
IEEPA,'' and definitions promulgated by an agency that has been 
delegated this authority thus ``carry the force of law'' subject to 
judicial deference.\339\ Section 2(b) of the Order delegated this 
statutory authority to the Attorney General, and the Department 
proposes to exercise this authority to define ``information or 
informational materials'' as follows.
---------------------------------------------------------------------------

    \338\ 50 U.S.C. 1704.
    \339\ Zarmach Oil Servs., Inc. v. U.S. Dep't of Treas., 750 F. 
Supp. 2d 150, 156 (D.D.C. 2010); see also, e.g., Holy Land Found. v. 
Ashcroft, 333 F.3d 156, 162-63 (D.C. Cir. 2003); United States v. 
Lindh, 212 F. Supp. 2d 541, 562-63 & n.52 (E.D. Va. 2002); Consarc 
Corp. v. U.S. Dep't of Treas., Off. of Foreign Assets Control, 71 
F.3d 909, 914-15 (D.C. Cir. 1995); Consarc Corp. v. Iraqi Ministry, 
27 F.3d 695, 701 (D.C. Cir. 1994).
---------------------------------------------------------------------------

    To implement 50 U.S.C. 1702(b)(3), the Department proposes defining 
``information or informational materials'' as limited to expressive 
material and including publications, films, posters, phonograph 
records, photographs, microfilms, microfiche, tapes, compact disks, CD 
ROMs, artworks, and news wire feeds.\340\
---------------------------------------------------------------------------

    \340\ See, e.g., 31 CFR 544.304(a); 31 CFR 547.314(a)(1); 31 CFR 
560.315(a); 31 CFR 576.306(a); 31 CFR 594.305(a).
---------------------------------------------------------------------------

    The proposed rule would adopt two exclusions to this definition 
from existing OFAC regulations and clarify the definition's application 
to non-expressive materials. First, as previewed in the ANPRM and 
explained in detail below, the Department's proposed rule would clarify 
that the phrase ``information or informational materials'' is limited 
to expressive material, consistent with the purpose of 50 U.S.C. 
1702(b)(3) to protect materials involving the free exchange of ideas 
from regulation under IEEPA. See Sec.  202.226. The definition of 
``information or informational materials'' does not include non-
expressive data--i.e., data that is not intended to communicate any 
idea. The statute therefore permits the President, and the Attorney 
General as his delegee under the Order, to regulate transactions 
involving the export of sensitive personal data or government-related 
data because this data is not expressive and therefore falls outside 
the scope of 50 U.S.C. 1702(b)(3) (``the Berman Amendment''). Second, 
the proposed definition would, consistent with OFAC regulations,\341\ 
exclude information or informational materials that are not fully 
created and in existence at the date of the data transaction, or the 
substantive or artistic alteration or enhancement of information or 
informational materials, or the provision of marketing and business 
consulting services, including to market, produce or co-produce, or 
assist in the creation of information or informational materials. 
Third, the proposed definition incorporates the statutory exemption for 
items controlled for export to the extent that such controls promote 
the nonproliferation or antiterrorism policies of the United States, or 
with respect to which acts are prohibited by 18 U.S.C. chapter 37. The 
definition's application to non-expressive material and exclusion for 
materials not fully created and in existence are discussed in further 
detail below.
---------------------------------------------------------------------------

    \341\ See, e.g., 31 CFR 560.210(c)(2), 560.210; United States v. 
Amirnazmi, 645 F.3d 564, 587 (3d Cir. 2011).
---------------------------------------------------------------------------

A. The Berman Amendment Is Intended To Protect the Free Exchange of 
Ideas

    As noted above, Sec.  202.226(a) of the proposed rule clarifies 
that ``information or informational materials'' is limited to 
expressive material rather than

[[Page 86166]]

including every piece of data that might be characterized technically 
or colloquially as ``information or informational materials.'' This 
interpretation is consistent with the statute's text and purpose, as 
demonstrated by legislative history and context, as well as judicial 
interpretations.
    The text indicates that the Berman Amendment's scope is properly 
limited to expressive materials. The provision restricts authority 
under IEEPA to regulate imports and exports ``regardless of format or 
medium of transmission, of any information or informational materials, 
including but not limited to, publications, films, posters, phonograph 
records, photographs, microfilms, microfiche, tapes, compact disks, CD 
ROMs, artworks, and news wire feeds.'' The specific examples 
accompanying the phrase ``information and informational materials''--
publications, films, posters, phonograph records, photographs, 
microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and 
news wire feeds--reflect Congress' intent to protect the import or 
export of expressive speech and communicative works and mediums that 
may be carrying such expressive content. Although the statute provides 
that it is ``not limited to'' the articulated categories of information 
or specified mediums, the general term ``information or informational 
materials'' must be read in the context of those examples and should 
not be read to extend to dissimilar categories of information to those 
specifically articulated.\342\ Because those examples overwhelmingly 
relate to expressive materials, the term ``information or informational 
materials'' is similarly limited under the established interpretive 
doctrine of noscitur a sociis.
---------------------------------------------------------------------------

    \342\ See, e.g., Dubin v. United States, 599 U.S. 110, 124-25 
(2023) (`` `Under the familiar interpretive canon noscitur a sociis, 
a word is known by the company it keeps.' `[T]his canon is often 
wisely applied where a word is capable of many meanings in order to 
avoid the giving of unintended breadth to the Acts of Congress.' '' 
McDonnell v. United States, 579 U.S. 550, 568-69 (2016) (citations 
omitted).)
---------------------------------------------------------------------------

    Congress enacted the Berman Amendment in 1988 and expanded it in 
1994,\343\ and the initial version of the Berman Amendment passed in 
1988 further supports this argument. It amended IEEPA to state that the 
President's authority under the statute did not include the authority 
``to regulate or prohibit, directly or indirectly . . . the importation 
from any country, or the exportation to any country, whether commercial 
or otherwise, of publications, films, posters, phonograph records, 
photographs, microfilms, microfiche, tapes, or other informational 
materials. The specified items shared the common attribute of having 
the primary or exclusive purpose of conveying expressive information, 
and the catch-all term ``other informational materials'' therefore 
carried that same limitation under the canon of ejusdem generis.\344\ 
This interpretation is further reinforced by the statute's use of 
``other'' before ``informational materials,'' indicating a commonality 
with the enumerated items. As further discussed below, there is no 
indication that, in amending the 1988 text, Congress sought to deviate 
from that understanding. The 1994 amendment that enacted the current 
version of the Berman Amendment was titled ``Free Trade in Ideas,'' 
indicating the provision's reach and orientation toward expressive and 
communicative materials.\345\ The statute includes an accompanying 
provision providing ``the sense of the Congress that the President 
should not restrict travel or exchanges for informational, education, 
religious, cultural, or humanitarian purposes or for public 
performances or exhibitions.'' \346\ Together, these features confirm 
that the ``information or informational materials'' covered by the 
Berman Amendment are limited to the kind of expressive information that 
is central to the free exchange of ideas; the Berman Amendment is not 
intended to broadly encompass every piece of data that might 
technically or colloquially be described as ``information.''
---------------------------------------------------------------------------

    \343\ Omnibus Trade and Competitiveness Act of 1988, Public Law 
100-418, 2502(b), 102 Stat. 1107, 1371-72; Foreign Relations 
Authorization Act, Fiscal Years 1994 and 1995, Public Law 103-236, 
sec. 525, 108 Stat. 382, 474 (1994).
    \344\ See, e.g., Bissonnette v. LePage Bakeries Park St., LLC, 
144 S. Ct. 905, 911 (2024) (explaining the ``familiar canon of 
statutory interpretation'' of ejusdem generis under which ``courts 
interpret a general or collective term at the end of a list of 
specific items in light of any `common attributes shared by the 
specific items'') (cleaned up); see also Ali v. Fed. Bureau of 
Prisons, 552 U.S. 214, 225 (2008) (explaining that ``the inference 
embodied in ejusdem generis'' is ``that Congress remained focused on 
the common attribute when it used the catchall phrase'').
    \345\ Foreign Relations Authorization Act, Fiscal Years 1994 and 
1995, Public Law 103-236, sec. 525, 108 Stat. 382, 474 (1994); see, 
e.g., Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883, 
893 (2018) (section headings ``supply clues as to what Congress 
intended'').
    \346\ Public Law 103-236, sec. 525(a), 108 Stat. at 474.
---------------------------------------------------------------------------

    The proposed interpretation is consistent with Congress' purpose in 
enacting the Berman Amendment. As one court explained shortly after the 
Berman Amendment's initial enactment in 1988, there is an ``obvious 
First Amendment orientation of the words `informational materials.' '' 
\347\ Other courts have reached similar conclusions about the Berman 
Amendment's purpose.\348\ And courts have consistently upheld the 
Executive Branch's interpretations that distinguish between the types 
of informational materials that are covered or not covered, explaining 
that these reflect ``permissible interpretation[s]'' of the Berman 
Amendment ``in light of IEEPA's competing imperatives (i.e., 
restricting material support for hostile regimes while encouraging the 
robust interchange of information).'' \349\
---------------------------------------------------------------------------

    \347\ Cernuda v. Heavey, 720 F. Supp. 1544, 1550 (S.D. Fla. 
1989).
    \348\ See, e.g., United States v. Amirnazmi, 645 F.3d 564, 586-
87 (3d Cir. 2011); Kalantari v. NITV, Inc., 352 F.3d 1202, 1205 (9th 
Cir. 2003) (explaining that the ``Berman Amendment was designed to 
prevent the executive branch from restricting the international flow 
of materials protected by the First Amendment''); Marland v. Trump, 
498 F. Supp. 3d 624, 630 (E.D. Pa. 2020) (explaining that the Berman 
Amendment prevents the use of IEEPA to `` `prohibit or restrict 
directly or indirectly the import or export of information that is 
protected under the First Amendment to the U.S. Constitution' '' 
(quoting H.R. Conf. Rep. No. 103-482, at 236)); United States v. 
Griffith, 515 F. Supp. 3d 106, 116-17 (S.D.N.Y. 2021); United States 
v. Alavi, CR 07-429-PHX-NVW, 2008 WL 1989773, at *1 (D. Ariz. May 5, 
2008) (similar).
    Two recent cases examining the provision are not to the 
contrary, since both cases dealt with only expressive materials. See 
TikTok Inc. v. Trump, 507 F. Supp. 3d 92, 98-100, 105 (D.D.C. 2020); 
Marland v. Trump, 498 F. Supp. 3d at 636. The United States 
Government did not dispute that these expressive communications 
exchanged on TikTok were ``informational materials'' under the 
Berman Amendment. See TikTok, 507 F. Supp. 3d, at 108.
    \349\ See Amirnazmi, 645 F.3d at 583, 587; see also Griffith, 
515 F. Supp. 3d at 116-17; Alavi, 2008 WL 1989773, at *1.
---------------------------------------------------------------------------

    These courts' interpretations are grounded in the relevant 
historical and legislative context, which reflects Congress' intent to 
protect the free exchange of ideas. Before the Berman Amendment's 
enactment in 1988, the President's broad authority to regulate commerce 
with foreign countries under IEEPA and its predecessor and wartime 
sibling, the Trading with the Enemy Act of 1917 (``TWEA''), did not 
contain any statutory exception for ``information or informational 
materials,'' and the implementing regulations and licenses generally 
did not exempt information or informational materials from trade 
embargoes. Before and during the Cold War, the Executive Branch 
exercised these authorities to prohibit the importation of and dealing 
in certain merchandise. These general regulations applied to books, 
newspapers, and magazines originating in countries designated as enemy 
nations, such as Cuba, Vietnam, China, North Korea, and

[[Page 86167]]

Cambodia.\350\ Absent a license granted by the Department of the 
Treasury, Americans could not import these materials into the United 
States or otherwise deal in them. To obtain such a license, an 
applicant had to show either that the books, magazines, and other 
materials were small-value ``bona fide gift[s]'' that did not provide 
``any direct or indirect financial or commercial benefit'' to the enemy 
country or its nationals,\351\ or that payment for the commercial 
import of the materials was made into a blocked account.\352\ These 
prohibitions resulted in, for example, customs officials in the 1960s 
seizing ``packages containing English language books and newspapers 
produced in North Vietnam and China'' and refusing their entry until 
licenses were granted.\353\
---------------------------------------------------------------------------

    \350\ E.g., 31 CFR 515.204 (1985) (Cuba); 31 CFR 500.204 (1976) 
(China, North Korea, Vietnam, Cambodia).
    \351\ 31 CFR 515.544(b) (1985); 31 CFR 500.544 (1971).
    \352\ 31 CFR 515.545(b) (1985); 31 CFR 500.545 (1974).
    \353\ Burt Neuborne & Steven R. Shapiro, The Nylon Curtain: 
America's National Border and the Free Flow of Ideas, 26 Wm. & Mary 
L. Rev. 719, 730 (1985).
---------------------------------------------------------------------------

    Prior to the Berman Amendment's enactment, the United States 
Government took varying approaches to imports of expressive materials. 
The Executive Branch initially required licenses for U.S. imports of 
thousands of Cuban publications destined for Americans' personal use, 
and then later ``nominally allowed the importation of informational 
materials from Cuba but in reality, banned such importation by 
requiring that the importers make payment into blocked U.S. accounts.'' 
\354\ Plaintiffs challenged these prohibitions and seizures under the 
First Amendment, but courts upheld them as constitutional on the 
grounds that the specific restrictions were merely ``incidental'' to 
the purpose of the regulations in restricting the flow of capital to 
enemy nations.\355\ In contrast, the 1985 Nicaraguan embargo and 1986 
Libyan embargo explicitly authorized the import of ``books, newspapers, 
magazines, films, phonograph records, tape recordings, photographs, 
microfilm, microfiche, posters, and similar materials'' and thus 
preserved Americans' ability to receive news, ideas, and other 
expressive content from those nations.\356\
---------------------------------------------------------------------------

    \354\ Walsh v. Brady, 927 F.2d 1229, 1230 (D.C. Cir. 1991) 
(citing 31 CFR 515.545 (1987)); see id. at 731.
    \355\ E.g., Veterans & Reservists for Peace in Vietnam v. 
Regional Comm'r of Customs, 459 F.2d 676, 681 (3d Cir. 1972); Teague 
v. Regional Comm'r of Customs, 404 F.2d 441, 445-46 (2d Cir. 1968); 
American Documentary Films, Inc. v. Sec'y of Treas., 344 F. Supp. 
703, 706-07 (S.D.N.Y. 1972).
    \356\ See 31 CFR 540.536 (1985); 31 CFR 550.507 (1986); 31 CFR 
550.411 (1986).
---------------------------------------------------------------------------

    Congress enacted the Berman Amendment against this regulatory and 
judicial backdrop and as an explicit ``reaction'' to the continued, and 
continually upheld, import restrictions on and seizures of ``shipments 
of magazines and books'' from most embargoed countries.\357\ The Berman 
Amendment thus ``codif[ied] current practice . . . in the recent 
embargoes of trade with Nicaragua and Libya of exempting information 
materials and publications from import restrictions,'' \358\ and used 
the same terms to do so (``publications,'' ``films,'' ``posters,'' and 
so on).
---------------------------------------------------------------------------

    \357\ E.g., United States v. Amirnazmi, 645 F.3d 564, 584 (3d 
Cir. 2011); Kalantari v. NITV, Inc., 352 F.3d 1202, 1205 (9th Cir. 
2003).
    \358\ Walsh, 927 F.2d at 1233 (quoting H.R. Rep. No. 40, 100th 
Cong., 1st Sess., pt. 3, at 113 (1987)); see also id. at 1233 n.3 
(explaining that House report's incorporation into the Berman Act's 
official legislative history). The House committee report favorably 
cited the Nicaragua and Libya blockades, which had exempted certain 
``informational materials such as books, records, and films.'' H.R. 
Rep. No. 100-40, pt. 3, at 71. The committee indicated an intention 
to ``codify'' that practice of ``exempting information materials and 
publications from import restrictions.'' Id. at 113.
---------------------------------------------------------------------------

    The legislative history confirms what context makes clear: The 
Berman Amendment was designed to reach expressive information protected 
by the First Amendment. The relevant House committee report explains 
that Congress intended the Berman Amendment to protect the import and 
export of expressive materials; the report favorably cited and quoted 
from an American Bar Association House of Delegates statement that ``no 
prohibitions should exist on imports to the United States of ideas and 
information if their circulation is protected by the First Amendment.'' 
\359\ ``Accordingly,'' the report continued, ``these sections also 
exempt informational materials and publications from the export 
restrictions that may be imposed under these acts.'' \360\ Senator 
Charles Mathias, the sponsor of an earlier bill that contained 
identical language removing restrictions on the import and export of 
information and that was the predecessor to the 1988 bill that enacted 
the Berman Amendment, explained that ``[t]he thread that ties all of 
these changes together'' is ``an ideal embodied in the first amendment 
[sic]: The removal of barriers that inhibit the free exchange of ideas 
across international frontiers.'' \361\ Mathias emphasized not the 
specific doctrine of the First Amendment but rather its ``philosophy'' 
and ``ideal[s],'' including an ``open and robust debate in the 
marketplace of ideas.'' \362\ As he further explained, ``this liberty, 
secured by the first amendment [sic], is thwarted by a number of laws 
which permit the Government to restrict the flow of information and the 
travel of individuals into and out of the United States,'' including 
``restrict[ing] the import and export of information on the basis of 
the political doctrines contained in the information''--restrictions 
that the Berman Amendment was designed to address.\363\
---------------------------------------------------------------------------

    \359\ H.R. Rep. No. 100-40, supra note 358, at 113. Although 
this committee report accompanied H.R. 3, a predecessor bill that 
was vetoed in May 1988, see H.R. Doc. No. 100-200, 100th Cong., 2d 
Sess. (1988) (veto message), the President and Congress later agreed 
on a successor bill, H.R. 4848, that contained the same 
informational-materials exception as its predecessor and that 
ultimately was enacted into law as the Omnibus Trade and 
Competitiveness Act of 1988. Since this Act was ``derived largely 
from [the] predecessor bill'' and ``was not itself the subject of 
legislative debate,'' the Act ``specifically provide[d] that the 
legislative history for the predecessor bill, H.R. 3, generally is 
treated as its own legislative history.'' Cernuda, 720 F. Supp. at 
1547-48; see Pub. L. 100-418, sec. 2(a), 102 Stat. 1107, 1119 
(1988).
    \360\ H.R. Rep. No. 100-40, supra note 358, at 113.
    \361\ 132 Cong. Rec. 6550 (Mar. 27, 1986) (statement of Sen. 
Charles Mathias).
    \362\ Id. at 6550-51.
    \363\ Id.; see Cernuda, 720 F. Supp. at 1550 (explaining that 
``[t]he point'' of the Berman Amendment was to ``totally exempt[ ] 
from prohibition or regulation the import of ideas and information 
protected by the First Amendment'' and thus ``eliminate[ ] the sort 
of constitutional questions that arose in cases like American 
Documentary Films and Teague'').
---------------------------------------------------------------------------

    In 1994, Congress updated the Berman Amendment in ways that 
reinforced the expressive focus of the term ``information or 
informational materials.'' Between the enactment of the Berman 
Amendment in 1988 and Congress' update in 1994, the Executive Branch 
had taken ``a narrow view of what constituted `informational 
materials.' '' \364\ Some of these restrictive Executive Branch 
interpretations were successfully challenged in court, and others were 
not. For example, the Department of the Treasury had interpreted the 
term ``informational materials'' as excluding ``intangible items, such 
as telecommunications transmissions'' (an interpretation that the 
courts approved),\365\ and original art in the form of paintings (an

[[Page 86168]]

interpretation that the courts rejected).\366\
---------------------------------------------------------------------------

    \364\ United States v. Amirnazmi, 645 F.3d 583, 584 (3d Cir. 
2011).
    \365\ Foreign Assets Control Regulations and Cuban Assets 
Control Regulations, 54 FR 5229 (Feb. 2, 1989) (codified at 31 CFR 
500.206(a), (c), 500.332(b)(2) (1989)); 31 CFR 515.545(b) (2010) 
(prohibiting the remittance of royalties or other payments relating 
to works not yet in being); see Capital Cities/ABC, Inc. v. Brady, 
740 F. Supp. 1007, 1011-12 (S.D.N.Y. 1990).
    \366\ See Cernuda, 720 F. Supp. at 1549-52.
---------------------------------------------------------------------------

    Congress responded to these regulatory and judicial decisions by 
``clarify[ing]'' the text of the Berman Amendment through the passage 
of the Free Trade in Ideas Act.\367\ As with the original 1988 version, 
the 1994 version of the Berman Amendment, as reflected in its text and 
legislative history, focuses on excluding expressive materials from 
regulation. In its 1994 changes, Congress added new examples of 
expressive materials to the Berman Amendment but did not otherwise 
expand its scope to include, for example, even non-expressive 
materials. First, Congress changed the term ``other informational 
materials'' to ``any information or informational materials.'' Second, 
Congress moved the new term from the end of the list to the beginning 
and expanded the list of materials, so that it now reads ``any 
information or informational materials, including but not limited to, 
publications, films, posters, phonograph records, photographs, 
microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and 
news wire feeds.'' \368\ Third, Congress made explicit that the Berman 
Amendment applied to information or informational materials 
``regardless of format or medium of transmission.'' \369\
---------------------------------------------------------------------------

    \367\ H.R. Rep. No. 103-482, 103d Cong., 2d Sess., at 239 (conf. 
rep.), reprinted in 1994 U.S.C.C.A.N. 398, 483; see Public Law 103-
236, sec. 525(b), 108 Stat. 382, 474 (1994) (codified at 50 U.S.C. 
1702(b)).
    \368\ Public Law 103-236, supra note 367, at 474.
    \369\ Id.
---------------------------------------------------------------------------

    The legislative history of these changes confirms that Congress 
intended to maintain the Berman Amendment's exclusive focus on 
protecting expressive materials from regulation under IEEPA and did not 
intend to exclude from the President's regulatory power the full scope 
of what colloquially might be understood to be information or 
informational materials. Among other things, the effect of these 
changes was, as the 1994 House report explained, to ``clarify'' the 
Berman Amendment by ``eliminating some of the unintended restrictive 
administrative interpretations of it.'' \370\ For example, by adding 
the words ``regardless of format or medium of transmission,'' the 1994 
amendment overrode the interpretation excluding intangible materials 
that was unsuccessfully challenged in Capital Cities/ABC, Inc. v. 
Brady, 740 F. Supp. 1007, 1015 (S.D.N.Y. 1990). Similarly, the 1994 
amendment codified the decision in Cernuda v. Heavey, 720 F. Supp. 
1544, 1548 (S.D. Fla. 1989), by adding ``artworks'' to the illustrative 
list of informational materials and otherwise took the opportunity to 
``expand[ ] the exemption's non-exclusive list of informational 
materials to include new media, such as compact discs and CD ROMs,'' on 
which expressive information may exist.\371\ But the House conference 
report makes clear that the 1994 amendment ``only intended to address 
some of those restrictive interpretations'' while leaving other 
interpretations in place.\372\ For example, Congress ``did not disabuse 
OFAC of its belief that it could permissibly regulate `informational 
materials not fully created and in existence at the date of the 
transaction' '' and ``did not counteract'' that interpretation, which 
is discussed in more detail below.\373\ By explicitly acknowledging 
that the bill was intended to overrule some but not all narrow 
interpretations of ``information or informational materials,'' Congress 
rejected a meaning that would include anything that, in a colloquial 
sense, could potentially be ``information or informational materials.'' 
\374\
---------------------------------------------------------------------------

    \370\ H.R. Rep. No. 103-482, supra note 367, at 239.
    \371\ Kalantari v. NITV, Inc., 352 F.3d 1202, 1205 (9th Cir. 
2003).
    \372\ H.R. Rep. No. 103-482, supra note 367, at 239.
    \373\ United States v. Amirnazmi, 645 F.3d 564, 586 (3d Cir. 
2011).
    \374\ See, e.g., id. at 586-87 (``When Congress is aware of an 
agency's interpretation of a statute and takes no action to correct 
it while amending other portions of the statute, it may be inferred 
that the agency's interpretation is consistent with congressional 
intent.'').
---------------------------------------------------------------------------

    Similarly, Rep. Howard Berman, the sponsor of the original Berman 
Amendment in 1988, described the 1994 amendment as designed to protect 
the right ``to impart and receive information and ideas.'' \375\ ``Even 
at the height of the Cold War,'' he recounted, the United States 
``positively promoted the exchange of literary and artistic work in an 
attempt to liberalize and open up the cultural and political climate in 
those countries,'' and the then-recent fall of the Soviet Union 
``suggest[ed] that contact with Americans and the exposure to American 
ideas were crucial to the momentous changes which are taking place 
there, to our great national advantage.'' \376\ The legislative history 
underscores what is apparent in the statutory text and context: The 
term is not meant to encompass everything that might technically or 
colloquially be described as ``information.''
---------------------------------------------------------------------------

    \375\ 138 Cong. Rec. 15052 (June 16, 1992) (statement of Rep. 
Berman).
    \376\ Id.
---------------------------------------------------------------------------

    Congress' purpose in enacting the Berman Amendment was to protect 
the free exchange of ideas, and the Berman Amendment does not exempt 
from regulation all types of conduct, information, or 
communications.\377\ Although the message need not be particularized or 
articulable, as in the case of many pieces of art, it must still 
``communicate . . . ideas.'' \378\ The types of ``information or 
informational materials'' listed in the Berman Amendment, such as 
``publications,'' ``news wire feeds,'' and ``artworks,'' are mediums 
for expressing and conveying an idea to others.\379\
---------------------------------------------------------------------------

    \377\ See, e.g., Texas v. Johnson, 491 U.S. 397, 404 (1989).
    \378\ Hurley v. Irish-Am. Gay, Lesbian & Bisexual Grp. of Bos., 
515 U.S. 557, 570 (1995).
    \379\ 50 U.S.C. 1702(b)(3).
---------------------------------------------------------------------------

B. Regulated Transactions Involving Sensitive Personal Data Under This 
Proposed Rule Do Not Implicate the Berman Amendment's Restrictions on 
Regulating Expressive Material

    The proposed rule would regulate transactions involving sensitive 
personal data that is non-expressive and thus is fully consistent with 
the Berman Amendment.\380\ It would regulate commercial transactions 
involving the export of government-related data or bulk U.S. sensitive 
personal data that lacks expressive content.
---------------------------------------------------------------------------

    \380\ See infra Sec. Sec.  202.249(b)(4) (excluding from the 
definition of ``sensitive personal data'' ``information or 
informational materials''), 202.226(a) (limiting ``information or 
informational materials'' to ``expressive materials'').
---------------------------------------------------------------------------

    The specific types of sensitive personal data proposed here for 
regulation are not expressive in nature because the data itself, 
whether in bulk or in isolation, does not convey an idea.\381\ For 
example, a person's fingerprints (biometric identifiers); DNA sequence 
(genomic data); financial account numbers or their browser's IP address 
(covered personal identifiers); debts and income (personal financial 
data); weight, blood type, test results, and treatments (personal 
health data); and their telephone's location history (precise 
geolocation data) do not convey expressive messages or ideas to the 
recipient. Sensitive personal data instead serves functional purposes, 
and the regulations proposed here are designed to prevent the export of 
this data based on its functionality to create and facilitate national 
security harms, not regulate the expression of ideas.
---------------------------------------------------------------------------

    \381\ So too for ``government-related data,'' which the proposed 
rule defines to mean certain sensitive personal data or certain 
precise geolocation data, regardless of volume.
---------------------------------------------------------------------------

    For example, human genomic data is the biological code of human 
functioning and growth. It is primarily used (along with personal 
health data)

[[Page 86169]]

to understand and address vulnerabilities in human functioning, health, 
and disease. The same human genomic data that can be used to design 
disease therapy can also be used to identify genetic variability in a 
population, which can potentially be used for nefarious purposes such 
as identifying and exploiting susceptibility to disease. Large human 
genetic datasets used for ancestry, solving crimes, and research can 
also be misused for counterintelligence purposes, including targeting, 
surveillance, coercion, blackmail, intimidation, and influence.\382\ 
Datasets containing human genomic data do not communicate any idea; 
they simply contain functionally useful data.
---------------------------------------------------------------------------

    \382\ See, e.g., Nat'l Counterintel. & Sec. Ctr., supra note 83, 
at 4.
---------------------------------------------------------------------------

    Biometric identifiers (like a fingerprint, palm print, iris 
pattern, or facial feature) are ``the measurement of physiological 
characteristics'' of an individual that are primarily used for security 
and identity verification--for example, by comparing the measurements 
of an identifier against those of previously enrolled identifiers 
permitted to access a system.\383\ Similarly, precise geolocation data 
measures geographic location, ordinarily defined by its longitude and 
latitude coordinates, that is used to identify the physical location of 
a device (and thus persons associated with the device). Geolocation 
data is primarily used to enable and facilitate, for example, 
navigation, tracking, the implementation of security measures through 
geofencing, anti-fraud measures, targeted advertising, and the 
provision of certain services like roadside assistance. Biometric 
identifiers and precise geolocation data do not communicate any idea; 
they simply contain functionally useful data.
---------------------------------------------------------------------------

    \383\ Nat'l Inst. of Standards & Tech., Biometrics, https://www.nist.gov/programs-projects/biometrics [https://perma.cc/SV3S-THLD].
---------------------------------------------------------------------------

    At their core, and as defined in these proposed regulations, 
personal financial data and personal health data also contain only 
functionally useful data that does not convey any idea or message. The 
former typically identifies and measures an individual's financial 
accounts, assets, debts, and liabilities, primarily to enable, 
facilitate, and track commercial activity (for example, by exchanging 
account and routing numbers, balances, and amounts to enable payments, 
or by identifying assets, debts, and liabilities associated with a 
particular individual to determine creditworthiness for loan 
applications). The latter typically identifies and measures an 
individual's medical conditions and history, primarily to assess and 
track an individual's health condition and determine a medical course 
of action.
    Finally, covered personal identifiers are specifically listed 
classes and combinations of data that are ``reasonably linked to an 
individual.'' \384\ This data (such as Social Security numbers, 
financial account numbers, hardware-based identifiers, advertising 
identifiers, and network-based identifiers) is primarily used to 
identify devices and individuals, and to distinguish them from each 
other. They are not typically used to express and communicate ideas or 
messages.
---------------------------------------------------------------------------

    \384\ 89 FR 15428-29.
---------------------------------------------------------------------------

    In sum, the regulations contained in this proposed rule 
appropriately ``balance[ ] IEEPA's competing purposes'' in 
``restricting material support for hostile regimes while encouraging 
the robust interchange of information.'' \385\ The export of non-
expressive data (including the sensitive personal data that the 
proposed rule would regulate) does not implicate the exchange of ideas 
and expression that the Berman Amendment protects. At the same time, 
allowing sensitive personal data to fall into the hands of countries of 
concern would directly support and enable their attempts to undermine 
national security, including through traditional and economic 
espionage, surveillance, sabotage, blackmail, and other nefarious 
activities. Moreover, these categories of sensitive personal data are 
already subject to some existing government regulation in the context 
of domestic commercial transactions. It would be unreasonable to 
interpret IEEPA--a statute that is specifically designed to address 
foreign threats to national security, foreign policy, and the economy--
as disallowing regulation of the same commercial transactions when they 
involve transferring such data to a country of concern.
---------------------------------------------------------------------------

    \385\ United States v. Amirnazmi, 645 F.3d 564, 587 (3d Cir. 
2011).
---------------------------------------------------------------------------

    This proposed interpretation aligns with the suggestions of several 
commenters to clarify the extent to which the transmission of 
expressive content and associated metadata, including through internet 
traffic, to entities and individuals in countries of concern would be 
exempt from the proposed regulations. Under this interpretation, 
expressive content and associated metadata that is not sensitive 
personal data would be categorically outside the scope of the proposed 
definition of ``sensitive personal data'' and thus outside the scope of 
the proposed regulations, regardless of the type of activity (or 
transaction) involved. The Department believes that other aspects of 
the proposed rule (such as bulk thresholds or the definition of 
``covered data transaction'') would also protect the dissemination of 
expressive content and its associated metadata. The Department welcomes 
further comments on this issue.
    To the extent that any parties believe that the sensitive personal 
data involved in their covered data transactions may nevertheless 
qualify as ``information or informational materials'' that is exempt 
under 50 U.S.C. 1702(b)(3), they can seek clarification using the 
proposed administrative processes for seeking an advisory opinion or 
applying for a specific license before engaging in the transaction.

C. Exclusion for Materials Already Created and in Existence

    Finally, consistent with longstanding OFAC practice, the proposed 
rule would exclude ``information or informational materials not fully 
created and in existence at the date of the data transaction, or the 
substantive or artistic alteration or enhancement of information or 
informational materials, or the provision of marketing and business 
consulting services, including to market, produce or co-produce, or 
assist in the creation of information or informational materials'' from 
the definition of ``information or informational materials.'' Sec.  
202.206(b)(1). Many commercial services and transactions may result in 
the creation of information or informational materials. This exclusion 
balances ``IEEPA's competing imperatives (i.e., restricting material 
support for hostile regimes while encouraging the robust interchange of 
information)'' and reflects a ``reasoned determination'' that 50 U.S.C. 
1702(b)(3) is not meant to exempt ``information or informational 
materials'' that ``would not be produced but for'' commercial 
transactions that could be otherwise prohibited or regulated.\386\ In 
the sanctions context, for example, a prohibition on providing 
consulting services would preclude provision of a consulting report 
even though such a report might otherwise be characterized as 
``informational materials.'' \387\ In the

[[Page 86170]]

context of this proposed rulemaking, a U.S. company's customization and 
sale of bulk U.S. sensitive personal data in response to a customer's 
particular criteria would fall within this independent exclusion and 
would not constitute information or informational materials (in 
addition to falling outside the definition of ``information or 
informational material'' because it is non-expressive material).
---------------------------------------------------------------------------

    \386\ Amirnazmi, 645 F.3d at 587; see also, e.g., United States 
v. Griffith, 515 F. Supp. 3d 106, 116-17 (S.D.N.Y. 2021).
    \387\ Cf., e.g., Off. of Foreign Assets Control, U.S. Dep't of 
Treas., Guidance on Certain Publishing Activities, at 2-3 (Oct. 28, 
2016), https://ofac.treasury.gov/media/6516/download?inline [https://perma.cc/GF9U-M4TJ]; Off. of Foreign Assets Control, U.S. Dep't of 
Treas., Letter No. 031211-FARCL-IA-14, Interpretive Ruling: Posting 
of Information from Iran on Website, at 2 (Dec. 11, 2003), https://ofac.treasury.gov/media/7921/download?inline [https://perma.cc/J7FP-CVAS].
---------------------------------------------------------------------------

    The legislative history of the Berman Amendment indicates that 
Congress was aware of this same interpretation in sanctions programs 
under IEEPA administered by OFAC and chose not to change it. The 
Department of the Treasury construed the Berman Amendment not to apply 
to ``informational materials not fully created and in existence at the 
date of the transaction, or to the substantive or artistic alteration 
or enhancement of informational materials, or to the provision of 
marketing and business consulting services'' shortly after it was 
enacted.\388\ As discussed above, when Congress amended the statute in 
1994, it overrode other government interpretations of the Berman 
Amendment but it ``did not disabuse OFAC of its belief that it could 
permissibly regulate `informational materials not fully created and in 
existence at the date of the transaction' '' and ``did not counteract'' 
that interpretation.\389\ Courts, relying in part on this legislative 
history, have affirmed this interpretation of the Berman 
Amendment,\390\ and the Department accordingly incorporates it into the 
definition of ``information or informational materials'' in proposed 
Sec.  202.226.
---------------------------------------------------------------------------

    \388\ 31 CFR 500.206(c) (1989).
    \389\ Amirnazmi, 645 F.3d at 586.
    \390\ See Amirnazmi, 645 F.3d at 583-88; Griffith, 515 F. Supp. 
3d at 116-17.
---------------------------------------------------------------------------

VII. Regulatory Requirements

    The Department designated the proposed rule as significant under 
Executive Order 12866, as amended, and the Office of Information and 
Regulatory Affairs in the Office of Management and Budget (``OMB'') 
reviewed the proposed rule.\391\ In addition, this section includes the 
required assessments of the reporting and recordkeeping burdens under 
the Paperwork Reduction Act of 1995,\392\ and the potential impact on 
small entities pursuant to the Regulatory Flexibility Act.\393\
---------------------------------------------------------------------------

    \391\ E.O. 12866, 58 FR 51735 (Sept. 30, 1993).
    \392\ 44 U.S.C. 3501 et seq.
    \393\ 5 U.S.C. 601 et seq. This proposed rulemaking pertains to 
a foreign affairs function of the United States and therefore is not 
subject to the notice-and-comment rulemaking requirements of the 
Administrative Procedure Act (``APA''), which exempts a rulemaking 
from such requirements ``to the extent there is involved . . . a 
military or foreign affairs function of the United States.'' 5 
U.S.C. 552(a)(1). The proposed rule is being issued to assist in 
addressing the national emergency declared by the President with 
respect to the threat posed to U.S. national security and foreign 
policy by the continuing effort of countries of concern to access 
and exploit government-related data or Americans' bulk U.S. 
sensitive personal data. As described in the Order, this threat to 
the national security and foreign policy of the United States has 
its source in whole or substantial part outside the United States. 
Accordingly, the proposed rule would have a direct impact on foreign 
affairs concerns, which include the protection of national security 
against external threats (for example, prohibiting or restricting 
transactions that pose an unacceptable risk of giving countries of 
concern or covered persons access to bulk sensitive personal data). 
Although the proposed rule is not subject to the APA's notice and 
comment requirements, the Department is engaging in notice and 
comment rulemaking for this proposed rule, consistent with sections 
2(a) and 2(c) of the Order.
---------------------------------------------------------------------------

A. Executive Orders 12866 (Regulatory Planning and Review) as Amended 
by Executive Orders 13563 (Improving Regulation and Regulatory Review) 
and 14094 (Modernizing Regulatory Review)

1. Executive Summary
    The Department of Justice estimates the discounted annualized cost 
of the proposed regulation to be approximately $502 million annually. 
The extremely high potential net benefits (i.e., expected benefits less 
estimated costs) justify moving forward with the proposed rule. The 
approximately $502 million estimated annual cost would afford 
protection to well over 100 million American individuals who are 
potential targets of adversaries using bulk U.S. sensitive personal 
data. Also, the approximately $502 million estimated annual cost of the 
regulation is about one-third of 1 percent (0.3 percent) of the $176 
billion revenues generated in the U.S. Computing, Infrastructure, Data 
Processing Services, and Web Hosting Services industry sector.
2. Introduction.
    The review that accompanies an NPRM is known as a Preliminary 
Regulatory Impact Analysis (``RIA''). The Office of Management and 
Budget's Circular A-4 provides guidance to Executive agencies on how to 
conduct effective regulatory analyses.\394\ Circular A-4 recognizes 
that good regulatory analyses cannot be conducted according to a 
formula; that conducting high-quality analysis requires competent 
professional judgment; and that different regulations may call for 
different emphases in the analysis, depending on the nature and 
complexity of the regulatory issue and the sensitivity of the benefit 
and cost estimates of the key assumptions.\395\
---------------------------------------------------------------------------

    \394\ Off. of Mgmt. & Budget, Circular No. A-4, Regulatory 
Analysis (Nov. 9, 2023), https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf [https://perma.cc/8J6A-K75Y].
    \395\ Id. at 4.
---------------------------------------------------------------------------

    Circular A-4 states that RIA analysts ``should aim for transparency 
about the key methods, data, and other analytical choices you make in 
your analysis.'' \396\ It also encourages consultation with key 
stakeholders, which can ``be useful in ensuring that your analysis 
addresses all of the relevant issues and that you have access to all 
pertinent data,'' noting that ``[e]arly consultation can be especially 
helpful.'' \397\ At the outset of this research, the Department reached 
out to the private sector and other government agencies regarding data 
that would be useful to the analysis. The response has, in general, 
been that the information and data available to and known by other 
agencies and the private sector that would potentially be relevant to 
conducting such an analysis are incomplete, irrelevant, and unreliable. 
The Department's own search found that there are enough information 
sources available to make a reasonable estimate of the impact of the 
proposed rule based on a cost analysis that considers the value of 
transactions lost due to the prohibitions, the security and due 
diligence costs associated with the pursuit of restricted transactions, 
and adequate data to approximate the number of firms likely to be 
affected by the regulation. Regarding the estimated value of 
transactions lost to the prohibitions, impacts could vary by the bulk 
thresholds for each of the data categories outlined in the proposed 
rule. However, due to data limitations, this analysis does not attempt 
to estimate cost sensitivities based upon alternatives to the proposed 
bulk thresholds. We welcome comments on addressing this analytical 
issue.
---------------------------------------------------------------------------

    \396\ Id.
    \397\ Id.
---------------------------------------------------------------------------

    Given the limitations on available information, the resulting 
uncertainty, and the qualifications surrounding the analysis, the 
Department has been unable to assess that any secondary impacts, such 
as how the prohibition on bulk U.S. sensitive personal data transfers 
to the countries of concern would influence international trade, are 
reasonably likely. Based on the available information, such secondary 
impacts are too speculative and hypothetical to be

[[Page 86171]]

quantified in this analysis. Although the scope of the proposed rule is 
limited, indirect trade impacts could run into the hundreds of millions 
of dollars; nevertheless, such costs would be impossible to calculate 
at this juncture, and such analysis is outside the scope of this 
assessment.
    This analysis considers the direct costs of the proposed 
regulation. Although it does not devote a section to indirect costs, 
Circular A-4 advises analysts to look beyond the obvious costs and 
benefits of a regulation for additional costs and benefits, which are 
sometimes referred to as ``indirect'' effects or ``downstream'' 
effects.\398\ Beyond the direct costs, there will be other market 
repercussions associated with the proposed regulation. Foreign firms 
will have less revenue from selling bulk U.S. sensitive personal data 
purchased from U.S. firms; new businesses may arise to provide vetting 
information to firms seeking entrance into the restricted transactions 
market; misunderstandings of the proposed regulation may result in 
firms spending more than necessary to comply; overall increased data 
security may result in more secure data and systems; transactions that 
are not prohibited may be reduced by firms not understanding nuances of 
the prohibitions; and, in retaliation, foreign countries may enact 
their own prohibitions and restrictions that may adversely affect U.S. 
businesses.
---------------------------------------------------------------------------

    \398\ Id. at 56. The usage of the term ``indirect costs'' in 
this analysis differs from the ANPRM's ``Economic Impact,'' which 
discussed the expected ``indirect costs'' of the rulemaking 
primarily in terms of due diligence and security costs. See 89 FR 
15799-800. In this analysis, the term ``indirect costs'' refers to 
downstream effects and does not necessarily encompass due diligence 
and security costs; to the extent that such costs are discussed, the 
Department simply refers to them by their own terms.
---------------------------------------------------------------------------

    Additionally, staff of the Department of Commerce Office of 
Undersecretary for Economic Affairs note that there will be indirect 
costs from the loss of database imports from countries of concern, 
forgone productivity gains associated with potential innovation 
resulting from access to restricted data by individuals in countries of 
concern, and firms' reduced access to employees from countries of 
concern. At this point, the Department is not aware of any data with 
which to assess these costs, and the assessment of such costs is 
outside the scope of this RIA.
    The regulatory review faces significant challenges in developing 
quantitative estimates of the monetary costs and benefits of the 
proposed regulation. Among these challenges to a reliable comparison of 
quantified cost and benefits, is the nature of the benefits that are 
expected from the regulation. These benefits include the security of 
the American people, economic prosperity and opportunity, and 
democratic values, all of which are beyond a reasonable, reliable, and 
acceptable estimate of quantified monetary value.\399\ In contrast, 
although precise, reliable, and relevant data to estimate the 
regulation's cost impacts are not publicly available, the Department 
has made a preliminary estimate of those costs using knowledge of the 
entities affected by the proposed rule; the transactions likely to be 
involved; and previous estimates of the costs of compliance with 
similar activities, such as due diligence, audits, recordkeeping, and 
reporting. Policy decisions will be informed by whether the benefits 
expected from the regulation justify the estimated costs.
---------------------------------------------------------------------------

    \399\ Exec. Off. of the President, National Security Strategy 
(Oct. 12, 2022), https://www.whitehouse.gov/wp-content/uploads/2022/10/Biden-Harris-Administrations-Nationalsecurity-Strategy-10.2022.pdf [https://perma.cc/6X6U-75DL].
---------------------------------------------------------------------------

3. Market Sectors Impacted by the Proposed Regulation
    The firms that are currently active in the collection, processing, 
sale, or other types of transfers of bulk U.S. sensitive personal data 
and that are likely to be impacted by the proposed regulation include 
those that collect sensitive personal data (often referred to as 
``first parties'') and those that aggregate, assemble, analyze, and 
sell sensitive personal data (``third parties''). Sensitive personal 
data passes through a long supply chain of third-party vendors, such as 
data brokers, that obtain the data from first-party sources such as 
doctors, hospitals, pharmacies, banks and other financial companies, 
insurance companies, internet service providers, online and brick-and-
mortar retail chains, schools, ``smart product'' sellers, rental 
agencies, ancestry agencies, software vendors, geolocation firms, and 
gaming firms.\400\ Another sector that may be impacted consists of 
those firms that export bulk biospecimens such as blood plasma and 
other medical products, laboratory supplies, and cosmetic products made 
with human hair. The United States supplies 70 percent of the world's 
supply of blood plasma, for example, making it the largest exporter of 
blood plasma.\401\ Additionally, blood plasma has become the United 
States' 11th most valuable export.\402\ In 2022, China imported more 
U.S. exports of ``immunological medicines, plasma and other blood 
fractions'' than any other country had in a given year.\403\ When it 
comes to the biospecimen segment, the proposed rule exempts items 
related to clinical trials, and official United States Government 
business and transactions required or authorized by international 
agreements, including United States Government business and 
international agreements related to pandemic preparedness and 
surveillance.
---------------------------------------------------------------------------

    \400\ See, e.g., Types of Sensitive Information: A Complete 
Guide, SealPath, https://www.sealpath.com/blog/types-of-sensitive-information-guide/ [https://perma.cc/7XPU-TLB6]; Nirmal Ranganathan, 
Understanding the Complexities of Enterprise Data Supply Chains, 
TechRadar Pro (May 1, 2023), https://www.techradar.com/opinion/understanding-the-complexities-of-enterprise-data-supply-chains 
[https://perma.cc/AKZ4-UJAE]; Lou Rabon, Uncovering Third-Party 
Risk: What Are They and Where They Come From, Cyber Defense Group 
(June 3, 2024), https://www.cdg.io/blog/third-party-risk [https://perma.cc/645V-YUBF]. This assessment has also considered whether the 
proposed rule would result in a reasonably measurable impact on 
product development and testing. Although some commenters raised 
concern about such potential impacts, none of the comments were 
specific enough to identify any concrete product development and 
testing involving prohibited or restricted transactions. The 
comments did not describe any specific scenarios in which 
government-related data or bulk U.S. sensitive personal data are 
critical to the development or testing of some product with a 
significant market the proposed rule would eliminate, for example, 
because there is no substitute development or testing market other 
than a country of concern or covered person.
    \401\ David Smith, `It's gamified': Inside America's Blood 
Plasma Donation Industry, The Guardian (Mar. 2, 2023), https://www.theguardian.com/books/2023/mar/02/blood-money-book-kathleen-mclaughlin [https://perma.cc/7VFK-QTSL].
    \402\ Peter Jaworski, Bloody Well Pay Them: The Case for 
Voluntary Remunerated Plasma Collections, Niskanen Center (June 14, 
2020), https://www.niskanencenter.org/bloody-well-pay-them-the-case-for-voluntary-remunerated-plasma-collections/ [https://perma.cc/WVR9-ZGS9].
    \403\ Ken Roberts, In 2022, China Dominates U.S. Exports of 
Immunological Drugs, Plasma and Vaccines, Forbes (Oct. 26, 2022), 
https://www.forbes.com/sites/kenroberts/2022/10/26/in-2022-china-now-dominates-us-exports-of-plasma-and-vaccines/ [https://perma.cc/X9KA-EG82].
---------------------------------------------------------------------------

    Bulk personal data that is extracted from different sources and 
then combined and analyzed can provide comprehensive profiles of 
individuals. Comprehensive profiles typically include a wide range of 
personal data, including contact information such as address, phone 
number, and email address; demographic data, including age, family 
ties, and ethnic and religious affiliations; data on general interests, 
such as charitable giving, gambling, pets, preferred celebrities, 
movies and music genres, and reading preferences; data about a person's 
home and neighborhood, including home equity, home size (e.g., number 
of rooms and baths), and rent or loan amount and interest rate; 
criminal and civil actions

[[Page 86172]]

background data, such as arrests and convictions, and judgments in 
civil cases; social media and technology data, including home internet 
provider, social media usage, and computer operating systems; financial 
data, including credit card usage, loans, and net worth; health data, 
including alcohol or tobacco usage, medical conditions (e.g., 
allergies), medicine preferences, and mental health issues; and other 
data, such as travel, vehicle, and behavior data.\404\
---------------------------------------------------------------------------

    \404\ Urbano Reviglio, The Untamed and Discreet Role of Data 
Brokers in Surveillance Capitalism: A Transnational and 
Interdisciplinary Overview, 11 Internet Pol'y Rev. (Issue) 3 (Aug. 
4, 2022), https://policyreview.info/articles/analysis/untamed-and-discreet-role-data-brokers-surveillance-capitalism-transnational-and 
[https://perma.cc/A4NS-AF5B].
---------------------------------------------------------------------------

a. Sensitive Personal Data and Government-Related Data
i. Personal Financial Data
    The universe of financial institutions that create bulk U.S. 
sensitive personal data is all firms that provide financial services. 
The smallest, narrowest set is the financial firms subject to a primary 
financial regulator. These include banks,\405\ credit unions,\406\ 
large financial utilities,\407\ securities firms,\408\ investment 
companies,\409\ and insurance companies.\410\ The total number of 
government-regulated and -supervised financial-services firms in this 
category is around 35,000.\411\ The total number of large financial-
services firms is about 17,000. The Department arrived at this number 
by consulting the North American Industry Classification System 
(``NAICS''), which, in its category for Finance and Insurance 
companies, contains the broadest potential set of firms that could be 
found in the NAICS category for Finance and Insurance companies. This 
category contains more than 240,000 firms in total, with around 17,000 
of these firms having over 20 employees, making them potentially more 
likely to have in-house data management and control systems.\412\
---------------------------------------------------------------------------

    \405\ Bd. of Governors of the Fed. Rsrv. Sys., 110th Annual 
Report of the Board of Governors of the Federal Reserve System 26-28 
(2023), https://www.federalreserve.gov/publications/files/2023-annual-report.pdf [https://perma.cc/3W34-QKYE].
    \406\ Press Release, Nat'l Credit Union Admin., Credit Union 
Assets, Lending, Insured Shares, Delinquencies Grow (June 2024), 
https://ncua.gov/newsroom/press-release/2024/credit-union-assets-lending-insured-shares-delinquencies-grow [https://perma.cc/MK9Z-7R3Z].
    \407\ Bd. of Governors of the Fed. Rsrv. Sys., supra note 405.
    \408\ Fin. Indus. Regul. Auth., 2024 FINRA Industry Snapshot 13 
(July 18, 2024), https://www.finra.org/sites/default/files/2024-07/2024-Industry-Snapshot.pdf [ https://perma.cc/UEV6-9XVM].
    \409\ Inv. Co. Inst., 2024 Investment Company Fact Book 23 
(2024) https://www.ici.org/system/files/2024-05/2024-factbook.pdf 
[https://perma.cc/5CJ3-JWHS].
    \410\ Ron Harden, Insurance Industry Facts, Nat'l Ass'n of Ins. 
Pros., Inc., https://thenaip.org/general/insurance-industry-facts/ 
[https://perma.cc/U8S9-BVRD].
    \411\ This figure includes 3,794 bank holding companies; 1,411 
Federal Reserve System member banks; 287 savings and loan holding 
companies; 8 financial market utilities; 4,572 credit unions; 3,298 
securities firms; 16,038 investment companies; and 5,929 insurance 
entities.
    \412\ U.S. Census Bureau, U.S. & states, 6-digit NAICS, 2021 
SUSB Annual Data Tables by Establishment Industry (Dec. 2023), 
https://www.census.gov/data/tables/2021/econ/susb/2021-susb-annual.html [https://perma.cc/A86S-NKHA].
---------------------------------------------------------------------------

ii. Personal Health Data
    As with human genomic data,\413\ many doctors, hospitals, medical 
facilities, consumer human genetic testing labs, insurance companies, 
businesses, healthcare providers, and research institutions sell 
sensitive health-related data (e.g., Electronic Medical Records 
(``EMRs''), prescriptions, laboratory tests, insurance claims). There 
is a large market for such data, which generates significant profits 
for companies with the capabilities to collect, anonymize, collate, and 
sell the data to third parties and data brokers. The market for these 
sales is at least in the billions of dollars.\414\ With the EMR market 
expected to grow at a compound annual growth rate of 6.5 percent to 
$46.96 billion in 2028, it is expected that the keepers of this data 
will take advantage of the increasing demand and massive economic 
benefits that these data sales can achieve.\415\
---------------------------------------------------------------------------

    \413\ While the NPRM proposes including human `omic data beyond 
genomic data within the scope of the categories of sensitive 
personal data, the NPRM seeks comments on how that category of human 
`omic data (other than genomic data) should be regulated. The 
Department defers consideration of that issue until it is settled in 
the final rule. Section 7(i) of the Order defines human `omic data 
as ``data generated from humans that characterizes or quantifies 
human biological molecule(s), such as human genomic data, epigenomic 
data, proteomic data, transcriptomic data, microbiomic data, or 
metabolomic data, as further defined by regulations issued by the 
Attorney General pursuant to section 2 of this order, which may be 
informed by the report described in section 6 of this order.'' E.O. 
14117, 89 FR 15429.
    \414\ Adam Tanner, Our Bodies, Our Data: How Companies Make 
Billions Selling Our Medical Records (2017).
    \415\ Electronic Medical Records Market to Surpass $46.96 
Billion by 2028, Lead [sic] by Asia-Pacific Growth and AI Trends, 
Yahoo! Finance (Mar. 11, 2024), https://finance.yahoo.com/news/electronic-medical-records-market-surpass-192000251.html [https://perma.cc/N45N-N5QV].
---------------------------------------------------------------------------

    At the forefront of data sales are the hospitals, medical 
facilities, pharmaceutical companies, insurers, and pharmacies that 
have direct access and involvement in the creation and maintenance of 
patient health data. HIPAA and other privacy laws help protect patients 
from having their personal health information shared, but nearly every 
State either recognizes medical providers as the owners of medical data 
or does not have any laws conferring patients specific ownership or 
property rights to their medical records.\416\ The situation with 
clinical trial data is similar, as any data generated by a trial 
participant becomes the property of the sponsor company.\417\
---------------------------------------------------------------------------

    \416\ Niam Yaraghi, Who Should Profit from the Sale of Patient 
Data? Brookings Inst. (Nov. 19, 2018), https://www.brookings.edu/articles/who-should-profit-from-the-sale-of-patient-data/ [https://perma.cc/9886-AS93].
    \417\ Paul W. Glimcher, Who Profits from Medical Records?, Med. 
Econ. Oct. 2020, at 50, available at https://www.medicaleconomics.com/view/who-profits-from-medical-records- 
[https://perma.cc/RP4S-GGZR].
---------------------------------------------------------------------------

    Furthermore, some companies in the health sector may be able to 
legally sell Americans' health-related information, depending on the 
legal requirements applicable to their context.\418\ For example, 
although healthcare providers that conduct certain standard 
transactions electronically may be HIPAA-covered entities that are 
generally prohibited from selling protected health information by the 
HIPAA Privacy Rule,\419\ many companies that collect healthcare 
information are not covered by HIPAA and are not subject to its 
restrictions. Pairing Americans' health-related information with 
publicly available health record databases, healthcare directories and 
clearinghouses, academic or government databases (e.g., data.gov), and 
basic internet searches makes it increasingly simple to re-identify or 
link information. Data brokers have flourished by selling packaged 
datasets on the sensitive health conditions of millions of Americans in 
the open market.\420\ As the volume and demand for this data increase, 
we may see continued growth in the market share.
---------------------------------------------------------------------------

    \418\ Justin Sherman, Your Health Data Might Be for Sale, Slate 
(June 22, 2022), https://slate.com/technology/2022/06/health-data-brokers-privacy.html [https://perma.cc/39CR-4ZS3].
    \419\ See 45 CFR 164.502(a)(5)(ii), 164.508(a)(4).
    \420\ Sherman, supra note 418.
---------------------------------------------------------------------------

    We also note that the Department of Health & Human Services 
(``HHS'') is supporting the secure sharing of clinical information via 
the development of the voluntary Trusted Exchange Framework and Common 
Agreement.\421\
---------------------------------------------------------------------------

    \421\ Notice of Publication of Common Agreement for Nationwide 
Health Information Interoperability (Common Agreement) Version 2.0, 
89 FR 35107 (May 1, 2024).
---------------------------------------------------------------------------

iii. Precise Geolocation Data
    The proposed rule defines ``precise geolocation data'' as ``data, 
whether real-time or historical, that identifies the

[[Page 86173]]

physical location of an individual or a device with a precision of 
within one kilometer.'' The parameters to be determined are (1) the 
level at which to set this precision, (2) the level of precision 
necessary to support common commercial applications of geolocation 
data, and (3) the effectiveness of applying location fuzzing to 
geolocation data (decreasing its accuracy) in some commercial 
applications to reduce potential privacy impacts. These parameters are 
necessary to provide clear guidance to acquirers and sellers of precise 
geolocation data.
    Mobile applications (``apps'') from smartphones are the primary 
sources that directly gather location data from consumers, although 
other technologies are also collecting and transmitting data, such as 
``Internet of Things'' wearable devices and connected vehicles. Once 
they collect it, many apps share location data with third parties, 
whether by selling it to data brokers, to advertisers who then sell it 
to data brokers, or directly to buyers who intend to use the 
geolocation data.\422\ Data brokers can ``pay a mobile app developer to 
use the broker's software development kit . . . in the developer's app. 
The broker can then sit within the app and gather data directly on 
users.'' Alternatively, many app developers will sell location data 
``directly to a data broker through a server-to-server transfer.'' 
\423\ As one example, the family safety app Life360 sold location data 
to nearly a dozen location data brokers in 2021--and in fact, it had 
agreements to directly transfer location data about its users to data 
brokers through its own servers.\424\ Such practices create 
opportunities for countries of concern to exert malign influence over 
U.S. persons relevant to national security.
---------------------------------------------------------------------------

    \422\ The Location Data Market, Data Brokers, and Threats to 
Americans' Freedoms, Privacy, and Safety: Hearing Before the Joint 
Committee on Consumer Protection and Professional Licensure, (Mass. 
2023) (written testimony of Justin Sherman, Senior Fellow and 
Research Lead, Data Brokerage Project, Duke Univ. Sanford Sch. of 
Pub. Pol'y), https://techpolicy.sanford.duke.edu/wp-content/uploads/sites/4/2023/07/Sherman-Justin_WrittenTestimony_MA_Legislature.pdf 
[https://perma.cc/52RR-J2HY].
    \423\ Id.
    \424\ Alfred Ng & Jon Keegan, The Popular Family Safety App 
Life360 Is Selling Precise Location Data on Its Tens of Millions of 
Users, The Markup (Dec. 6, 2021), https://themarkup.org/privacy/2021/12/06/the-popular-family-safety-app-life360-is-selling-precise-location-data-on-its-tens-of-millions-of-user [https://perma.cc/NTK2-CL96].
---------------------------------------------------------------------------

    The market for location data is large, and many companies operate 
as data brokers.\425\ Significantly, three major data brokers--Acxiom, 
LexisNexis, and Nielsen--sell data on current or former U.S. military 
personnel, some of which is specifically marketed as such.\426\ All 
three firms collect and advertise information on individuals, ranging 
from their family members and friends to their spending habits, mental 
health conditions, and geolocation.\427\ Both Acxiom and LexisNexis 
also provide users with the ability to verify whether someone is active 
duty.\428\
---------------------------------------------------------------------------

    \425\ See The Location Data Market, Data Brokers, and Threats to 
Americans' Freedoms, Privacy, and Safety, supra note 422, at 3 
(listing some of the ``significant companies in the location data 
market'').
    \426\ Justin Sherman, Data Brokers Are Advertising Data on U.S. 
Military Personnel, Lawfare (Aug. 23, 2021), https://www.lawfaremedia.org/article/data-brokers-are-advertising-data-us-military-personnel [https://perma.cc/Y9RN-WHZF].
    \427\ Steven J. Arango, Data Brokers Are a Threat to National 
Security, Vol. 148/12/1,438 U.S. Naval Inst.: Proceedings (Dec. 
2022). https://www.usni.org/magazines/proceedings/2022/december/data-brokers-are-threat-national security [https://perma.cc/74W3-TCR3].
    \428\ Id.
---------------------------------------------------------------------------

iv. Human Genomic and Human 'Omic Data
    There is value in both human genomic and 'omic data, and there is a 
large global ecosystem for buying and selling this data for a variety 
of purposes. The 'omic data market is growing exponentially due to the 
use of such data for drug discovery. There is little current regulation 
that restricts the buying and selling of this data, but there are real 
risks and potential harms associated with the misuse of such data, 
ranging from the individual to the population level.
    The human genomic data ecosystem is large and has both public and 
private actors, including healthcare entities, law enforcement, 
international security agencies, and recreational personal human 
genomics/biospecimen companies.\429\ The global human genomics market 
was valued at $28 billion in 2022 and is projected to grow to over $164 
billion by 2032, with North America accounting for approximately 45 
percent of the market's current size.\430\
---------------------------------------------------------------------------

    \429\ Abraham P. Schwab et al., Genomic Privacy, 64 Clinical 
Chemistry 1696 (2018), https://academic.oup.com/clinchem/article/64/12/1696/5608647 [https://perma.cc/Q89R-5WRZ].
    \430\ Precedence Rsch., Report No. 1204, Genomics Market--Global 
Industry Analysis, Size, Share, Growth, Regional Outlook and 
Forecast, 2023 to 2032 (Nov. 2023), https://www.precedenceresearch.com/genomics-market [https://perma.cc/J9WA-RKVB].
---------------------------------------------------------------------------

    Personal human genomics companies (e.g., 23andMe, Ancestry, Ariosa 
Diagnostics, Color Genomics, FamilyTreeDNA, Ionis, GenScript, Illumina, 
Genentech, My Heritage, Navigenics, Orig3n, and Prenetics) and human 
biospecimen (e.g., BioChain Institute, BioIVT, Boca Biologistics, 
Creative Bioarray, Cureline, Discovery Life Sciences, Infinity 
BiologiX, Precision for Medicine) companies collect human genomic and 
related data or human biospecimens, such as tissue and blood samples, 
that can be used to extract human genomic information for a variety of 
healthcare and recreational purposes.\431\ It is common for companies 
in these spaces, especially direct-to-consumer firms, to be owned by 
pharmaceutical companies or to sell the human genomic data they obtain 
to pharmaceutical companies. It is also common for them to conduct 
health research in collaboration with healthcare systems and to enter 
into partnerships with other industries.\432\
---------------------------------------------------------------------------

    \431\ Susi Geiger & Nicole Gross, A Tidal Wave of Inevitable 
Data? Assetization in the Consumer Genomics Testing Industry, 60 
Bus. & Soc'y 614 (2021), https://journals.sagepub.com/doi/10.1177/0007650319826307 [https://perma.cc/7YSC-VTEW]; Ramish Cheema, Top 20 
Genomics Companies in the World, Yahoo! Finance (Oct. 30, 2023), 
https://finance.yahoo.com/news/top-20-genomics-companies-world-194600414.html [https://perma.cc/8WXD-KGCC]; Kayte Spector-Bagdady, 
Hospitals Should Act Now to Notify Patients About Research Use of 
Their Data and Biospecimens, 26 Nature Med. 306 (2020), https://www.nature.com/articles/s41591-020-0795-6 [https://perma.cc/BEX6-3GCJ]; InsightAce Analytic, Report No. 1264, Biospecimen Contract 
Research Services Market Size, Share & Trends Analysis Report, 2024-
2032 (2024), https://www.insightaceanalytic.com/report/global-biospecimen-contract-research-services-market/1264 [https://perma.cc/N667-TL8F].
    \432\ Geiger & Gross, supra note 431, at 625-26, 638; Shmuel I. 
Becher & Andelka M. Phillips, Data Rights and Consumer Contracts: 
The Case of Personal Genomic Services, in Data Rights and Private 
Law 83 (Damian Clifford et al. eds., 2023), https://ssrn.com/abstract=4180967 [https://perma.cc/35GE-ZQQ4].
---------------------------------------------------------------------------

    There is little readily available information on who is purchasing 
or reselling human genomic data beyond pharmaceutical companies. 
Similarly, there is little readily available information on which 
entities (such as multinational pharmaceutical companies) are 
transferring human genomic data to their subsidiaries or vendors in 
countries of concern.
    While many of the uses of human genomic data are for the 
development of new health technologies and pharmaceuticals, and the 
health and drug discovery environment are highly regulated, the sale of 
the data appears common and is currently virtually unregulated. As a 
result, there are few records of current transactions, and any company 
that collects human genomic data could potentially broker its sale to 
other companies or interested parties. For example, the States of 
Vermont and California have data broker registration laws, but even in 
those States, there is

[[Page 86174]]

not specific information regarding genomic information sales.\433\
---------------------------------------------------------------------------

    \433\ Both California's and Vermont's regulations provide 
definitions of ``Data Broker'' that differ from the definition of 
``data brokerage'' provided in Subpart C of the proposed rule. See 
Cal. Civ. Code sec. 1798.99.80, supra note 62; Vt. Stat. Ann. tit. 
9, sec. 2430(4) (2024).
---------------------------------------------------------------------------

v. Biometric Identifiers
    The proposed rule defines biometric identifiers'' as ``measurable 
physical characteristics or behaviors used to recognize or verify the 
identity of an individual, including facial images, voice prints and 
patterns, retina and iris scans, palm prints and fingerprints, gait, 
and keyboard usage patterns that are enrolled in a biometric system and 
the templates created by the system.'' In recent years, such 
identifiers have become increasingly ubiquitous in our security and 
verification systems. A wide variety of companies and agencies collect 
this information, amassing large datasets on everything from face 
shape, eye scans, and fingerprints to voice recordings and even 
heartbeats.\434\
---------------------------------------------------------------------------

    \434\ Samuel Chapman, Understanding Biometric Data Collection in 
2024, PrivacyJournal.net (Apr. 10, 2023), https://www.privacyjournal.net/biometric-data-collection/ [https://perma.cc/RAQ2-VTLZ].
---------------------------------------------------------------------------

    There is also limited information regarding the biometric data 
broker community. Because of the highly sensitive nature of the data 
(i.e., fingerprints cannot be changed), brokers are not forthcoming in 
their advertising or collection of available information.
vi. Covered Personal Identifiers
    An individual can have personal identifiers both assigned to them 
and collected from them in a wide variety of contexts and through a 
wide variety of entities--including governments, advertisers, and 
providers of technology and communications services. This, combined 
with the fact that personal identifiers have been used in some form for 
many years, means that they are a widely available form of sensitive 
personal data. The proposed rule specifies two subcategories of covered 
personal identifiers that could be used, when combined with each other 
or combined with other types of sensitive personal data, to ``identify 
an individual from a data set or link data across multiple data sets to 
an individual.'' \435\ These subcategories of covered personal 
identifiers in the proposed rule are listed identifiers: (1) In 
combination with any other listed identifier; or (2) In combination 
with other data that is disclosed by a transacting party pursuant to 
the transaction such that the listed identifier is linked or linkable 
to other listed identifiers or to other sensitive personal data.\436\ 
See Sec.  202.212.
---------------------------------------------------------------------------

    \435\ 89 FR 15428.
    \436\ Id.
---------------------------------------------------------------------------

b. The Data-Brokerage Market
    Much of the economic impact of the proposed rule's restrictions on 
the transfer or sale of data types described in part VII.A.3.a of this 
preamble will be borne by firms involved in the data-brokerage market. 
The United States is widely perceived to be the largest data-brokerage 
market in the world, as described below in this section. While the 
proposed rule regulates data-brokerage activities (i.e., transactions), 
there does not appear to be any direct measure of data-brokerage 
activities. This analysis therefore uses and examines information 
regarding first-party data brokers and third-party data brokers as a 
reasonable measure of data-brokerage activities.
i. Companies That May Meet the Definition of Data Brokers for the 
Purposes of the Proposed Rule
    Data brokers collect, aggregate, and sell personal data.\437\ 
First-party or primary data brokers collect and sell information from 
their own customers. Third-party data brokers purchase and resell data. 
On the global scale, an estimated 5,000 data-brokerage firms operate 
worldwide.\438\ There may be as many as 11,000 firms that fall under 
the 518210 NAICS code, which covers firms that provide data processing, 
hosting, and related services.\439\
---------------------------------------------------------------------------

    \437\ How to Stop Data Brokers from Selling Your Personal Data, 
Kaspersky, https://usa.kaspersky.com/resource-center/preemptive-safety/how-to-stop-data-brokers-from-selling-your-personal-information [https://perma.cc/ZLU3-S7N9].
    \438\ Susan Moore, How to Choose a Data Broker, Gartner (June 8, 
2016), https://www.gartner.com/smarterwithgartner/how-to-choose-a-data-broker [https://perma.cc/5FP2-RGM5].
    \439\ U.S. Census Bureau, supra note 412.
---------------------------------------------------------------------------

ii. Market Size
    Estimates of the size of the data broker market vary widely, from 
$50 billion to $300 billion, with one popular estimate claiming that 
over $200 billion in revenue is generated globally each year.\440\ For 
the United States, which maintains approximately 60 percent of the 
global market, a likely range is between $30 billion and $180 
billion.\441\
---------------------------------------------------------------------------

    \440\ How Data Brokers Sell Your Identity & Personal 
Information, IDShield: Blog (Mar. 18, 2022), https://www.idshield.com/blog/internet-privacy/data-brokers-what-they-know-and-how-they-collect-your-data/ [https://perma.cc/6LRX-SX79]; 
Catherine Tucker & Nico Neumann, Buying Consumer Data? Tread 
Carefully, Harv. Bus. Rev. (May 1, 2020), https://hbr.org/2020/05/buying-consumer-data-tread-carefully [https://perma.cc/GDY3-AWKQ]; 
David Lazarus, Shadowy Data Brokers Make the Most of Their 
Invisibility Cloak, L.A. Times (Nov. 5, 2019), https://www.latimes.com/business/story/2019-11-05/column-data-brokers 
[https://perma.cc/AH6C-UKDA]; OnAudience.com, Global Data Market 
Size: 2017-2021 (Nov. 2020), https://pressmania.pl/wp-content/uploads/2020/12/Global-Data-Market-Size-2017-2021-OnAudience-Report.pdf [https://perma.cc/KX6E-4XC6].
    \441\ OnAudience.com, supra note 440 at 8, 11.
---------------------------------------------------------------------------

    Based on total revenue (U.S. and foreign) and the number of 
employees at these firms, the Department estimates the market size as 
shown in Table VII-1 of this preamble.

                         Table VII-1--Selected Data Broker Revenue and Employee Figures
----------------------------------------------------------------------------------------------------------------
           Data broker                Total revenue         U.S. revenue       Foreign revenue       Employees
----------------------------------------------------------------------------------------------------------------
Acxiom (2018) \a\................  $917.4 million.....  $834.6 million.....  $82.8 million......           3,380
LexisNexis (2021) \b\............  $974.3 million.....  n/a \c\............  n/a \c\............          10,200
Oracle America (2023) \d\........  $50 billion........  $31 billion........  $19 billion........     \g\ 164,000
Equifax (2023) \e\...............  $5.3 billion.......  $4.1 billion.......  $1.2 billion.......          14,900
Experian (2022) \f\..............  $6.6 billion.......  $4.4 billion.......  $2.2 billion.......          22,000
----------------------------------------------------------------------------------------------------------------
\a\ Acxiom LLC 2018 Annual Report, AnnualReports.com (2018), https://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_ACXM_2018.pdf [https://perma.cc/6BVA-DQS5].
\b\ Latka, How LexisNexis Hit $974.3M Revenue with a 10.2K Person Team in 2021, SaaS Database, https://getlatka.com/companies/lexisnexis [https://perma.cc/M4DM-HAC9].
\c\ LexisNexis is owned by RELX and is folded into their annual report and therefore the annual report does not
  provide specific domestic and foreign revenue numbers just for LexisNexis.

[[Page 86175]]

 
\d\ Oracle, Oracle Announces Fiscal 2023 Fourth Quarter and Fiscal Full Year Financial Results (June 12, 2023),
  https://investor.oracle.com/investor-news/news-details/2023/Oracle-Announces-Fiscal-2023-Fourth-Quarter-and-Fiscal-Full-Year-Financial-Results/default.aspx [https://perma.cc/DL8Y-H2VM]. The U.S. Revenue entry of $31
  billion is for ``the America's.'' The Foreign Revenue entry of $19 billion is for ``Europe/Middle East/
  Africa'' and ``Asia/Pacific.'' Oracle, Culture and Inclusion Empowers Diversity, https://www.oracle.com/careers/culture-inclusion/best-practices/ [https://perma.cc/3M2B-GQ7F].
\e\ Equifax Inc., 2023 Annual Report (2024), https://investor.equifax.com/sec-filings/annual-reports##document-3666-0001308179-24-000246-2 [https://perma.cc/WU9A-NHZ2].
\f\ Experian, Annual Report 2023 (2023), https://www.experianplc.com/content/dam/marketing/global/plc/en/assets/documents/reports/2023/annual-report/experian_annual_report_2023_web.pdf [https://perma.cc/7QRT-GN3T].
\g\ Oracle Corp., Annual Report (Form 10-K) (June 20, 2023), https://www.sec.gov/Archives/edgar/data/1341439/000095017023028914/orcl-20230531.htm [https://perma.cc/4ADX-R6EJ].

iii. Products Sold by Data Brokers
    Data brokers often collect data regarding, for example, where the 
average person goes, where they shop, and what they search for 
online.\442\ Notably, researchers from Duke University who used a 
secret shopper approach were offered access to thousands of records of 
military personnel and military veterans' data containing names, 
addresses, emails, phone numbers, military agency or branch, medical 
ailments, political affiliations, religion, gender, age, income, credit 
rating, and even details on children in the household.\443\ Not all 
brokers sell the same data, with many targeting niche industries or 
markets to help them gain a competitive advantage. Brokers also trade 
and combine their data with primary collectors to create detailed 
profiles they can package and commercialize.\444\
---------------------------------------------------------------------------

    \442\ Public Hearing on HB 2052 Before the H. Comm. On Bus. & 
Labor, 82nd Leg. Assemb. (Or. 2023) (written public testimony, Or. 
Dep't of Just., Off. of the Att'y Gen.), https://olis.oregonlegislature.gov/liz/2023R1/Downloads/PublicTestimonyDocument/40843 [https://perma.cc/XVM5-4ZEJ].
    \443\ Sherman et al., supra note 6.
    \444\ Henrik Twetman & Gundars Bergmanis-Korats, Data Brokers 
and Security, NATO Strategic Comm'ns Ctr. of Excellence (2021), 
https://stratcomcoe.org/publications/data-brokers-and-security/17 
[https://perma.cc/XJ4D-UQYP].
---------------------------------------------------------------------------

iv. Price Information
    Depending on its type and volume, personal data can be purchased 
for prices ranging from less than $1 for one personal record to 
millions of dollars for a large dataset. In a secret shopper study, 
Duke University researchers found that they could purchase a single 
record for as little as $0.12 and spend upwards of $10,000 for 
approximately 50,000 records of service members and military veterans. 
The price did not noticeably vary based on the data subjects' IP 
location (United States vs. Singapore). The Duke University researchers 
found that if one broker could not sell the information to them, 
another one could. There are estimates that mental health datasets 
could range between $15,000 and $100,000 and may be sold for even 
higher prices if the datasets include more detailed demographic 
data.\445\
---------------------------------------------------------------------------

    \445\ Joanne Kim, Data Brokers and the Sale of Americans' Mental 
Health Data (2023) https://techpolicy.sanford.duke.edu/wp-content/uploads/sites/4/2023/02/Kim-2023-Data-Brokers-and-the-Sale-of-Americans-Mental-Health-Data.pdf [https://perma.cc/48UN-ELKG].
---------------------------------------------------------------------------

v. Customers of Data-Brokerage Products
    It is known that data brokers sell datasets both domestically and 
internationally; however, specific transaction activities with these 
parties are difficult to ascertain from available financial reports. 
The U.S. Bureau of Economic Analysis (``BEA'') faces significant 
limitations for estimating the size of the domestic and international 
markets because BEA data does not break out data brokerage separately 
as an industry. Furthermore, based on sample financial data of the 
data-brokerage firms listed in Table VII-1 of this preamble, the 
Department estimates that the U.S. market produces over 60 percent of 
data broker revenue.
c. Agreements Affected by the Proposed Regulation
    It is difficult to determine an approximate number of affected 
vendor agreements, employment agreements, and investment agreements 
that are entered in any given year by a U.S. person due to the scope 
and nature of these agreements. Each of these three types of agreements 
are considered restricted transactions if they involve access to 
government-related data or bulk U.S. sensitive personal data. The 
Department welcomes comments that provide a source for the annual 
number of vendor agreements, employment agreements, and investment 
agreements that might be affected by the regulation.
i. Vendor Agreements
    According to the proposed rule, a vendor agreement is defined as 
``any agreement or arrangement, other than an employment agreement, in 
which any person provides goods or services to another person, 
including cloud-computing services, in exchange for payment or other 
consideration.'' See Sec.  202.258(a). A potential example of a vendor 
agreement covered by the proposed rule is a medical facility in the 
United States that contracts with a company headquartered in a country 
of concern to provide information technology (``IT'') related services. 
The medical facility has bulk personal health data on its U.S. 
patients, and the IT services provided under the contract involve 
access to the medical facility's systems containing that bulk personal 
health data. (See Example 2 in Sec.  202.258(b)). The NPRM also 
discusses additional examples of vendor agreements pertaining to 
technology services and data storage. (See Examples 3 and 4 in Sec.  
202.258(b)).
    The costs of compliance with the security requirements will vary. 
Covered persons who have vendor agreements within the scope of the 
proposed rule may face costs associated with either replacing a vendor 
located in a country of concern or spending more on compliance (e.g., 
implementing the security requirements) to maintain those vendor 
agreements. Furthermore, some U.S. companies may choose to remove 
vendor agreements altogether rather than bear the cost of complying 
with the security requirements. In contrast, most Fortune 500 companies 
or companies in sectors subject to cybersecurity regulations already 
have cybersecurity controls in place and might only need minor 
modifications to their existing vendor agreements and data security 
controls, while companies with less mature cybersecurity programs may 
require more significant changes.
ii. Employment Agreements
    This NPRM defines an employment agreement as ``any agreement or 
arrangement in which an individual, other than as an independent 
contractor, performs work or performs job functions directly for a 
person in exchange for payment or other consideration, including 
employment on a board or committee, executive-level arrangements or 
services, and employment services at an operational level.'' See Sec.  
202.217(a). A potential example of an employment agreement is a U.S. 
company that employs a team of individuals who are citizens of and 
primarily reside in a country of concern and have access to back-end IT 
services

[[Page 86176]]

and company systems that contain bulk human genomic data (see Example 1 
in Sec.  202.217(b)). Similarly, the employment of a lead project 
manager or a CEO of a U.S. company who primarily resides in a country 
of concern and who has access to bulk U.S. sensitive personal data 
would be considered a restricted transaction (see Examples 2 and 3 in 
Sec.  202.217(b)).
    Any employment agreements involving government-related data or bulk 
U.S. sensitive personal data between U.S. persons and countries of 
concern or covered persons would need to comply with security 
requirements. The cost of security and due diligence requirements may 
drive some companies to cease employment agreements with these covered 
persons, while other companies may incur costs to ensure compliance or 
even implement job transfers to eliminate the potential cost of 
compliance with the proposed regulation. Ultimately, employment 
agreements may incur larger upfront costs once the proposed regulation 
comes into effect that may be minimized over time as the initial market 
disruptions due to the proposed rule settle, the costs associated with 
job transfers are minimized, and firms learn how to operate in the 
changed environment.
iii. Investment Agreements
    This NPRM defines an investment agreement as ``an agreement or 
arrangement in which any person, in exchange for payment or other 
consideration, obtains direct or indirect ownership interests in or 
rights in relation to (1) real estate located in the United States or 
(2) a U.S. legal entity.'' See Sec.  202.228(a). An example is when a 
U.S. company intends to build a data center located in a U.S. territory 
to store bulk personal health data on U.S. persons, and a foreign 
private equity fund located in a country of concern agrees to provide 
capital for the construction of the data center in exchange for 
acquiring a majority ownership stake in the data center (see Example 1 
in Sec.  202.227(c)). Ultimately, investment agreements may incur 
larger upfront costs once the proposed regulation comes into effect 
that may be minimized over time.
iv. Security Requirements
    The proposed rule authorizes three classes of otherwise prohibited 
transactions (vendor agreements, employment agreements, and investment 
agreements) if they meet the security requirements proposed by CISA. 
The goal of the proposed security requirements is to address national 
security and foreign-policy threats that arise when countries of 
concern and covered persons access government-related data or bulk U.S. 
sensitive personal data that may be implicated by the categories of 
restricted transactions. The proposed security requirements 
(incorporated by reference in Sec.  202.402 of this NPRM) have been 
developed by DHS through CISA, which has published the proposed 
requirements on its website, as announced via a Federal Register 
request for comments on the proposed security requirements, issued 
concurrently with this proposed rule. After CISA receives and considers 
public input, it will revise as appropriate and publish the security 
requirements.
    Regarding investment agreements, as described in Sec.  202.228 and 
Sec.  202.508, the proposed rule would treat investment agreements 
entered into by U.S. persons with countries of concern or covered 
persons as restricted transactions even if they are also covered 
transactions subject to CFIUS review, unless and until CFIUS issues an 
interim order, enters into a mitigation agreement, or imposes a 
condition with respect to a particular covered transaction.\446\ As a 
result, any investment agreement that is both a restricted transaction 
under the proposed rule and a covered transaction subject to CFIUS 
review would be subject to the security requirements under the proposed 
rule unless and until the transaction is filed with CFIUS and CFIUS 
takes a ``CFIUS action,'' as defined in the proposed rule, by entering 
into a mitigation agreement or imposing mitigation measures. Because 
the security requirements are likely at least similar to and 
potentially less burdensome than any bespoke mitigation measures that 
CFIUS would enter into or impose, the parties to such a covered 
transaction would likely face, as a result of the proposed rule, only 
the marginal cost of complying with the security requirements before 
CFIUS takes action. Because this cost of compliance is marginal, and 
because it appears likely, based on the Department's experience, that 
many investment agreements by countries of concern or covered persons 
that involve access to sensitive personal data would also be covered 
transactions subject to CFIUS review, it appears likely that there will 
not be a meaningful cost for investment agreements to comply with the 
security requirements.
---------------------------------------------------------------------------

    \446\ Security requirements may only need to be implemented 
while the transaction is pending CFIUS review if the transaction is 
undertaken in the interim. See, e.g., Example 9 in Sec.  202.508.
---------------------------------------------------------------------------

v. Due Diligence and Recordkeeping
    Due diligence and recordkeeping requirements will be important 
considerations when engaging in a restricted transaction or as a 
condition of a license (general or specific) and may be similar to 
certain requirements of an IEEPA-based sanctions program administered 
by OFAC. Section 202.1101 of the proposed rule requires U.S. persons 
subject to these affirmative requirements to maintain documentation of 
their due diligence to assist in inspections and enforcement, and to 
maintain the results of annual audits that verify their compliance with 
the security requirements, as applicable, and the conditions of any 
licenses, where relevant, that the U.S. persons may also have. Entities 
may be required to collect, maintain, and analyze readily available 
information to make appropriate judgments regarding their transactions 
and potential requirements under the proposed regulation. They may also 
be required to make available to the Department any annual audits that 
verify the U.S. person's compliance with the security requirements and 
any conditions on a license.
vi. Audits
    The proposed rule imposes certain audit requirements on restricted 
transactions to ensure compliance with the security requirements for 
covered data transactions, such as appointing a qualified auditor to 
annually assess compliance. Such audits would address the nature of the 
U.S. person's covered data transaction and whether it is in accordance 
with applicable security requirements, the terms of any license issued 
by the Attorney General, or any other aspect of the regulations.
vii. Licenses
    General and specific licenses would be available under the proposed 
regulation. Such licenses would permit transactions that are otherwise 
prohibited by the proposed regulation. Both general and specific 
licenses could include a range of requirements or obligations as the 
Department deems appropriate. The benefits of this type of regime 
include giving regulated parties the ability to bring specific concerns 
to the Department and seek appropriate regulatory relief and affording 
the Department the flexibility to resolve varied cases either generally 
or individually.

[[Page 86177]]

4. Need for Regulatory Action
    There are many statutes, regulations, and programs that aim to keep 
America secure by monitoring, restricting, prohibiting, or otherwise 
regulating the flow of goods, services, investments, and information to 
foreign countries and foreign nationals, especially countries 
considered to be adversaries. For example, CFIUS has the authority to 
take action to mitigate any national security risk arising from certain 
foreign investments in U.S. businesses or involving U.S. real estate, 
or to recommend that the President suspend or prohibit a transaction on 
national security grounds. In addition, OFAC ``administers and enforces 
economic and trade sanctions based on U.S. foreign-policy and national 
security goals against targeted foreign countries and regimes, 
terrorists, international narcotics traffickers, those engaged in 
activities related to the proliferation of weapons of mass destruction, 
and other threats to the national security, foreign policy, or economy 
of the United States.'' \447\
---------------------------------------------------------------------------

    \447\ U.S. Dep't of Treas., Off. of Foreign Assets Control, 
https://ofac.treasury.gov/ [https://perma.cc/4N8E-X7XM].
---------------------------------------------------------------------------

    In Executive Order 13873, the President authorized the Department 
of Commerce to prohibit transactions in the information and 
communications technology and services supply chain or to impose 
mitigation measures to address an unusual and extraordinary threat to 
the national security, foreign policy, and economy of the United 
States.\448\ The Secretary of Commerce exercises this authority through 
the Bureau of Industry and Security.\449\ Executive Order 14034 takes 
various steps to protect sensitive personal data from foreign 
adversaries.\450\
---------------------------------------------------------------------------

    \448\ 84 FR 22689-22690.
    \449\ Office of Information and Communications Technology and 
Services (OICTS), Bureau of Industry and Security, https://www.bis.gov/OICTS [https://perma.cc/MFX8-MDN4].
    \450\ 86 FR 31423.
---------------------------------------------------------------------------

    While existing legislation provides the Department of Justice with 
authority to promulgate this proposed rule, no existing statute 
replicates the measures undertaken here. Neither do any of the previous 
executive actions set forth in Executive Order 14117 \451\ broadly 
empower the government to prohibit or otherwise restrict the sale or 
transfer of government-related data or bulk U.S. sensitive personal 
data to countries of concern. Therefore, the proposed regulation will 
not be duplicative of any existing regulatory regime.
---------------------------------------------------------------------------

    \451\ 89 FR 15422.
---------------------------------------------------------------------------

    As relevant here, the regulatory philosophy of Executive Order 
12866 provides that agencies should issue regulations when there is a 
compelling public need, such as a market failure.\452\ Executive Order 
12866 further directs agencies issuing new regulations to identify, 
where applicable, the specific market failure that warrants new agency 
action and to assess its significance. In perfect, unregulated markets, 
supply and demand lead to transactions that allocate resources 
efficiently, fully supply the market at prices that buyers are willing 
to pay, and do not harm third parties. However, some transactions 
result in market failures known as ``negative externalities;'' that is, 
harms to parties not directly involved in the transactions. The sale of 
government-related data or bulk U.S. sensitive personal data to 
adversaries is an example. Such transactions are mutually beneficial to 
the parties: U.S. data brokers obtain monetary benefits, and 
adversaries obtain possession of a potentially strategic asset of 
sensitive data that they can put to malicious use. However, when the 
data can be used to harm U.S. nationals who are not directly involved 
in the transactions by presenting a risk to national security or 
foreign policy, then the transaction creates negative externalities. 
These market failures demonstrate a need for the regulation being 
proposed, which will eliminate or reduce the risk to national security 
and foreign policy from such transactions. Circular A-4 also recognizes 
a common need for regulation to protect civil rights, civil liberties, 
or advancing democratic values, all of which are threatened if 
government-related data or bulk U.S. sensitive personal data end up in 
the hands of adversaries.\453\
---------------------------------------------------------------------------

    \452\ See 58 FR 51735.
    \453\ See Off. of Mgmt. & Budget, supra note 394, at 15.
---------------------------------------------------------------------------

5. Baseline (Without the Proposed Rule)
    The baseline refers to what the world would look like without the 
regulatory changes being proposed here, which is closely related to the 
need for the regulation described above. To inform the public of the 
rationale behind the agency's proposed regulations, the Department must 
analyze the quantifiable and qualitative costs and benefits of the 
proposed action. The baseline for the proposal under consideration is 
the state of the world without the regulation, often referred to as the 
``no-action alternative,'' which here includes the current regulatory 
regime.
a. Baseline National Security and Foreign-Policy Risks by Category of 
Data
i. Human Genomic and Human 'Omic Data
    Human genomic data presents characteristics that, under certain 
circumstances, allow for misuse. Although humans share more than 99 
percent of their DNA, the remaining differences play a significant role 
in physical and mental health.\454\ In addition to genomic data, which 
describes a person's DNA sequence, if combined with other data, data 
characterizing other human systems, known as 'omic data, can also 
uniquely identify individuals. For example, transcriptomic data 
describes RNA transcripts, or the expression of genes as impacted by 
environmental factors; proteomic data describes the complete set of 
proteins expressed by a cell, tissue, or organism; and metabolomic data 
describes the small molecule metabolites found within a biological 
sample.
---------------------------------------------------------------------------

    \454\ The Human Genome Project, Nat'l Hum. Genome Rsch. Inst., 
https://www.genome.gov/human-genome-project [https://perma.cc/55Z4-XHFN].
---------------------------------------------------------------------------

    Human genomic data and human `omic data are therefore highly 
personal, and there are both person- and population-level risks to 
national security associated with the potential sale of such data to 
foreign adversaries.\455\ Genomic data has been widely acknowledged in 
scientific, policy, and ethics literature to have the potential to be 
used to track an individual; breach their privacy; and expose 
individuals to discrimination, exclusion, or social embarrassment when 
paired with other personally identifiable information, such as by 
coloring public perception of a person's competence or health. Genomic 
data that is de-identified by standard healthcare practices (i.e., 
removal of name, date of birth) can, in some cases, be potentially re-
identified by methods that combine genomic data with other privately 
and publicly available information.\456\ There are also other

[[Page 86178]]

potential risks related to such data.\457\ For instance, the 2023 
Annual Threat Assessment of the U.S. Intelligence Community explains 
that generally, ``[r]apid advances in dual-use technology, including 
bioinformatics, synthetic biology, nanotechnology, and genomic editing, 
could enable development of novel biological weapons that complicate 
detection, attribution, and treatment.'' \458\ Additionally, as the 
National Counterproliferation and Biosecurity Center has stated, 
``[r]esearch in genome editing by countries with different regulatory 
or ethical standards than those of Western countries probably increases 
the risk of the creation of potentially harmful biological agents or 
products.'' Furthermore, because biological relatives share some 
genetic traits, the misuse of genomic and related information can 
potentially harm not only the individual but also their current and 
future biological relatives, to some degree.
---------------------------------------------------------------------------

    \455\ Kirsty Needham, Special Report: COVID Opens New Doors for 
China's Gene Giant, Reuters (Aug. 5, 2020), https://www.reuters.com/article/world/special-report-covid-opens-new-doors-for-chinas-gene-giant-idUSKCN2511CD/ [https://perma.cc/U4B2-Y4TB]; Nat'l Acads. of 
Scis., Eng'g & Med., Safeguarding the Bioeconomy 296-306 (2020), 
https://nap.nationalacademies.org/catalog/25525/safeguarding-the-bioeconomys [https://perma.cc/77RH-ACKG]; Bonomi et al., supra note 
237, at 647.
    \456\ Adam Tanner, Strengthening Protection of Patient Medical 
Data, Century Found. (Jan. 10, 2017), https://tcf.org/content/report/strengthening-protection-patient-medical-data/ [https://perma.cc/R26L-G9WP].
    \457\ Jan van Aken & Edward Hammond, Genetic Engineering and 
Biological Weapons: New Technologies, Desires and Threats from 
Biological Research, 4 EMBO Reports S57 (May 9, 2003), https://doi.org/10.1038/sj.embor.embor860 [https://perma.cc/Z95V-SWVL].
    \458\ Off. of the Dir. of Nat'l Intel., supra note 91, at 25; 
Nat'l Counterproliferation & Biosecurity Ctr., Biological Warfare, 
https://www.dni.gov/index.php/ncbc-features/1548-features-2 [https://perma.cc/6V8M-354G].
---------------------------------------------------------------------------

    For example, Huntington's Disease is neurodegenerative, is 
frequently highly incapacitating, has no cure, and is tied to specific 
genetic variants.\459\ Revealing that an individual carries the 
variants for Huntington's Disease could therefore be used to claim that 
a political candidate for office may soon become incapacitated or to 
harm that person's family members mentally or emotionally.
---------------------------------------------------------------------------

    \459\ Huntington's Disease, Nat'l Inst. of Health, Nat'l Inst. 
of Neurological Disorders & Stroke, https://www.ninds.nih.gov/health-information/disorders/huntingtons-disease#toc-what-is-huntington-s-disease [https://perma.cc/YE7C-UKN2].
---------------------------------------------------------------------------

    At a population level, there are multiple examples of the risks 
posed by harmful use of genomic data. For example, the PRC has 
collected and used genetic data from minority groups and potential 
political dissidents to carry out human-rights abuses against those 
groups and to support state surveillance.\460\ The PRC's collection of 
healthcare data from the United States poses equally serious risks, not 
only to the privacy of Americans, but also to the economic and national 
security of the United States.\461\
---------------------------------------------------------------------------

    \460\ Nat'l Counterintel. & Sec. Ctr., supra note 83, at 3-4.
    \461\ Id.
---------------------------------------------------------------------------

    It is conceivable that bulk genomic data in the wrong hands could 
be used to identify or track ethnic or racial subgroups in the United 
States and to target them for physical, mental, or emotional harm. As 
the NCSC has publicly explained, for example, ``[c]oncerns over the 
exploitation of healthcare and genomic data by the [People's Republic 
of China] are not hypothetical,'' as China ``has a documented history 
of exploiting DNA for genetic surveillance and societal control of 
minority populations in Xinjiang, China.'' \462\ Specifically, China 
``has established a high-tech surveillance system across Xinjiang, as 
part of a province-wide apparatus of oppression aimed primarily against 
traditionally Muslim minority groups.'' \463\ This apparatus includes 
an ``initiative launched by the PRC government in 2014'' that ``has 
been used to justify the collection of biometric data from all Xinjiang 
residents ages 12 to 65.'' \464\ Chinese authorities have ``collected 
DNA samples, fingerprints, iris scans, and blood types'' and linked the 
biometric data ``to individuals' identification numbers and centralized 
[it] in a searchable database used by PRC authorities.'' \465\ As NCSC 
has further explained, ``[s]pecific abuses by the PRC government as 
part of this effort include mass arbitrary detentions, severe physical 
and psychological abuse, forced labor, oppressive surveillance used 
arbitrarily or unlawfully, religious persecution, political 
indoctrination, and forced sterilization of members of minority groups 
in Xinjiang.'' \466\ In 2020, the Department of Commerce ``sanctioned 
two subsidiaries of China's BGI for their role in conducting genetic 
analysis used to further the PRC government's repression of Uyghurs and 
other Muslim minority groups in Xinjiang.'' \467\ As this example 
shows, ``[t]he combination of stolen PII, personal health information, 
and large genomic data sets collected from abroad affords the PRC''--
and other countries of concern--``vast opportunities to precisely 
target individuals in foreign governments, private industries, or other 
sectors for potential surveillance, manipulation, or extortion.'' \468\ 
The potential exploitation of this kind of data is not limited to 
targeting and repression within the borders of a country of concern, as 
this data could help ``not only recruit individuals abroad, but also 
act against foreign dissidents.'' \469\
---------------------------------------------------------------------------

    \462\ Id. at 3.
    \463\ Id.
    \464\ Id.
    \465\ Id.
    \466\ Id.
    \467\ Id.
    \468\ Id. at 4.
    \469\ Id.
---------------------------------------------------------------------------

    There are additional risks to national security associated with the 
sale of bulk genomic data to countries of concern. For example, BGI 
Group, a Chinese company, grew exponentially during the COVID-19 
pandemic by selling COVID-19 test kits in 180 countries around the 
world, which enabled it to collect biospecimens and DNA sequences from 
the individuals tested.\470\ The company also built laboratories in 18 
countries, widely distributing its genetic sequencing/gathering 
technology across the globe, and the government of China helped to 
coordinate some of BGI's arrangements with other countries. The human 
genetic samples that BGI collected may be shared publicly on China's 
government-funded National GeneBank, creating individual privacy risks, 
and the Chinese government has indicated that its backing of BGI is 
intended to support China in commanding a significant position in the 
international biotechnology industry.\471\
---------------------------------------------------------------------------

    \470\ Needham, supra note 455 (``[i]n science journals and 
online, BGI is calling on international health researchers to send 
in virus data generated on its equipment, as well as patient samples 
that have tested positive for COVID-19, to be shared publicly via 
China's government-funded National GeneBank.'').
    \471\ Id.
---------------------------------------------------------------------------

ii. Biometric Identifiers
    As previously discussed, the gathering and aggregating of biometric 
data can be a complex process, and much about the market for biometric 
data is still unknown. The legitimate use of biometrics across many 
areas of technology is increasing rapidly, and the exposure of 
biometric data to countries of concern could prove to be especially 
damaging since the physical characteristics linked to biometrics are 
often difficult or impossible to change.
    The PRC already has a demonstrated ability to collect and exploit 
the biometric data of its citizens, an effort that has been especially 
targeted at oppressed groups within its population. This has included 
gathering data such as ``DNA samples, fingerprints, iris scans, and 
blood types'' and creating a database where such data is linked with an 
individual's personal identifier.\472\ These capabilities will likely 
continue to be developed as the technology improves and could easily be 
used to undermine U.S. national security.
---------------------------------------------------------------------------

    \472\ Nat'l Counterintel. & Sec. Ctr., supra note 83.

---------------------------------------------------------------------------

[[Page 86179]]

iii. Precise Geolocation Data
    Precise geolocation data in the hands of foreign adversaries poses 
national security risks with respect to two areas: (1) operations, 
including missions, deployments, exercises, and activities of national 
security personnel; and (2) personnel, including those in the military 
and their families, as well as nonmilitary persons with the potential 
to obtain or hold information vital to national security.\473\
---------------------------------------------------------------------------

    \473\ Hazelrig, supra note 4; Sherman et al., supra note 6.
---------------------------------------------------------------------------

    Potentially sensitive information can be gleaned outside direct 
conflict zones. Precise geolocation data can be readily used to 
identify the location and purpose of important national security-
related infrastructure, facilities, and equipment, all of which could 
lead to immense harm to national security.
    Precise geolocation data can also be used to coerce military 
personnel, State Department officials, and anyone else with access to 
sensitive national security information, including through the use of 
such data on their family members or other close associates.\474\ 
Compromising information gleaned from geolocation data can be used by 
adversaries for surveillance and intelligence gathering as well as to 
extort, blackmail, dox, and manipulate behavior to obtain sensitive 
national security information. With all the information that is readily 
available from data brokers, it is quite feasible to develop effective 
strategies to identify national security personnel and diplomatic/
foreign-policy personnel working with specific sensitive information 
and to track their movements and behavior.
---------------------------------------------------------------------------

    \474\ Sherman et al., supra note 6 at 14.
---------------------------------------------------------------------------

    Adversaries could use these datasets to identify where national 
security personnel work, then use the personnel's health or financial 
information to bribe or blackmail them into providing the adversaries 
with access to restricted systems, sensitive information, or critical 
programs or infrastructure. Precise geolocation data could also allow 
these countries to track service members' and other national security 
personnel's movements, impersonate personnel online or in email, and 
identify personnel working on specific tasks within the national 
security community.
    Countries of concern can also exploit access to government-related 
data, regardless of its volume. As one report has explained, for 
example, location-tracking data on individuals (e.g., military members, 
government employees and contractors, or senior government officials) 
can ``reveal sensitive locations--such as visits to a place of worship, 
a gambling venue, a health clinic, or a gay bar[,]'' or 
``reputationally damaging lifestyle characteristics, such as 
infidelity[,]'' which ``could be used for profiling, coercion, 
blackmail, or other purposes[.]'' \475\
---------------------------------------------------------------------------

    \475\ Sherman et al., supra note 6, at 15.
---------------------------------------------------------------------------

    In addition, these geolocation capabilities, combined with 
photography, ``can expose personal information, locations, routines and 
numbers of [Department of Defense (DOD)] personnel, and potentially 
create unintended security consequences and increased risk to the joint 
force and mission.'' \476\
---------------------------------------------------------------------------

    \476\ Press Release, Def. Logistics Agency, New Policy Prohibits 
DoD Employees from Using GPS Services in Operational Areas, (Aug. 8, 
2018) (quotation omitted), https://www.dla.mil/About-DLA/News/News-Article-View/Article/1597116/new-policy-prohibits-dod-employees-from-using-gps-services-in-operational-areas/ (quoting a defense 
department official) [https://perma.cc/8BNE-WU65].
---------------------------------------------------------------------------

iv. Personal Health Data
    Personal health data also presents threats in the hands of foreign 
adversaries. There are a few documented cases of data brokers selling 
sensitive health information to foreign governments, including those in 
part IV.D.1.a of this preamble. Purchasers may have direct, indirect, 
or undisclosed ties to foreign officials that provide these entities 
with access to otherwise prohibited data. The presence of foreign 
adversaries in the U.S. health data market makes the variety and amount 
of American health data available in the data-brokerage ecosystem 
risky. Notably, the types of sensitive personal data (e.g., mental 
health or HIV/AIDS diagnoses) available, paired with the increasing 
speed and ease with which artificial intelligence and other 
technologies can re-identify individuals using as few as 15 demographic 
attributes (e.g., ZIP code, date of birth, gender, citizenship, race, 
occupation) from another dataset, have the potential to produce harmful 
outcomes for the American public if placed in the wrong hands.\477\
---------------------------------------------------------------------------

    \477\ Adam Tanner, supra note 456; Rocher et al., supra note 45.
---------------------------------------------------------------------------

    Currently, health data brokers collect and sell a wealth of 
information encompassing everything from general health conditions to 
addiction and prescription drug use. Additional discussion of these 
risks associated with personal health data can be found in part V.A.4 
of this preamble.
v. Personal Financial Data
    Financial data tied to individuals can pose associated national 
security threats in the hands of foreign adversaries. There is also an 
associated threat to national security to U.S. persons who might be 
targeted for recruitment by a foreign adversary through the use of 
financial data as leverage over such U.S. persons. Data about an 
individual's credit, charge, or debit card, or bank account, including 
purchases and payment history; data in a bank, credit, or other 
financial statement, including assets, liabilities and debts, and 
transactions; or data in a credit or ``consumer report'' expose that 
individual to more than monetary losses.\478\ The threat of exposing an 
individual's spending habits, particularly spending that may be 
embarrassing, can render that person open to extortion or 
blackmail.\479\ In instances where a threatened individual has access 
to especially sensitive information, national security may be at risk.
---------------------------------------------------------------------------

    \478\ Ctr. for Democracy & Tech., Docket No. CFPB-2023-0020, 
Response to Request for Information Regarding Data Brokers, at 3-5 
(July 15, 2023), https://cdt.org/wp-content/uploads/2023/07/CDT-Comment-to-CFPB-on-Data-Brokers-CFPB-2023-002054.pdf [https://perma.cc/YTJ8-QMVW].
    \479\ Arango, supra note 428.
---------------------------------------------------------------------------

vi. Covered Personal Identifiers
    Covered personal identifiers are a form of sensitive personal data 
that are both widely available and highly variable in nature. For 
example, covered personal identifiers may include demographic or 
contact data (e.g., first and last name, birthplace, ZIP code, 
residential street or postal address, phone number, and email address 
and similar public account identifiers) that is linked to financial 
account numbers. Many types of covered personal identifiers can be used 
effectively in combination with other typers of sensitive personal 
data. The versatility of this data could make covered personal 
identifiers a valuable target for foreign adversaries attempting to 
increase the effectiveness of the bulk sensitive personal data in their 
possession by linking together separate datasets. For example, the PRC 
has both stolen data on U.S. persons that has included covered personal 
identifiers (e.g., names and Social Security numbers, as evidenced in 
the 2015 hack of the health insurer Anthem, Inc.) and has effectively 
used personal identifiers within internal datasets on their citizens as 
a way to more effectively surveil marginalized groups.\480\
---------------------------------------------------------------------------

    \480\ Nat'l Counterintel. & Sec. Ctr., supra note 83.

---------------------------------------------------------------------------

[[Page 86180]]

vii. Government-Related Data
    It has become increasingly evident in recent years that government-
related location data is at risk of being exploited by countries of 
concern through location information collected from electronic devices, 
including cell phones and fitness apps.\481\ Such data can be used to 
not only track the movements of targeted government associates but also 
to link them with sensitive activities and vices, such as gambling or 
prostitution. This information can then be used to pressure these 
persons to reveal sensitive information, thereby compromising U.S. 
national security. Methods include malicious cyber-enabled activities, 
espionage, and blackmail.\482\
---------------------------------------------------------------------------

    \481\ Def. Logistics Agency, supra note 476.
    \482\ Sherman et al., supra note 6 at 15.
---------------------------------------------------------------------------

b. Baseline: Total Potential U.S. Population Affected by Risks
    Part IV.A.1 of this preamble explains how adversaries can use their 
access to Americans' bulk sensitive personal data to engage in 
malicious cyber-enabled activities and malign foreign influence and to 
track and build profiles on U.S. individuals, including members of the 
military and government employees and contractors, for illicit purposes 
such as blackmail and espionage. As of July 2021, one of the largest 
data brokers, Acxiom, sold products that purported to cover 45.5 
million current and former U.S. military personnel and 21.3 million 
current and former government employees.\483\ The proposed rule also 
observes that countries of concern can exploit their access to 
Americans' bulk sensitive personal data to collect information on 
activists, academics, journalists, dissidents, political figures, and 
members of nongovernmental organizations or marginalized communities to 
intimidate them; curb political opposition; limit the freedoms of 
expression, peaceful assembly, or association; or enable other forms of 
suppression of civil liberties. Even family members of primary targets 
can be ensnared in such malicious activity. Finally, individuals with 
access to advanced intellectual property, such as semiconductor 
designs, could be high-value targets of countries of concern.
---------------------------------------------------------------------------

    \483\ Justin Sherman, Data Brokers and Sensitive Data on U.S. 
Individuals (2021), https://techpolicy.sanford.duke.edu/wp-content/uploads/sites/4/2021/08/Data-Brokers-and-Sensitive-Data-on-US-Individuals-Sherman-2021.pdf [https://perma.cc/Q3QL-PK7K].
---------------------------------------------------------------------------

    Tables VII-2 and VII-3 of this preamble provide estimates of the 
size of these targeted populations, but these figures should not be 
added together to calculate a single population figure, since a single 
individual could be a member of more than one of the communities.
    Several of the estimates presented in Table VII-2 of this preamble 
required calculations based on certain assumptions. Because data on the 
number of current Federal employees provided by the Office of Personnel 
Management does not include employees of the U.S. Postal Service, 
Office of the Director of National Intelligence, or Central 
Intelligence Agency, data on those groups was obtained from other 
sources and added in separate lines. The estimated number of former 
Federal Government contractors was calculated by applying the economy-
wide labor turnover rate from 2001 to 2023 to the number of current 
Federal Government contractors; the Department assumed that half of the 
labor turnover involved workers staying in Federal Government 
contracting, and half involved workers leaving the industry. The 
estimated number of family members of military veterans was calculated 
by applying the current average number of family members for current 
military members to the military veteran population.

       Table VII-2--Affected Population--Government-Related Groups
------------------------------------------------------------------------
                      Category                            Population
------------------------------------------------------------------------
Current Federal Government employees (excluding                2,271,498
 employees of the U.S. Postal Service, director of
 National Intelligence, and Central Intelligence
 Agency) \a\........................................
U.S. Postal Service employees \b\...................             525,469
Office of the Director of National Intelligence                    1,750
 employees \c\......................................
Central Intelligence Agency employees \d\...........              20,000
Former Federal Government employees \e\.............           4,103,208
Current Federal Government contractors \f\..........           4,100,000
Former Federal Government contractors f g...........           1,715,850
Department of Defense active duty \h\...............           1,304,720
Coast Guard active duty \h\.........................              39,485
Ready Reserve \h\...................................             994,860
Standby Reserve \h\.................................               5,253
Retired Reserve \h\.................................             183,728
Current military family members \h\.................           2,482,499
Military veterans \i\...............................          17,680,000
Former military family members h i..................          21,188,328
------------------------------------------------------------------------
\a\ U.S. Off. of Pers. Mgmt., Status Data: Employment, Federal Workforce
  Data (Feb. 2024), https://perma.cc/7NF9-CTSC.
\b\ Number of Postal Employees Since 1926, U.S. Postal Service (Feb.
  2024), https://about.usps.com/who/profile/history/employees-since-1926.htm [https://perma.cc/6W5W-VJJ6].
\c\ Charles C. Clark, Lifting the Lid, Gov't Exec. (Sept. 1, 2012),
  https://www.govexec.com/magazine/features/2012/09/lifting-lid/57807/
  [https://perma.cc/N8Z8-GEL8].
\d\ Michael J. O'Neal, CIA, Formation and History, Encylopedia.com,
  https://www.encyclopedia.com/politics/encyclopedias-almanacs-transcripts-and-maps/cia-formation-and-history [https://perma.cc/RZ24-YJAE YJAE].

[[Page 86181]]

 
\e\ U.S. Off. of Pers. Mgmt., Dynamics Data: Separations, FY 20052005-FY
  2009 (data cube), Federal Workforce Data (Feb. 2024), https://
  www.fedscope.opm.gov/ibmcognos/bi/v1/
  disp?b_action=powerPlayService&m_encoding=UTF-
  8&BZ=1AAABv9rMvcF42pVOQW6DQAz8jE2SQyOvYRM4cFjYRcmhkAYuPVXbZFNFpRAB~1cF
  qEraW2dkyR6PR~bKYl1WxdHsddwPbef2eonMVxOQkYFKhJbbgEIZCl9xsNlkyt8mUhAyr7
  zx1qhjujuoahcjZ6e2GVwzIGeXtj67DmWCATX2y6GvFwd7_rQfrn8r3c12dri2Tb9AqZGz
  27z67X_wIVPVueaMTMvsFZmYSCLTEzL9zNFqDPN0ma7TIs9NWu2LPFfPJv53kJe8xBciEE
  QkBAEAgSRggpEA90BkQh7TVF0jRdoO7o8EyCGyT8hOIL8jR7Mg7gJMQPZH_wPExKmbn5lq
  fmHGNxVvb8I%3D [https://perma.cc/L42Z-AFAA]; U.S. Off. of Pers. Mgmt.,
  Dynamics Data, Separations, FY 2010-FY 2014 (data cube), Federal
  Workforce Data (Feb. 2024), https://www.fedscope.opm.gov/ibmcognos/bi/
  v1/disp?b_action=powerPlayService&m_encoding=UTF-
  8&BZ=1AAABv4ldgp142pVOwW6CQBD9mR3UQ83sg1U4cAB2iR4KVrj01FBdG1MKBvj~NEAa
  bW99L5PMvHnzMk6Rr4syP5q9Dvuh7exeLwm4GqmiTZAoX_vAg_~HasNbTwdBbCL4W0PAyh
  lvTXRMdoeo3IWE9NQ2g20GQnpp67PtSMXkcVN9WXL14lCdPqsP278V9lZ11XBtm35BShPS
  27z67X_wEbjsbHMm8DJ9JTBYMoGfCPwze6sxzNFFsk7yLDNJuc_zLHo24b_DnPglvDALyc
  xSshCChWIBFiOFuAcSmDCmRXVNHOhqsH8kQfAJLhOsJLwTglmQd0FMILij~QFy4tTNz0w1
  vzDjG3wAb~w%3D [https://perma.cc/5D43-3SY8]; U.S. Off. of Pers. Mgmt.,
  Dynamics Data, Separations, FY 2015-FY 2019 (data cube), Federal
  Workforce Data (Feb. 2024), https://www.fedscope.opm.gov/ibmcognos/bi/
  v1/disp?b_action=powerPlayService&m_encoding=UTF-
  8&BZ=1AAABv6ePmJp42pVOQW6DQAz8jE2SQyOvFyI4cFjYReFQSAOXnqptsqmiUoiA~6sC
  VCXtrTOyZI~HI3tVua3q8mhyHQ9j17tcr5H5GpJvRCgCtVPCJyOjROosldpPDCU7Qci88a
  Zbo47p~qDqfYycnbp2dO2InF265ux6DBL0qbVfDqVeHezp03644a1yN9vb8dq1wwoDjZzd
  ltVv~4MNmeretWdkWmevyMQkAmR6QqafOdpMYZ6u0m1aFoVJ67wsCvVs4n8HeclLfCECQU
  RCEAAQBARMMBHgHohMyFOaahqkSNvR~ZEAOUSWhOwE8jtytAjiLsAMZDnZHyBmzt3yzFzL
  Cwu_AVRTb_0%3D [https://perma.cc/646G-6NBA]; U.S. Off. of Pers. Mgmt.,
  Dynamics Data, Separations, FY 2020-FY 2024 (data cube), Federal
  Workforce Data (Feb. 2024), https://www.fedscope.opm.gov/ibmcognos/bi/v1/disp?b_action=powerPlayService&m_encoding=UTF-8&BZ=1AAABv3dM77542pVOwW6DMAz9GZu2h1WOAa05cIAkqD0MusKlpylr06kagwr4f00BTe1223uyZD8%7EPzmoynVVlwez08kwdr3b6SUyX2PJmeFYylCrSD9HKemNyFiQkkJpEyHzKvC3Jj2o7T6ttwlyfura0bUjcn7pmrPrMc4wotZ_OQz1Ym9Pn%7EbDDW_Vu9nejteuHRYYa_T8Nq9__x9syFT3rj0j0zI%7EIpMnMj0h088crXxYoCu1VmVRGFXvyqJIX0zy76Age00uRCCISAgCAIKYgAk8Ae6B6K99Wto0SFLb0f2RAHmDHBKyE8jvyHIWxF2ACcihtz9ATJy6_Zmp5hdmfANkKW%7Ev [https://perma.cc/58FZ-T7VA].
\f\ David Welna & Marisa Pe[ntilde]aloza, Not Expecting Back Pay,
  Government Contractors Collect Unemployment, Dip into Savings, NPR
  (Jan. 7, 2019), https://www.npr.org/2019/01/07/682821224/most-contractors-do-not-expect-to-get-back-pay-when-the-shutdown-ends
  [https://perma.cc/K4AW-ARFW].
\g\ U.S. Bureau of Labor Stat., Total Separations Rate, Total Nonfarm,
  Not Seasonally Adjusted (JTU000000000000000TSR), Job Openings and
  Labor Turnover Survey, https://data.bls.gov/toppicks?survey=jt [https://perma.cc/VQQ3-7AT3] (data extracted Sept. 2024) (select ``Total
  separations rate, Total nonfarm, not seasonally adjusted'' from list;
  then click ``Retrieve data''). Estimate is based on the average annual
  separations rate from 2000 to 2022. The estimate of former government
  officials is based on the average turnover rate for all employees in
  the economy.
\h\ U.S. Dep't of Def., ICF, 022 Demographics: Profile of the Military
  Community (2022), https://download.militaryonesource.mil/12038/MOS/Reports/2022-demographics-report.pdf [https://perma.cc/TP2G-UADR].
\i\ U.S. Bureau of Labor Stat., Population Level--Total Veterans, 18
  Years and Over (LNU00049526), Labor Force Statistics from the Current
  Population Survey, https://beta.bls.gov/dataViewer/view/timeseries/LNU00049526 LNU00049526 [https://perma.cc/P396-7M3A] (data extracted Feb. 2024).

    The proposed rule highlights data associated with ``activists, 
academics, journalists, dissidents, political figures, or members of 
nongovernmental organizations or marginalized communities'' that could 
be used to ``intimidate such persons; curb political opposition; limit 
freedoms of expression, peaceful assembly, or association; or enable 
other forms of suppression of civil liberties.'' \484\ Table VII-3 of 
this preamble describes the size of these populations.
---------------------------------------------------------------------------

    \484\ 89 FR 15781.
---------------------------------------------------------------------------

    Table VII-3 of this preamble also contains several figures that 
required calculations based on certain assumptions. The estimated 
number of activists was calculated using a survey from the Washington 
Post and Kaiser Family Foundation that asked respondents whether they 
considered themselves activists; the percentage that answered ``yes'' 
was then applied to the current adult population. No data was available 
on the number of people residing in the United States who would be 
considered dissidents, so an estimate is provided for the size of this 
group. For this analysis, marginalized communities were assumed to 
include members of the lesbian, gay, bisexual, or transgender 
(``LGBT'') community; religious minorities; and racial minorities.\485\ 
The number of religious minorities was calculated using the percentage 
of the population that identified as Jewish, Muslim, Buddhist, Hindu, 
or another religion.\486\
---------------------------------------------------------------------------

    \485\ The groups that were assumed to be marginalized 
communities are similar to the groups most likely to be targeted in 
one or more countries of concern, which differs from the definition 
of underserved communities defined in Executive Order 13985 
(Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government), 89 FR 7009 (Jan. 20, 2021). For 
examples of LGBT, religious, and racial minorities being targeted in 
the countries of concern, see, e.g., Bibek Bhandari & Elgar Hu, 
`Rainbow Hunters' Target LGBTQ Chinese Students, Foreign Policy 
(July 28, 2023), https://foreignpolicy.com/2023/07/28/china-rainbow-hunters-target-lgbtq-students/ [https://perma.cc/UZ37-D48A]; Pew 
Rsch. Ctr., Government Policy Toward Religion in the People's 
Republic of China--A Brief History, Measuring Religion in China 
(Aug. 30, 2023), https://www.pewresearch.org/religion/2023/08/30/government-policy-toward-religion-in-the-peoples-republic-of-china-a-brief-history/ [https://perma.cc/25CH-7AKH].
    \486\ People who identify as Jewish, Muslim, Buddhist, Hindu, or 
members of other religions are non-Christian populations that each 
represent less than 2 percent of the U.S. population. 2022 PRRI 
Census of American Religion: Religious Affiliation Updates and 
Trends, PRRI (Feb. 24, 2023), https://www.prri.org/spotlight/prri-2022-american-values-atlas-religious-affiliation-updates-and-trends/ 
[https://perma.cc/BQA7-MK2J].
---------------------------------------------------------------------------

    As noted earlier in this section, the populations affected by risks 
have substantial overlap, so the Department is unable to provide a 
single estimate of the affected population. Nonetheless, these 
estimates show that a substantial portion of the U.S. population is 
currently affected by the risks resulting from adversaries' access to 
bulk sensitive personal data.

        Table VII-3--Populations Affected by Risks--Other Groups
------------------------------------------------------------------------
                      Category                            Population
------------------------------------------------------------------------
Activists a b.......................................          46,973,153
Academics \c\.......................................           1,380,290
Journalists \d\.....................................              44,530
Dissidents e f g h..................................             127,929
Political figures \i\...............................             519,682
Members of non-governmental organizations \j\.......             715,790
Marginalized communities--LGBT \k\..................          13,942,200
Marginalized communities--Religious b l.............          14,352,908

[[Page 86182]]

 
Marginalized communities--Race \m\ (white Hispanic           130,398,545
 population not included)...........................
------------------------------------------------------------------------
\a\ Wash. Post & Kaiser Family Found., Survey on Political Rallygoing
  and Activism (Apr. 2018), https://files.kff.org/attachment/Topline-Washington-Post-Kaiser-Family-Foundation-Survey-on-Political-Rallygoing-and-Activism [https://perma.cc/7ELT-NM6L].
\b\ U.S. Census Bureau, K200104: Population by Age, American Community
  Survey, 1-Year Supplemental Estimates (2022), https://data.census.gov/table/ACSSE2022.K200104 [https://perma.cc/D6KP-JTKD].
\c\ U.S. Bureau of Labor Stat., 25-1000: Postsecondary Teachers,
  National Occupational Employment and Wage Estimates (May 2023), https://www.bls.gov/oes/current/oes_nat.htm [https://perma.cc/8FTZ-FCMW].
\d\ U.S. Bureau of Labor Stat., 27-3023: News Analysts, Reporters and
  Journalists, National Occupational Employment and Wage Estimates (May
  2023), https://www.bls.gov/oes/current/oes_nat.htm [https://perma.cc/8FTZ-FCMW].
\e\ U.S. Dep't of Homeland Sec., Off. of Immigr. Stat., 2003 Yearbook of
  Immigration Statistics (2004), https://www.dhs.gov/ohss/topics/immigration/yearbook/2003 immigration/yearbook/2003 [https://perma.cc/FSJ3-XRSG].
\f\ U.S. Dep't of Homeland Sec., Off. of Immigr. Stat., 2012 Yearbook of
  Immigration Statistics (2013), https://www.dhs.gov/ohss/topics/immigration/yearbook/2012 immigration/yearbook/2012 [https://perma.cc/XZG6-WL65].
\g\ U.S. Dep't of Homeland Sec., Off. of Immigr. Stat., 2022 Yearbook of
  Immigration Statistics (2023), https://www.dhs.gov/ohss/topics/immigration/yearbook/2022 immigration/yearbook/2022 [https://perma.cc/9YXU-Y2EF].
\h\ U.S. Dep't of Just., Exec. Off. for Immigr. Rev., Adjudication
  Statistics: Asylum Decision Rates by Nationality (2023), https://www.justice.gov/eoir/page/file/1107366/dl [https://perma.cc/PJ7C-GRK4 GRK4].
\i\ How Many Politicians Are There in the USA? PoliEngine, https://poliengine.com/blog/how-many-politicians-are-there-in-the-us [https://perma.cc/D5DG-KJHM].
\j\ Ctr. on Nonprofits, Philanthropy, and Soc. Enter., George Mason U.,
  Nonprofit Employment Data Project Jobs Recovery Data Dashboard (Jan.
  10, 2023), https://nonprofitcenter.schar.gmu.edu/nonprofit-employment-data-project/resources-and-dashboards/ [https://perma.cc/2XBZ-ACDW].
\k\ Andrew R. Flores & Kerith J. Conron, Adult LGBT Population in the
  United States, Williams Inst., UCLA Sch. of L. (2023), https://williamsinstitute.law.ucla.edu/publications/adult-lgbt-pop-us/ [https://perma.cc/MZQ2-EAP9].
\l\ 2022 PRRI Census of American Religion: Religious Affiliation Updates
  and Trends, PRRI (Feb. 24, 2023), https://www.prri.org/spotlight/prri-2022-american-values-atlas-religious-affiliation-updates-and-trends/
  [https://perma.cc/BQA7-MK2J].
\m\ U.S. Census Bureau, K200201: Race, American Community Survey, 1-Year
  Supplemental Estimates (2022), https://data.census.gov/table/ACSSE2022.K200201 [https://perma.cc/XJ3V-LH8J].

c. Summary of Baseline (Without the Proposed Rule)
    As stated in part IV.A.1 of this preamble, the government-related 
data or bulk U.S. sensitive personal data discussed here may, under 
certain conditions, be used against individuals--such as members of the 
military, government employees, and government contractors--for illicit 
purposes, including blackmail and espionage. The risks of any 
particular individual or group being targeted may vary depending on the 
circumstances, and these data illustrate the range of such activities. 
Countries of concern can also use access to government-related data or 
Americans' bulk U.S. sensitive personal data to collect information on 
activists, academics, journalists, dissidents, political figures, and 
members of nongovernmental organizations or marginalized communities to 
intimidate such persons; curb political opposition; limit freedoms of 
expression, peaceful assembly, or association; or enable other forms of 
suppression of civil liberties.
    The individuals within the subgroups most at risk of having their 
sensitive personal data exploited by countries of concern not only play 
important roles in American society, but also make up a large portion 
of the population. When we consider that threats to the spouses and 
children of targeted individuals could also be made, the Department 
estimates that the total population of individuals who could 
potentially be targeted is well over 100 million individuals. Thus, the 
total number of those who are at risk of being targeted by foreign 
adversaries could exceed one-third of the entire American population. 
Failing to prevent the current and future sale or transfer of 
government-related data or bulk U.S. sensitive personal data to 
countries of concern effectively forgoes all the benefits that may be 
realized from such an action. Given the nature of the benefits to be 
gained from protecting national security and foreign policy from 
malicious actors, these benefits are unable to be monetized or 
quantified but will be contrasted with the estimated costs of the 
proposed regulation.
6. Alternative Approaches
    In addition to the proposed action, the Department considered two 
alternatives. The first alternative, the No Action alternative, would 
take no regulatory action and allow the unrestricted transfer of bulk 
U.S. sensitive personal data to any foreign company, person, or 
country, including the countries of concern. The No Action alternative 
would not achieve the benefits of reducing the risks to the targeted 
populations or to U.S. national security and foreign policy. The 
growing threats related to foreign adversaries' use of bulk U.S. 
sensitive personal data, enhanced by advancing technologies such as 
artificial intelligence, for purposes of subjecting American citizens 
to exposure to blackmail and other malicious actions would continue. In 
addition to the sale of bulk U.S. sensitive personal data, the vendor, 
employment, and investment agreements would also continue without 
restrictions, as would the risks that the proposed rule is intended to 
reduce. Of course, the No Action alternative would also result in no 
additional costs to industry. As explained in part VII.A.7 of this 
preamble, however, the Department considers the expected benefits of 
the proposed regulation to greatly exceed the estimated costs, 
resulting in net benefits that are not realized by the No Action 
alternative. Therefore, the Department rejects the No Action 
alternative.
    The second alternative considered was a prohibition of the transfer 
to countries of concern of all data that would fall within the scope of 
the proposed rule. This alternative would go further than directed by 
the Order, the provisions of which were directed at bulk U.S. sensitive 
personal data and would entail more complicated and costly enforcement 
efforts than the proposed rule. Since this alternative would prohibit 
not only bulk U.S. sensitive personal data but also small transfers of 
sensitive personal data that may not present any marginal substantial 
risk to national defense or foreign policy, the small additional 
benefits are not likely to justify the much larger value of lost 
transactions and compliance costs than the proposed rule's estimated 
cost of $502 million.

[[Page 86183]]

Since the marginal costs of this alternative over the costs of the 
proposed regulation are expected to be larger than the marginal 
benefits--if there are any--associated with it, this alternative would 
necessarily have lower net benefits, as measured by total benefits less 
total costs.
    More generally, in addressing proposals from commenters, the 
Department also considered alternatives that could broaden the scope of 
the rule (and thus potentially be more costly) or narrow its scope (and 
thus potentially be less costly). These alternatives include, for 
example, lowering or increasing the proposed bulk thresholds, 
prohibiting or restricting (instead of exempting) additional categories 
of transactions such as those involving telecommunications or clinical-
trial data, expanding the list of countries of concern, and expanding 
the categories of covered persons. The Department declined to adopt 
them because they would appear not to appropriately tailor the proposed 
rule to the national security risks and could cause unintended economic 
effects, for the reasons more fully discussed with respect to those 
proposals.
7. Benefits of the Proposed Rule
    As mentioned in part VII.A.2 of this preamble, the benefits of the 
proposed rule associated with reducing threats to national security and 
foreign policy are difficult to measure. While these benefits are 
difficult to measure, there is a liberal opportunity for foreign 
adversaries to access and exploit Americans' sensitive data without the 
proposed rule. This situation and the best-available information 
indicate that there is a high likelihood of harm to national security 
and that the harm to national security could be high, suggesting that 
the expected benefits of the proposed rule exceed its expected costs. 
Alternatively, even if the likelihood of harm to national security is 
low in some circumstances, the potential damage to national security 
remains high, suggesting that even modest risk reductions are 
justified.
    The proposed rule focuses on the risk of access to government-
related data or bulk U.S. sensitive personal data by countries of 
concern and covered persons. Countries of concern can use their access 
to Americans' bulk sensitive personal data to engage in malicious 
cyber-enabled activities and malign foreign influence as well as to 
track and build profiles of U.S. individuals, including members of the 
military and Federal employees and contractors, for illicit purposes 
such as blackmail and espionage. Countries of concern can also exploit 
their access to Americans' bulk sensitive personal data to collect 
information on activists, academics, journalists, dissidents, political 
figures, and members of nongovernmental organizations or marginalized 
communities to intimidate them; curb political opposition; limit 
freedoms of expression, peaceful assembly, or association; or enable 
other forms of suppression of civil liberties. Nongovernmental experts 
have underscored these risks.
    Reducing these threats may produce many qualitative benefits, such 
as improving the security of the American people and safeguarding 
democratic values, all of which are beyond a reasonable, reliable, and 
acceptable estimate of quantified monetary value. Other benefits may 
also arise, such as the creation of new businesses to provide vetting 
information to firms seeking entrance into the restricted transactions 
market, or advancements in overall industry cybersecurity technology 
that result in more secure systems. We make no attempt to quantify 
these potential benefits, but we welcome comments that may allow us to 
do so.
8. Costs of the Proposed Rule
    The economic costs of the proposed rule are the lost economic value 
of the covered transactions that are prohibited or forgone, referred to 
as ``direct costs,'' and the costs of compliance (for restricted 
transactions, the cost of complying with the security requirements 
established by DHS/CISA, affirmative due diligence requirements, audit 
requirements, and affirmative reporting requirements).
    Other provisions included in the regulations--including regulations 
of investment, employment, and vendor agreements through the imposition 
of security requirements--will have a mixture of economic impacts, such 
as one-time costs of switching to approaches that will comply with new 
regulations, and economic benefits, such as improved cybersecurity 
controls.
    The challenge of estimating the economic impact with any degree of 
precision is that, because there are no regulations prohibiting cross-
border bulk U.S. sensitive personal data transactions, currently 
available data provides incomplete, unreliable, or irrelevant estimates 
of the types, volume, and value of the bulk U.S. sensitive personal 
data transfer activity and thus creates uncertainty in estimates of 
lost value due to the proposed rule.
    Similarly, the estimates of the costs of requirements for 
affirmative due diligence, security, recordkeeping, affirmative 
reporting, and audits are very preliminary in this analysis because the 
size of the industry, per-company costs, and per-transaction costs are 
very difficult to estimate precisely. Furthermore, based on its 
experience with similar regulations related to economic sanctions and 
export controls, the Department expects the costs of compliance with 
this proposed rule to vary significantly across companies.
    Our estimates reflect costs for firms that currently engage in 
transactions involving bulk U.S. sensitive personal data. The universe 
of firms that engage in transactions involving bulk U.S. sensitive 
personal data is larger than the subset of such firms that knowingly 
transfer such data to countries of concern or covered persons; this 
larger universe of firms will need to undertake some due diligence 
measures to ensure that their typical data transfers are not in fact 
going to countries of concern or covered persons. Comments are 
solicited and welcome on the estimates that follow.
a. Value of Lost and Forgone Transactions
    The costs of the proposed rule would include the economic value of 
lost or forgone transactions related to the sale, transfer, and 
licensing of bulk U.S. sensitive personal data, as well as 
biospecimens, to the six countries of concern. These lost or forgone 
transactions would include transactions that are prohibited as well as 
covered data transactions that are forgone because an entity decides 
not to bear the costs of complying with the due diligence and security 
requirements necessary to engage in a restricted transaction.
    The total economic value of lost and forgone transactions should 
not exceed the total economic value of such exports to these countries 
of concern, as, all else equal, an entity would forgo a transaction if 
its expected compliance costs exceed the expected economic value of the 
transaction. The anticipated value of potentially regulated 
transactions with all countries of concern except China is negligible, 
given the lack of general cross-border transactions involving bulk 
sensitive personal data and the existing impediments to trade, such as 
economic sanctions. More specifically, in recent years, the proportions 
of U.S. bidirectional trade and investment

[[Page 86184]]

represented by trade with Iran,\487\ North Korea,\488\ and Cuba,\489\ 
respectively, have been negligible or unknown. Trade with Venezuela 
represents 0.1 percent of U.S. totals.\490\
---------------------------------------------------------------------------

    \487\ U.S. Census Bureau, Trade in Goods with Iran, https://www.census.gov/foreign-trade/balance/c5070.html [https://perma.cc/EAZ7-PJU2].
    \488\ U.S. Census Bureau, Trade in Goods with Korea, North, 
https://www.census.gov/foreign-trade/balance/c5790.html [https://perma.cc/NY7X-DRBA].
    \489\ U.S. Census Bureau, Trade in Goods with Cuba, https://www.census.gov/foreign-trade/balance/c2390.html [https://perma.cc/CUF2-FWWY].
    \490\ U.S. Bureau of Econ. Analysis, U.S. International Trade in 
Goods and Services, Venezuela, Venezuela--International Trade and 
Investment Country Facts, https://apps.bea.gov/international/factsheet/factsheet.html#219 [https://perma.cc/2K9N-YGFS].
---------------------------------------------------------------------------

    Trade with Russia averaged about 0.5 percent of all U.S. trade from 
2014 to 2023, dropping to 0.1 percent in 2023.\491\ U.S. cross-
investment (i.e., two-way foreign direct investment) \492\ with Russia 
averaged about 0.2 percent of total U.S. foreign cross-investment from 
2013 to 2022.\493\ In contrast, the respective shares of U.S. imports/
exports and cross-investment that are conducted with China have 
averaged about 12 percent and 1.3 percent, respectively, during the 
same periods.\494\ Given this, the estimation of the economic costs of 
lost or forgone transactions here focuses primarily on China, although 
Russia is also considered.
---------------------------------------------------------------------------

    \491\ U.S. Bureau of Econ. Analysis, U.S. International Trade in 
Goods and Services, Russia, Russia--International Trade and 
Investment Country Facts, https://apps.bea.gov/international/factsheet/factsheet.html#341 [https://perma.cc/GF8U-6GK2].
    \492\ Mark Casson & Nigel Wadeson, Cross-Investments by 
Multinationals: A New Perspective, 14 Glob. Strategy J. 279, 279-80 
(2023) (defining cross-investment as ``where firms conduct FDI into 
each other's home countries'').
    \493\ U.S. Bureau of Econ. Analysis, supra note 491.
    \494\ U.S. International Trade in Goods and Services, China, 
China--International Trade and Investment Country Facts, https://apps.bea.gov/international/factsheet/factsheet.html#650 [https://perma.cc/X7QF-CYXH].
---------------------------------------------------------------------------

    Similarly, foreign direct investment into the United States from 
countries of concern in the information industry is a relatively small 
portion of the total level of foreign direct investment in this sector. 
Chinese investment, which has been the highest among countries of 
concern, has been steadily falling over the past several years. Foreign 
direct investment figures, based on the country of the ultimate 
beneficial owner and the country of direct foreign ownership, are 
presented in Tables VII-4 and VII-5 of this preamble.

   Table VII-4--Foreign Direct Investment Position in the United States on a Historical-Cost Basis in the Information Industry by Country of Ultimate
                                                                    Beneficial Owner
                                                                  [millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2016            2017            2018            2019            2020            2021            2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Countries Total.....................         171,474         197,266         208,932         204,950         182,913         259,867         254,691
China...................................           1,806           2,413           2,286           2,936           1,700           1,432             452
Hong Kong...............................             366             416             148             562             413             429             417
Venezuela...............................             (*)             (*)              -3              -5              -6              -7             (D)
China + Hong Kong Share.................            1.3%            1.4%            1.2%            1.7%            1.2%            0.7%            0.3%
Venezuela Share.........................             n/a             n/a            0.0%            0.0%            0.0%            0.0%             n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: (*) indicates a nonzero value that rounds to zero. (D) indicates that the data in the cell have been suppressed to avoid disclosure of data of
  individual companies.
Source: U.S. Bureau of Econ. Analysis, Balance of Payments and Direct Investment Position Data: Foreign Direct Investment in the U.S., Foreign Direct
  Investment Position in the United States on a Historical-Cost Basis, Country of UBO and Industry (NAICS) (Millions of Dollars), <a href="https://apps.bea.gov/iTable/?ReqID=2&step=1&_gl=1*ubcfnx*_ga*MjEzMzE0NDY0Ny4xNzA1NTc5Mjcw*_ga_J4698JNNFT*MTcyMDYzNjY0My44Mi4xLjE3MjA2MzgzMzQuNTMuMC4w#eyJhcHBpZCI6Miwic3RlcHMiOlsxLDIsMyw0LDUsNywxMF0sImRhdGEiOltbIlN0ZXAxUHJvbXB0MSIsIjIiXSxbIlN0ZXAxUHJvbXB0MiIsIjEiXSxbIlN0ZXAyUHJvbXB0MyIsIjEiXSxbIlN0ZXAzUHJvbXB0NCIsIjIyIl0sWyJTdGVwNFByb21wdDUiLCIyMiJdLFsiU3RlcDVQcm9tcHQ2IiwiMSJdLFsiU3RlcDdQcm9tcHQ4IixbIjI4LDI5LDMwLDMxLDMyLDMzLDM0LDM1LDM2LDM3LDM4LDM5LDQwLDQxLDQyLDQzLDQ4LDQ5LDUyLDU1LDU2LDU4LDYwLDYxLDY1LDY2Il1dLFsiU3RlcDhQcm9tcHQ5QSIsWyI3Il1dLFsiU3RlcDhQcm9tcHQxMEEiLFsiMSJdXV19">https://apps.bea.gov/iTable/?ReqID=2&step=1&_gl=1*ubcfnx*_ga*MjEzMzE0NDY0Ny4xNzA1NTc5Mjcw*_ga_J4698JNNFT*MTcyMDYzNjY0My44Mi4xLjE3MjA2MzgzMzQuNTMuMC4w#eyJhcHBpZCI6Miwic3RlcHMiOlsxLDIsMyw0LDUsNywxMF0sImRhdGEiOltbIlN0ZXAxUHJvbXB0MSIsIjIiXSxbIlN0ZXAxUHJvbXB0MiIsIjEiXSxbIlN0ZXAyUHJvbXB0MyIsIjEiXSxbIlN0ZXAzUHJvbXB0NCIsIjIyIl0sWyJTdGVwNFByb21wdDUiLCIyMiJdLFsiU3RlcDVQcm9tcHQ2IiwiMSJdLFsiU3RlcDdQcm9tcHQ4IixbIjI4LDI5LDMwLDMxLDMyLDMzLDM0LDM1LDM2LDM3LDM4LDM5LDQwLDQxLDQyLDQzLDQ4LDQ5LDUyLDU1LDU2LDU4LDYwLDYxLDY1LDY2Il1dLFsiU3RlcDhQcm9tcHQ5QSIsWyI3Il1dLFsiU3RlcDhQcm9tcHQxMEEiLFsiMSJdXV19</a> LDU1LDU2LDU4LDYwLDYxLDY1LDY2Il1dLFsiU3RlcDhQcm9tcHQ5QSIsWyI3Il1dLFsiU3RlcDhQcm9tcHQxMEEiLFsiMSJdXV19 [https://perma.cc/X7SK-2LD8].


Table VII-5--Foreign Direct Investment Position in the United States on a Historical-Cost Basis in the Information Industry by Country of Direct Foreign
                                                                         Parent
                                                                  [millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2016            2017            2018            2019            2020            2021            2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Countries Total.....................         171,474         197,266         208,932         204,950         182,913         259,867         254,691
China...................................             134             (D)           4,286           4,882           3,480           2,809             772
Hong Kong...............................             (D)             (D)             -53             389             284             282             196
Venezuela...............................              -4             (D)              -3              -2              -2             (*)             (D)
China + Hong Kong Share.................             n/a             n/a            2.0%            2.6%            2.1%            1.2%            0.5%
Venezuela Share.........................            0.0%             n/a            0.0%            0.0%            0.0%             N/A             N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: (*) indicates a nonzero value that rounds to zero. (D) indicates that the data in the cell have been suppressed to avoid disclosure of data of
  individual companies.
Source: U.S. Bureau of Econ. Analysis, Balance of Payments and Direct Investment Position Data: Foreign Direct Investment in the U.S., Foreign Direct
  Investment Position in the United States on a Historical-Cost Basis, By Country and Industry (NAICS) (Millions of Dollars) <a href="https://apps.bea.gov/iTable/?ReqID=2&step=1&_gl=1*ay559c*_ga*MTM5ODMzNTkyNy4xNzEwMjgzOTY0*_ga_J4698JNNFT*MTcyMjk0ODk5My4yNi4xLjE3MjI5NTA2NTEuNTcuMC4w#eyJhcHBpZCI6Miwic3RlcHMiOlsxLDIsMyw0LDUsNywxMF0sImRhdGEiOltbIlN0ZXAxUHJvbXB0MSIsIjIiXSxbIlN0ZXAxUHJvbXB0MiIsIjEiXSxbIlN0ZXAyUHJvbXB0MyIsIjEiXSxbIlN0ZXAzUHJvbXB0NCIsIjIyIl0sWyJTdGVwNFByb21wdDUiLCIxIl0sWyJTdGVwNVByb21wdDYiLCIxIl0sWyJTdGVwN1Byb21wdDgiLFsiNjYiLCI2NSIsIjYxIiwiNjAiLCI1OCIsIjU2IiwiNTUiXV0sWyJTdGVwOFByb21wdDlBIixbIjciXV0sWyJTdGVwOFByb21wdDEwQSIsWyIxIl1dXX0=">https://apps.bea.gov/iTable/?ReqID=2&step=1&_gl=1*ay559c*_ga*MTM5ODMzNTkyNy4xNzEwMjgzOTY0*_ga_J4698JNNFT*MTcyMjk0ODk5My4yNi4xLjE3MjI5NTA2NTEuNTcuMC4w#eyJhcHBpZCI6Miwic3RlcHMiOlsxLDIsMyw0LDUsNywxMF0sImRhdGEiOltbIlN0ZXAxUHJvbXB0MSIsIjIiXSxbIlN0ZXAxUHJvbXB0MiIsIjEiXSxbIlN0ZXAyUHJvbXB0MyIsIjEiXSxbIlN0ZXAzUHJvbXB0NCIsIjIyIl0sWyJTdGVwNFByb21wdDUiLCIxIl0sWyJTdGVwNVByb21wdDYiLCIxIl0sWyJTdGVwN1Byb21wdDgiLFsiNjYiLCI2NSIsIjYxIiwiNjAiLCI1OCIsIjU2IiwiNTUiXV0sWyJTdGVwOFByb21wdDlBIixbIjciXV0sWyJTdGVwOFByb21wdDEwQSIsWyIxIl1dXX0=</a> XV0sWyJTdGVwOFByb21wdDEwQSIsWyIxIl1dXX0= [https://perma.cc/NH7V-GZNU].


[[Page 86185]]

    Note that some fraction of the lost or forgone data transactions 
may be for beneficial uses. Beneficial uses of bulk U.S. sensitive 
personal data in the countries of concern may include consumer-choice 
improvements and the use of artificial intelligence to expedite 
innovation in drug discovery and increase knowledge of patterns of, for 
example, consumption, commerce, transportation, traffic, information/
news transmission, nutrition, and health.
    The following analysis relies in part on data available from the 
BEA on U.S. exports of telecommunications, computer, and information 
services, both in total and for each of the three sub-categories, to 
China and Russia. Tables VII-6 and VII-7 of this preamble rely on an 
analysis of the BEA data to approximate the value of lost transactions.
i. Global Market Value of Genomic, Biometric, and Location Data
    Genomic data includes data that is used in drug discovery and 
development, specifically in developing products such as systems, 
software, and reagents, and in developing processes such as cell 
isolation, sample preparation, and genomic analysis.\495\ Biometric 
data is used in consumer electronics and automotive applications for 
safety, surveillance, and identification methods, including facial, 
posture, voice, fingerprint, and iris recognition technologies.\496\ 
Location data is used in smart devices, network services for improved 
connectivity, systems integration, monitoring, and satellite location 
technology, as well as to produce timely, relevant and personalized 
offers/information for customers.\497\
---------------------------------------------------------------------------

    \495\ Genomics Global Market to Reach $63.5 Billion in 2026 at a 
CAGR of 18.2%, Globe Newswire (Sept. 6, 2022), https://www.globenewswire.com/en/news-release/2022/09/06/2510235/28124/en/Genomics-Global-Market-to-Reach-63-5-Billion-in-2026-at-a-CAGR-of-18-2.html [https://perma.cc/SUV8-VVMK].
    \496\ Grand View Research, Report ID No. 978-1-68038-299-0, 
Biometric Technology Market Size, Share & Trends Analysis Report, 
2023-2030 (2023), https://www.grandviewresearch.com/industry-analysis/biometrics-industry [https://perma.cc/KN36-3KZW].
    \497\ Grand View Research, Report ID No. GVR-2-68038-401-7, 
Location Intelligence Market Size, Share & Trends Analysis Report, 
2024-2030 (2024), https://www.grandviewresearch.com/industry-analysis/location-intelligence-market [https://perma.cc/WS6U-2324].
---------------------------------------------------------------------------

    According to market research data from one company,\498\ the global 
genomics market's value is estimated at $27.58 billion in 2021, $32.56 
billion in 2022, and, given an estimated compound annual growth rate of 
18.2 percent, $38.49 billion in 2023 and $45.49 billion in 2024.\499\ 
One estimate of the global biometric technology market values it at 
$34.27 billion in 2022 and, given an estimated 20.4 percent compound 
annual growth rate, $41.26 billion in 2023 and $49.68 billion in 
2024.\500\ Finally, one estimate values the global location data market 
at $18.52 billion in 2023 and, given an estimated 15.6 percent compound 
annual growth rate, $21.41 billion in 2024.\501\ Table VII-6 of this 
preamble presents these global totals for genomic, biometric, and 
location data estimates.\502\
---------------------------------------------------------------------------

    \498\ Genomics Global Market to Reach $63.5 Billion in 2026 at a 
CAGR of 18.2%, supra note 495.
    \499\ Id.
    \500\ Grand View Research, supra note 496.
    \501\ Grand View Research, supra note 497.
    \502\ The Department notes several caveats with the Grand View 
Research estimates shown in Tables VII-4 and VII-5 of this preamble, 
including non-transparent methods for gathering data and producing 
estimates, a non-statistical sample of firms that may not be 
statistically representative of the industry, and non-response bias 
from interviewees from the firms.

  Table VII-6--Global Technology Market Value Estimates for Genomic, Biometric, and Location Data for 2021-2024
                    (in Billions of 2022 Dollars) With Compound Annual Growth Rate (``CAGR'')
----------------------------------------------------------------------------------------------------------------
            Data type                  2021            2022            2023            2024          CAGR (%)
----------------------------------------------------------------------------------------------------------------
Genomic \a\.....................          $27.58          $32.56          $38.49          $45.49            18.2
Biometric \b\...................  ..............           34.27           41.26           49.68            20.4
Location \c\....................  ..............  ..............           18.52           21.41            15.6
----------------------------------------------------------------------------------------------------------------
\a\ Genomics Global Market to Reach $63.5 Billion in 2026 at a CAGR of 18.2%, Globe Newswire (Sept. 6, 2022),
  https://www.globenewswire.com/en/news-release/2022/09/06/2510235/28124/en/Genomics-Global-Market-to-Reach-63-5-Billion-in-2026-at-a-CAGR-of-18-2.html [https://perma.cc/SUV8-VVMK].
\b\ Grand View Research, Report ID No. 978-1-68038-299-0, Biometric Technology Market Size, Share & Trends
  Analysis Report, 2023-2030 (2023), https://www.grandviewresearch.com/industry-analysis/biometrics-industry
  [https://perma.cc/KN36-3KZW].
\c\ Grand View Research, Report ID No. GVR-2-68038-401-7, Location Intelligence Market Size, Share & Trends
  Analysis Report, 2024-2030 (2024), https://www.grandviewresearch.com/industry-analysis/location-intelligence-market market [https://perma.cc/WS6U-2324].

ii. U.S. Exports to Relevant Specific Categories and to Countries of 
Concern
    Data is available on U.S. exports in the category of 
telecommunications, computer, and information services, both in total 
and for each of these three service subcategories, to China and 
Russia.\503\ Data on exports in a relevant sub-category of information 
services--database and other information services--is available 
globally and for both China and Russia individually.
---------------------------------------------------------------------------

    \503\ U.S. Bureau of Econ. Analysis, U.S. International Economic 
Accounts: Concepts and Methods, at 248 (June 2023), https://www.bea.gov/system/files/2023-06/iea-concepts-methods-2023.pdf 
[https://perma.cc/8M48-Q2ZG].
---------------------------------------------------------------------------

    Telecommunications, Computer, and Information Services is one of 
the eleven service categories BEA presents in the U.S. international 
transactions accounts. The Telecommunications Services sub-category 
includes basic services (e.g., transmitting messages between 
destinations) as well as value-added and support services. The Computer 
Services sub-category includes software, computing and data-storage 
services, hardware and software consultancy, and licensing agreements 
tied to downloading applications. The category of information services 
includes database services and web search portals, which belong to one 
subcategory, and news agency services, which belong to the other.\504\ 
This Database Services sub-category includes data brokers.
---------------------------------------------------------------------------

    \504\ Id.
---------------------------------------------------------------------------

    Table VII-7 of this preamble presents the value of U.S. exports of 
telecommunications services, computer services, information services, 
and the database and other information services component of 
information services. The table also reports exports to China for the 
three components combined and the exports to China and Russia 
individually for database and other information services.

[[Page 86186]]



               Table VII-7--U.S. Exports of Telecommunications, Computer, and Information Services
                                          [In billions of 2023 dollars]
----------------------------------------------------------------------------------------------------------------
                             Service                                    All            China          Russia
----------------------------------------------------------------------------------------------------------------
                                                   Components
----------------------------------------------------------------------------------------------------------------
Telecommunications Services.....................................          $9.329          $0.095          $0.041
Computer Services...............................................         $50.328          $1.847          $0.113
Information Services............................................         $10.972          $0.318          $0.034
                                                                 -----------------------------------------------
    Total Value.................................................         $70.629          $2.260          $0.188
                                                                 -----------------------------------------------
    Percentage of Total.........................................            100%           3.20%           0.27%
----------------------------------------------------------------------------------------------------------------
                                     Database and Other Information Services
----------------------------------------------------------------------------------------------------------------
Value...........................................................         $10.768        * $0.318          $0.032
                                                                 -----------------------------------------------
    Percentage of Total.........................................            100%           2.94%           0.30%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Bureau of Econ. Analysis, International Transactions, International Services, and International
  Investment Position Tables, Tables 2.2, https://www.bea.gov/itable/direct-investment-multinational-enterprises
  [https://perma.cc/9XWQ-A8YQ] (last updated July 23, 2024).
* An upper bound for 2023 is $0.318.

    The $10.768 billion Database and Other Information Services sub-
category comprises most (98.1 percent) of the $10.972 billion 
Information Services category, with the other $0.275 billion (2.6 
percent) in the News-Agency Services category. For the Database and 
Other Information Services sub-category, U.S. exports to China are 
$0.318 billion ($318 million) for 2023, which is 2.94 percent of the 
U.S. export total. U.S. exports to Russia are $0.32 billion ($32 
million), which is 0.30 percent of the U.S. export total.
    These U.S. export estimates are significantly over-inclusive, as 
they include many kinds of data that are explicitly excluded from 
regulation under the proposed rule, such as web browser history and 
other expressive data, in addition to services that do not involve data 
transfer at all. Consequently, the estimates of the costs due to lost 
or foregone transactions resulting from the proposed rule are probably 
overstated.
    Tables VII-6 and VII-7 of this preamble comprise the ``raw'' data 
on U.S. exports to countries of concern that provide upper-bound 
estimates of the value of lost or forgone transactions. Given the 
available data that informs the following analysis, the Department 
welcomes comments on the use of this data and on any alternative or 
additional data that could also be employed.
iii. Estimates of U.S. Exports of Genomic, Biometric, and Location Data
    This section provides estimates of U.S. revenue from sales for 
three categories of data covered under the proposed rule for which data 
on the global market are available: genomic, biometric, and location 
data.
    Given the lack of available published estimates of the value of 
U.S. exports of such data to China, Russia, and other countries of 
concern, the Department developed a multi-step method for estimating 
the value of lost transactions in genomic, biometric, and location data 
to the countries of concern. To summarize, we began with market 
research companies' estimates of the size of the global markets in 
geometric, biometric, and location data shown in Table VII-6 of this 
preamble. Then we derived estimates of the value of lost transactions 
through a three-step process that involved estimating the U.S. share 
(domestic plus export) of the global market, estimating the percentage 
of U.S. global sales that are domestic, and finally making some data-
informed assumptions about the share of global sales in those 
industries that were to the countries of concern.
    In 2022, the total value of the U.S. location data market was $4.20 
billion, with a projected compound annual growth rate of 13.6 
percent.\505\ Based on these estimates, it can be projected that the 
U.S. portion in 2023 would be $4.77 billion ($4.20 * 1.136 = $4.77). As 
shown in Table VII-6 of this preamble, the market research company 
estimated that the global market value of location data in 2023 was 
$18.52 billion, so the estimated U.S. portion in 2023 would constitute 
25.76 percent of that estimated global value ($4.77/$18.52 = 0.2576). 
Because the market research company estimated the U.S. compound annual 
growth rate for location data to be 13.6 percent and the global 
compound annual growth rate to be 15.6 percent, it can be projected 
that the U.S. portion of the global market in 2024 would fall slightly, 
from 25.76 percent to 25.31 percent (($4.77 * 1.136)/($18.52 * 1.156) = 
0.2531).
---------------------------------------------------------------------------

    \505\ Grand View Research, supra note 497.
---------------------------------------------------------------------------

    The market research company estimated that the North American 
revenue share of the global biometric technology market in 2022 was 
30.7 percent.\506\ If Canada and Mexico were responsible for 5 percent 
of global market value, then the U.S. share of the global biometric 
data market in 2022 would be 25.7 percent, nearly the same as the 
portion for location data in 2023. Given the alignment in our estimates 
of the U.S. market share for location and biometric data markets, we 
assume that the estimated U.S. location data market in 2024 (25.31 
percent) also applies to the U.S. portion of global genomic and 
biometric data. With that assumption, we estimate that the U.S. genomic 
data market is worth $12.57 billion in 2024 (25.31 percent of $49.68 
billion (from Table VII-6 of this preamble)), and the U.S. market is 
worth $5.42 billion (25.31 percent of $21.41 billion). Table VII-8 of 
this preamble provides 2024 estimates of U.S. revenue (foreign plus 
domestic) for those three industries.
---------------------------------------------------------------------------

    \506\ Grand View Research, supra note 496.
---------------------------------------------------------------------------

    Next, the Department assumes that U.S. exports in genomic, 
biometric, and location data constitute 30 percent of total U.S. 
revenue (domestic sales plus exports). This assumption is based on 
market research from a U.S.-based company,\507\ which estimated that in

[[Page 86187]]

2017, 30 percent of revenue for data brokerage companies came from 
international sales. When applying this assumption to revenue from 
sales of genomic, biometric, and location data, we estimate that 
exports of U.S. genomic data in 2023 were worth $3.454 billion for 
genomic data (30 percent of $11.513 billion); exports of biometric data 
were worth $3.772 billion (30 percent of $12.574 billion); and exports 
of location data were worth $1.626 billion (30 percent of $5.419 
billion). Table VII-8 of this preamble presents estimated revenue from 
U.S. exports (Step 2) alongside the other estimates from which it was 
derived.
---------------------------------------------------------------------------

    \507\ Market research data includes: Genomics Global Market to 
Reach $63.5 Billion in 2026 at a CAGR of 18.2%, supra note 495; 
Grand View Research, supra note 496; Grand View Research, supra note 
497.

    Table VII-8--Estimated Revenue From International Sales of Genomic, Biometric, and Location Data in 2023
                                          [In billions of 2024 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                  Global revenue   U.S. revenue
                                                                    (from Table      (domestic     Revenue from
                        Category of data                            VII[dash]6)       sales +      U.S. exports
                                                                        \a\        exports) \b\         \c\
----------------------------------------------------------------------------------------------------------------
Genomic.........................................................          $45.49          $11.51           $3.45
Biometric.......................................................          $49.68          $12.57           $3.77
Location........................................................          $21.41           $5.42           $1.63
                                                                 -----------------------------------------------
    Total.......................................................         $116.58          $29.51           $8.85
    U.S. Revenue Share of Global Total..........................  ..............          25.31%  ..............
U.S. Export Share of U.S. Revenue...............................  ..............  ..............             30%
----------------------------------------------------------------------------------------------------------------
\a\ Genomics Global Market to Reach $63.5 Billion in 2026 at a CAGR of 18.2%, Globe Newswire (Sept. 6, 2022),
  https://www.globenewswire.com/en/news-release/2022/09/06/2510235/28124/en/Genomics-Global-Market-to-Reach-63-5-Billion-in-2026-at-a-CAGR-of-18-2.html [https://perma.cc/SUV8-VVMK]; Grand View Research, Report ID No. 978-1-
  68038-299-0, Biometric Technology Market Size, Share & Trends Analysis Report, 2023-2030 (2023), https://www.grandviewresearch.com/industry-analysis/biometrics-industry [https://perma.cc/KN36-3KZW]; Grand View
  Research, Report ID No. GVR-2-68038-401-7, Location Intelligence Market Size, Share & Trends Analysis Report,
  2024-2030 (2024), https://www.grandviewresearch.com/industry-analysis/location-intelligence-market [https://perma.cc/WS6U-2324].
\b\ Department of Justice estimates based on global revenue data from Table VII-6 of this preamble. U.S. Revenue
  (Domestic Sales + Exports) is assumed to be 25.31 percent of the total global revenue for each category of
  data.
\c\ Department of Justice estimates based on data in global revenue data from Table VII-6 of this preamble.
  Revenue from U.S. exports is assumed to be 30 percent of the U.S. revenue for each category of data.

    To reiterate, the Department assumes that U.S. exports in genomic, 
biometric, and location data constitute 30 percent of total U.S. 
revenue (domestic sales plus exports). The Department uses this 
assumption to inform the analysis throughout part VII of this preamble.
iv. Estimates of U.S. Exports of Genomic, Biometric, and Location Data 
to the Six Countries of Concern
    As delineated above in this section, the current value of 
potentially regulated transactions with all countries of concern except 
China and, to a lesser degree, Russia is negligible, given the lack of 
general cross-border trade in data and data-driven services and the 
general impediments to trade with these countries of concern, such as 
economic sanctions. We therefore focus this part of the analysis on 
China, and to a lesser degree on Russia due to the $32 million in U.S. 
exports of database and other information services to Russia.\508\ The 
Department lacks data on cross-border transfers of genomic, biometric, 
and location data other than sales. An example of such cross-border 
transfers may include transfer of data within multinational companies.
---------------------------------------------------------------------------

    \508\ See discussion in part VII.A.8.a of this preamble.
---------------------------------------------------------------------------

    As set forth in Table VII-7 of this preamble and the subsequent 
discussion in part VII.A.8.a.ii of this preamble, 3 percent (0.032 = 
$0.318 of $10.768 billion) of U.S. exports of database and other 
information services are currently to China and 1 percent are to Russia 
(0.0106 = $0.111 of $10.768 billion). Applying these percentages to the 
value of U.S. exports of genomic, biometric, and location data set 
forth in Table VII-8 of this preamble yields estimates for the value of 
U.S. exports of genomic, biometric, and location data to China and 
Russia. The estimates for U.S. exports of genomic, biometric and 
location data to China total $267 million and to Russia total $94 
million.

       Table VII-9--Estimates of U.S. Exports of Genomic, Biometric, and Location Data to China and Russia
                                          [In billions of 2022 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                   U.S. exports
                        Category of data                            (from table    U.S. exports    U.S. exports
                                                                      VII-8)       to China \a\    to Russia \b\
----------------------------------------------------------------------------------------------------------------
Genomic.........................................................           $3.45           $0.10           $0.04
Biometric.......................................................           $3.77           $0.11           $0.04
Location........................................................           $1.63           $0.05           $0.02
                                                                 -----------------------------------------------
    Total.......................................................           $8.85           $0.27           $0.10
China share of U.S. exports.....................................  ..............           3.02%  ..............
Russia share of U.S. exports....................................  ..............  ..............           1.06%
----------------------------------------------------------------------------------------------------------------
\a\ Revenue from U.S. exports to China is assumed to be 3.02 percent of total revenue from U.S. exports for each
  category of data.
\b\ Revenue from U.S. exports to Russia is assumed to be 1.06 percent of total revenue from U.S. exports for
  each category of data.

[[Page 86188]]

 
Source: Department of Justice estimates based on market research data from U.S.-based company, including:
  Genomics Global Market to Reach $63.5 Billion in 2026 at a CAGR of 18.2%, Globe Newswire (Sept. 6, 2022),
  https://www.globenewswire.com/en/news-release/2022/09/06/2510235/28124/en/Genomics-Global-Market-to-Reach-63-5-Billion-in-2026-at-a-CAGR-of-18-2.html [https://perma.cc/SUV8-VVMK]; Grand View Research, Report ID No. 978-1-
  68038-299-0, Biometric Technology Market Size, Share & Trends Analysis Report, 2023-2030 (2023), https://www.grandviewresearch.com/industry-analysis/biometrics-industry [https://perma.cc/KN36-3KZW]; Grand View
  Research, Report ID No. GVR-2-68038-401-7, Location Intelligence Market Size, Share & Trends Analysis Report,
  2024-2030 (2024), https://www.grandviewresearch.com/industry-analysis/location-intelligence-market [https://perma.cc/WS6U-2324].

v. Total Estimated Value of Lost and Forgone Transactions
    To reiterate, U.S. exports of genomic, biometric, and location data 
to China and Russia totaled approximately $361 million in 2022. Some of 
these exports may have been for beneficial uses, such as consumer-
choice improvement; effective medical responses; and increased 
knowledge of patterns of consumption, commerce, transportation, 
traffic, information/news transmission, nutrition, and health. The 
Department's estimates of the value of lost transactions do not include 
the potential value of any lost positive externalities to U.S. 
residents. The estimated annual value of lost or forgone transactions 
is presented in Table VII-10 of this preamble.

   Table VII-10--Estimated Annual Value of Lost Transactions: Genomic,
                      Biometric, and Location Data
                      [In millions of 2022 dollars]
------------------------------------------------------------------------
                                                       Value of forgone
                 Country of concern                      transactions
------------------------------------------------------------------------
China...............................................                $267
Russia..............................................                  94
                                                     -------------------
    Total...........................................                 361
------------------------------------------------------------------------
Source: Department of Justice estimates based on market research data
  from U.S.-based company, including: Genomics Global Market to Reach
  $63.5 Billion in 2026 at a CAGR of 18.2%, Globe Newswire (Sept. 6,
  2022), https://www.globenewswire.com/en/news-release/2022/09/06/2510235/28124/en/Genomics-Global-Market-to-Reach-63-5-Billion-in-2026-at-a-CAGR-of-18-2.html [https://perma.cc/SUV8-VVMK]; Grand View
  Research, Report ID No. 978-1-68038-299-0, Biometric Technology Market
  Size, Share & Trends Analysis Report, 2023-2030 (2023), https://www.grandviewresearch.com/industry-analysis/biometrics-industry
  [https://perma.cc/KN36-3KZW]; Grand View Research, Report ID No. GVR-2-
  68038-401-7, Location Intelligence Market Size, Share & Trends
  Analysis Report, 2024-2030 (2024), https://www.grandviewresearch.com/industry-analysis/location-intelligence-market [https://perma.cc/WS6U-2324 2324].

    The Department welcomes comments on the use of this data and on any 
alternative or additional data that could also be employed. The 
Department reiterates the following limitations on these estimates, 
described in further detail in the analysis above:
    1. The estimate assumes that the U.S. share of the global market 
value for location data is the same as the U.S. share of the global 
market value for genomic and biometric technology.
    2. The export share of each of these respective U.S. markets is 
assumed to be the same as the share of revenue of U.S. data-brokerage 
companies that comes from international sales, which is 30 percent.
    3. The estimate assumes that the database (and other information) 
services category of BEA's data includes most data brokers.
    4. The estimate uses the share of U.S. exports of database and 
other information services that go to China and Russia to estimate the 
share of U.S. exports of genomic, biometric, and location data that go 
to China and Russia.
    5. The Department assumes that the annual economic value of lost 
and forgone transactions would be equal to the value of all U.S. 
exports of biometric, location, and genomic data to China and Russia.
vi. Alternative Methodology for Estimating the Value of Lost and 
Forgone Transactions
    An alternative estimate of the value of U.S. exports to China and 
Russia for this analysis can be derived from BEA data on the value of 
U.S. exports of database and other information services. As shown in 
the bottom of Table VII-7 of this preamble, BEA's estimates for 2023 
were $318 million for China and $32 million for Russia.
    Given the rapid growth of Chinese exports, the Department projected 
the 2023 BEA estimate forward to 2024. Based on the growth rates of 
U.S. exports of information services to China between 2006 and 
2023,\509\ using an annual growth rate of 5 percent for China \510\ 
would increase BEA's $318 million estimate for 2023 to $334 million for 
2024.
---------------------------------------------------------------------------

    \509\ U.S. Bureau of Econ. Analysis, Table 2.3. U.S. Trade in 
Services, by Country or Affiliation and by Type of Service, 
International Transactions, International Services, and 
International Investment Position Tables, https://apps.bea.gov/iTable/?reqid=62&step=9&isuri=1&product=4#eyJhcHBpZCI6NjIsInN0ZXBzIjpbMSw5LDEwLDcsN10sImRhdGEiOltbInByb2R1Y3QiLCI0Il0sWyJUYWJsZUxpc3QiLCIzMDU4MyJdLFsiVGFibGVMaXN0U2Vjb25kYXJ5IiwiMzA2NTYiXSxbIkZpbHRlcl8jMSIsWyIxIiwiMiIsIjMiLCI0IiwiNSIsIjYiLCI3IiwiOCIsIjkiLCIxMCIsIjExIiwiMTIiLCIxMyIsIjE0IiwiMTUiLCIxNiIsIjE3IiwiMTgiXV0sWyJGaWx0ZXJfIzIiLFsiMjgiLCI3MyJdXSxbIkZpbHRlcl8jMyIsWyIxIiwiNTUiLCI2MSIsIjYzIl1dLFsiRmlsdGVyXyM0IixbIjAiXV0sWyJGaWx0ZXJfIzUiLFsiMCJdXV19 [https://perma.cc/7USS-P3PL].
    \510\ Chu Daye, China Achieves 5.2% GDP Growth in 2023, Global 
Times (Jan. 17, 2024), https://www.globaltimes.cn/page/202401/1305571.shtml [https://perma.cc/3NGJ-RXZ7].
---------------------------------------------------------------------------

    The Department's alternative estimates for the value of lost 
transactions are $334 million in forgone exports of information 
services to China and $32 million in foregone exports of information 
services to Russia, as shown in Table VII-11 of this preamble.

[[Page 86189]]



 Table VII-11--Estimates of the Annual Value of Lost Transactions Using
                         Alternative Methodology
                      [In millions of 2022 dollars]
------------------------------------------------------------------------
                                                 Estimated value of U.S.
               Country of concern                  exports of data and
                                                   information services
------------------------------------------------------------------------
China..........................................                     $334
Russia.........................................                       32
                                                ------------------------
    Total......................................                      366
------------------------------------------------------------------------
Source: U.S. Bureau of Econ. Analysis, Table 2.3. U.S. Trade in
  Services, by Country or Affiliation and by Type of Service,
  International Transactions, International Services, and International
  Investment Position Tables, https://apps.bea.gov/iTable/?reqid=62&step=9&isuri=1&product=4#eyJhcHBpZCI6NjIsInN0ZXBzIjpbMSw5LDEwLDcsN10sImRhdGEiOltbInByb2R1Y3QiLCI0Il0sWyJUYWJsZUxpc3QiLCIzMDU4MyJdLFsiVGFibGVMaXN0U2Vjb25kYXJ5IiwiMzA2NTYiXSxbIkZpbHRlcl8jMSIsWyIxIiwiMiIsIjMiLCI0IiwiNSIsIjYiLCI3IiwiOCIsIjkiLCIxMCIsIjExIiwiMTIiLCIxMyIsIjE0IiwiMTUiLCIxNiIsIjE3IiwiMTgiXV0sWyJGaWx0ZXJfIzIiLFsiMjgiLCI3MyJdXSxbIkZpbHRlcl8jMyIsWyIxIiwiNTUiLCI2MSIsIjYzIl1dLFsiRmlsdGVyXyM0IixbIjAiXV0sWyJGaWx0ZXJfIzUiLFsiMCJdXV19 yJGaWx0ZXJfIzUiLFsiMCJdXV19 [https://perma.cc/7USS-P3PL].

    Under this alternative methodology, the Department's estimate of 
the economic value of transactions lost due to the proposed rule is 
$366 million per year (Table VII-11 of this preamble), compared with 
the $361 million estimate reached in the main analysis (Table VII-10 of 
this preamble).
    The alternative methodology may overestimate the annual value of 
lost transactions, since the BEA category for the Database and Other 
Information Services may include many kinds of data that are explicitly 
excluded from regulation under the proposed rule (such as web-browser 
history and other expressive data).\511\ The comparability of the main 
and alternative methodologies suggests that the main estimate of $361 
million may underestimate the annual value of lost transactions because 
it does not include personal financial data or health records. With 
these disparities in mind, we are estimating the value of lost 
transactions at the midpoint of these estimates, $364 million, and 
solicit comments on this total.
---------------------------------------------------------------------------

    \511\ Sherman, supra note 6.
---------------------------------------------------------------------------

    The Department estimates that the economic value of lost or forgone 
transactions would be minimal for firms not engaged in data brokerage 
(i.e., for restricted transactions). In other words, the Department 
assumes that firms not engaged in data brokerage would bear minimal 
economic costs beyond those that may be associated with implementing 
and maintaining a risk-based compliance program (as described in Sec.  
202.302 of the proposed rule). For example, the Department assumes that 
the small number of U.S.-based firms currently using Chinese cloud-
service providers to store prohibited or restricted data would be able 
to switch to another cloud service provider at low or no cost, given 
that Chinese cloud-service providers constitute only a tiny fraction of 
the cloud market for U.S.-based firms. The Department assumes that the 
other five countries of interest do not sell cloud services of any 
significant value to the United States.\512\
---------------------------------------------------------------------------

    \512\ David McCabe, China's Cloud Computing Firms Raise Concern 
for U.S., N.Y. Times (June 21, 2023), https://www.nytimes.com/2023/06/21/technology/china-cloud-computing-concern.html [https://perma.cc/4CQJ-F6GJ].
---------------------------------------------------------------------------

b. Security Costs
    Data security is an important aspect of protecting government-
related data or bulk U.S. sensitive personal data from being improperly 
accessed by foreign adversaries or in ways that could pose a threat to 
national security. The proposed rule incorporates by reference proposed 
security requirements that have been developed by DHS through CISA, 
which represent conditions that businesses must meet to engage in 
restricted transactions. These security requirements are intended to 
address national security and foreign-policy threats that arise when 
countries of concern and covered persons access government-related data 
or bulk U.S. sensitive personal data that may be implicated by the 
categories of restricted transactions. Specifically, the proposed rule 
would prohibit U.S. persons from engaging in transactions unless they 
comply with three categories of requirements, the first two of which 
are addressed in the proposed security requirements, which are proposed 
to be incorporated by reference:
    1. Organizational and system-level requirements for instituting 
cybersecurity policies, practices, and requirements for any covered 
system (which CISA proposes to define as a specific type of information 
system that is used to conduct a number of activities related to 
covered data as part of a restricted transaction).
    2. Data-level requirements using any combination of the following 
capabilities necessary to prevent access to covered data by covered 
persons or countries of concern:
    a. Data minimization and data masking;
    b. Encryption;
    c. Privacy-enhancing technologies; and
    d. Denial of access.
3. Compliance-Related Requirements for Independent Testing and Auditing
    These requirements would impose new costs on firms to the extent 
that they are not already voluntarily meeting such requirements. Any 
additional costs may be offset by reducing cyber incidents and their 
associated costs. The Department estimates the new cybersecurity-
related costs imposed on affected firms by analyzing the costs that 
companies at different sizes and levels of technological maturity face 
when implementing existing security standards and frameworks of similar 
scope.
i. Similar Security Standards and Frameworks
    The proposed rule would create cybersecurity standards that are 
based on, and thus overlap with, several similar, widely used 
cybersecurity standards or frameworks. Currently, firms engaged in 
transactions that are proposed to be restricted transactions are 
encouraged--but generally not explicitly required--to comply with 
existing Federal cybersecurity standards or frameworks. Given the 
similarities between the proposed rule's security requirements and 
existing cybersecurity standards and frameworks, the costs of complying 
with one of the existing, commonly implemented sets of cybersecurity 
standards or frameworks are likely similar to the costs that would be 
incurred by businesses to comply

[[Page 86190]]

with the proposed rule. Furthermore, such costs will be offset because, 
as commenters generally agreed, most companies will already have 
foundational baseline security requirements in place.
    As required by the Order, the security requirements for firms 
engaged in restricted transactions are based on the National Institute 
of Standards and Technology (``NIST'') Cybersecurity Framework 
(``CSF'') \513\ and the NIST Privacy Framework (``PF'').\514\ CISA has 
also leveraged existing performance goals, guidance, practices, and 
controls, including the CISA Cross-Sector Cybersecurity Performance 
Goals (``CPGs''),\515\ which are themselves based on the NIST CSF and 
PF.
---------------------------------------------------------------------------

    \513\ Nat'l Inst. of Standards & Tech., Framework for Improving 
Critical Infrastructure Cybersecurity (v. 1.1, Apr. 16, 2018), 
https://doi.org/10.6028/NIST.CSWP.04162018 [https://perma.cc/2FKZ-3PAT].
    \514\ Nat'l Inst. of Standards & Tech., NIST Privacy Framework: 
A Tool for Improving Privacy Through Enterprise Risk Management (v. 
1.0, Jan. 16, 2020), https://doi.org/10.6028/NIST.CSWP.01162020 
[https://perma.cc/36SC-VZXN].
    \515\ Cybersec. & Infrastructure Sec. Agency, Cross-Sector 
Cybersecurity Performance Goals: March 2023 Update (2023), https://www.cisa.gov/sites/default/files/2023-03/CISA_CPG_report_v1.0.1_final.pdf [https://perma.cc/4YRS-Z9UJ].
---------------------------------------------------------------------------

    The CPGs, NIST CSF, and NIST PF are sets of recommendations, based 
on current best practices, that companies can voluntarily follow. The 
CPGs are themselves mapped to the CSF. In its proposed security 
requirements, CISA has included mapping to the CPGs and NIST CSF and 
PF, as applicable. Furthermore, the CSF aligns its requirements with 
other similar standards that are commonly used in industry, including 
NIST SP 800-53 and International Organization for Standardization/
International Electrotechnical Commission (``ISO'')/(``IEC'') 
27001:2013. The ISO/IEC 27001:2013 standard, unlike the CISA and NIST 
frameworks, has a more formal certification process and has granted 
certificates to 48,671 companies globally and 1,898 companies in the 
United States.\516\ Finally, NIST SP 800-171 rev.3,\517\ a common 
security framework, lays out security standards for firms handling 
controlled unclassified information, while the Department of Defense's 
Cybersecurity Maturity Model Certification (``CMMC'') program \518\ 
includes the NIST SP 800-171 requirements but with a more formal 
auditing and certification process.
---------------------------------------------------------------------------

    \516\ Int'l Org. for Standardization, ISO/IEC 27001:2013&2022 
Information Technology--Security Techniques--Information Security 
Management Systems--Requirements, 1. ISO Survey 2023 Results--Number 
of Certificates and Sites per Country and the Number of Sectors 
Overall (Sept. 18, 2024), https://www.iso.org/committee/54998.html?t=KomURwikWDLiuB1P1c7SjLMLEAgXOA7emZHKGWyn8f3KQUTU3m287NxnpA3DIuxm&view=documents [https://perma.cc/L43C-MVY8] (click ``1. ISO 
Survey 2023 results--Number of certificates and sites per country 
and the number of sectors overall'' to download spreadsheet; then 
open tab titled ``ISO IEC 27001'' in that file).
    \517\ Ron Ross & Victoria Pillitteri, Nat'l Inst. of Standards & 
Tech., NIST SP 800-171r3, Protecting Controlled Unclassified 
Information in Nonfederal Systems and Organizations, Nat'l Inst. of 
Standards & Tech. (2024), https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.800-171r3.pdf [https://perma.cc/ER88-7Y8F].
    \518\ U.S. Dep't of Def., Office of the Undersecretary of 
Defense for Acquisition & Sustainment, Cybersecurity Maturity Model 
Certification (CMMC) Model Overview Version 2.0 (2021), https://dodcio.defense.gov/Portals/0/Documents/CMMC/ModelOverview_V2.0_FINAL2_20211202_508.pdf [https://perma.cc/2HAM-92TJ].
---------------------------------------------------------------------------

ii. Current Industry Compliance Level
    The majority of firms affected by the proposed rule likely already 
comply with some portion of the security requirements in the proposed 
rule. The level of existing adherence to the proposed security 
requirements for the average U.S. company would vary significantly 
based on each firm's size, industry, existing regulatory landscape, 
technological maturity, and internalized priorities.\519\ Given the 
high degree of overlap between the DHS draft security requirements and 
existing standards and frameworks discussed below, it is possible that 
the level of existing compliance among affected firms will be high.
---------------------------------------------------------------------------

    \519\ Deloitte, 2023 Global Future of Cyber Survey (2023), 
https://www.deloitte.com/content/dam/assets-shared/docs/services/risk-advisory/2023/gx-deloitte_future_of_cyber_2023.pdf [https://perma.cc/B9E3-QNRW].
---------------------------------------------------------------------------

    One survey of business expenditures on cybersecurity conducted by 
IANS Research indicates that such spending can vary depending on 
industry and business size. According to this survey, the average firm 
spent nearly 10 percent of its IT budget on cybersecurity, with firms 
in industries like technology, healthcare, and business services 
spending the highest proportion at over 13 percent.\520\ Furthermore, 
in the same report, an analysis of firm size found that smaller 
businesses spend the highest proportion of their IT budgets on 
cybersecurity.\521\ While it is possible that companies with larger 
expenditures on cybersecurity would be closer to compliance with the 
proposed rule, it is difficult to determine with the available data the 
extent to which companies are using their cybersecurity budgets to keep 
up with evolving best practices and maintain the capabilities required 
by the proposed security requirements.
---------------------------------------------------------------------------

    \520\ IANS Research, Benchmark Insights: Security Budget 
Benchmark Summary Report 4 (2022), https://cdn.iansresearch.com/Files/Marketing/IANSResearch-2022SecurityBudgetBenchmarkSummaryReport.pdf [https://perma.cc/B9SE-4YS5].
    \521\ Id.
---------------------------------------------------------------------------

    The level of technological and cybersecurity maturity also varies 
significantly, even among larger firms. Recent data indicates that 
there is great variability in cybersecurity practice sophistication and 
maturity. In 2023, Deloitte conducted a survey of cyber decision makers 
at firms around the world with at least 1,000 employees and $500 
million in annual revenue. The Deloitte study determined that of these 
organizations, 38 percent had low cyber maturity (as defined in the 
study), 41 percent had medium cyber maturity, and 21 percent had high 
cyber maturity.\522\ Another survey of IT professionals found that 45 
percent of firms did not have a designated Chief Information Security 
Officer, which would make them noncompliant with the proposed security 
requirements.\523\
---------------------------------------------------------------------------

    \522\ Deloitte, supra note 519, at 14.
    \523\ Navisite, The State of Cybersecurity Leadership and 
Readiness, Fall 2021 (2021), at 4, https://lp.navisite.com/l/824543/2023-05-19/3733vx/824543/1684513240bPrtcWBS/state_of_cybersecurity_leadership_and_readiness_report.pdf [https://perma.cc/6VQG-VGZG].
---------------------------------------------------------------------------

    Furthermore, research suggests that the cost of cybersecurity 
activities can vary based on factors such as the size of the company, 
the cybersecurity capabilities required, and whether those capabilities 
are developed in house or by contracting with third parties. 
Additionally, the Center for internet Security provided high and low 
estimates of cybersecurity budgets based on company size, with an 
average estimate of $22,000 for a small firm (1 to 10 employees) and 
about $800,000 for a large firm (100 to 999 employees).\524\
---------------------------------------------------------------------------

    \524\ The average budget estimates for the small and large firms 
were calculated by averaging the high and low estimates from the 
relevant size category. Ctr. for internet Sec., The Cost of Cyber 
Defense: CIS Controls Implementation Group 1, at 8 (v. 1.0, 2023), 
https://learn.cisecurity.org/l/799323/2023-08-02/4t3qkj/799323/1694810927NC0iZQGR/CIS_Controls__Cost_of_Cyber_Defense__2023_08.pdf 
[https://perma.cc/C46G-EZFR].
---------------------------------------------------------------------------

iii. Costs of Compliance
    Regarding the cost of compliance, the Department assumes that most 
affected companies will not have to build cybersecurity capabilities 
from the ground up to meet the requirements of the proposed rule. Given 
that most firms will have existing cybersecurity protections in place, 
a more realistic approach to calculating the potential cost of the 
proposed rule would be to consider the additional expenditures that a 
company would have to make to increase its cybersecurity standards. The 
Department assumes, based on the

[[Page 86191]]

design of the proposed rule, that added cybersecurity compliance costs 
will closely mirror the costs that companies face when complying with 
similar or more onerous/prescriptive standards, such as NIST 800-171, 
NIST 800-53, ISO/IEC 27001, and the CMMC program, providing a helpful 
tool to estimate the added compliance costs associated with the data 
security requirements, though such estimates may be conservative. 
Furthermore, since some firms may already clearly be in voluntary 
compliance with more stringent standards than the proposed security 
standards, which would allow them to forgo some of the following steps, 
some of the costs may not be incurred by all firms.
    The first step that most firms engaging in restricted transactions 
will take toward compliance is completing an assessment of their 
current capabilities and shortcomings. For example, it would cost a 
small to medium-sized firm that is working toward compliance with NIST 
800-171 and NIST 800-53 around $30,000 to $35,000 to build in-house 
assessment capabilities.\525\ Along the same lines, another source 
estimates that an assessment for a CMMC certification for a firm with 
250 employees could cost up to $35,000.\526\ For the initial assessment 
stage of the ISO/IEC 27001 certification process, a small business 
would expect to spend $25,000 to $40,000 to complete the process 
internally and around $30,000 to hire a consultant.\527\ However, a 
company with more complicated compliance issues could expect to pay as 
much as $130,000 for the consulting and assessment.\528\ Thus, the 
Department finds that an assessment will cost between $25,000 and 
$130,000 for most firms, depending on the scale of the compliance needs 
involved.
---------------------------------------------------------------------------

    \525\ Estimated Costs Associated with NIST 800-53 and NIST 800-
171 Security Risk Assessments, GoldSky Security (Apr. 29, 2021), 
https://www.goldskysecurity.com/estimated-costs-associated-with-nist-800-53-and-nist-800-171-security-risk-assessments/ [https://perma.cc/87V6-FZ4N].
    \526\ CMMC Certification Cost: The Price of Compliance, Cuick 
Trac, https://www.cuicktrac.com/blog/cmmc-certification-cost/ 
[https://perma.cc/KR79-AWLA].
    \527\ How Much Does ISO 27001 Certification Cost?, OneTrust: 
Blog (Sept. 21, 2022), https://www.onetrust.com/blog/iso-27001-certification/ [https://perma.cc/G5UU-P62E].
    \528\ Cost of Compliance with CMMC and NIST-171, Hyper 
Vigilance, https://blog.hypervigilance.com/cost-of-cmmc-nist-compliance [https://perma.cc/PF8Z-QVTM].
---------------------------------------------------------------------------

    The next step in the compliance process is remediating the issues 
found in the initial assessment. It is likely that remediation would 
involve a combination of fixed and recurring costs. One-time 
remediation costs could involve revising security policies or patching 
vulnerabilities in covered systems, while recurring costs could include 
subscriptions to services that provide data encryption, multifactor 
authentication, or password management services, as well as costs 
associated with maintaining access controls or required documentation. 
Estimates for remediation costs for NIST 800-171 compliance range 
between $35,000 and $115,000.\529\ Another estimate suggests that 
midsized companies with lower levels of technological maturity can 
expect to pay approximately $100,000 to correct any compliance 
issues.\530\
---------------------------------------------------------------------------

    \529\ Navigate NIST 800-171 with Confidence, Fortified Services, 
https://nist171.fortifiedservices.com/ [https://perma.cc/K92U-UCAY]; 
Cost of Compliance with CMMC and NIST-171, supra note 528.
    \530\ Cost of Compliance with CMMC and NIST-171, supra note 528.
---------------------------------------------------------------------------

    In accordance with the security requirements with which U.S. 
persons engaged in restricted transactions must comply under the 
proposed rule, every firm, regardless of its initial compliance level, 
will need to annually verify its compliance through audits and testing. 
This is a common cost that firms incur to comply with existing 
frameworks or standards. For a small company with 50 employees, the 
annual recertification audit for ISO/IEC 27001 compliance costs an 
estimated $6,000 to $7,500.\531\ The continuous monitoring costs 
associated with NIST 800-171 compliance for small businesses are 
estimated to be around $6,500 to $13,000.\532\ However, annual 
surveillance audits to ensure compliance with ISO/IEC 27001 standards 
can cost as much as $40,000.\533\
---------------------------------------------------------------------------

    \531\ How Much Does ISO 27001 Certification Cost?, supra note 
527.
    \532\ Navigate NIST 800-171 with Confidence, supra note 529.
    \533\ Srividhya Karthik, ISO 27001 Certification Cost: Plan Your 
Compliance Budget Better, Sprinto (Mar. 1, 2024), https://sprinto.com/blog/iso-27001-certification-cost/ [https://perma.cc/YP75-YW6G].
---------------------------------------------------------------------------

    Table VII-12 of this preamble summarizes the high and low estimates 
for the costs--both one-time and ongoing--that an average U.S. company 
engaged in restricted transactions may face under the proposed rule. A 
firm may find itself in the higher-cost category based on either 
greater size and complexity or a lower level of technological maturity. 
For this analysis, it is assumed that even firms in the low-cost 
scenario will have added costs in each category. Furthermore, based on 
the Department's experience, half of the added one-time remediation 
costs in both the high and low estimates are assumed to recur annually. 
Finally, for the added training costs, the low estimate was taken from 
the small business low-cost figure in a report by the Center for 
internet Security, and the high estimate was taken from the midsized 
business high-cost figure in the same report.\534\
---------------------------------------------------------------------------

    \534\ Ctr. for internet Sec., supra note 524, at 22.

                    Table VII-12--Costs of Complying With the Proposed Security Requirements
----------------------------------------------------------------------------------------------------------------
                   Category                        Cost--Low      Cost--High                  Type
----------------------------------------------------------------------------------------------------------------
Initial Assessment............................         $25,000        $130,000  One-time.
Remediation...................................          35,000         115,000  One-time.
Ongoing Remediation...........................          17,500          57,500  Annually recurring.
Compliance Audits.............................           6,000          40,000  Annually recurring.
Training......................................             120           3,660  Annually recurring.
----------------------------------------------------------------------------------------------------------------

c. Costs Associated With Compliance Program: Due Diligence, 
Recordkeeping, and Auditing
    In addition to security requirements, the proposed rule also 
introduces affirmative due diligence, recordkeeping, affirmative 
reporting, and auditing requirements as conditions of a license or for 
U.S. persons engaged in restricted transactions, each of which would 
likely impose added costs. In this section, the Department estimates 
costs for affirmative due diligence, recordkeeping, and auditing for 
firms engaged in licensed or restricted transactions.
    The compliance program for affirmative due diligence,

[[Page 86192]]

recordkeeping, and auditing would consist partly of risk-based 
procedures for verifying the data flows involved in any restricted 
transaction. Further requirements would include a policy describing the 
compliance program and process, a policy describing the implementation 
of any applicable security requirements or other conditions, annual 
certification of such compliance policies, maintenance records 
documenting the due diligence performed in implementing the compliance 
policy with respect to data transactions, and an annual certification 
of the completeness and accuracy of the records documenting due 
diligence as supported by an audit.
    With regard to due diligence, recordkeeping, and auditing costs for 
U.S. companies, precise numbers on the number of affected firms, their 
sizes, and per-company or per-transaction costs are very difficult to 
estimate. Further, the compliance costs for firms that have established 
programs relative to existing Federal and State regulations may be 
minimal, as their compliance approach can be modified at low or no cost 
to address the proposed security requirements, whereas firms without 
such compliance programs would likely incur higher costs.
    In particular, many firms may have existing compliance programs 
targeted at three notable provisions that were passed and implemented 
in recent years: the California Consumer Privacy Act of 2018 (``CCPA'') 
\535\ the EU's General Data Protection Regulation (``GDPR''),\536\ and 
the APEC CBPR.\537\ More than 10 other U.S. States have also recently 
passed data privacy legislation, and many others are considering such 
laws.\538\ Due to these laws and existing Federal export-related 
regulations, it is possible that some expected due diligence costs 
imposed by the proposed rule may have already been incurred by affected 
businesses. However, given that the definitions under the proposed rule 
do not fully align with the definitions used in these frameworks, there 
are likely to be separate due diligence costs.
---------------------------------------------------------------------------

    \535\ California Consumer Privacy Act of 2018, supra note 28.
    \536\ Regulation (EU) 2016/679, supra note 28.
    \537\ Asia-Pac. Econ. Coop., APEC Cross-Border Privacy 
Enforcement Arrangement (CPEA) (Feb. 2024), https://www.apec.org/groups/committee-on-trade-and-investment/digital-economy-steering-group/cross-border-privacy-enforcement-arrangement# [https://perma.cc/GRA3-8UQX].
    \538\ US State Privacy Legislation Tracker, Int'l Ass'n of 
Privacy Pros. (July 22, 2024), https://iapp.org/media/pdf/resource_center/State_Comp_Privacy_Law_Chart.pdf [https://perma.cc/WF3A-PJ5K].
---------------------------------------------------------------------------

    The Department has estimated upper- and lower-bound costs to firms 
from the proposed rule related to due diligence, recordkeeping, and 
auditing based on our analysis of the literature regarding the CCPA, 
GDPR, and other data privacy rules and related research. These upper- 
and lower-bound estimates and the supporting literature are discussed 
in this part VII.A.8.c of this preamble. In summary, part VII.A.8.c.i 
of this preamble estimates that Know Your Customer/Know Your Vendor 
(``KYC''/``KYV'') costs for verifying one's business and its executives 
are between $150 (lower bound) and $4,230 (upper bound). In addition, 
parts VII.A.8.c.ii through VII.A.8.c.iv of this preamble estimate that 
the combined annual recordkeeping and auditing costs per firm are 
between a lower bound of $1,260 ($300 for auditing + $960 for 
recordkeeping) and an upper bound of $232,500 ($7,500 for auditing + 
$225,000 for recordkeeping). These estimates are based on the 
Department's analysis, but could be different depending on industry and 
context. The Department welcomes additional input from stakeholders on 
this point.
i. Due Diligence Costs
    The proposed rule requires entities engaged in restricted 
transactions to perform due diligence that includes KYC/KYV activities, 
which may involve verifications to confirm the legitimacy and 
eligibility of customers and vendors. Costs would generally be incurred 
one time per customer or vendor, but they could be repetitive if there 
is reason to believe that a customer or vendor's legitimacy or 
eligibility has changed. The Department estimates the due diligence 
(i.e., KYC/KYV) costs for verifying one business and its executives at 
between $150 (lower bound) and $4,230 (upper bound).
    The upper-bound estimate assumes that the background check costs 
for one customer or vendor business would include a background check 
for the business and three background checks for executives residing 
outside the United States. The Department estimates an upper-bound cost 
of $1,200 per business background check based on a study showing an 
upper-bound range of more than $1,000 for a due diligence background 
check of a business.\539\ The Department estimates an upper-bound cost 
of $1,010 per executive background check based on the highest cost for 
a background check of an executive residing in a country of concern 
(which is associated with Venezuela) from Table VII-13 of this 
preamble.\540\ Therefore, the upper-bound background check costs for 
one customer business with three executives could be as high as $4,230 
($1,200 per business \541\ + ($1,010 per executive \542\ * 3)).
---------------------------------------------------------------------------

    \539\ Tim Santoni, So What's the Difference Between Background 
Checks and Investigations?, Santoni, https://santoniservices.com/whats-new-at-santoni/whats-the-difference-between-background-checks-and-investigations/ [https://perma.cc/WM9X-5YMY].
    \540\ International Screening Checkout Portal, Global Background 
Screening, https://www.globalbackgroundscreening.com/online-background-check/International-Employee-Screening-Select-Country-For-Pricing-p303546142 [https://perma.cc/3AUN-84R4] (select most 
expensive options for all Venezuelan searches and verifications from 
dropdowns).
    \541\ Santoni, supra note 539 (estimating that a due diligence 
background check for a business may cost over $1,000).
    \542\ International Screening Checkout Portal, supra note 540.
---------------------------------------------------------------------------

    One company, Global Background Screening, charges $150 to $250 for 
business background checks, with the higher end for businesses 
headquartered outside the United States.\543\ These business background 
checks include documentation on directorship, financials, registration, 
judgments, liens, bankruptcies, and credit risk.\544\ Screenings for 
firm executives appear to be separate costs, which vary by country of 
residence and type of background check, as summarized in Table VII-13 
of this preamble. Countries identified in the proposed rule as 
countries of concern (see Sec.  202.209) are included in Table VII-13 
of this preamble where sufficient data is available. Santoni also 
advertises due diligence business background checks, which appear to 
include foreign firms and officers, ranging from $395 to more than 
$1,000.\545\
---------------------------------------------------------------------------

    \543\ Background Check on a Business, Global Background 
Screening, https://www.globalbackgroundscreening.com/online-background-check/background-check-on-a-business-p316742635 [https://perma.cc/3AUN-84R4].
    \544\ Carlos Crameri, Business Credit Reports for Informed 
Decision-Making, Global Background Screening (Mar. 21, 2023), 
https://www.globalbackgroundscreening.com/online-background-check/
BACKGROUND-CHECK-ON-A-BUSINESS-p316742635 [https://perma.cc/QE6U-FFMR]; for more detailed pricing, see Background Check on a 
Business, Global Background Screening, https://www.globalbackgroundscreening.com/online-background-check/background-check-on-a-business-p316742635 [https://perma.cc/3AUN-84R4].
    \545\ Santoni, supra note 539.

[[Page 86193]]



                              Table VII-13--Estimated International Screening Costs for Individuals by Country of Residence
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            All nations     All nations
                    Type of screening                          China          Russia           Cuba          Venezuela          low            high
--------------------------------------------------------------------------------------------------------------------------------------------------------
Criminal background.....................................        $80-$110            $129            $169            $135             $59            $260
Civil judgements........................................              80             145             239             159              45             279
Identity verification...................................              25              25              25              25              25              25
Bankruptcy records......................................              50  ..............  ..............             188              23             188
Credit history..........................................              80             127             274             234              50             532
Employment verification.................................           35-99           35-99           35-99           35-99              35              99
Education verification..................................              35              35              35              35              35              35
Worldscan (global databases)............................           11-65           11-65           11-65           11-65              11              65
Social media scan.......................................           50-70           50-70           50-70           50-70              50              70
                                                         -----------------------------------------------------------------------------------------------
    Totals..............................................         446-614         557-695         838-976       872-1,010             333           1,553
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: International Screening Checkout Portal, Global Background Screening, https://www.globalbackgroundscreening.com/online-background-check/International-Employee-Screening-Select-Country-For-Pricing-p303546142 (reflecting costs of services at the time the Department drafted the proposed
  rule).

    The remainder of this section summarizes additional research on 
background check costs for foreign firms and for individuals residing 
outside the United States, which is broadly consistent with the 
Department's upper- and lower-bound estimates discussed so far in this 
section.
    The U.S. International Trade Administration (``ITA'') provides 
basic background check and in-depth data on foreign firms to help U.S. 
companies determine the suitability of possible business partners. To 
be eligible for the service, companies must be export-ready and 
endeavoring to export goods or services of U.S. origin with at least 
51-percent U.S. content. The ITA provides partial profiles that include 
general business information, background and product data, pertinent 
executives, reputation information, brief analysis of information 
collected, and identities of the references used. Fees for these 
partial profiles range from $150 to $450 depending on the size of the 
inquiring firm. Full business profiles add onsite visits and interviews 
of company executives, with costs ranging from $700 to $2,000. Costs 
could increase if ITA staff are required to travel more than 80 
kilometers or 2 hours from an ITA office.\546\
---------------------------------------------------------------------------

    \546\ Int'l Trade Admin., International Company Profile (Full 
and Partial), https://www.trade.gov/international-company-profile-0 
[https://perma.cc/N3PX-4DEZ].
---------------------------------------------------------------------------

    Diligentia, Inc. categorizes background checks on individuals based 
on the thoroughness of the investigation. An individual or red flag 
investigation is designed to identify adverse issues predominantly via 
online searches, at a cost of $500 to $1,500. A professional background 
investigation is a more thorough review that adds onsite records 
depository visits and analysis of documents there, at a cost of $1,500 
to $2,500. A comprehensive background investigation goes even further, 
with additional analyses, reviews of business interests, the use of 
other intelligence sources, financial investigation, and a credit 
history, at a cost of more than $2,500. This provider does not 
advertise a price difference between domestic and foreign background 
investigations.\547\
---------------------------------------------------------------------------

    \547\ Brian Willingham, How Much Does a Background Investigation 
Cost?, Diligentia Group (Apr. 23, 2024), https://diligentiagroup.com/background-investigations/how-much-does-a-background-investigation-cost/ [https://perma.cc/2RGF-LH5G].
---------------------------------------------------------------------------

    Checkr states that international background checks can range from 
$30 to $500, with their fees varying from $32 to $300 and covering more 
than 200 countries. Checkr asserts that a global background check may 
include searches for criminal history, watchlist posting, education/
employment verification, and media checks.\548\
---------------------------------------------------------------------------

    \548\ Simple, Transparent Pricing: Background Check Pricing for 
Businesses of All Sizes, Checkr, https://checkr.com/pricing?utm_medium=ppc&utm_source=google&utm_campaign=pricing_sitelink&utm_term=checkr&utm_campaign=FM_Brand_Search_LP_Control_1122&utm_source=google&utm_medium=ppc&utm_content=677534444565&_bm=p&_bn=g&device=c&utm_adgroup=Brand_Core&gad_source=1&gclid=Cj0KCQjwyL24BhCtARIsALo0fSAQPeVlfGXfAoN59kjZI4TEpIchvwY7u4ZdX3iPL0Sg8Z0_ZVLLjPwaApKyEALw_wcB
 [https://perma.cc/7U3R-T8R5].
---------------------------------------------------------------------------

    An ITA partial or full profile of foreign businesses would likely 
be preferable for U.S. companies due to the real or perceived 
credibility of a government agency and the comparatively reasonable 
costs. Accordingly, for verifying one business and its executives, the 
Department relied on ITA's pricing for the estimated lower-bound cost 
of $150.
    The sources supporting our cost estimates do not discuss whether 
the costs include extensive investigations that involve foreign travel 
or contracting with third parties in foreign locations to perform 
onsite visits, inquiries, interviews, and other in-depth activities. 
The Department estimates that it is unlikely that firms would allocate 
resources for these kinds of investigations, particularly when the ITA 
service is available. However, some firms may not meet the ITA's 
eligibility criteria for their services. Thus, it is possible that KYC/
KYV activities may need to be performed via a private vendor, such as 
one of the vendors just described. Again, based on the analysis, the 
Department estimates the due diligence costs for verifying one business 
and its executives at between $150 (lower bound) and $4,230 (upper 
bound).
    These estimates are based on Department analysis but could be 
different depending on the industry and context. The DOJ welcomes 
additional input from stakeholders on this point.
ii. Recordkeeping Costs
    The proposed rule's recordkeeping requirements would include 
generating or maintaining documents pertinent to various data 
transactions details, verifications of transaction partners, 
transactions agreements, licenses, exemptions, advisory opinions, 
annual due diligence certifications, and supporting documentation, as 
applicable. Data brokers incorporated in the United States market and 
sell data on individuals not only domestically but from many other 
countries; \549\ for example, Acxiom markets data coverage for more 
than 62 countries.\550\ Assuming that this data on foreign persons 
includes individuals protected by EU

[[Page 86194]]

law, these data brokers are subject to the GDPR.
---------------------------------------------------------------------------

    \549\ Sherman, supra note 483.
    \550\ Acxiom LLC, Global Data Navigator (2018), https://marketing.acxiom.com/rs/982-LRE-196/images/Acxiom%20Global%20Data.pdf [https://perma.cc/4NX5-M8P6].
---------------------------------------------------------------------------

    Since 2018, the GDPR has required all organizations that target or 
collect data relative to persons in the EU to abide by privacy and 
security standards outlined in that law. One of the seven data 
protection principles in the GDPR is accountability or due diligence. 
Accordingly, data controllers (i.e., holders of data) must be able to 
demonstrate compliance relative to accountability by (1) designating 
data protection responsibilities as appropriate; (2) maintaining 
comprehensive records of collected data, its use, and those responsible 
for it; (3) training staff and executing technical and organizational 
security measures; (4) implementing contracts with third parties that 
process data on their behalf; and (5) appointing a data protection 
officer (if a public authority or regularly processing personal data on 
a large scale).\551\ Thus, a portion of covered persons subject to the 
proposed rule are already complying with GDPR recordkeeping 
requirements and would arguably not incur the full magnitude of these 
new costs.
---------------------------------------------------------------------------

    \551\ Ben Wolford, What Is GDPR, the EU's New Data Protection 
Law?, GDPR.eu, https://gdpr.eu/what-is-gdpr/ [https://perma.cc/ECS2-P67N].
---------------------------------------------------------------------------

iii. Executive Order on Modernizing Regulatory Review Recordkeeping and 
Related Costs
    As shown in the following analysis, the annual recordkeeping and 
related costs per firm are estimated to be between $960 (lower bound) 
and $225,000 (upper bound).
    The Department calculates a lower-bound estimate of annual 
recordkeeping costs per firm by starting with the average annual 
incremental compliance costs/administrative burdens from the EU impact 
assessment of GDPR. According to the EU's impact assessment of the 
GDPR, average annual incremental compliance costs/administrative 
burdens for small and medium-sized enterprises (``SMEs'') \552\ are 
approximately $9,624 (in 2024 dollars).\553\ The Department assumes 
that the incremental recordkeeping costs of the proposed rule would 
only be about 10 percent of the estimated incremental annual costs for 
GDPR compliance. This assumption is based on the facts that the GDPR 
includes extensive recordkeeping requirements \554\ and that many of 
the proposed rule's recordkeeping requirements are similar in scope to 
the obligations of existing data protection regulations.\555\ 
Furthermore, the EU's impact assessment of the GDPR includes costs of 
compliance beyond recordkeeping costs. Based on these considerations 
and input from SMEs, the Department estimates that 1,400 small to 
medium-sized firms will incur recordkeeping costs of $960 per firm per 
year.
---------------------------------------------------------------------------

    \552\ According to the European Commission, SMEs consist of the 
following company types: medium with <250 employees, <=[euro]50 
million turnover, or a balance sheet total <=[euro]43 million; small 
with <50 employees, <=[euro]10 million turnover, or a balance sheet 
total <=[euro]10 million; and micro with <10 employees, <=[euro]2 
million turnover, or a balance sheet total <=[euro]2 million. See 
European Comm'n, SME definition, Internal Market, Industry, 
Entrepreneurship and SMEs, https://single-market-economy.ec.europa.eu/smes/sme-definition_en [https://perma.cc/N4UX-WV5V].
    \553\ [euro]5.258 billion/926,272 active cross-border firms = 
[euro]5,676 per SME per year = $7,068 at July 2012 average exchange 
rate ([euro]1.00 = $1.24). European Comm'n, Doc. 52012SC0072, 
Commission Staff Working Paper Impact Assessment, Annex 9 (Jan. 25, 
2012), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52012SC0072&qid=1713360200812 [https://perma.cc/W3FZ-GQ9Z].
    \554\ Regulation (EU) 2016/679, supra note 28, at art. 30.
    \555\ Id.; see infra note 557 and accompanying text.
---------------------------------------------------------------------------

    An upper-bound estimate of annual recordkeeping costs per firm is 
also based on estimates of company privacy protection annual costs, 
which for large firms were estimated at $4.5 million per firm.\556\ The 
Department further estimates that the incremental recordkeeping costs 
of the proposed rule for large firms would be approximately 5 percent 
of the estimated annual costs for privacy protections. This assumption 
is based on the same factors as those described for the lower-bound 
annual recordkeeping cost estimate as well as the fact that the prior 
study included additional necessary costs (e.g., IT upgrades) beyond 
recordkeeping alone. Further, the Department believes that larger firms 
predominantly have the added benefit of possessing additional 
sophistication in complying with existing data privacy and security 
regimes and already have significant compliance programs and mechanisms 
in place. Thus, based on this analysis and subject-matter expert input, 
the Department estimates that 100 firms will incur the higher 
recordkeeping costs of $225,000 per firm.
---------------------------------------------------------------------------

    \556\ This cost figure was converted into 2024 dollars. Cisco, 
Data Privacy Benchmark Study, Forged by the Pandemic: The Age of 
Privacy 9 (2021), https://www.cisco.com/c/dam/en_us/about/doing_business/trust-center/docs/cisco-privacy-benchmark-study-2021.pdf [https://perma.cc/6UTB-48C3]. Note that large firms were 
assumed to be the complement of the aforementioned small to medium-
sized firms.
---------------------------------------------------------------------------

    To provide context on these upper- and lower-bound recordkeeping 
costs, this section summarizes additional studies.
    The CCPA mandated that businesses in California update privacy 
policies, develop mechanisms for providing notice to consumers when 
collecting personal information (``PI''), and adequately respond to 
consumer wishes regarding the handling of such data. The State of 
California Department of Justice, Office of the Attorney General's 
(``CDOJAG'') standardized regulatory impact assessment for the CCPA 
regulations estimated the following rule-imposed costs per firm: $959 
in one-time operational costs (e.g., establishing workflows/plans), 
$7,500 for technological systems development (assumed one-time), $615 
per year for training, $984 per year to abide by record-keeping 
requirements (one data privacy professional at $61.50 per hour * 16 
hours),\557\ and $492 (assumed per year) to provide financial 
incentives or differential services/prices to promote non-
discriminatory practices in their treatment of consumers exercising 
their CCPA rights. Apart from the $984 in compliance-related costs, the 
CDOJAG assumed that there were no incremental costs for collecting the 
information subject to the CCPA's recordkeeping requirement, as 
affected businesses likely already had mature mechanisms for 
identifying, processing, and analyzing PI from their data-mapping and 
consumer response practices. The CDOJAG's total estimated costs per 
firm to comply with the CCPA were about $29,000 ($2,900 annually) for 
the period from 2020 to 2030.\558\
---------------------------------------------------------------------------

    \557\ Off. of Att'y Gen., Cal. Dep't of Just, Standardized 
Regulatory Impact Assessment: California Consumer Privacy Act of 
2018 Regulations 24 (2019), https://dof.ca.gov/wp-content/uploads/sites/352/Forecasting/Economics/Documents/CCPA_Regulations-SRIA-DOF.pdf [https://perma.cc/5J5S-7DNA]. The record-keeping 
requirements contained in the CCPA consist mainly of documenting 
business practices when processing consumer requests on how their 
particular data is handled. Businesses are required to compile 
metrics on these requests and their responses. These metrics include 
the number of requests to know, delete, and opt out that were 
received, complied with, and denied.
    \558\ Id. Ten-year costs per firm: $959 + $7,500 + $6,150 + 
$9,840 ($61.50 x 16 hrs. x 10 yrs.) + $4,920 = $29,369 for 10 years 
(Id., at 24-28).
---------------------------------------------------------------------------

    Christensen et al. estimated GDPR compliance costs at between 
$5,065 and $12,157 (2024 dollars) \559\ per year per SME, which 
represents a 16- to 40-percent increase in annual IT budgets. These 
presumably would align with the aforementioned GDPR accountability

[[Page 86195]]

elements identified by Wolford,\560\ which are generally consistent 
with those of the proposed rule.
---------------------------------------------------------------------------

    \559\ [euro]3,000 ($3,720 in 2012 dollars) to [euro]7,200 
($8,929 in 2012 dollars) per SME per year; Laurits R. Christensen et 
al., The Impact of the Data Protection Regulation in the E.U. (Feb. 
13, 2013), https://www.analysisgroup.com/globalassets/insights/publishing/2013_data_protection_reg_in_eu_christensen_rafert_etal.pdf [https://perma.cc/4K3B-DF2R].
    \560\ Wolford, supra note 551.
---------------------------------------------------------------------------

    A 2018 International Association of Privacy Professionals and Ernst 
& Young (``IAPP''/``EY'') study/survey identified much higher average 
expected spending of about $3 million per firm on GDPR compliance, or 
$300,000 annually if assumed over 10 years. This included $1,276,000 
already spent, another $822,000 expected for adaptation of products and 
services, and $989,000 for other adaptation activities. However, the 
average annual costs per firm due to GDPR were unclear based on the 
IAPP/EY 2018 and 2019 surveys. Company annual mean and median privacy-
related spending ranged from $128 to $147 on a per-employee basis. 
Survey respondents were a mix of company sizes ranging from under 100 
employees to more than 75,000.\561\
---------------------------------------------------------------------------

    \561\ Int'l Ass'n of Privacy Pros. & Ernst & Young, IAPP-EY 
Annual Privacy Governance Report 2018 (2018), https://iapp.org/media/pdf/resource_center/IAPP_EY_Governance_Report_2018.pdf 
[https://perma.cc/SA8P-QV3G]; Int'l Ass'n of Privacy Pros. & Ernst & 
Young, IAPP-EY Annual Privacy Governance Report 2019 (2019), https://iapp.org/media/pdf/resource_center/IAPP_EY_Governance_Report_2019.pdf [https://perma.cc/DG8X-3W5G].
---------------------------------------------------------------------------

    A 2021 Cisco annual global survey of all major industries found 
that annual privacy budgets doubled from the previous year to an 
average of $2.4 million (with smaller firms at a lower end of $1.6 
million and larger firms at an upper end of $3.7 million, as reported 
in 2020).\562\ This average figure of $2.4 million is comparable to a 
high-end estimate found in another study that aimed to project the 
costs to businesses incurred by possible Florida consumer privacy 
legislation; that study had a lower-bound estimate of about $733,000 in 
one-time costs per firm and subsequent ongoing annual costs ranging 
from about $542,000 to $1.5 million.\563\ Organizations may spend an 
average of about $1,406 per subject rights request by consumers 
pursuant to privacy regulations.\564\ According to one estimate, data 
processing agreements may have an average cost of $785.\565\ Though 
privacy budgets, including some of their underlying elements, are 
different in scope and detail from the proposed rule they nonetheless 
have relevance for estimating the costs of the proposed rule as these 
budgets often serve similar objectives and require companies to 
undertake similar processes to protect sensitive data.
---------------------------------------------------------------------------

    \562\ Cisco, supra note 556.
    \563\ Florida TaxWatch, Who Knows What? An Independent Analysis 
of the Potential Effects of Consumer Data Privacy Legislation in 
Florida, TaxWatch Research Blog (Oct. 11, 2021), https://floridataxwatch.org/Research/Blog/who-knows-whatanalysis-of-data-privacy-legislation-in-florida [https://perma.cc/2TD9-RLBR].
    \564\ Rob van der Meulen, 4 Key Trends in the Gartner Hype Cycle 
for Legal and Compliance Technologies, 2020, Gartner (Sept. 21, 
2020), https://www.gartner.com/smarterwithgartner/4-key-trends-in-the-gartner-hype-cycle-for-legal-and-compliance-technologies-2020 
[https://perma.cc/2AN5-PDTJ].
    \565\ Data Processing Agreement Cost, ContractsCounsel, https://www.contractscounsel.com/b/data-processing-agreement-cost [https://perma.cc/PDW6-LFZN].
---------------------------------------------------------------------------

    The relatively new APEC CBPR is a voluntary accountability 
framework regulating data transfers between member nations that is 
somewhat similar to the EU's GDPR, but based on Organisation for 
Economic Co-operation and Development (``OECD'') privacy 
principles.\566\ In the United States, APEC CBPR annual certification 
costs range from $15,000 to $40,000.\567\ The APEC CBPR's data security 
\568\ due diligence mechanism is another requirement with which firms 
may already be complying and thus could reduce incremental costs of the 
proposed rule due to comparable or related requirements.
---------------------------------------------------------------------------

    \566\ Clare Sullivan, EU GDPR or APEC CBPR? A Comparative 
Analysis of the Approach of the EU and APEC to Cross Border Data 
Transfers and Protection of Personal Data in the IoT Era, 35 Comput. 
L. & Sec. Rev. 380 (2019), https://doi.org/10.1016/j.clsr.2019.05.004 [https://perma.cc/EGH9-D7ER].
    \567\ ISO 27701 vs. APEC CBPR, nccgroup (July 20, 2023), https://www.nccgroup.com/us/iso-27701-vs-apec-cbpr/ [https://perma.cc/8VVW-FYMB].
    \568\ Asia-Pac. Econ. Coop., APEC Privacy Framework ] 32 (2015), 
https://www.apec.org/docs/default-source/Publications/2017/8/APEC-Privacy-Framework-(2015)/217_ECSG_2015-APEC-Privacy-Framework.pdf 
[https://perma.cc/C8RN-V2ND].
---------------------------------------------------------------------------

    In summary, available sources show variations regarding the 
compliance costs for data privacy and cybersecurity regulations 
specific to recordkeeping. The Department estimates that it is very 
likely that incremental recordkeeping costs for at least some firms 
impacted by the proposed rule are zero, as the CDOJAG discussed in its 
cost estimates for the CCPA. Conversely, the possibility exists that 
larger firms have not been subject to the EU's GDPR and would be 
impacted by the proposed rule, resulting in their incurring some 
portion of the $4.5 million in 2024 in estimated annual recordkeeping 
costs documented by Cisco for such firms.\569\ These ranges, along with 
the other data and analysis discussed throughout this subpart, were 
taken into consideration for the calculations of the proposed rule's 
average annual lower- and upper-bound costs per firm of $960 and 
$225,000. Part VII.F of this preamble estimates that costs due to the 
proposed annual reporting requirements for certain categories of U.S. 
persons engaged in certain subsets of restricted transactions would 
range from $821,100 (lower bound) to $1,642,200 (upper bound).
---------------------------------------------------------------------------

    \569\ Cisco, supra note 556, at 9.
---------------------------------------------------------------------------

iv. Auditing Costs
    As shown in the following analysis, annual auditing costs per firm 
are estimated to be between $300 (lower bound) and $7,500 (upper 
bound).
    Auditing costs for restricted transactions would be incurred in the 
form of independent examinations to support the due diligence 
certifications. TrustNet offers services to help firms determine their 
compliance with the CCPA. One such service is a CCPA gap assessment, 
which covers scope, project management, risk assessment, controls 
identification, testing/analysis, remediation roadmap, and reporting. 
The cost of this service starts at $10,000. TrustNet also offers a CCPA 
compliance assessment with costs starting at $15,000, which covers 
similar elements.\570\
---------------------------------------------------------------------------

    \570\ CCPA Assessment Cost, TrustNet, https://trustnetinc.com/california-consumer-privacy-act-cost/ [https://perma.cc/V88J-WW5M].
---------------------------------------------------------------------------

    According to Neumetric, a cybersecurity products and services 
company, GDPR accreditation or certification is not offered by the EU 
or any of its member states. Firms do not need to certify that they are 
GDPR compliant; however, there are third-party certification bodies/
consultants that offer GDPR certification services for consultant fees 
ranging from $3,000 to $11,000, on average.\571\ This does not include 
internal costs to prepare for certification or other prerequisites for 
obtaining ISO/IEC 27001 and ISO 27701 certification, which could cost 
between $1,000 and $4,000.\572\ Another source estimated that costs for 
GDPR certification range from about $5,000 to $20,000 or more 
(excluding ISO/IEC 27001 and ISO 27701 certification).\573\
---------------------------------------------------------------------------

    \571\ GDPR Certification Cost: Factors, Examples and Benefits, 
Neumetric (May 15, 2023), https://www.neumetric.com/gdpr-certification-cost/ [https://perma.cc/X8ZM-HW32].
    \572\ Id.
    \573\ Ayush Saxena, Compliance Q&A: How Much Does GDPR 
Compliance Cost?, Sprinto (Apr. 3, 2024), https://sprinto.com/blog/gdpr-compliance-cost/ [https://perma.cc/NA35-YAQP].
---------------------------------------------------------------------------

    The American Institute of Certified Public Accountants has 
developed a cybersecurity compliance framework known as Service 
Organization Control 2 (``SOC 2''). Cybersecurity audit costs can be 
divided into SOC 2 Type 1 audits and SOC 2 Type 2 audits. Type 1 audits 
evaluate the suitability of controls at a specific point in time and 
can cost between $5,000 and $25,000. Type 2 audits gauge the 
effectiveness of controls over a more extended

[[Page 86196]]

timeframe and can range in costs from $30,000 to $100,000.\574\ The 
latter is more appropriate for firms processing highly sensitive 
personal data on a regular basis.\575\ ``Dunkelberger provides a 
slightly different range for SOC 2 Type 1 audits, estimating that they 
can cost $15,000 to $50,000 for small to medium-sized businesses and 
between $50,000 to $100,000 for large businesses; and for SOC 2 Type 2 
Audits, estimating that they can cost $30,000 to $75,000 for small to 
medium-sized businesses and $75,000 to $150,000 for large businesses. 
These costs include the price of a readiness assessment, audit, 
remediation, and consultant fees.\576\
---------------------------------------------------------------------------

    \574\ Tim Mektrakarn, How Much Does a SOC2 Audit Cost in 2024?, 
Bright Defense (Aug. 7, 2024), https://www.brightdefense.com/resources/soc-2-audit-costs/ [ https://perma.cc/G7FD-28Y6].
    \575\ Meeba Gracy, SOC 2 Type 1 vs Type 2 (A Detailed 
Comparison), Sprinto (Mar. 16, 2024), https://sprinto.com/blog/soc-2-type-1-vs-type-2/ [https://perma.cc/BZL4-GJY4].
    \576\ David Dunkelberger, SOC 2 Budgeting: How Much Does a SOC 2 
Audit Cost?, I.S. Partners: Blog (Nov. 6, 2023), https://www.ispartnersllc.com/blog/soc-2-audit-cost/ [https://perma.cc/KCJ8-SMNA].
---------------------------------------------------------------------------

    As these estimates show, the costs of annual audits for compliance 
with CCPA, GDPR, and SOC 2 range from $3,000 to $150,000, depending on 
audit type and firm size. The Department expects that such examiners 
may not always charge these full rates separately just to certify 
compliance with the proposed rule, due to redundancies with existing 
legislation and efficiencies of conducting simultaneous audits pursuant 
to multiple rules. Nevertheless, there would be increased costs, as 
there are likely to be variations in addition to the redundancies. For 
purposes of this analysis, the Department assumes that for all small 
firms, the proposed rule would result in audit costs that are 10 
percent of the estimated cost of an audit from the reviewed literature, 
or $300 ($3,000 * 10 percent incremental cost). The Department assumes 
that for all large firms, the proposed rule would result in audit costs 
that are 5 percent of the estimated cost of an audit from the reviewed 
literature, or $7,500 ($150,000 * 5 percent incremental cost).
v. Estimated Recordkeeping Costs From the Reviewed Literature
    The wide-ranging estimates of recordkeeping costs in the studies 
reviewed, and the entwinement of the former with other costs, 
demonstrate the difficulty in determining specific costs for each due 
to the proposed rule. Further, the literature is not specific to 
compliance with this proposed rule. Rather, the literature relates to 
the business costs of protecting personal information from unauthorized 
dissemination while establishing procedures for its processing and 
transfer, in addition to protocols for responding to consumer 
preferences regarding handling of their own personal information. In 
recent years, privacy and protection laws affecting the entities that 
will likely be impacted by the proposed rule have proliferated. Thus, 
the recordkeeping costs contemplated under the proposed rule have 
already been incurred to some extent.
vi. Summary of a Compliance Program: Due Diligence, Recordkeeping, and 
Auditing
    From this examination of the available literature, the due 
diligence, recordkeeping, and auditing requirements are likely to 
unevenly impact firms that must comply with the proposed rule, 
depending on the size of each firm and how much it currently spends on 
the components of due diligence. Although the means by which firms will 
comply is uncertain, the Department has relied on a variety of research 
in the topic areas to make preliminary estimates of costs due to the 
proposed rule.
    Uncertainty is prevalent in these restricted transactions and data-
brokerage market cost estimates for several reasons. In particular, the 
estimates of recordkeeping costs based on the percentage of the costs 
of compliance with GDPR and other data protection regimes reported in 
various studies are highly speculative. Estimates of the proposed rule-
imposed incremental costs above and beyond similar compliance 
activities already taking place are also speculative. Consequently, the 
Department welcomes comments on these cost calculations from affected 
industries and stakeholders to better inform decision making relative 
to the proposed rule.
    Beyond the cost impacts of the proposed regulation, there could 
possibly be adjustments and market movements in reaction to changes in 
the threshold levels that are being proposed. This analysis assumes 
that all the current bulk U.S. sensitive personal data transactions are 
above the lower threshold levels as defined by the proposed rule. If 
the threshold levels are set at the higher level in the final rule, it 
is possible that there may be less immediate market disruption but also 
a greater risk of more data falling into malicious hands, including 
through evasion techniques such as structuring and smurfing (i.e., 
conducting smaller and more frequent transactions using additional 
individuals). Since there is no available data on the number of 
transactions by volume of personal data being transferred, the impacts 
of selecting one bulk threshold over another within the ranges in the 
NPRM are uncertain at the time of the proposal, and the Department 
welcomes comments on this subject.
    Note that the recordkeeping costs discussed here (part VII.A of 
this preamble) are also included in part VII.F of this preamble 
(Paperwork Reduction Act), which presents cost estimates for the six 
new information collection requests introduced by the proposed rule. 
The costs of affirmative annual reporting are also discussed above. In 
addition to recordkeeping costs and the cost of affirmative annual 
reporting, part VII.F of this preamble presents estimates for the 
applications for specific licenses, reports of rejected prohibited 
transactions, requests for advisory opinions, petitions for removal 
from the Covered Persons List, and reports of known or suspected 
violations of onward transfers prohibition. All of those information 
collections affect a relatively small number of firms. Additional 
detail on those annual costs is available in the Information Collection 
Request submitted for Office of Management and Budget review under the 
Paperwork Reduction Act and publicly available on reginfo.gov.
9. Summary of Regulatory Analysis
    Regulatory analysis in the areas of national security and foreign 
policy is often not easily quantifiable or monetizable due to an array 
of factors, such as inadequate information, inaccessibility of 
sensitive or proprietary data; and the absence of a good measure of the 
effectiveness of the regulations.
    The purpose of the Preliminary RIA is to gather and analyze enough 
adequate information to inform agency decision makers about whether a 
proposed rulemaking is in the public's interest. The analysis should 
describe the impacts on firms in the market and in the supply chain, 
remembering that the intermediate firms in the chain are customers of 
the suppliers. To the extent possible, the impacts on the general 
public should be considered, as well as--in the case of this proposed 
rulemaking--the impact on national security and foreign policy and the 
impact of data-brokerage restrictions on the positive uses of bulk 
data. The precision of estimates depends on the availability of data, 
the confidence in the accuracy of the data, and the degree of 
understanding of the impacted markets.

[[Page 86197]]

    These economic impact estimates lack precision due to significant 
gaps in the available data on the number of firms and data transactions 
that would be affected by the proposed rule and by the lack of 
confidence in much of the available data. Due to relatively recent and 
emerging developments in studying the market for data, relevant, 
reliable, and representative size, sales, employment, and other 
descriptive information on the data-brokerage market and other entities 
that will be subject to the proposed rule does not appear to be 
currently available. The Department is not aware of reliable data on 
the exact number of firms that currently engage in prohibited data-
brokerage transactions, the size distribution of these firms, or the 
numbers of firms that sell above or below the threshold levels that 
would bring them under the proposed rule's umbrella. The Department 
welcomes additional input on this point. The low and high threshold 
levels for the different categories of sensitive personal data or 
government-related data vary by factors of 10 to 1 for human genomic 
data and 1,000 to 1 for personal health data and personal financial 
data. Furthermore, the Department lacks data on the broader universe of 
firms that transact in government-related data or bulk U.S. sensitive 
personal data in the context of restricted transactions. As noted in 
the NPRM, firms that transact in bulk U.S. sensitive personal data 
above the proposed thresholds, as laid out in part V.C of this 
preamble, will need to ensure that their typical data transfers are not 
in fact going to countries of concern or covered persons (for 
prohibited transactions) and to comply with the security and due 
diligence requirements for restricted transactions.
    This analysis leverages the limited available data on the number of 
data-brokerage firms and the volume of data-brokerage exports, along 
with estimates of security and due diligence costs from studies of 
similar policies and guidelines. The Department finds that, based on 
certain assumptions, the proposed rule will have at least some 
measurable economic impacts. From Table VII-10 of this preamble, the 
Department estimates that the total annual value of lost transactions 
is $361 million, or an estimated $80,222 per firm for 4,500 firms 
(3,000 data brokers + 1,500 firms engaged in restricted transactions).
    Table VII-14 of this preamble presents estimates of security 
compliance costs derived from data shown in part VII.B.2 of this 
preamble and estimates of due diligence, recordkeeping, and auditing 
costs derived from data shown in part VII.A.8.c of this preamble. The 
variations in costs are due to firm size and other factors. As 
explained in part VII.A.8.c of this preamble, the Department estimates 
the KYC/KYV (i.e., due diligence) costs for verifying one business and 
its executives to be between a lower bound of $150 and an upper bound 
of $4,230. There is no information on how many verifications a firm 
will do, but the Department assumes for purposes of this analysis 10 
verifications per firm per year, for a total cost of between $1,500 and 
$42,300. Adding the lower bounds of due diligence costs ($1,500), 
auditing costs ($300), and recordkeeping costs ($960) per firm, the 
resulting costs at a lower bound are $2,760 per firm for other 
compliance costs. Adding the upper bound of due diligence costs 
($42,300), audit costs ($7,500), and recordkeeping costs ($225,000) per 
firm, the resulting costs are $274,800 for total compliance annual 
costs per large firm. Table VII-14 of this preamble shows annual 
compliance costs per firm. The Department welcomes additional input on 
this point.

             Table VII-14--Annual Compliance Costs per Firm
             [For Firms Engaged in Restricted Transactions]
------------------------------------------------------------------------
                                            Low (small      High (large
              Cost category                   firms)          firms)
------------------------------------------------------------------------
Security: One-Time Costs................         $60,000        $245.000
Security: Recurring Costs...............          23,620         101,160
Other Compliance Costs (Due Diligence,             2,760         274,800
 Audits, Recordkeeping).................
------------------------------------------------------------------------

    When the proposed rule is finalized and becomes effective, market 
dynamics will set in, and firms will exit and enter the market as they 
adjust to the new regulatory environment. As noted in part VII.A.3.b of 
this preamble, the U.S. data-brokerage market ranges from around $30 
billion to $180 billion per year, suggesting average revenues per firm 
at around $10 million to $60 million per year, assuming an estimated 
3,000 firms. The compliance costs per firm will determine whether firms 
pursue restricted transactions.
    For the purposes of this estimate, the Department assumes that 
1,500 firms will engage in restricted transactions, the largest 100 
will incur the high costs, and the remaining 1,400 will incur the lower 
costs. Although it is estimated that there are a relatively few U.S.-
based firms conducting business with Chinese cloud-service providers 
that may continue these activities under the restrictions, it is 
expected that a large--but unknown--number of other firms will pursue 
the restricted transaction opportunities involving employment and 
investment agreements. Under these conditions, the Department assumes 
that about 1,500 firms beyond the 3,000 data brokers will be active in 
pursuing vendor, employment, and investment agreement opportunities in 
the restricted transactions market, the 100 largest of which will be at 
the high cost and 1,400 of which will incur the lower costs.
    The annualized costs of the proposed rule are determined by 
deriving the 10-year projections for three cost components: the 
economic value of lost transactions, security costs, and other 
compliance costs (due diligence, auditing, and recordkeeping). Our 
analysis assumes that 4,500 firms, including 3,000 data brokers and 
1,500 other firms engaged in restricted transactions, will incur 
economic costs. The analyses also assume that 4,300 of those firms are 
small firms (including 2,900 data brokers and 1,400 firms engaged in 
restricted transactions) and 200 of those firms are large firms (100 
data brokers and 100 firms engaged in restricted transactions). The 
analysis also assumes that the data-brokerage industry affected by the 
proposed rule is growing at a 5-percent annual rate.
    Turning to compliance costs, our analyses assume that 1,500 firms 
will incur compliance costs as a result of the proposed rule. The 
Department assumes that security costs have one-time components--
initial assessment and remediation--that are only realized in the first 
year, as well as recurring components--ongoing remediation, compliance 
audits, and training--that

[[Page 86198]]

are present for all 10 years. In addition, it is assumed that the other 
compliance costs, including affirmative due diligence, auditing, and 
recordkeeping costs, will decline as firms become more efficient and 
learn to pursue lower-cost compliance options. These due diligence, 
auditing, and recordkeeping costs are presented as annually decreasing, 
but at a decreasing rate. As companies move away from reliance on 
employees in countries of concern or vendors in countries of concern, 
the Department assumes that these costs will decrease over time. 
Further, since the security measures are all reliant on existing NIST 
standards and CISA performance goals to which many companies already 
align their security posture, the Department assumes that due 
diligence, auditing, and recordkeeping costs will decrease 15 percent 
in the second year, 12 percent in the third year, 9 percent in the 
fourth year, 7 percent in the fifth year, and then 5 percent, 4 
percent, 3 percent, 2 percent, and 1 percent in each of the sixth 
through tenth years. The costs are presented undiscounted (0-percent 
rate) and at discounted by 2 percent.
    In sum, the parameter assumptions of the 10-year projections are:
    1. The annual growth rate of the economic value of lost 
transactions is 5 percent, compounded annually.
    2. Due diligence, auditing, and recordkeeping costs in Year 1 are 
taken from Table VII-14 of this preamble. Costs in Years 2 through 10 
decrease, but at a decreasing rate of 15 percent, 12 percent, 9 
percent, 7 percent, 5 percent, 4 percent, 3 percent, 2 percent, and 1 
percent.
    3. Security costs have both one-time and recurring components in 
Year 1 and only recurring components in Years 2 through 10 (as shown in 
Table VII-14 of this preamble).
    4. The analysis assumes either undiscounted costs or a 2-percent 
annual discount rate.
    5. The value of lost transactions is from Table VII-10 of this 
preamble.
    6. Small firms will bear ``low'' costs shown in the security cost 
and lost transaction totals, and large firms will bear the ``high'' 
costs shown in the security cost and lost transaction totals in Tables 
VII-15 and VII-16 of this preamble.
    7. One thousand five hundred (1,500) firms will incur compliance 
costs as a result of the proposed rule, and a broader group of 4,500 
firms will incur costs due to lost transactions.
    The 10-year annualized cost analysis (undiscounted and for a 2-
percent discount rate) for security and other compliance costs (due 
diligence, auditing, and recordkeeping costs) is presented in Table 
VII-15 of this preamble for the 1,400 small firms and in Table VII-16 
of this preamble for the 100 large firms. These estimates for security, 
due diligence, auditing, and recordkeeping costs for both small and 
large firms engaged in restricted transactions are combined with the 
industry-wide estimates for the economic value of lost transactions to 
obtain total costs for all firms, which are presented in Table VII-17 
of this preamble.

          Table VII-15--10-Year Annualized Cost Analysis for Security, Due Diligence, Auditing (and Recordkeeping) for (the 1,400) Small Firms
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Cost category                Year 1   Year 2   Year 3   Year 4   Year 5   Year 6   Year 7   Year 8   Year 9  Year 10   Total    Annualized
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Undiscounted
--------------------------------------------------------------------------------------------------------------------------------------------------------
Security................................     $117      $35      $36      $38      $40      $42      $44      $47      $49      $51     $500          $50
Due Diligence, Audits, and Recordkeeping        4        3        3        3        3        3        3        3        3        3       33          3.3
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................      121       38       40       41       43       45       47       50       52       55      532           53
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Discount Rate: 2 Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Security................................      117       34       35       36       37       38       39       41       42       43      463           46
Due Diligence, Audits, and Recordkeeping        4        3        3        3        3        3        3        3        3        3       30          3.0
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................      121       37       38       39       40       41       42       43       45       46      493           49
--------------------------------------------------------------------------------------------------------------------------------------------------------
Key Assumptions: Industry growth rate of 5 percent; due diligence, auditing, and recordkeeping costs decreasing at a decreasing rate of 15-12-9-7-5-4-3-
  2-1 percent over years 2-10.

    These year-to-year changes are the same in percentage terms for the 
analysis of large firms in Table VII-16 of this preamble.

               Table VII-16--10-Year Annualized Cost Analysis for Security and Due Diligence (and Recordkeeping) for (the 100) Large Firms
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Cost category                Year 1   Year 2   Year 3   Year 4   Year 5   Year 6   Year 7   Year 8   Year 9  Year 10   Total    Annualized
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Undiscounted
--------------------------------------------------------------------------------------------------------------------------------------------------------
Security................................      $35      $11      $11      $12      $12      $13      $14      $14      $15      $16     $152          $15
Due Diligence, Audits, and Recordkeeping       27       25       23       22       22       22       22       22       23       24      232           23
                                         ---------------------------------------------------------------------------------------------------------------

[[Page 86199]]

 
    Total...............................       62       35       34       34       34       35       35       37       38       40      383           38
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Discount Rate: 2 Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Security................................       35       10       11       11       11       12       12       12       13       13      140           14
Due Diligence, Audits, and Recordkeeping       27       24       22       21       20       19       19       19       19       20      212           21
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................       62       35       33       32       31       31       31       32       32       33      352           35
--------------------------------------------------------------------------------------------------------------------------------------------------------
Key Assumptions: Industry growth rate of 5 percent; due diligence, auditing, and recordkeeping costs decreasing at a decreasing rate of 15-12-9-7-5-4-3-
  2-1 percent over years 2-10.

    The total annualized costs of the proposed rule for small and large 
firms are combined and presented in Table VII-17 of this preamble, 
estimated at $549 million undiscounted and $502 million discounted at 2 
percent (any differences are due to rounding). Tables VII-15 and VII-16 
of this preamble only include the costs of the security, due diligence, 
and recordkeeping requirements of the proposed rule, while Table VII-17 
of this preamble also includes the costs associated with the value of 
lost transactions.

                                              Table VII-17--10-Year Annualized Cost Analysis for All Firms
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Cost category                Year 1   Year 2   Year 3   Year 4   Year 5   Year 6   Year 7   Year 8   Year 9  Year 10   Total    Annualized
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Undiscounted
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lost Transactions.......................     $364     $382     $401     $421     $442     $465     $488     $512     $538     $565   $4,578         $458
Security................................      152       45       48       50       52       55       58       61       64       67      652           65
Due Diligence, Audits, and Recordkeeping       31       28       26       25       25       25       25       25       26       27      264           26
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................      547      456      475      497      520      544      571      598      628      659    5,494          549
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Discount Rate: 2 Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lost Transactions.......................      364      375       22      398      410      422      435      448      461      475    4,173          417
Security................................      152       44       46       47       49       50       52       53       55       56      604           60
Due Diligence, Audits, and Recordkeeping       31       28       25       24       23       22       22       22       22       23      241           24
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................      547      447       93      469      481      494      508      523      538      554    5,018          502
--------------------------------------------------------------------------------------------------------------------------------------------------------
Key Assumptions: Industry growth rate of 5 percent; due diligence, auditing, and recordkeeping costs decreasing at a decreasing rate of 15-12-9-7-5-4-3-
  2-1 percent over years 2-10.

    Table VII-18 of this preamble summarizes the 10-year annualized 
cost analysis (presented in Tables VII-15, VII-16, and VII-17 of this 
preamble) for small and large firms separately and in total, both 
undiscounted and with a discount rate of 2 percent.
    This cost estimate reflects the likelihood that a number of smaller 
firms will drop out of the market if the costs of compliance are 
greater than expected revenues (i.e., if marginal costs exceed marginal 
revenues). Of course, this could also be true of larger firms that lack 
the infrastructure or financial resources to comply with the proposed 
rules and therefore choose to forgo certain transactions or business 
operations in that market altogether.
    In addition to the potential decrease in the number of firms in the 
industry, another related effect is that the proposed rule may create a 
barrier to entry for potential data brokers. That is, the same 
compliance burdens that affect marginal current brokers will also 
affect potential ones.

         Table VII-18--Summary of Total 10-Year Annualized Costs
            [Undiscounted and for a 2-Percent Discount Rate]
------------------------------------------------------------------------
                      Discount rate                         Total cost
------------------------------------------------------------------------
Undiscounted............................................    $549,000,000
2 Percent...............................................     502,000,000
------------------------------------------------------------------------

    These preliminary estimated costs of the proposed rule appear to be 
reasonable when balanced against the expected benefits of preventing 
the potential risk and harms to national security and foreign policy 
that are possible when government-related data or bulk U.S. sensitive 
personal data is transferred to foreign adversaries. These

[[Page 86200]]

benefits are beyond monetary calculation but suggest that the proposed 
rule will have very large net benefits, including protections to well 
over 100 million American individuals who are potential targets of 
adversaries using government-related data or bulk U.S. sensitive 
personal data. A wide range of benefits of the regulation will also be 
realized by firms, including the savings associated with potentially 
reducing the likelihood of data breaches thanks to improved security, 
which are estimated to cost an average of $4.88 million per 
breach.\577\ And firms that sell data to, or buy data from, brokers 
will have increased confidence in the security and due diligence 
arrangements associated with the regulation.
---------------------------------------------------------------------------

    \577\ Cost of a Data Breach Report 2024, IBM, https://www.ibm.com/reports/data-breach [https://perma.cc/8GNL-YEUX].
---------------------------------------------------------------------------

    Both the benefits to be realized and the costs to the economy and 
government will be determined, to some extent, by the effectiveness of 
compliance and enforcement activities and by the methods that market 
participants use to attempt to avoid detection of prohibited or 
restricted activities. For example, ``back doors'' are used to 
circumvent economic sanctions, and digital assets are used to hide 
sanctioned transactions themselves. The countries of concern are known 
to conduct commercial and military operations through proxies. As shown 
in parts IV.D.1.b and IV.D.1.f of this preamble, Cuba and Venezuela 
have acted as third parties to promote malicious acts by other 
countries of concern. Unless the due diligence requirements are fully 
complied with and the due diligence procedures and inquiries provide 
accurate information, the effectiveness of the proposed rule may be 
weakened, leading to reduced expected benefits.
    One commenter suggested that the Department conduct a retrospective 
review of the impact after the final rule becomes effective. The Order 
already requires such a review. Under section 5 of the Order, within 1 
year after the final rule becomes effective, the Department must submit 
a report to the President that addresses, to the extent practicable, 
the effectiveness of the measures imposed under the Order in addressing 
threats to the national security of the United States described in the 
Order and the economic impact of the implementation of the Order, 
including on the international competitiveness of U.S. industry. The 
Order requires the Department to solicit public comment in evaluating 
the economic impact. The Department also intends to regularly monitor 
the effectiveness and impact of the regulations once they become 
effective.

  Table VII-19--OMB Circular A-4 Accounting Statement Provisions Pertaining to Preventing Access to U.S. Sensitive Personal Data and Government-Related
                                                  Data by Countries of Concern or Covered Persons NPRM
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Estimate                                 Units
                                            ------------------------------------------------------------------------------
                  Category                                                           Dollar                       Time                 Notes
                                                 Primary        Low        High       year     Discount rate    horizon
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized benefits..............  The benefits of the proposal include the security of the American people, economic prosperity and
                                             opportunity, and democratic values, all of which are beyond a reasonable, reliable, and acceptable estimate
                                             of quantified monetary value. Details in NPRM.
Annualized quantified, but non-monetized,    The Department did not identify any benefits that were quantified.
 benefits.
Unquantified benefits......................  Discussed in NPRM.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized costs.................    $549,000,000  .........  .........  .........    undiscounted   Years 1-10  The primary costs of the
                                                                                                                            proposed rule are the lost
                                                                                                                            value of transactions due to
                                                                                                                            the prohibitions and costs
                                                                                                                            related to the restrictions
                                                                                                                            that will require due
                                                                                                                            diligence expenditures for
                                                                                                                            enhanced security, KYC/KYV
                                                                                                                            verifications,
                                                                                                                            recordkeeping, reporting,
                                                                                                                            and audits.
                                               $502,000,000  .........  .........  .........              2%   Years 1-10  .............................
Annualized quantified, but non-monetized,    ..............  .........  .........  .........  ..............  ...........  .............................
 costs.
Unquantified costs.........................  ..............  .........  .........  .........  ..............  ...........  .............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized Federal budgetary       ..............  .........  .........  .........  ..............  ...........  .............................
 transfers.
    From/To:...............................
Other annualized monetized transfers.......  ..............  .........  .........  .........  ..............  ...........  .............................
    From/To:...............................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Effects
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effects on State, local, or Tribal           The proposed rule would not have Tribal implications warranting the application of Executive Order 13175.
 governments.                                It would not have substantial direct effects on one or more Indian Tribes, on the relationship between the
                                             Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the
                                             Federal Government and Indian Tribes.
Effects on small businesses................  This analysis assumes that the small entities affected by the proposed rule will incur compliance costs of
                                             around $32,380 per firm annually, compared with an annual compliance cost of $400,460 for the largest
                                             affected firms. Both cost figures are undiscounted. The Department estimates that the proposed rule will
                                             impact just over 4,000 small entities, and that the highest-cost scenario will apply to approximately 100
                                             firms.
Effects on wages...........................  The Department did not estimate any impacts on wages.

[[Page 86201]]

 
Effects on growth..........................  The Department did not estimate any impacts on growth.
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Regulatory Flexibility Act

    The Department is proposing this rule to address the growing threat 
posed by the efforts of foreign adversaries to access and exploit the 
government-related data or Americans' bulk U.S. sensitive personal 
data. On February 28, 2024, the President issued Executive Order 14117 
on ``Preventing Access to Americans' Bulk Sensitive Personal Data and 
United States Government-Related Data by Countries of Concern.'' This 
Order directs the Attorney General to, among other things, determine 
which classes of data transactions ought to be prohibited due to the 
unacceptable risk they pose by allowing countries of concern or covered 
persons to access government-related data or bulk U.S. sensitive 
personal data. The Order also directs the Attorney General to work with 
relevant agencies to identify countries of concern and classes of 
covered persons, establish a process to issue licenses authorizing 
transactions that would otherwise be prohibited or restricted 
transactions, address the need for requirements for recordkeeping and 
reporting transactions, and determine which classes of transactions 
will be required to comply with separate security requirements.
    The need for the proposed rule stems from the increased efforts 
that countries of concern are making to obtain sensitive personal data 
of Americans and to utilize it in a way that undermines national 
security and foreign policy. Advances in computing technology, 
artificial intelligence, and methods for processing large datasets 
allow countries of concern to more effectively leverage collected data 
for malicious purposes. The capability currently exists to allow those 
who government-related data or Americans' bulk U.S. sensitive personal 
data to combine and manipulate it in ways that could identify sensitive 
personal data, including personal identifiers and precise geolocation 
information.
1. Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule
    Through the Order, the President used his authority under IEEPA and 
the National Emergencies Act to declare national emergencies and 
regulate certain types of economic transactions in order to protect the 
country against foreign threats. The Order expands upon the national 
emergency previously declared by Executive Order 13873 of May 15, 2019 
(Securing the Information and Communications Technology and Services 
Supply Chain), which was modified by Executive Order 14034 of June 9, 
2021 (Protecting Americans' Sensitive Data from Foreign Adversaries). 
Furthermore, the President, under title 3, section 301 of the U.S. 
Code, authorized the Attorney General, in consultation with the heads 
of relevant executive agencies, to employ the President's powers 
granted by IEEPA as may be necessary or appropriate to carry out the 
purposes of the Order.
    IEEPA empowers the President to ``investigate, regulate, or 
prohibit'' foreign exchanges in cases where there is a threat coming 
from outside the United States that threatens the country's ``national 
security, foreign policy, or economy.'' Existing IEEPA-based programs 
include those administered by OFAC, which enforces economic and trade 
sanctions, and the Department of Commerce's Bureau of Industry and 
Security, which is responsible for information and communications 
technology and services supply chain security.
2. Description of and, Where Feasible, an Estimate of the Number of 
Small Entities to Which the Proposed Rule Will Apply
    The proposed rule would affect data-brokerage firms and other firms 
engaged in covered data transactions that pose a risk of exposing 
government-related data or bulk U.S. sensitive personal data to 
countries of concern or covered persons. The Department has estimated 
that about 4,500 firms, just over 90 percent of which are small 
businesses (hereafter referred to as ``small entities''), would be 
impacted by the proposed rule. Therefore, the Department estimates that 
this proposed rule would impact approximately 4,050 small entities and 
approximately 450 firms that would not be classified as small entities.
    Small entities, as defined by the Regulatory Flexibility Act, 
include small businesses, small nonprofit organizations, and small 
governmental jurisdictions. The definition of ``small entities'' 
includes the definition of ``small businesses'' pursuant to section 3 
of the Small Business Act of 1953, as amended: ``A small business 
concern . . . shall be deemed to be one which is independently owned 
and operated, and which is not dominant in its field of operation.'' 
The definition of ``small business'' varies from industry to industry 
(as specified by NAICS code and found in 13 CFR 121.201) to reflect the 
typical company size in each industry.
    NAICS code 518210, ``Computing Infrastructure Providers, Data 
Processing, Web Hosting, and Related Services,'' contains all the 
affected data brokers as well as some of the other entities engaged in 
one or more of the classes of restricted data transactions.\578\ The 
number of small entities affected by the proposed rule was estimated by 
using the Small Business Administration (``SBA'') small business size 
standard for the NAICS code to calculate the proportion of firms that 
are considered small entities. Data brokers are only a subset of the 
total firms contained in the identified NAICS code; however, for this 
analysis, it was assumed that the proportion of small entities was the 
same for both the broader NAICS industry and the specific data broker 
industry. Because more than 90 percent of impacted firms across all 
relevant industries can be considered small entities, the proposed rule 
would have an impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \578\ 518210--Computing Infrastructure Providers, Data 
Processing, Web Hosting, and Related Services, North American 
Industry Classification System, https://www.naics.com/naics-code-description/?v=2022&code=518210 [https://perma.cc/5PWG-AQWL].

[[Page 86202]]



      Table VII-20--Small Business Size Standard and Affected Firms
------------------------------------------------------------------------
                                   Share of affected
    Number of affected firms        firms that are    Number of affected
                                         small            small firms
------------------------------------------------------------------------
4,500...........................  Approximately 90    Approximately
                                   percent.            4,050.
------------------------------------------------------------------------

    This analysis assumes that the small entities affected by the 
proposed rule will incur compliance costs of around $32,380 per firm 
per year, compared with an annual compliance cost of $400,460 for the 
largest affected firms.
    The Department is not aware of reliable revenue data by firm size 
for the data broker industry, but a reasonable assumption is that if a 
firm's revenues from data sales are not sufficient to cover the 
compliance costs, then that firm will have an incentive to exit that 
market. Furthermore, calculating the proportion of the costs associated 
with the proposed rule that falls on small firms is complicated by the 
fact that several of the proposed rule's provisions--specifically the 
requirements related to cybersecurity, due diligence, recordkeeping, 
and reporting--likely involve high fixed costs. Even if small entities 
have less complex business operations, leading to fewer complications 
related to compliance, they may still face a higher cost burden from 
the proposed rule than larger firms. Large entities will likely already 
have a greater portion of the fixed costs associated with the proposed 
rule covered by existing capabilities. Therefore, while the costs 
associated with the security and due diligence requirements will be 
smaller in absolute terms for smaller entities, such entities will 
likely need to pay a higher proportion of their overall budgets to 
comply. Due to the unknowns and the large number of small entities, it 
is possible that a substantial number of small firms will experience a 
significant impact. The Department welcomes comments on this topic.
3. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Rule
    The proposed rule would require firms engaged in restricted 
transactions to adhere to certain standards for data security, due 
diligence, recordkeeping, and reporting. See Sec.  202.401. To mitigate 
the risk of sharing government-related data or bulk U.S. sensitive 
personal data with countries of concern or covered persons through 
restricted transactions, organizations engaged in restricted 
transactions would be required to institute organizational and system-
level cybersecurity policies, practices, and requirements and data-
level requirements developed by DHS through CISA in coordination with 
the Department. See Sec.  202.402. Those requirements, which CISA will 
release through a separate Request For Information, overlap with 
several similar, widely used cybersecurity standards or frameworks. In 
addition, the security requirements developed by CISA would require 
firms to protect the data associated with restricted transactions using 
combinations of the following capabilities necessary to prevent access 
to covered data by covered persons or countries of concern:
    1. data minimization and data masking;
    2. encryption;
    3. privacy-enhancing technologies; and
    4. denial of access.
    Firms will also be required to undergo annual independent testing 
and auditing to ensure their continuing compliance with the security 
requirements.
    Additionally, in order to ensure that government-related data or 
Americans' bulk U.S. sensitive personal data are not accessible by 
countries of concern or covered persons, firms will be required to 
engage in due diligence before pursuing restricted transactions, which 
involves utilizing KYC/KYV programs to complete background checks on 
potential partners. Furthermore, firms will be required to keep records 
that contain extensive details of their restricted transactions as well 
as the details of the other parties involved. They will also be 
required to undergo annual audits of their records to ensure compliance 
and assess potential risks.
4. Identification of All Relevant Federal Rules That May Duplicate, 
Overlap, or Conflict With the Proposed Rule
    As discussed in part IV.K of this preamble, while the PADFAA seeks 
to address some of the same national security risks of the proposed 
rule, there are clear differences between the PADFAA, the Order, and 
this proposed rule, including the scope of regulated data brokerage 
activities, the types of bulk sensitive personal data that are covered, 
and the relevant countries of concern. Further, while the PADFAA allows 
the FTC to investigate certain data-brokerage activities involving 
countries of concern as unfair trade practices consistent with the 
FTC's existing jurisdiction, the proposed rule establishes a new set of 
consistent regulatory requirements that apply across multiple types of 
commercial transactions and sectors. Finally, as stated in part IV.K of 
this preamble, the Department will coordinate closely with the FTC to 
ensure consistency in how both authorities are implemented.
    Some restricted transactions under the proposed rule could also end 
up being subject to review and action by CFIUS. The Foreign Investment 
Risk Review Modernization Act of 2018 gave CFIUS the authority to 
review certain non-controlling foreign investments that may pose a risk 
to national security by allowing the sensitive personal data of U.S. 
citizens to be exploited.\579\ However, while CFIUS acts on a 
transaction-by-transaction basis, the proposed rule would create 
restrictions and prohibitions on covered data transactions that would 
apply to categories of data transactions involving the six countries of 
concern. In a situation where a covered data transaction regulated by 
the proposed rule was later subject to a CFIUS review, it would be 
exempt from the proposed rule to the extent that CFIUS takes any of the 
actions identified in the proposed rule. See Sec. Sec.  202.207; 
202.508.
---------------------------------------------------------------------------

    \579\ See Foreign Investment Risk Review Modernization Act of 
2018, supra note 11.
---------------------------------------------------------------------------

    Furthermore, the categories of covered data transactions covered by 
the proposed rule extend beyond the scope of CFIUS, including the 
provision of government-related data or bulk U.S. sensitive personal 
data through data brokerage, vendor agreements, and employment 
agreements. The proposed rule also covers investment agreements that 
may not be covered by CFIUS as well as cases where the relevant risks 
do not result from the covered transaction or may occur before a CFIUS 
action takes place.

C. Executive Order 13132 (Federalism)

    The proposed rule would not have federalism implications warranting 
the application of Executive Order 13132. The proposed rule does not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government.

[[Page 86203]]

D. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)

    The proposed rule would not have Tribal implications warranting the 
application of Executive Order 13175. It does not have substantial 
direct effects on one or more Indian Tribes, on the relationship 
between the Federal Government and Indian Tribes, or on the 
distribution of power and responsibilities between the Federal 
Government and Indian Tribes.

E. Executive Order 12988 (Civil Justice Reform)

    This proposed rule meets the applicable standards set forth in 
sections 3(a) and 3(b)(2) of Executive Order 12988.

F. Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995, 44 
U.S.C. 3507(d), under control number 1124-AA01.
    Written comments on this collection can be submitted by visiting 
www.reginfo.gov/public/do/PRAMain. Find this document by selecting 
``Currently Under Review--Open for Public Comments'' or by using the 
search function. Comments on the collection of information should be 
received by November 29, 2024.
    The Department of Justice is soliciting comments from members of 
the public concerning this collection of information to:
    <bullet> Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    <bullet> Evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information;
    <bullet> Enhance the quality, utility, and clarity of the 
information to be collected; and
    <bullet> Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated collection techniques or other forms of information 
technology.
    The proposed rule includes seven new collections of information: 
annual reports; applications for specific licenses; reports on rejected 
prohibited transactions; requests for advisory opinions; petitions for 
removal from the designated Covered Persons List; reports of known or 
suspected violations of the onward transfers prohibition; and 
recordkeeping requirements for restricted transactions.
    Based on wage rates from the Bureau of Labor Statistics and lower- 
and upper-bound estimates (used because this is a new program and there 
is uncertainty in the estimated number of potential respondents for 
each of the forms), the following are the estimated burdens of the 
proposed collections:
    <bullet> Annual reports. The Department estimates that 375 to 750 
filers will send an average of one annual report per year, spending an 
estimated average of 40 hours to prepare and submit each annual report. 
The Department estimates the aggregated costs for all filers at 
$821,100 to $1,642,200 annually for annual reports.
    <bullet> Applications for specific licenses. The Department 
estimates that 15 to 25 filers will send an average of one application 
for a specific license per year, spending an estimated average of 10 
hours to prepare and submit each application for a specific license. 
The Department estimates the aggregated costs for all filers at $8,211 
to $13,685 annually for applications for specific licenses.
    <bullet> Reports on rejected prohibited transactions. The 
Department estimates that 15 to 25 filers will send an average of one 
report on a rejected prohibited transaction per year, spending an 
estimated average of 2 hours to prepare and submit each application for 
a specific license. The Department estimates the aggregated costs for 
all filers at $1,642 to $2,737 annually for reports on rejected 
prohibited transactions.
    <bullet> Requests for advisory opinions. The Department estimates 
that 50 to 100 filers will send an average of one request for an 
advisory opinion per year, spending an estimated average of 2 hours to 
prepare and submit each request for an advisory opinion. The Department 
estimates the aggregated costs for all filers at $5,474 to $10,948 
annually for requests for advisory opinions.
    <bullet> Petitions for removal from covered persons list. The 
Department estimates that 15 to 25 filers will send an average of one 
petition for removal from the Covered Persons List per year, spending 
an estimated average of 5 hours to prepare and submit each petition for 
removal from the Covered Persons List. The Department estimates the 
aggregated costs for all filers at $4,106 to $6,843 annually for 
petitions for removal from the Covered Persons List.
    <bullet> Reports of known or suspected violations of onward 
transfers prohibition. The Department estimates that 300 to 450 filers 
will send an average of one report of known or suspected violations of 
the onward transfers prohibition per year, spending an estimated 
average of 2 hours to prepare and submit each report of known or 
suspected violations of the onward transfers prohibition. The 
Department estimates the aggregated costs for all filers at $32,844 to 
$49,266 annually for reports of known or suspected violations of the 
onward transfers prohibition.
    <bullet> Recordkeeping requirements for restricted transactions. 
The Department estimates that 1,400 small to medium-sized firms will 
incur a total of $1,344,000 in recordkeeping costs per year. Also, the 
Department estimates that 100 large firms will incur a total of 
$84,844,000 in recordkeeping costs per year.
    Under the Paperwork Reduction Act, an agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a valid control number assigned by the 
Office of Management and Budget.

G. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act requires that Federal agencies 
prepare a written statement assessing the effects of any Federal 
mandate in a proposed or final agency rule that may directly result in 
the expenditure of $100 million or more in 1995 dollars (adjusted 
annually for inflation) in any 1 year by State, local, and Tribal 
governments, in the aggregate, or by the private sector (2 U.S.C. 
1532(a)). However, the Unfunded Mandates Reform Act does not apply to 
``any provision'' in a proposed or final rule that is ``necessary for 
the national security'' (2 U.S.C. 1503(5)).
    In the Order, the President explained that ``[t]he continuing 
effort of certain countries of concern to access Americans' sensitive 
personal data and United States Government-related data constitutes an 
unusual and extraordinary threat, which has its source in whole or 
substantial part outside the United States, to the national security 
and foreign policy of the United States.'' The Order expanded the scope 
of the national emergency declared in Executive Order 13873 of May 15, 
2019 (Securing the Information and Communications Technology and 
Services Supply Chain), and further addressed with additional measures 
in Executive Order 14034 of June 9, 2021 (Protecting Americans' 
Sensitive Data From Foreign Adversaries). Section 2(a) of the Order 
thus requires the Attorney General to issue the regulations in this

[[Page 86204]]

part, subject to public notice and comment, ``[t]o assist in addressing 
the national security emergency described'' in the Order. Because the 
entirety of this proposed rule and every provision in it addresses the 
national emergency described by the President in the Order, the 
Department has concluded that the Unfunded Mandates Reform Act does not 
apply to this proposed rule.

List of Subjects in 28 CFR Part 202

    Computer technology, Health records, Incorporation by reference, 
Investments, Military personnel, National security, Personally 
identifiable information, Privacy, Reporting and recordkeeping 
requirements, Security measures.

0
Under the rulemaking authority vested in the Attorney General in 5 
U.S.C. 301; 28 U.S.C. 509, 510 and delegated to the Assistant Attorney 
General for National Security by A.G. Order No. 6067-2024, and for the 
reasons set forth in the preamble, the Department of Justice proposes 
to add part 202 to chapter I of title 28 of the Code of Federal 
Regulations to read as follows:

PART 202--ACCESS TO U.S. SENSITIVE PERSONAL DATA AND GOVERNMENT-
RELATED DATA BY COUNTRIES OF CONCERN OR COVERED PERSONS

Sec.
Subpart A--General
202.101 Scope.
202.102 Rules of construction and interpretation.
202.103 Relation of this part to other laws and regulations.
202.104 Delegation of authorities.
202.105 Amendment, modification, or revocation.
202.106 Severability.
Subpart B--Definitions
202.201 Access.
202.202 Attorney General.
202.203 Assistant Attorney General.
202.204 Biometric identifiers.
202.205 Bulk.
202.206 Bulk U.S. sensitive personal data.
202.207 CFIUS action.
202.208 China.
202.209 Country of concern.
202.210 Covered data transaction.
202.211 Covered person.
202.212 Covered personal identifiers.
202.213 Cuba.
202.214 Data brokerage.
202.215 Directing.
202.216 Effective date.
202.217 Employment agreement.
202.218 Entity.
202.219 Exempt transaction.
202.220 Former senior official.
202.221 Foreign person.
202.222 Government-related data.
202.223 Human biospecimens.
202.224 Human genomic data.
202.225 IEEPA.
202.226 Information or informational materials.
202.227 Interest.
202.228 Investment agreement.
202.229 Iran.
202.230 Knowingly.
202.231 Licenses; general and specific.
202.232 Linked.
202.233 Linkable.
202.234 Listed identifier.
202.235 National Security Division.
202.236 North Korea.
202.237 Order.
202.238 Person.
202.239 Personal communications.
202.240 Personal financial data.
202.241 Personal health data.
202.242 Precise geolocation data.
202.243 Prohibited transaction.
202.244 Property; property interest.
202.245 Recent former employees or contractors.
202.246 Restricted transaction.
202.247 Russia.
202.248 Security requirements.
202.249 Sensitive personal data.
202.250 Special Administrative Region of Hong Kong.
202.251 Special Administrative Region of Macau.
202.252 Telecommunications service.
202.253 Transaction.
202.254 Transfer.
202.255 United States.
202.256 United States person or U.S. person.
202.257 U.S. device.
202.258 Vendor agreement.
202.259 Venezuela.
Subpart C--Prohibited Transactions and Related Activities
202.301 Prohibited data-brokerage transactions.
202.302 Other prohibited data-brokerage transactions involving 
potential onward transfer to countries of concern or covered 
persons.
202.303 Prohibited human genomic data and human biospecimen 
transactions.
202.304 Prohibited evasions, attempts, causing violations, and 
conspiracies.
202.305 Knowingly directing prohibited or restricted transactions.
Subpart D--Restricted Transactions
202.401 Authorization to conduct restricted transactions.
202.402 Incorporation by reference.
Subpart E--Exempt Transactions
202.501 Personal communications.
202.502 Information or informational materials.
202.503 Travel.
202.504 Official business of the United States Government.
202.505 Financial services.
202.506 Corporate group transactions.
202.507 Transactions required or authorized by Federal law or 
international agreements, or necessary for compliance with Federal 
law.
202.508 Investment agreements subject to a CFIUS action.
202.509 Telecommunications services.
202.510 Drug, biological product, and medical device authorizations.
202.511 Other clinical investigations and post-marketing 
surveillance data.
Subpart F--Determination of Countries of Concern
202.601 Determination of countries of concern.
Subpart G--Covered Persons
202.701 Designation of covered persons.
202.702 Procedures governing removal from the Covered Persons List.
Subpart H--Licensing
202.801 General licenses.
202.802 Specific licenses.
202.803 General provisions.
Subpart I--Advisory Opinions
202.901 Inquiries concerning application of this part.
Subpart J--Due Diligence and Audit Requirements
202.1001 Due diligence for restricted transactions.
202.1002 Audits for restricted transactions.
Subpart K--Reporting and Recordkeeping Requirements
202.1101 Records and recordkeeping requirements.
202.1102 Reports to be furnished on demand.
202.1103 Annual reports.
202.1104 Reports on rejected prohibited transactions.
Subpart L--Submitting Applications, Requests, Reports, and Responses
202.1201 Procedures.
Subpart M--Penalties and Finding of Violation
202.1301 Penalties for violations.
202.1302 Process for pre-penalty notice.
202.1303 Penalty imposition.
202.1304 Administrative collection and litigation.
202.1305 Finding of violation.
202.1306 Opportunity to respond to a pre-penalty notice or finding 
of violation.
Subpart N--Government-Related Location Data List
202.1401 Government-Related Location Data List.

    Authority: 50 U.S.C. 1701 et seq.; 50 U.S.C. 1601 et seq.; E.O. 
14117, 89 FR 15421.

Subpart A--General


Sec.  202.101  Scope.

    (a) Executive Order 14117 of February 28, 2024 (Preventing Access 
to Americans' Bulk Sensitive Personal Data and United States 
Government-Related Data by Countries of Concern) (``the Order''), 
directs the Attorney General to issue regulations that prohibit or 
otherwise restrict United States persons from engaging in any 
acquisition, holding, use, transfer,

[[Page 86205]]

transportation, or exportation of, or dealing in, any property in which 
a foreign country or national thereof has any interest 
(``transaction''), where the transaction: involves United States 
Government-related data (``government-related data'') or bulk U.S. 
sensitive personal data, as defined by final rules implementing the 
Order; falls within a class of transactions that has been determined by 
the Attorney General to pose an unacceptable risk to the national 
security of the United States because the transactions may enable 
access by countries of concern or covered persons to government-related 
data or bulk U.S. sensitive personal data; and meets other criteria 
specified by the Order.
    (b) This part contains regulations implementing the Order and 
addressing the national emergency declared in Executive Order 13873 of 
May 15, 2019 (Securing the Information and Communications Technology 
and Services Supply Chain), and further addressed with additional 
measures in Executive Order 14034 of June 9, 2021 (Protecting 
Americans' Sensitive Data from Foreign Adversaries) and Executive Order 
14117.


Sec.  202.102  Rules of construction and interpretation.

    (a) The examples included in this part are provided for 
informational purposes and should not be construed to alter the meaning 
of the text of the regulations in this part.
    (b) As used in this part, the term ``including'' means ``including 
but not limited to.''
    (c) All references to ``days'' in this part mean calendar days. In 
computing any time period specified in this part:
    (1) Exclude the day of the event that triggers the period;
    (2) Count every day, including Saturdays, Sundays, and legal 
holidays; and
    (3) Include the last day of the period, but if the last day is a 
Saturday, Sunday, or Federal holiday, the period continues to run until 
the end of the next day that is not a Saturday, Sunday, or Federal 
holiday.


Sec.  202.103  Relation of this part to other laws and regulations.

    Nothing in this part shall be construed as altering or affecting 
any other authority, process, regulation, investigation, enforcement 
measure, or review provided by or established under any other provision 
of Federal law, including the International Emergency Economic Powers 
Act.


Sec.  202.104  Delegation of authorities.

    Any action that the Attorney General is authorized to take pursuant 
to the Order or pursuant to this part may be taken by the Assistant 
Attorney General for National Security or by any other person to whom 
the Attorney General or Assistant Attorney General for National 
Security in writing delegates authority so to act.


Sec.  202.105  Amendment, modification, or revocation.

    Except as otherwise provided by law, any determinations, 
prohibitions, decisions, licenses (whether general or specific), 
guidance, authorizations, instructions, orders, or forms issued 
pursuant to this part may be amended, modified, or revoked, in whole or 
in part, at any time.


Sec.  202.106  Severability.

    If any provision of this part is held to be invalid or 
unenforceable by its terms, or as applied to any person or 
circumstance, or stayed pending further agency action or judicial 
review, the provision is to be construed so as to continue to give the 
maximum effect to the provision permitted by law, unless such holding 
will be one of utter invalidity or unenforceability, in which event the 
provision will be severable from this part and will not affect the 
remainder thereof.

Subpart B--Definitions


Sec.  202.201  Access.

    The term access means logical or physical access, including the 
ability to obtain, read, copy, decrypt, edit, divert, release, affect, 
alter the state of, or otherwise view or receive, in any form, 
including through information systems, information technology systems, 
cloud-computing platforms, networks, security systems, equipment, or 
software.


Sec.  202.202  Attorney General.

    The term Attorney General means the Attorney General of the United 
States or the Attorney General's designee.


Sec.  202.203  Assistant Attorney General.

    The term Assistant Attorney General means the Assistant Attorney 
General, National Security Division, United States Department of 
Justice, or the Assistant Attorney General's designee.


Sec.  202.204  Biometric identifiers.

    The term biometric identifiers means measurable physical 
characteristics or behaviors used to recognize or verify the identity 
of an individual, including facial images, voice prints and patterns, 
retina and iris scans, palm prints and fingerprints, gait, and keyboard 
usage patterns that are enrolled in a biometric system and the 
templates created by the system.


Sec.  202.205  Bulk.

    The term bulk means any amount of sensitive personal data that 
meets or exceeds the following thresholds at any point in the preceding 
12 months, whether through a single covered data transaction or 
aggregated across covered data transactions involving the same U.S. 
person and the same foreign person or covered person:
    (a) Human genomic data collected about or maintained on more than 
100 U.S. persons;
    (b) Biometric identifiers collected about or maintained on more 
than 1,000 U.S. persons;
    (c) Precise geolocation data collected about or maintained on more 
than 1,000 U.S. devices;
    (d) Personal health data collected about or maintained on more than 
10,000 U.S. persons;
    (e) Personal financial data collected about or maintained on more 
than 10,000 U.S. persons;
    (f) Covered personal identifiers collected about or maintained on 
more than 100,000 U.S. persons; or
    (g) Combined data, meaning any collection or set of data that 
contains more than one of the categories in paragraphs (a) through (g) 
of this section, or that contains any listed identifier linked to 
categories in paragraphs (a) through (e) of this section, where any 
individual data type meets the threshold number of persons or devices 
collected or maintained in the aggregate for the lowest number of U.S. 
persons or U.S. devices in that category of data.


Sec.  202.206  Bulk U.S. sensitive personal data.

    The term bulk U.S. sensitive personal data means a collection or 
set of bulk data relating to U.S. persons, in any format, regardless of 
whether the data is anonymized, pseudonymized, de-identified, or 
encrypted.


Sec.  202.207  CFIUS action.

    The term CFIUS action means any agreement or condition the 
Committee on Foreign Investment in the United States has entered into 
or imposed pursuant to 50 U.S.C. 4565(l)(1), (3), or (5) to resolve a 
national security risk involving access by a country of concern or 
covered person to sensitive personal data that the Committee on Foreign 
Investment in the United States has explicitly designated, in the 
agreement or document containing the condition, as a CFIUS action, 
including:

[[Page 86206]]

    (a) Suspension of a proposed or pending transaction, as authorized 
under 50 U.S.C. 4565(l)(1);
    (b) Entry into or imposition of any agreement or condition with any 
party to a covered transaction, as authorized under 50 U.S.C. 
4565(l)(3); and
    (c) The establishment of interim protections for covered 
transactions withdrawn before CFIUS's review or investigation is 
completed, as authorized under 50 U.S.C. 4565(l)(5).


Sec.  202.208  China.

    The term China means the People's Republic of China, including the 
Special Administrative Region of Hong Kong and the Special 
Administrative Region of Macau, as well as any political subdivision, 
agency, or instrumentality thereof.


Sec.  202.209  Country of concern.

    The term country of concern means any foreign government that, as 
determined by the Attorney General with the concurrence of the 
Secretary of State and the Secretary of Commerce, (1) has engaged in a 
long-term pattern or serious instances of conduct significantly adverse 
to the national security of the United States or security and safety of 
United States persons, and (2) poses a significant risk of exploiting 
government-related data or bulk U.S. sensitive personal data to the 
detriment of the national security of the United States or security and 
safety of U.S. persons.


Sec.  202.210  Covered data transaction.

    (a) Definition. A covered data transaction is any transaction that 
involves any access to any government-related data or bulk U.S. 
sensitive personal data and that involves:
    (1) Data brokerage;
    (2) A vendor agreement;
    (3) An employment agreement; or
    (4) An investment agreement.
    (b) Examples. (1) Example 1. A U.S. institution conducts medical 
research at its own laboratory in a country of concern, including 
sending several U.S.-citizen employees to that laboratory to perform 
and assist with the research. The U.S. institution does not engage in 
data brokerage or a vendor, employment, or investment agreement that 
gives a covered person or country of concern access to government-
related data or bulk U.S. sensitive personal data. Because the U.S. 
institution does not engage in any data brokerage or enter into a 
vendor, employment, or investment agreement, the U.S. institution's 
research activity is not a covered data transaction.
    (2) [Reserved]


Sec.  202.211  Covered person.

    (a) Definition. The term covered person means:
    (1) A foreign person that is an entity that is 50 percent or more 
owned, directly or indirectly, by a country of concern, or that is 
organized or chartered under the laws of, or has its principal place of 
business in, a country of concern;
    (2) A foreign person that is an entity that is 50 percent or more 
owned, directly or indirectly, by an entity described in paragraph 
(a)(1) of this section or a person described in paragraphs (a)(3), (4), 
or (5) of this section;
    (3) A foreign person that is an individual who is an employee or 
contractor of a country of concern or of an entity described in 
paragraphs (a)(1), (2), or (5) of this section;
    (4) A foreign person that is an individual who is primarily a 
resident in the territorial jurisdiction of a country of concern; or
    (5) Any person, wherever located, determined by the Attorney 
General:
    (i) To be, to have been, or to be likely to become owned or 
controlled by or subject to the jurisdiction or direction of a country 
of concern or covered person;
    (ii) To act, to have acted or purported to act, or to be likely to 
act for or on behalf of a country of concern or covered person; or
    (iii) To have knowingly caused or directed, or to be likely to 
knowingly cause or direct a violation of this part.
    (b) Examples--(1) Example 1. Foreign persons primarily resident in 
Cuba, Iran, or another country of concern would be covered persons.
    (2) Example 2. Chinese or Russian citizens located in the United 
States would be treated as U.S. persons and would not be covered 
persons (except to the extent individually designated). They would be 
subject to the same prohibitions and restrictions as all other U.S. 
persons with respect to engaging in covered data transactions with 
countries of concern or covered persons.
    (3) Example 3. Citizens of a country of concern who are primarily 
resident in a third country, such as Russian citizens primarily 
resident in a European Union country or Cuban citizens primarily 
resident in a South American country that is not a country of concern, 
would not be covered persons except to the extent they are individually 
designated or to the extent that they are employees or contractors of a 
country of concern government or a covered person that is an entity.
    (4) Example 4. A foreign person is located abroad and is employed 
by a company headquartered in China. Because the company is a covered 
person that is an entity and the employee is located outside the United 
States, the employee is a covered person.
    (5) Example 5. A foreign person is located abroad and is employed 
by a company that has been designated as a covered person. Because the 
foreign person is the employee of a covered person that is an entity 
and the employee is a foreign person, the person is a covered person.


Sec.  202.212  Covered personal identifiers.

    (a) Definition. The term covered personal identifiers means any 
listed identifier:
    (1) In combination with any other listed identifier; or
    (2) In combination with other data that is disclosed by a 
transacting party pursuant to the transaction such that the listed 
identifier is linked or linkable to other listed identifiers or to 
other sensitive personal data.
    (b) Exclusion. The term covered personal identifiers excludes:
    (1) Demographic or contact data that is linked only to other 
demographic or contact data (such as first and last name, birthplace, 
ZIP code, residential street or postal address, phone number, and email 
address and similar public account identifiers); and
    (2) A network-based identifier, account-authentication data, or 
call-detail data that is linked only to other network-based identifier, 
account-authentication data, or call-detail data as necessary for the 
provision of telecommunications, networking, or similar service.
    (c) Examples of listed identifiers in combination with other listed 
identifiers--(1) Example 1. A standalone listed identifier in isolation 
(i.e., that is not linked to another listed identifier, sensitive 
personal data, or other data that is disclosed by a transacting party 
pursuant to the transaction such that the listed identifier is linked 
or linkable to other listed identifiers or to other sensitive personal 
data)--such as a Social Security Number or account username--would not 
constitute a covered personal identifier.
    (2) Example 2. A listed identifier linked to another listed 
identifier--such as a first and last name linked to a Social Security 
number, a driver's license number linked to a passport number, a device 
Media Access Control (``MAC'') address linked to a residential address, 
an account username linked to a first and last name, or a mobile 
advertising ID linked to an email address--would constitute covered 
personal identifiers.

[[Page 86207]]

    (3) Example 3. Demographic or contact data linked only to other 
demographic or contact data--such as a first and last name linked to a 
residential street address, an email address linked to a first and last 
name, or a customer loyalty membership record linking a first and last 
name to a phone number--would not constitute covered personal 
identifiers.
    (4) Example 4. Demographic or contact data linked to other 
demographic or contact data and to another listed identifier--such as a 
first and last name linked to an email address and to an IP address--
would constitute covered personal identifiers.
    (5) Example 5. Account usernames linked to passwords as part of a 
sale of a dataset would constitute covered personal identifiers. Those 
pieces of account-authentication data are not linked as a necessary 
part of the provision of telecommunications, networking, or similar 
services. This combination would constitute covered personal 
identifiers.
    (d) Examples of a listed identifier in combination with other data 
disclosed by a transacting party--(1) Example 1. A foreign person who 
is a covered person asks a U.S. company for a list of Media Access 
Control (``MAC'') addresses from devices that have connected to the 
wireless network of a U.S. fast-food restaurant located in a particular 
government building. The U.S. company then sells the list of MAC 
addresses, without any other listed identifiers or sensitive personal 
data, to the covered person. The disclosed MAC addresses, when paired 
with the other data disclosed by the covered person--that the devices 
``have connected to the wireless network of a U.S. fast-food restaurant 
located in a particular government building''--makes it so that the MAC 
addresses are linked or linkable to other sensitive personal data, in 
this case precise geolocation data of the location of the fast-food 
restaurant that the national security-related individuals frequent with 
their devices. This combination of data therefore meets the definition 
of covered personal identifiers.
    (2) Example 2. A U.S. company sells to a country of concern a list 
of residential addresses that the company describes (whether in a 
heading on the list or separately to the country of concern as part of 
the transaction) as ``addresses of members of a country of concern's 
opposition political party in New York City'' or as ``addresses of 
active-duty military officers who live in Howard County, Maryland'' 
without any other listed identifiers or sensitive personal data. The 
data disclosed by the U.S. company's description, when paired with the 
disclosed addresses, makes the addresses linked or linkable to other 
listed identifiers or to other sensitive personal data of the U.S. 
individuals associated with them. This combination of data therefore 
meets the definition of covered personal identifiers.
    (3) Example 3. A covered person asks a U.S. company for a bulk list 
of birth dates for ``any American who visited a Starbucks in 
Washington, DC, in December 2023.'' The U.S. company then sells the 
list of birth dates, without any other listed identifiers or sensitive 
personal data, to the covered person. The other data disclosed by the 
covered person--``any American who visited a Starbucks in Washington, 
DC, in December 2023''--does not make the birth dates linked or 
linkable to other listed identifiers or to other sensitive personal 
data. This combination of data therefore does not meet the definition 
of covered personal identifiers.
    (4) Example 4. Same as Example 3, but the covered person asks the 
U.S. company for a bulk list of names (rather than birth dates) for 
``any American who visited a Starbucks in Washington, DC, in December 
2023.'' The other data disclosed by the covered person--``any American 
who visited a Starbucks in Washington, DC, in December 2023''--does not 
make the list of names, without more, linked or linkable to other 
listed identifiers or to other sensitive personal data. This 
combination of data therefore does not meet the definition of covered 
personal identifiers.
    (5) Example 5. A U.S. company sells to a covered person a list of 
residential addresses that the company describes (in a heading in the 
list or to the covered person as part of the transaction) as 
``households of Americans who watched more than 50% of episodes'' of a 
specific popular TV show, without any other listed identifiers or 
sensitive personal data. The other data disclosed by the U.S. company--
``Americans who watched more than 50% of episodes'' of a specific 
popular TV show--does not increase the extent to which the addresses 
are linked or linkable to other listed identifiers or to other 
sensitive personal data. This combination of data therefore does not 
meet the definition of covered personal identifiers.


Sec.  202.213  Cuba.

    The term Cuba means the Republic of Cuba, as well as any political 
subdivision, agency, or instrumentality thereof.


Sec.  202.214  Data brokerage.

    (a) Definition. The term data brokerage means the sale of data, 
licensing of access to data, or similar commercial transactions 
involving the transfer of data from any person (the provider) to any 
other person (the recipient), where the recipient did not collect or 
process the data directly from the individuals linked or linkable to 
the collected or processed data.
    (b) Examples--(1) Example 1. A U.S. company sells bulk U.S. 
sensitive personal data to an entity headquartered in a country of 
concern. The U.S. company engages in prohibited data brokerage.
    (2) Example 2. A U.S. company enters into an agreement that gives a 
covered person a license to access government-related data held by the 
U.S. company. The U.S. company engages in prohibited data brokerage.
    (3) Example 3. A U.S. organization maintains a database of bulk 
U.S. sensitive personal data and offers annual memberships for a fee 
that provide members a license to access that data. Providing an annual 
membership to a covered person that includes a license to access 
government-related data or bulk U.S. sensitive personal data would 
constitute prohibited data brokerage.
    (4) Example 4. A U.S. company owns and operates a mobile app for 
U.S. users with available advertising space. As part of selling the 
advertising space, the U.S. company provides the bulk precise 
geolocation data, IP address, and advertising IDs of its U.S. users' 
devices to an advertising exchange based in a country of concern. The 
U.S. company's provision of this data as part of the sale of 
advertising space is data brokerage and a prohibited transaction.
    (5) Example 5. Same as Example 4, but the U.S. company provides the 
data to an advertising exchange based in the United States. As part of 
the sale of the advertising space, the U.S. advertising exchange 
provides the data to advertisers headquartered in a country of concern. 
The U.S. company's provision of the data to the U.S. advertising 
exchange would not be a transaction because it is between U.S. persons. 
The advertising exchange's provision of this data to the country of 
concern-based advertisers is data brokerage because it is a commercial 
transaction involving the transfer of data from the U.S. advertising 
exchange to the advertisers headquartered in the country of concern, 
where those country-of-concern advertisers did not collect or process 
the data directly from the individuals linked or linkable to the 
collected or processed data.

[[Page 86208]]

Furthermore, the U.S. advertising exchange's provision of this data to 
the country of concern-based advertisers is a prohibited transaction.
    (6) Example 6. A U.S. information technology company operates an 
autonomous driving platform that collects the precise geolocation data 
of its cars operating in the United States. The U.S. company sells or 
otherwise licenses this bulk data to its parent company headquartered 
in a country of concern to help develop artificial intelligence 
technology and machine learning capabilities. The sale or license is 
data brokerage and a prohibited transaction.


Sec.  202.215  Directing.

    The term directing means having any authority (individually or as 
part of a group) to make decisions for or on behalf of an entity and 
exercising that authority.


Sec.  202.216  Effective date.

    The term effective date refers to the effective date of the 
applicable prohibitions and directives contained in this part, which is 
12:01 a.m. ET on [date to be determined].


Sec.  202.217  Employment agreement.

    (a) Definition. The term employment agreement means any agreement 
or arrangement in which an individual, other than as an independent 
contractor, performs work or performs job functions directly for a 
person in exchange for payment or other consideration, including 
employment on a board or committee, executive-level arrangements or 
services, and employment services at an operational level.
    (b) Examples--(1) Example 1. A U.S. company that conducts consumer 
human genomic testing collects and maintains bulk human genomic data 
from U.S. consumers. The U.S. company has global IT operations, 
including employing a team of individuals who are citizens of and 
primarily resident in a country of concern to provide back-end 
services. The agreements related to employing these individuals are 
employment agreements. Employment as part of the global IT operations 
team includes access to the U.S. company's systems containing the bulk 
human genomic data. These employment agreements would be prohibited 
transactions (because they involve access to bulk human genomic data).
    (2) Example 2. A U.S. company develops its own mobile games and 
social media apps that collect the bulk U.S. sensitive personal data of 
its U.S. users. The U.S. company distributes these games and apps in 
the United States through U.S.-based digital distribution platforms for 
software applications. The U.S. company intends to hire as CEO an 
individual designated by the Attorney General as a covered person 
because of evidence the CEO acts on behalf of a country of concern. The 
agreement retaining the individual as CEO would be an employment 
agreement. The individual's authorities and responsibilities as CEO 
involve access to all data collected by the apps, including the bulk 
U.S. sensitive personal data. The CEO's employment would be a 
restricted transaction.
    (3) Example 3. A U.S. company has derived U.S. persons' biometric 
identifiers by scraping public photos from social media platforms. The 
U.S. company stores the derived biometric identifiers in bulk, 
including face-data scans, for the purpose of training or enhancing 
facial-recognition software. The U.S. company intends to hire a foreign 
person, who primarily resides in a country of concern, as a project 
manager responsible for the database. The agreement retaining the 
project manager would be an employment agreement. The individual's 
employment as the lead project manager would involve access to the bulk 
biometric identifiers. The project manager's employment would be a 
restricted transaction.
    (4) Example 4. A U.S. financial-services company seeks to hire a 
data scientist who is a citizen of a country of concern who primarily 
resides in that country of concern and who is developing a new 
artificial intelligence-based personal assistant that could be sold as 
a standalone product to the company's customers. The arrangement 
retaining the data scientist would be an employment agreement. As part 
of that individual's employment, the data scientist would have 
administrator rights that allow that individual to access, download, 
and transmit bulk quantities of personal financial data not ordinarily 
incident to and part of the company's underlying provision of financial 
services to its customers. The data scientist's employment would be a 
restricted transaction.
    (5) Example 5. A U.S. company sells goods and collects bulk 
personal financial data about its U.S. customers. The U.S. company 
appoints a citizen of a country of concern, who is located in a country 
of concern, to its board of directors. This director would be a covered 
person, and the arrangement appointing the director would be an 
employment agreement. In connection with the board's data security and 
cybersecurity responsibilities, the director could access the bulk 
personal financial data. The director's employment would be a 
restricted transaction.


Sec.  202.218  Entity.

    The term entity means a partnership, association, trust, joint 
venture, corporation, group, subgroup, or other organization.


Sec.  202.219  Exempt transaction.

    The term exempt transaction means a data transaction that is 
subject to one or more exemptions described in subpart E of this part.


Sec.  202.220  Former senior official.

    The term former senior official means either a ``former senior 
employee'' or a ``former very senior employee,'' as those terms are 
defined in 5 CFR 2641.104.


Sec.  202.221  Foreign person.

    The term foreign person means any person that is not a U.S. person.


Sec.  202.222  Government-related data.

    (a) Definition. The term government-related data means the 
following:
    (1) Any precise geolocation data, regardless of volume, for any 
location within any area enumerated on the Government-Related Location 
Data List in Sec.  202.1401 which the Attorney General has determined 
poses a heightened risk of being exploited by a country of concern to 
reveal insights about locations controlled by the Federal Government, 
including insights about facilities, activities, or populations in 
those locations, to the detriment of national security, because of the 
nature of those locations or the personnel who work there. Such 
locations may include:
    (i) The worksite or duty station of Federal Government employees or 
contractors who occupy a national security position as that term is 
defined in 5 CFR 1400.102(a)(4);
    (ii) A military installation as that term is defined in 10 U.S.C. 
2801(c)(4); or
    (iii) Facilities or locations that otherwise support the Federal 
Government's national security, defense, intelligence, law enforcement, 
or foreign policy missions.
    (2) Any sensitive personal data, regardless of volume, that a 
transacting party markets as linked or linkable to current or recent 
former employees or contractors, or former senior officials, of the 
United States Government, including the military and Intelligence 
Community.
    (b) Examples of government-related data marketed by a transacting 
party--(1) Example 1. A U.S. company advertises the sale of a set of 
sensitive

[[Page 86209]]

personal data as belonging to ``active duty'' personnel, ``military 
personnel who like to read,'' ``DoD'' personnel, ``government 
employees,'' or ``communities that are heavily connected to a nearby 
military base.'' The data is government-related data.
    (2) Example 2. In discussing the sale of a set of sensitive 
personal data with a covered person, a U.S. company describes the 
dataset as belonging to members of a specific named organization. The 
identified organization restricts membership to current and former 
members of the military and their families. The data is government-
related data.


Sec.  202.223  Human biospecimens.

    The term human biospecimens means a quantity of tissue, blood, 
urine, or other human-derived material, including such material 
classified under any of the following 10-digit Harmonized System-based 
Schedule B numbers:
    (a) 0501.00.0000 Human hair, unworked, whether or not washed or 
scoured; waste of human hair
    (b) 3001.20.0000 Extracts of glands or other organs or of their 
secretions
    (c) 3001.90.0115 Glands and other organs, dried, whether or not 
powdered
    (d) 3002.12.0010 Human blood plasma
    (e) 3002.12.0020 Normal human blood sera, whether or not freeze-
dried
    (f) 3002.12.0030 Human immune blood sera
    (g) 3002.12.0090 Antisera and other blood fractions, Other
    (h) 3002.51.0000 Cell therapy products
    (i) 3002.59.0000 Cell cultures, whether or not modified, Other
    (j) 3002.90.5210 Whole human blood
    (k) 3002.90.5250 Blood, human/animal, other
    (l) 9705.21.0000 Human specimens and parts thereof


Sec.  202.224  Human genomic data.

    The term human genomic data means data representing the nucleic 
acid sequences that constitute the entire set or a subset of the 
genetic instructions found in a human cell, including the result or 
results of an individual's ``genetic test'' (as defined in 42 U.S.C. 
300gg-91(d)(17)) and any related human genetic sequencing data.


Sec.  202.225  IEEPA.

    The term IEEPA means the International Emergency Economic Powers 
Act (50 U.S.C. 1701 et seq.).


Sec.  202.226  Information or informational materials.

    (a) Definition. The term information or informational materials is 
limited to expressive material and includes publications, films, 
posters, phonograph records, photographs, microfilms, microfiche, 
tapes, compact disks, CD ROMs, artworks, and news wire feeds. It does 
not include data that is technical, functional, or otherwise non-
expressive.
    (b) Exclusions. The term information or informational materials 
does not include:
    (1) Information or informational materials not fully created and in 
existence at the date of the data transaction, or the substantive or 
artistic alteration or enhancement of information or informational 
materials, or the provision of marketing and business consulting 
services, including to market, produce or co-produce, or assist in the 
creation of information or informational materials;
    (2) Items that were, as of April 30, 1994, or that thereafter 
become, controlled for export to the extent that such controls promote 
the nonproliferation or antiterrorism policies of the United States, or 
with respect to which acts are prohibited by 18 U.S.C. chapter 37.
    (c) Examples--(1) Example 1. A U.S. person enters into an agreement 
to create a customized dataset of bulk U.S. sensitive personal data 
that meets a covered person's specifications (such as the specific 
types and fields of data, date ranges, and other criteria) and to sell 
that dataset to the covered person. This customized dataset is not 
fully created and in existence at the date of the agreement, and 
therefore is not information or informational materials.
    (2) Example 2. A U.S. company has access to several pre-existing 
databases of different bulk sensitive personal data. The U.S. company 
offers, for a fee, to use data analytics to link the data across these 
databases to the same individuals and to sell that combined dataset to 
a covered person. This service constitutes a substantive alteration or 
enhancement of the data in the pre-existing databases and therefore is 
not information or informational materials.


Sec.  202.227  Interest.

    Except as otherwise provided in this part, the term interest, when 
used with respect to property (e.g., ``an interest in property''), 
means an interest of any nature whatsoever, direct or indirect.


Sec.  202.228  Investment agreement.

    (a) Definition. The term investment agreement means an agreement or 
arrangement in which any person, in exchange for payment or other 
consideration, obtains direct or indirect ownership interests in or 
rights in relation to:
    (1) Real estate located in the United States; or
    (2) A U.S. legal entity.
    (b) Exclusion for passive investments. The term investment 
agreement excludes any investment that:
    (1) Is made:
    (i) Into a publicly traded security, with ``security'' defined in 
section 3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(10)), denominated in any currency that trades on a securities 
exchange or through the method of trading that is commonly referred to 
as ``over-the-counter,'' in any jurisdiction;
    (ii) Into a security offered by:
    (A) Any ``investment company'' (as defined in section 3(a)(1) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)(1)) that is 
registered with the United States Securities and Exchange Commission, 
such as index funds, mutual funds, or exchange traded funds; or
    (B) Any company that has elected to be regulated or is regulated as 
a business development company pursuant to section 54(a) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-53), or any derivative of 
either of the foregoing; or
    (iii) As a limited partner into a venture capital fund, private 
equity fund, fund of funds, or other pooled investment fund, if the 
limited partner's contribution is solely capital and the limited 
partner cannot make managerial decisions, is not responsible for any 
debts beyond its investment, and does not have the formal or informal 
ability to influence or participate in the fund's or a U.S. person's 
decision making or operations;
    (2) Gives the covered person less than 10% in total voting and 
equity interest in a U.S. person; and
    (3) Does not give a covered person rights beyond those reasonably 
considered to be standard minority shareholder protections, including 
(a) membership or observer rights on, or the right to nominate an 
individual to a position on, the board of directors or an equivalent 
governing body of the U.S. person, or (b) any other involvement, beyond 
the voting of shares, in substantive business decisions, management, or 
strategy of the U.S. person.
    (c) Examples--(1) Example 1. A U.S. company intends to build a data 
center located in a U.S. territory. The data center will store bulk 
personal health

[[Page 86210]]

data on U.S. persons. A foreign private equity fund located in a 
country of concern agrees to provide capital for the construction of 
the data center in exchange for acquiring a majority ownership stake in 
the data center. The agreement that gives the private equity fund a 
stake in the data center is an investment agreement. The investment 
agreement is a restricted transaction.
    (2) Example 2. A foreign technology company that is subject to the 
jurisdiction of a country of concern and that the Attorney General has 
designated as a covered person enters into a shareholders' agreement 
with a U.S. business that develops mobile games and social media apps, 
acquiring a minority equity stake in the U.S. business. The 
shareholders' agreement is an investment agreement. These games and 
apps developed by the U.S. business systematically collect bulk U.S. 
sensitive personal data of its U.S. users. The investment agreement 
explicitly gives the foreign technology company the ability to access 
this data and is therefore a restricted transaction.
    (3) Example 3. Same as Example 2, but the investment agreement 
either does not explicitly give the foreign technology company the 
right to access the data or explicitly forbids that access. The 
investment agreement nonetheless provides the foreign technology 
company with the sufficient ownership interest, rights, or other 
involvement in substantive business decisions, management, or strategy 
such that the investment does not constitute a passive investment. 
Because it is not a passive investment, the ownership interest, rights, 
or other involvement in substantive business decisions, management, or 
strategy gives the foreign technology company the ability to obtain 
logical or physical access, regardless of how the agreement formally 
distributes those rights. The investment agreement therefore involves 
access to bulk U.S. sensitive personal data. The investment agreement 
is a restricted transaction.
    (4) Example 4. Same as Example 3, but the U.S. business does not 
maintain or have access to any government-related data or bulk U.S. 
sensitive personal data (e.g., a pre-commercial company or startup 
company). Because the data transaction cannot involve access to any 
government-related data or bulk U.S. sensitive personal data, this 
investment agreement does not meet the definition of a covered data 
transaction and is not a restricted transaction.


Sec.  202.229  Iran.

    The term Iran means the Islamic Republic of Iran, as well as any 
political subdivision, agency, or instrumentality thereof.


Sec.  202.230  Knowingly.

    (a) Definition. The term knowingly, with respect to conduct, a 
circumstance, or a result, means that a person has actual knowledge, or 
reasonably should have known, of the conduct, the circumstance, or the 
result.
    (b) Examples--(1) Example 1. A U.S. company sells DNA testing kits 
to U.S. consumers and maintains bulk human genomic data collected from 
those consumers. The U.S. company enters into a contract with a foreign 
cloud-computing company (which is not a covered person) to store the 
U.S. company's database of human genomic data. The foreign company 
hires employees from other countries, including citizens of countries 
of concern who primarily reside in a country of concern, to manage 
databases for its customers, including the U.S. company's human genomic 
database. There is no indication of evasion, such as the U.S. company 
knowingly directing the foreign company's employment agreements with 
covered persons, or the U.S. company engaging in and structuring these 
transactions to evade the regulations. The cloud-computing services 
agreement between the U.S. company and the foreign company would not be 
prohibited or restricted, because that covered data transaction is 
between a U.S. person and a foreign company that does not meet the 
definition of a covered person. The employment agreements between the 
foreign company and the covered persons would not be prohibited or 
restricted because those agreements are between foreign persons.
    (2) Example 2. A U.S. company transmits the bulk U.S. sensitive 
personal data of U.S. persons to a country of concern, in violation of 
this part, using a fiber optic cable operated by another U.S. company. 
The U.S. cable operator has not knowingly engaged in a prohibited 
transaction or a restricted transaction solely by virtue of operating 
the fiber optic cable because the U.S. cable operator does not know, 
and reasonably should not know, the content of the traffic transmitted 
across the fiber optic cable.
    (3) Example 3. A U.S. service provider provides a software platform 
on which a U.S. company processes the bulk U.S. sensitive personal data 
of its U.S.-person customers. While the U.S. service provider is 
generally aware of the nature of the U.S. company's business, the U.S. 
service provider is not aware of the kind or volume of data that the 
U.S. company processes on the platform, how the U.S. company uses the 
data, or whether the U.S. company engages in data transactions. The 
U.S. company also primarily controls access to its data on the 
platform, with the U.S. service provider accessing the data only for 
troubleshooting or technical support purposes, upon request by the U.S. 
company. Subsequently, without the actual knowledge of the U.S. service 
provider and without providing the U.S. service provider with any 
information from which the service provider should have known, the U.S. 
company grants access to the data on the U.S. service provider's 
software platform to a covered person through a covered data 
transaction, in violation of this part. The U.S. service provider 
itself, however, has not knowingly engaged in a restricted transaction 
by enabling the covered persons' access via its software platform.
    (4) Example 4. Same as Example 3, but in addition to providing the 
software platform, the U.S. company's contract with the U.S. service 
provider also outsources the U.S. company's processing and handling of 
the data to the U.S. service provider. As a result, the U.S. service 
provider primarily controls access to the U.S. company's bulk U.S. 
sensitive personal data on the platform. The U.S. service provider 
employs a covered person and grants access to this data as part of this 
employment. Although the U.S. company's contract with the U.S. service 
provider is not a restricted transaction, the U.S. service provider's 
employment agreement with the covered person is a restricted 
transaction. The U.S. service provider has thus knowingly engaged in a 
restricted transaction by entering into an employment agreement that 
grants access to its employee because the U.S. service provider knew or 
should have known of its employee's covered person status and, as the 
party responsible for processing and handling the data, the U.S. 
service provider was aware of the kind and volume of data that the U.S. 
company processes on the platform.
    (5) Example 5. A U.S. company provides cloud storage to a U.S. 
customer for the encrypted storage of the customer's bulk U.S. 
sensitive personal data. The U.S. cloud-service provider has an 
emergency back-up encryption key for all its customers' data, but the 
company is contractually limited to using the key to decrypt the data 
only at the customer's request. The U.S. customer's systems and access 
to the key become disabled, and the U.S. customer requests that the 
cloud-service provider use the back-up encryption key to decrypt the 
data and store it on a

[[Page 86211]]

backup server while the customer restores its own systems. By having 
access to and using the backup encryption key to decrypt the data in 
accordance with the contractual limitation, the U.S. cloud-service 
provider does not and reasonably should not know the kind and volumes 
of the U.S. customer's data. If the U.S. customer later uses the cloud 
storage to knowingly engage in a prohibited transaction, the U.S. 
cloud-service provider's access to and use of the backup encryption key 
does not mean that the U.S. cloud-service provider has also knowingly 
engaged in a restricted transaction.
    (6) Example 6. A prominent human genomics research clinic enters 
into a cloud-services contract with a U.S. cloud-service provider that 
specializes in storing and processing healthcare data to store bulk 
human genomic research data. The cloud-service provider hires IT 
personnel in a country of concern, who are thus covered persons. While 
the data that is stored is encrypted, the IT personnel can access the 
data in encrypted form. The employment agreement between the U.S. 
cloud-service provider and the IT professionals in the country of 
concern is a prohibited transaction because the agreement involves 
giving the IT personnel access to the encrypted data and constitutes a 
transfer of human genomic data. Given the nature of the research 
institution's work and the cloud-service provider's expertise in 
storing healthcare data, the cloud-service provider reasonably should 
have known that the encrypted data is bulk U.S. sensitive personal data 
covered by the regulations. The cloud-service provider has therefore 
knowingly engaged in a prohibited transaction (because it involves 
access to human genomic data).


Sec.  202.231  Licenses; general and specific.

    (a) General license. The term general license means a written 
license issued pursuant to this part authorizing a class of 
transactions and not limited to a particular person.
    (b) Specific license. The term specific license means a written 
license issued pursuant to this part to a particular person or persons, 
authorizing a particular transaction or transactions in response to a 
written license application.


Sec.  202.232  Linked.

    (a) Definition. The term linked means associated.
    (b) Examples--(1) Example 1. A U.S. person transfers two listed 
identifiers in a single spreadsheet--such as a list of names of 
individuals and associated MAC addresses for those individuals' 
devices. The names and MAC addresses would be considered linked.
    (2) Example 2. A U.S. person transfers two listed identifiers in 
different spreadsheets--such as a list of names of individuals in one 
spreadsheet and MAC addresses in another spreadsheet--to two related 
parties in two different covered data transactions. The names and MAC 
addresses would be considered linked, provided that some correlation 
existed between the names and MAC addresses (e.g., associated employee 
ID number is also listed in both spreadsheets).
    (3) Example 3. A U.S. person transfers a standalone list of MAC 
addresses, without any additional listed identifiers. The standalone 
list does not include covered personal identifiers. That standalone 
list of MAC addresses would not become covered personal identifiers 
even if the receiving party is capable of obtaining separate sets of 
other listed identifiers or sensitive personal data through separate 
covered data transactions with unaffiliated parties that would 
ultimately permit the association of the MAC addresses to specific 
persons. The MAC addresses would not be considered linked or linkable 
to those separate sets of other listed identifiers or sensitive 
personal data.


Sec.  202.233  Linkable.

    The term linkable means reasonably capable of being linked.
    Note to Sec.  202.233. Data is considered linkable when the 
identifiers involved in a single covered data transaction, or in 
multiple covered data transactions or a course of dealing between the 
same or related parties, are reasonably capable of being associated 
with the same person(s). Identifiers are not linked or linkable when 
additional identifiers or data not involved in the relevant covered 
data transaction(s) would be necessary to associate the identifiers 
with the same specific person(s).


Sec.  202.234  Listed identifier.

    The term listed identifier means any piece of data in any of the 
following data fields:
    (a) Full or truncated government identification or account number 
(such as a Social Security number, driver's license or State 
identification number, passport number, or Alien Registration Number);
    (b) Full financial account numbers or personal identification 
numbers associated with a financial institution or financial-services 
company;
    (c) Device-based or hardware-based identifier (such as 
International Mobile Equipment Identity (``IMEI''), Media Access 
Control (``MAC'') address, or Subscriber Identity Module (``SIM'') card 
number);
    (d) Demographic or contact data (such as first and last name, birth 
date, birthplace, ZIP code, residential street or postal address, phone 
number, email address, or similar public account identifiers);
    (e) Advertising identifier (such as Google Advertising ID, Apple ID 
for Advertisers, or other mobile advertising ID (``MAID''));
    (f) Account-authentication data (such as account username, account 
password, or an answer to security questions);
    (g) Network-based identifier (such as internet Protocol (``IP'') 
address or cookie data); or
    (h) Call-detail data (such as Customer Proprietary Network 
Information (``CPNI'')).


Sec.  202.235  National Security Division.

    The term National Security Division means the National Security 
Division of the United States Department of Justice.


Sec.  202.236  North Korea.

    The term North Korea means the Democratic People's Republic of 
North Korea, and any political subdivision, agency, or instrumentality 
thereof.


Sec.  202.237  Order.

    The term Order means Executive Order 14117 of February 28, 2024 
(Preventing Access to Americans' Bulk Sensitive Personal Data and 
United States Government-Related Data by Countries of Concern), 89 FR 
15421 (March 1, 2024).


Sec.  202.238  Person.

    The term person means an individual or entity.


Sec.  202.239  Personal communications.

    The term personal communications means any postal, telegraphic, 
telephonic, or other personal communication that does not involve the 
transfer of anything of value, as set out under 50 U.S.C. 1702(b)(1).


Sec.  202.240  Personal financial data.

    The term personal financial data means data about an individual's 
credit, charge, or debit card, or bank account, including purchases and 
payment history; data in a bank, credit, or other financial statement, 
including assets, liabilities, debts, or trades in a securities 
portfolio; or data in a credit report or in a ``consumer report'' (as 
defined in 15 U.S.C. 1681a(d)).

[[Page 86212]]

Sec.  202.241  Personal health data.

    The term personal health data means health information that relates 
to the past, present, or future physical or mental health or condition 
of an individual; the provision of healthcare to an individual; or the 
past, present, or future payment for the provision of healthcare to an 
individual. This term includes basic physical measurements and health 
attributes (such as bodily functions, height and weight, vital signs, 
symptoms, and allergies); social, psychological, behavioral, and 
medical diagnostic, intervention, and treatment history; test results; 
logs of exercise habits; immunization data; data on reproductive and 
sexual health; and data on the use or purchase of prescribed 
medications.


Sec.  202.242  Precise geolocation data.

    The term precise geolocation data means data, whether real-time or 
historical, that identifies the physical location of an individual or a 
device with a precision of within 1,000 meters.


Sec.  202.243  Prohibited transaction.

    The term prohibited transaction means a data transaction that is 
subject to one or more of the prohibitions described in subpart C of 
this part.


Sec.  202.244  Property; property interest.

    The terms property and property interest include money; checks; 
drafts; bullion; bank deposits; savings accounts; debts; indebtedness; 
obligations; notes; guarantees; debentures; stocks; bonds; coupons; any 
other financial instruments; bankers acceptances; mortgages, pledges, 
liens, or other rights in the nature of security; warehouse receipts, 
bills of lading, trust receipts, bills of sale, or any other evidences 
of title, ownership, or indebtedness; letters of credit and any 
documents relating to any rights or obligations thereunder; powers of 
attorney; goods; wares; merchandise; chattels; stocks on hand; ships; 
goods on ships; real estate mortgages; deeds of trust; vendors' sales 
agreements; land contracts, leaseholds, ground rents, real estate and 
any other interest therein; options; negotiable instruments; trade 
acceptances; royalties; book accounts; accounts payable; judgments; 
patents; trademarks or copyrights; insurance policies; safe deposit 
boxes and their contents; annuities; pooling agreements; services of 
any nature whatsoever; contracts of any nature whatsoever; any other 
property, real, personal, or mixed, tangible or intangible, or interest 
or interests therein, present, future, or contingent.


Sec.  202.245  Recent former employees or contractors.

    The terms recent former employees or recent former contractors mean 
employees or contractors who worked for or provided services to the 
United States Government, in a paid or unpaid status, within the past 2 
years of a potential covered data transaction.


Sec.  202.246  Restricted transaction.

    The term restricted transaction means a data transaction that is 
subject to subpart D of this part.


Sec.  202.247  Russia.

    The term Russia means the Russian Federation, and any political 
subdivision, agency, or instrumentality thereof.


Sec.  202.248  Security requirements.

    The term security requirements means the Cybersecurity and 
Infrastructure Agency (``CISA'') Security Requirements for Restricted 
Transactions (incorporated by reference, see Sec.  202.402).


Sec.  202.249  Sensitive personal data.

    (a) Definition. The term sensitive personal data means covered 
personal identifiers, precise geolocation data, biometric identifiers, 
human genomic data, personal health data, personal financial data, or 
any combination thereof.
    (b) Exclusions. The term sensitive personal data excludes:
    (1) Public or nonpublic data that does not relate to an individual, 
including such data that meets the definition of a ``trade secret'' (as 
defined in 18 U.S.C. 1839(3)) or ``proprietary information'' (as 
defined in 50 U.S.C. 1708(d)(7));
    (2) Data that is, at the time of the transaction, lawfully 
available to the public from a Federal, State, or local government 
record (such as court records) or in widely distributed media (such as 
sources that are generally available to the public through unrestricted 
and open-access repositories);
    (3) Personal communications; and
    (4) Information or informational materials.


Sec.  202.250  Special Administrative Region of Hong Kong.

    The term Special Administrative Region of Hong Kong means the 
Special Administrative Region of Hong Kong, and any political 
subdivision, agency, or instrumentality thereof.


Sec.  202.251  Special Administrative Region of Macau.

    The term Special Administrative Region of Macau means the Special 
Administrative Region of Macau, and any political subdivision, agency, 
or instrumentality thereof.


Sec.  202.252  Telecommunications service.

    The term telecommunications service means ``telecommunications 
service'' as defined in 47 U.S.C. 153(53).


Sec.  202.253  Transaction.

    The term transaction means any acquisition, holding, use, transfer, 
transportation, exportation of, or dealing in any property in which a 
foreign country or national thereof has an interest.


Sec.  202.254  Transfer.

    The term transfer means any actual or purported act or transaction, 
whether or not evidenced by writing, and whether or not done or 
performed within the United States, the purpose, intent, or effect of 
which is to create, surrender, release, convey, transfer, or alter, 
directly or indirectly, any right, remedy, power, privilege, or 
interest with respect to any property. Without limitation on the 
foregoing, it shall include the making, execution, or delivery of any 
assignment, power, conveyance, check, declaration, deed, deed of trust, 
power of attorney, power of appointment, bill of sale, mortgage, 
receipt, agreement, contract, certificate, gift, sale, affidavit, or 
statement; the making of any payment; the setting off of any obligation 
or credit; the appointment of any agent, trustee, or fiduciary; the 
creation or transfer of any lien; the issuance, docketing, filing, or 
levy of or under any judgment, decree, attachment, injunction, 
execution, or other judicial or administrative process or order, or the 
service of any garnishment; the acquisition of any interest of any 
nature whatsoever by reason of a judgment or decree of any foreign 
country; the fulfillment of any condition; the exercise of any power of 
appointment, power of attorney, or other power; or the acquisition, 
disposition, transportation, importation, exportation, or withdrawal of 
any security.


Sec.  202.255  United States.

    The term United States means the United States, its territories and 
possessions, and all areas under the jurisdiction or authority thereof.


Sec.  202.256  United States person or U.S. person.

    (a) Definition. The terms United States person and U.S. person mean 
any United States citizen, national, or lawful permanent resident; any 
individual admitted to the United States as a refugee under 8 U.S.C. 
1157 or granted

[[Page 86213]]

asylum under 8 U.S.C. 1158; any entity organized solely under the laws 
of the United States or any jurisdiction within the United States 
(including foreign branches); or any person in the United States.
    (b) Examples--(1) Example 1. An individual is a citizen of a 
country of concern and is in the United States. The individual is a 
U.S. person.
    (2) Example 2. An individual is a U.S. citizen. The individual is a 
U.S. person, regardless of location.
    (3) Example 3. An individual is a dual citizen of the United States 
and a country of concern. The individual is a U.S. person, regardless 
of location.
    (4) Example 4. An individual is a citizen of a country of concern, 
is not a permanent resident alien of the United States, and is outside 
the United States. The individual is a foreign person.
    (5) Example 5. A company is organized under the laws of the United 
States and has a foreign branch in a country of concern. The company, 
including its foreign branch, is a U.S. person.
    (6) Example 6. A parent company is organized under the laws of the 
United States and has a subsidiary organized under the laws of a 
country of concern. The subsidiary is a foreign person regardless of 
the degree of ownership by the parent company; the parent company is a 
U.S. person.
    (7) Example 7. A company is organized under the laws of a country 
of concern and has a branch in the United States. The company, 
including its U.S. branch, is a foreign person.
    (8) Example 8. A parent company is organized under the laws of a 
country of concern and has a subsidiary organized under the laws of the 
United States. The subsidiary is a U.S. person regardless of the degree 
of ownership by the parent company; the parent company is a foreign 
person.


Sec.  202.257  U.S. device.

    The term U.S. device means any device with the capacity to store or 
transmit data that is linked or linkable to a U.S. person.


Sec.  202.258  Vendor agreement.

    (a) Definition. The term vendor agreement means any agreement or 
arrangement, other than an employment agreement, in which any person 
provides goods or services to another person, including cloud-computing 
services, in exchange for payment or other consideration.
    (b) Examples--(1) Example 1. A U.S. company collects bulk precise 
geolocation data from U.S. users through an app. The U.S. company 
enters into an agreement with a company headquartered in a country of 
concern to process and store this data. This vendor agreement is a 
restricted transaction.
    (2) Example 2. A medical facility in the United States contracts 
with a company headquartered in a country of concern to provide IT-
related services. The contract governing the provision of services is a 
vendor agreement. The medical facility has bulk personal health data on 
its U.S. patients. The IT services provided under the contract involve 
access to the medical facility's systems containing the bulk personal 
health data. This vendor agreement is a restricted transaction.
    (3) Example 3. A U.S. company, which is owned by an entity 
headquartered in a country of concern and has been designated a covered 
person, establishes a new data center in the United States to offer 
managed services. The U.S. company's data center serves as a vendor to 
various U.S. companies to store bulk U.S. sensitive personal data 
collected by those companies. These vendor agreements are restricted 
transactions.
    (4) Example 4. A U.S. company develops mobile games that collect 
bulk precise geolocation data and biometric identifiers of U.S.-person 
users. The U.S. company contracts part of the software development to a 
foreign person who is primarily resident in a country of concern and is 
a covered person. The contract with the foreign person is a vendor 
agreement. The software-development services provided by the covered 
person under the contract involve access to the bulk precise 
geolocation data and biometric identifiers. This is a restricted 
transaction.
    (5) Example 5. A U.S. multinational company maintains bulk U.S. 
sensitive personal data of U.S. persons. This company has a foreign 
branch, located in a country of concern, that has access to this data. 
The foreign branch contracts with a local company located in the 
country of concern to provide cleaning services for the foreign 
branch's facilities. The contract is a vendor agreement, the foreign 
branch is a U.S. person, and the local company is a covered person. 
Because the services performed under this vendor agreement do not 
``involve access to'' the bulk U.S. sensitive personal data, the vendor 
agreement would not be a covered data transaction.


Sec.  202.259  Venezuela.

    The term Venezuela means the Bolivarian Republic of Venezuela, and 
any political subdivision, agency, or instrumentality thereof.

Subpart C--Prohibited Transactions and Related Activities


Sec.  202.301  Prohibited data-brokerage transactions.

    (a) Prohibition. Except as otherwise authorized pursuant to 
subparts E or H of this part or any other provision of this part, no 
U.S. person, on or after the effective date, may knowingly engage in a 
covered data transaction involving data brokerage with a country of 
concern or covered person.
    (b) Examples--(1) Example 1. A U.S. subsidiary of a company 
headquartered in a country of concern develops an artificial 
intelligence chatbot in the United States that is trained on the bulk 
U.S. sensitive personal data of U.S. persons. While not its primary 
commercial use, the chatbot is capable of reproducing or otherwise 
disclosing the bulk sensitive personal health data that was used to 
train the chatbot when responding to queries. The U.S. subsidiary 
knowingly licenses subscription-based access to that chatbot worldwide, 
including to covered persons such as its parent entity. Although 
licensing use of the chatbot itself may not necessarily ``involve 
access'' to bulk U.S. sensitive personal data, the U.S. subsidiary 
knows or should know that the license can be used to obtain access to 
the U.S. persons' bulk sensitive personal training data if prompted. 
The licensing of access to this bulk U.S. sensitive personal data is 
data brokerage because it involves the transfer of data from the U.S. 
company (i.e., the provider) to licensees (i.e., the recipients), where 
the recipients did not collect or process the data directly from the 
individuals linked or linkable to the collected or processed data. Even 
though the license did not explicitly provide access to the data, this 
is a prohibited transaction because the U.S. company knew or should 
have known that the use of the chatbot pursuant to the license could be 
used to obtain access to the training data, and because the U.S. 
company licensed the product to covered persons.
    (2) [Reserved]


Sec.  202.302  Other prohibited data-brokerage transactions involving 
potential onward transfer to countries of concern or covered persons.

    (a) Prohibition. Except as otherwise authorized pursuant to this 
part, no U.S. person, on or after the effective date, may knowingly 
engage in a covered data transaction involving data brokerage with any 
foreign person that is not a covered person unless the U.S. person:

[[Page 86214]]

    (1) Contractually requires that the foreign person refrain from 
engaging in a subsequent covered data transaction involving data 
brokerage of the same data with a country of concern or covered person; 
and
    (2) Reports any known or suspected violations of this contractual 
requirement in accordance with paragraph (b) of this section.
    (b) Reporting known or suspected violations--(1) When reports are 
due. U.S. persons shall file reports within 14 days of the U.S. person 
becoming aware of a known or suspected violation.
    (2) Contents of reports. Reports on known or suspected violations 
shall include the following, to the extent the information is known and 
available to the person filing the report at the time of the report:
    (i) The name and address of the U.S. person reporting the known or 
suspected violation of the contractual requirement in accordance with 
paragraph (b) of this section;
    (ii) A description of the known or suspected violation, including:
    (A) Date of known or suspected violation;
    (B) Description of the data-brokerage transaction referenced in 
paragraph (a) of this section;
    (C) Description of the contractual provision prohibiting the onward 
transfer of the same data to a country of concern or covered person;
    (D) Description of the known or suspected violation of the 
contractual obligation prohibiting the foreign person from engaging in 
a subsequent covered data transaction involving the same data with a 
country of concern or a covered person;
    (E) Any persons substantively participating in the transaction 
referenced in paragraph (a) of this section;
    (F) Information about the known or suspected persons involved in 
the onward data transfer transaction, including the name and location 
of any covered persons or countries of concern;
    (G) A copy of any relevant documentation received or created in 
connection with the transaction; and
    (iii) Any other information that the Department of Justice may 
require or any other information that the U.S. person filing the report 
believes to be pertinent to the known or suspected violation or the 
implicated covered person.
    (3) Additional contents; format and method of submission. Reports 
required by this section must be submitted in accordance with this 
section and with subpart L of this part.
    (c) Examples--(1) Example 1. A U.S. business knowingly enters into 
an agreement to sell bulk human genomic data to a European business 
that is not a covered person. The U.S. business is required to include 
in that agreement a limitation on the European business' right to 
resell or otherwise engage in a covered data transaction involving data 
brokerage of that data to a country of concern or covered person. 
Otherwise, the agreement would be a prohibited transaction.
    (2) Example 2. A U.S. company owns and operates a mobile app for 
U.S. users with available advertising space. As part of selling the 
advertising space, the U.S. company provides the bulk precise 
geolocation data, IP address, and advertising IDs of its U.S. users' 
devices to an advertising exchange based in Europe that is not a 
covered person. The U.S. company's provision of this data to the 
advertising exchange is data brokerage and a prohibited transaction 
unless the U.S. company obtains a contractual commitment from the 
advertising exchange not to engage in any covered data transactions 
involving data brokerage of that same data with a country of concern or 
covered person.


Sec.  202.303  Prohibited human genomic data and human biospecimen 
transactions.

    Except as otherwise authorized pursuant to this part, no U.S. 
person, on or after the effective date, may knowingly engage in any 
covered data transaction with a country of concern or covered person 
that involves access by that country of concern or covered person to 
bulk U.S. sensitive personal data that involves bulk human genomic 
data, or to human biospecimens from which bulk human genomic data could 
be derived.


Sec.  202.304  Prohibited evasions, attempts, causing violations, and 
conspiracies.

    (a) Prohibition. Any transaction on or after the effective date 
that has the purpose of evading or avoiding, causes a violation of, or 
attempts to violate any of the prohibitions set forth in this part is 
prohibited. Any conspiracy formed to violate the prohibitions set forth 
in this part is prohibited.
    (b) Examples--(1) Example 1. A U.S. data broker seeks to sell bulk 
U.S. sensitive personal data to a foreign person who primarily resides 
in China. With knowledge that the foreign person is a covered person 
and with the intent to evade the regulations, the U.S. data broker 
invites the foreign person to travel to the United States to consummate 
the data transaction and transfer the bulk U.S. sensitive personal data 
in the United States. After completing the transaction, the person 
returns to China with the bulk U.S. sensitive personal data. The 
transaction in the United States is not a covered data transaction 
because the person who resides in China is a U.S. person while in the 
United States (unless that person was individually designated as a 
covered person pursuant to Sec.  202.211(a)(5), in which case their 
covered person status would remain, even while in the United States, 
and the transaction would be a covered data transaction). However, the 
U.S. data broker has structured the transaction to evade the 
regulation's prohibitions on covered data transactions with covered 
persons. As a result, this transaction has the purpose of evading the 
regulations and is prohibited.
    (2) Example 2. A Russian national, who is employed by a corporation 
headquartered in Russia, travels to the United States to conduct 
business with the Russian company's U.S. subsidiary, including with the 
purpose of obtaining bulk U.S. sensitive personal data from the U.S. 
subsidiary. The U.S. subsidiary is a U.S. person, the Russian 
corporation is a covered person, and the Russian employee is a covered 
person while outside the United States but a U.S. person while 
temporarily in the United States (unless that Russian employee was 
individually designated as a covered person pursuant to Sec.  
202.211(a)(5), in which case their covered person status would remain, 
even while in the United States, and the transaction would be a covered 
data transaction). With knowledge of these facts, the U.S. subsidiary 
licenses access to bulk U.S. sensitive personal data to the Russian 
employee while in the United States, who then returns to Russia. This 
transaction has the purpose of evading the regulations and is 
prohibited.
    (3) Example 3. A U.S. subsidiary of a company headquartered in a 
country of concern collects bulk precise geolocation data from U.S. 
persons. The U.S. subsidiary is a U.S. person, and the parent company 
is a covered person. With the purpose of evading the regulations, the 
U.S. subsidiary enters into a vendor agreement with a foreign company 
that is not a covered person. The vendor agreement provides the foreign 
company access to the data. The U.S. subsidiary knows (or reasonably 
should know) that the foreign company is a shell company, and knows 
that it subsequently outsources the vendor agreement to the U.S. 
subsidiary's parent company. This transaction has the purpose of 
evading the regulations and is prohibited.

[[Page 86215]]

    (4) Example 4. A U.S. company collects bulk personal health data 
from U.S. persons. With the purpose of evading the regulations, the 
U.S. company enters into a vendor agreement with a foreign company that 
is not a covered person. The agreement provides the foreign company 
access to the data. The U.S. company knows (or reasonably should know) 
that the foreign company is a front company staffed primarily by 
covered persons. The U.S. company has not complied with either the 
security requirements in Sec.  202.248 or other applicable requirements 
for conducting restricted transactions as detailed in subpart J of this 
part. This transaction has the purpose of evading the regulations and 
is prohibited.
    (6) Example 6. A U.S. online gambling company uses an artificial 
intelligence algorithm to analyze collected bulk covered personal 
identifiers to identify users based on impulsivity for targeted 
advertising. For the purpose of evasion, a U.S. subsidiary of a company 
headquartered in a country of concern licenses the derivative algorithm 
from the U.S. online gambling company for the purpose of accessing bulk 
sensitive personal identifiers from the training data contained in the 
algorithm that would not otherwise be accessible to the parent company 
and shares the algorithm with the parent company so that the parent 
company can obtain the bulk covered personal identifiers. The U.S. 
subsidiary's licensing transaction with the parent company has the 
purpose of evading the regulations and is prohibited.


Sec.  202.305  Knowingly directing prohibited or restricted 
transactions.

    (a) Prohibition. Except as otherwise authorized pursuant to this 
part, no U.S. person, on or after the effective date, may knowingly 
direct any covered data transaction that would be a prohibited 
transaction or restricted transaction that fails to comply with the 
requirements of subpart D and all other applicable requirements under 
this part, if engaged in by a U.S. person.
    (b) Examples--(1) Example 1. A U.S. person is an officer, senior 
manager, or equivalent senior-level employee at a foreign company that 
is not a covered person, and the foreign company undertakes a covered 
data transaction at that U.S. person's direction or with that U.S. 
person's approval when the covered data transaction would be prohibited 
if performed by a U.S. person. The U.S. person has knowingly directed a 
prohibited transaction.
    (2) Example 2. Several U.S. persons launch, own, and operate a 
foreign company that is not a covered person, and that foreign company, 
under the U.S. persons' operation, undertakes covered data transactions 
that would be prohibited if performed by a U.S. person. The U.S. 
persons have knowingly directed a prohibited transaction.
    (3) Example 3. A U.S. person is employed at a U.S.-headquartered 
multinational company that has a foreign affiliate that is not a 
covered person. The U.S. person instructs the U.S. company's compliance 
unit to change (or approve changes to) the operating policies and 
procedures of the foreign affiliate with the specific purpose of 
allowing the foreign affiliate to undertake covered data transactions 
that would be prohibited if performed by a U.S. person. The U.S. person 
has knowingly directed prohibited transactions.
    (4) Example 4. A U.S. bank processes a payment from a U.S. person 
to a covered person, or from a covered person to a U.S. person, as part 
of that U.S. person's engagement in a prohibited transaction. The U.S. 
bank has not knowingly directed a prohibited transaction, and its 
activity would not be prohibited (although the U.S. person's covered 
data transaction would be prohibited).
    (5) Example 5. A U.S. financial institution underwrites a loan or 
otherwise provides financing for a foreign company that is not a 
covered person, and the foreign company undertakes covered data 
transactions that would be prohibited if performed by a U.S. person. 
The U.S. financial institution has not knowingly directed a prohibited 
transaction, and its activity would not be prohibited.
    (6) Example 6. A U.S. person, who is employed at a foreign company 
that is not a covered person, signs paperwork approving the foreign 
company's procurement of real estate for its operations. The same 
foreign company separately conducts data transactions that use or are 
facilitated by operations at that real estate location and that would 
be prohibited transactions if performed by a U.S. person, but the U.S. 
employee has no role in approving or directing those separate data 
transactions. The U.S. person has not knowingly directed a prohibited 
transaction, and the U.S. person's activity would not be prohibited.
    (7) Example 7. A U.S. company owns or operates a submarine 
telecommunications cable with one landing point in a foreign country 
that is not a country of concern and one landing point in a country of 
concern. The U.S. company leases capacity on the cable to U.S. 
customers that transmit bulk U.S. sensitive personal data to the 
landing point in the country of concern, including transmissions as 
part of prohibited transactions. The U.S. company's ownership or 
operation of the cable does not constitute knowingly directing a 
prohibited transaction, and its ownership or operation of the cable 
would not be prohibited (although the U.S. customers' covered data 
transactions would be prohibited).
    (8) Example 8. A U.S. person engages in a vendor agreement 
involving bulk U.S. sensitive personal data with a foreign person who 
is not a covered person. Such vendor agreement is not a restricted or 
prohibited transaction. The foreign person then employs an individual 
who is a covered person and grants them access to bulk U.S. sensitive 
personal data without the U.S. person's knowledge or direction. There 
is no covered data transaction between the U.S. person and the covered 
person, and there is no indication that the parties engaged in these 
transactions with the purpose of evading the regulations (such as the 
U.S. person having knowingly directed the foreign person's employment 
agreement with the covered person or the parties knowingly structuring 
a restricted transaction into these multiple transactions with the 
purpose of evading the prohibition). The U.S. person has not knowingly 
directed a restricted transaction.
    (9) Example 9. A U.S. company sells DNA testing kits to U.S. 
consumers and maintains bulk human genomic data collected from those 
consumers. The U.S. company enters into a contract with a foreign 
cloud-computing company (which is not a covered person) to store the 
U.S. company's database of human genomic data. The foreign company 
hires employees from other countries, including citizens of countries 
of concern who primarily reside in a country of concern, to manage 
databases for its customers, including the U.S. company's human genomic 
database. There is no indication of evasion, such as the U.S. company 
knowingly directing the foreign company's employment agreements or the 
U.S. company knowingly engaging in and structuring these transactions 
to evade the regulations. The cloud-computing services agreement 
between the U.S. company and the foreign company would not be 
prohibited or restricted because that transaction is between a U.S. 
person and a foreign company that does not meet the definition of a 
covered person. The employment agreements between the foreign company 
and the covered persons would not be prohibited or restricted

[[Page 86216]]

because those agreements are between foreign persons.

Subpart D--Restricted Transactions


Sec.  202.401  Authorization to conduct restricted transactions.

    (a) Restricted transactions. Except as otherwise authorized 
pursuant to subparts E or H of this part or any other provision of this 
part, no U.S. person, on or after the effective date, may knowingly 
engage in a covered data transaction involving a vendor agreement, 
employment agreement, or investment agreement with a country of concern 
or covered person unless the U.S. person complies with the security 
requirements required by subpart D of this part and all other 
applicable requirements under this part.
    (b) This subpart does not apply to covered data transactions 
involving access to bulk human genomic data or human biospecimens from 
which such data can be derived that is subject to the prohibition in 
Sec.  202.303 of this part.
    (c) Examples--(1) Example 1. A U.S. company engages in an 
employment agreement with a covered person to provide information 
technology support. As part of their employment, the covered person has 
access to personal financial data. The U.S. company implements and 
complies with the security requirements. The employment agreement is 
authorized as a restricted transaction because the company has complied 
with the security requirements.
    (2) Example 2. A U.S. company engages in a vendor agreement with a 
covered person to store bulk personal health data. Instead of 
implementing the security requirements as identified by reference in 
this subpart, the U.S. company implements different controls that it 
believes mitigate the covered person's access to the bulk personal 
health data. Because the U.S. person has not complied with the security 
requirements, the vendor agreement is not authorized and thus is a 
prohibited transaction.
    (3) Example 3. A U.S. person engages in a vendor agreement 
involving bulk U.S. sensitive personal data with a foreign person who 
is not a covered person. The foreign person then employs an individual 
who is a covered person and grants them access to bulk U.S. sensitive 
personal data without the U.S. person's knowledge or direction. There 
is no covered data transaction between the U.S. person and the covered 
person, and there is no indication that the parties engaged in these 
transactions with the purpose of evading the regulations (such as the 
U.S. person having knowingly directed the foreign person's employment 
agreement with the covered person or the parties knowingly structuring 
a prohibited transaction into these multiple transactions with the 
purpose of evading the prohibition). As a result, neither the vendor 
agreement nor the employment agreement would be a restricted 
transaction.


Sec.  202.402  Incorporation by reference.

    (a) Incorporation by reference. Certain material is incorporated by 
reference into this part with the approval of the Director of the 
Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. This 
incorporation by reference (``IBR'') material is available for 
inspection at the Department of Justice and at the National Archives 
and Records Administration (``NARA''). Please contact the Foreign 
Investment Review Section, National Security Division, U.S. Department 
of Justice, 175 N St. NE, Washington, DC 20002, telephone: 202-514-
8648, <a href="/cdn-cgi/l/email-protection#713f22355f373823225f151005100214120403180508310402151e1b5f161e07"><span class="__cf_email__" data-cfemail="7b35283f553d322928551f1a0f1a081e180e09120f023b0e081f1411551c140d">[email protected]</span></a>. You may also obtain the material 
from the National Security Division at https://www.justice.gov/nsd. For 
information on the availability of this material at NARA, visit 
www.archives.gov/federal-register/cfr/ibr-locations.html or email 
<a href="/cdn-cgi/l/email-protection#066074286f6875766365726f6968466867746728616970"><span class="__cf_email__" data-cfemail="3c5a4e1255524f4c595f485553527c525d4e5d125b534a">[email protected]</span></a>. The material may also be obtained from the 
sources in the following paragraphs of this section.
    (b) Other sources. The Cybersecurity and Infrastructure Security 
Agency, Mail Stop 0380, Department of Homeland Security, 245 Murray 
Lane, Washington, DC 20528-0380, <a href="/cdn-cgi/l/email-protection#096a6c677d7b6865496a607a68276e667f"><span class="__cf_email__" data-cfemail="7f1c1a110b0d1e133f1c160c1e51181009">[email protected]</span></a>, 888-282-0870, http://www.cisa.gov. You may also obtain the material from the Cybersecurity 
and Infrastructure Security Agency at https://www.cisa.gov/.
    (1) The Cybersecurity and Infrastructure Agency (``CISA''), 
Security Requirements for Restricted Transactions; (Final edition 202X 
Draft), IBR approved for Sec. Sec.  202.248; 202.304(b)(4); 202.401(a); 
202.401(c)(1); 202.401(c)(2); 202.508(b)(8); 202.508(b)(10); 
202.508(b)(11); 202.1001(b)(4); 202.1002(b)(1); 202.1002(e)(4); 
202.1002(f)(2)(iv); 202.1002(f)(2)(v); 202.1002(f)(2)(vi); 
202.1101(b)(2); 202.1101(b)(3).
    (2) [Reserved]

Subpart E--Exempt Transactions


Sec.  202.501  Personal communications.

    Subparts C and D of this part do not apply to data transactions to 
the extent that they involve any postal, telegraphic, telephonic, or 
other personal communication that does not involve the transfer of 
anything of value.


Sec.  202.502  Information or informational materials.

    Subparts C and D of this part do not apply to data transactions to 
the extent that they involve the importation from any country, or the 
exportation to any country, whether commercial or otherwise, regardless 
of format or medium of transmission, of any information or 
informational materials.


Sec.  202.503  Travel.

    Subparts C and D of this part do not apply to data transactions to 
the extent that they are ordinarily incident to travel to or from any 
country, including importation of accompanied baggage for personal use; 
maintenance within any country, including payment of living expenses 
and acquisition of goods or services for personal use; and arrangement 
or facilitation of such travel, including nonscheduled air, sea, or 
land voyages.


Sec.  202.504  Official business of the United States Government.

    (a) Exemption. Subparts C and D of this part do not apply to data 
transactions to the extent that they are for the conduct of the 
official business of the United States Government by its employees, 
grantees, or contractors; any authorized activity of any United States 
Government department or agency (including an activity that is 
performed by a Federal depository institution or credit union 
supervisory agency in the capacity of receiver or conservator); or 
transactions conducted pursuant to a grant, contract, or other 
agreement entered into with the United States Government.
    (b) Examples--(1) Example 1. A U.S. hospital receives a Federal 
grant to conduct human genomic research on U.S. persons. As part of 
that federally funded human genomic research, the U.S. hospital 
contracts with a foreign laboratory that is a covered person, hires a 
researcher that is a covered person, and gives the laboratory and 
researcher access to the human biospecimens and human genomic data in 
bulk. The contract with the foreign laboratory and the employment of 
the researcher are exempt transactions but would be prohibited 
transactions if they were not part of the federally funded research.
    (2) [Reserved]


Sec.  202.505  Financial services.

    (a) Exemption. Subparts C and D of this part do not apply to data 
transactions, to the extent that they are ordinarily incident to and 
part of the

[[Page 86217]]

provision of financial services, including:
    (1) Banking, capital-markets (including investment-management 
services), or financial-insurance services;
    (2) A financial activity authorized for national banks by 12 U.S.C. 
24 (Seventh) and rules and regulations and written interpretations of 
the Office of the Comptroller of the Currency thereunder;
    (3) An activity that is ``financial in nature or incidental to such 
financial activity'' or ``complementary to a financial activity,'' 
section (k)(1), as set forth in section (k)(4) of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1843(k)(4)) and rules and regulations 
and written interpretations of the Board of Governors of the Federal 
Reserve System thereunder;
    (4) The transfer of personal financial data or covered personal 
identifiers incidental to the purchase and sale of goods and services 
(such as the purchase, sale, or transfer of consumer products and 
services through online shopping or e-commerce marketplaces);
    (5) The provision or processing of payments or funds transfers 
(such as person-to-person, business-to-person, and government-to-person 
funds transfers) involving the transfer of personal financial data or 
covered personal identifiers, or the provision of services ancillary to 
processing payments and funds transfers (such as services for payment 
dispute resolution, payor authentication, tokenization, payment 
gateway, payment fraud detection, payment resiliency, mitigation and 
prevention, and payment-related loyalty point program administration); 
and
    (6) The provision of investment-management services that manage or 
provide advice on investment portfolios or individual assets for 
compensation (such as devising strategies and handling financial assets 
and other investments for clients) or provide services ancillary to 
investment-management services (such as broker-dealers executing trades 
within a securities portfolio based upon instructions from an 
investment advisor).
    (b) Examples--(1) Example 1. A U.S. company engages in a data 
transaction to transfer personal financial data in bulk to a financial 
institution that is incorporated in, located in, or subject to the 
jurisdiction or control of a country of concern to clear and settle 
electronic payment transactions between U.S. individuals and merchants 
in a country of concern where both the U.S. individuals and the 
merchants use the U.S. company's infrastructure, such as an e-commerce 
platform. Both the U.S. company's transaction transferring bulk 
personal financial data and the payment transactions by U.S. 
individuals are exempt transactions.
    (2) Example 2. As ordinarily incident to and part of securitizing 
and selling asset-backed obligations (such as mortgage and nonmortgage 
loans) to a covered person, a U.S. bank provides bulk U.S. sensitive 
personal data to the covered person. The data transfers are exempt 
transactions.
    (3) Example 3. A U.S. bank or other financial institution, as 
ordinarily incident to and part of facilitating payments to U.S. 
persons in a country of concern, stores and processes the customers' 
bulk financial data using a data center operated by a third-party 
service provider in the country of concern. The use of this third-party 
service provider is a vendor agreement, but it is an exempt transaction 
that is ordinarily incident to and part of facilitating payment.
    (4) Example 4. Same as Example 3, but the underlying payments are 
between U.S. persons in the United States and do not involve a country 
of concern. The use of this third-party service provider is a vendor 
agreement, but it is not an exempt transaction because it is not 
ordinarily incident to facilitating this type of financial activity.
    (5) Example 5. As part of operating an online marketplace for the 
purchase and sale of goods, a U.S. company, as ordinarily incident to 
and part of U.S. consumers' purchase of goods on that marketplace, 
transfers bulk contact information, payment information (e.g., credit-
card account number, expiration data, and security code), and delivery 
address to a merchant in a country of concern. The data transfers are 
exempt transactions because they are ordinarily incident to and part of 
U.S. consumers' purchase of goods.
    (6) Example 6. A U.S. investment adviser purchases securities of a 
company incorporated in a country of concern for the accounts of its 
clients. The investment adviser engages a broker-dealer located in a 
country of concern to execute the trade, and, as ordinarily incident to 
and part of the transaction, transfers to the broker-dealer its 
clients' covered personal identifiers and financial account numbers in 
bulk. This provision of data is an exempt transaction because it is 
ordinarily incident to and part of the provision of investment-
management services.
    (7) Example 7. A U.S. company that provides payment-processing 
services sells bulk U.S. sensitive personal data to a covered person. 
This sale is prohibited data brokerage and is not an exempt transaction 
because it is not ordinarily incident to and part of the payment-
processing services provided by the U.S. company.
    (8) Example 8. A U.S. bank facilitates international funds 
transfers to foreign persons not related to a country of concern, but 
through intermediaries or locations subject to the jurisdiction or 
control of a country of concern. These transfers result in access to 
bulk financial records by some covered persons to complete the 
transfers and manage associated risks. Providing this access as part of 
these transfers is ordinarily incident to the provision of financial 
services and is exempt.
    (9) Example 9. A U.S. insurance company underwrites personal 
insurance to U.S. persons residing in foreign countries in the same 
region as a country of concern. The insurance company relies on its own 
business infrastructure and personnel in the country of concern to 
support its financial activity in the region, which results in access 
to the bulk sensitive personal data of some U.S.-person customers 
residing in the region, to covered persons at the insurance company 
supporting these activities. Providing this access is ordinarily 
incident to the provision of financial services and is exempt.
    (10) Example 10. A U.S. bank operates a foreign branch in a country 
of concern and provides financial services to U.S. persons living 
within the country of concern. The bank receives a lawful request from 
the regulator in the country of concern to review the financial 
activity conducted in the country, which includes providing access to 
the bulk sensitive personal data of U.S. persons resident in the 
country or U.S. persons conducting transactions through the foreign 
branch. Responding to the regulator's request, including providing 
access to this bulk sensitive personal data, is ordinarily incident to 
the provision of financial services and is exempt.
    (11) Example 11. A U.S. bank voluntarily shares information, 
including relevant bulk sensitive personal data, with financial 
institutions organized under the laws of a country of concern for the 
purposes of, and consistent with industry practices for, fraud 
identification, combatting money laundering and terrorism financing, 
and U.S. sanctions compliance. Sharing this data for these purposes is 
ordinarily incident to the provision of financial services and is 
exempt.

[[Page 86218]]

    (12) Example 12. A U.S. company provides wealth-management services 
and collects bulk personal financial data on its U.S. clients. The U.S. 
company appoints a citizen of a country of concern, who is located in a 
country of concern, to its board of directors. In connection with the 
board's data security and cybersecurity responsibilities, the director 
could access the bulk personal financial data. The appointment of the 
director, who is a covered person, is a restricted employment agreement 
and is not exempt because the board member access to the bulk personal 
financial data is not ordinarily incident to the U.S. company's 
provision of wealth-management services.


Sec.  202.506  Corporate group transactions.

    (a) Subparts C and D of this part do not apply to data transactions 
to the extent they are:
    (1) Between a U.S. person and its subsidiary or affiliate located 
in (or otherwise subject to the ownership, direction, jurisdiction, or 
control of) a country of concern; and
    (2) Ordinarily incident to and part of administrative or ancillary 
business operations, including:
    (i) Human resources;
    (ii) Payroll, expense monitoring and reimbursement, and other 
corporate financial activities;
    (iii) Paying business taxes or fees;
    (iv) Obtaining business permits or licenses;
    (v) Sharing data with auditors and law firms for regulatory 
compliance;
    (vi) Risk management;
    (vii) Business-related travel;
    (viii) Customer support;
    (ix) Employee benefits; and
    (x) Employees' internal and external communications.
    (b) Examples--(1) Example 1. A U.S. company has a foreign 
subsidiary located in a country of concern, and the U.S. company's 
U.S.-person contractors perform services for the foreign subsidiary. As 
ordinarily incident to and part of the foreign subsidiary's payments to 
the U.S.-person contractors for those services, the U.S. company 
engages in a data transaction that gives the subsidiary access to the 
U.S.-person contractors' bulk personal financial data and covered 
personal identifiers. This is an exempt corporate group transaction.
    (2) Example 2. A U.S. company aggregates bulk personal financial 
data. The U.S. company has a subsidiary that is a covered person 
because it is headquartered in a country of concern. The subsidiary is 
subject to the country of concern's national security laws requiring it 
to cooperate with and assist the country's intelligence services. The 
exemption for corporate group transactions would not apply to the U.S. 
parent's grant of a license to the subsidiary to access the parent's 
databases containing the bulk personal financial data for the purpose 
of complying with a request or order by the country of concern under 
those national security laws to provide access to that data because 
granting of such a license is not ordinarily incident to and part of 
administrative or ancillary business operations.
    (3) Example 3. A U.S. company's affiliate operates a manufacturing 
facility in a country of concern for one of the U.S. company's 
products. The affiliate uses employee fingerprints as part of security 
and identity verification to control access to that facility. To 
facilitate its U.S. employees' access to that facility as part of their 
job responsibilities, the U.S. company provides the fingerprints of 
those employees in bulk to its affiliate. The transaction is an exempt 
corporate group transaction.
    (4) Example 4. A U.S. company has a foreign subsidiary located in a 
country of concern that conducts research and development for the U.S. 
company. The U.S. company sends bulk personal financial data to the 
subsidiary for the purpose of developing a financial software tool. The 
transaction is not an exempt corporate group transaction because it is 
not ordinarily incident to and part of administrative or ancillary 
business operations.
    (5) Example 5. Same as Example 4, but the U.S. company has a 
foreign branch located in a country of concern instead of a foreign 
subsidiary. Because the foreign branch is a U.S. person as part of the 
U.S. company, the transaction occurs within the same U.S. person and is 
not subject to the prohibitions or restrictions. If the foreign branch 
allows employees who are covered persons to access the bulk personal 
financial data to develop the financial software tool, the foreign 
branch has engaged in restricted transactions.


Sec.  202.507  Transactions required or authorized by Federal law or 
international agreements, or necessary for compliance with Federal law.

    (a) Required or authorized by Federal law or international 
agreements. Subparts C and D of this part do not apply to data 
transactions to the extent they are required or authorized by Federal 
law or pursuant to an international agreement to which the United 
States is a party, including relevant provisions in the following:
    (1) Annex 9 to the Convention on International Civil Aviation, 
International Civil Aviation Organization Doc. 7300 (2022);
    (2) Section 2 of the Convention on Facilitation of International 
Maritime Traffic (1965);
    (3) Articles 1, 12, 14, and 16 of the Postal Payment Services 
Agreement (2021);
    (4) Articles 63, 64, and 65 of the Constitution of the World Health 
Organization (1946);
    (5) Article 2 of the Agreement Between the Government of the United 
States of America and the Government of the People's Republic of China 
Regarding Mutual Assistance in Customs Matters (1999);
    (6) Article 7 of the Agreement Between the Government of the United 
States of America and the Government of the People's Republic of China 
on Mutual Legal Assistance in Criminal Matters (2000);
    (7) Article 25 of the Agreement Between the Government of the 
United States of America and the Government of the People's Republic of 
China for the Avoidance of Double Taxation and the Prevention of Tax 
Evasion with Respect to Taxes on Income (1987);
    (8) Article 2 of the Agreement Between the United States of America 
and the Macao Special Administrative Region of the People's Republic of 
China for Cooperation to Facilitate the Implementation of FATCA (2021);
    (9) Articles II, III, VII of the Protocol to Extend and Amend the 
Agreement Between the Department of Health and Human Services of the 
United States of America and the National Health and Family Planning 
Commission of the People's Republic of China for Cooperation in the 
Science and Technology of Medicine and Public Health (2013);
    (10) Article III of the Treaty Between the United States and Cuba 
for the Mutual Extradition of Fugitives from Justice (1905);
    (11) Articles 3, 4, 5, 7 of the Agreement Between the Government of 
the United States of America and the Government of the Russian 
Federation on Cooperation and Mutual Assistance in Customs Matters 
(1994);
    (12) Articles 1, 2, 5, 7, 13, and 16 of the Treaty Between the 
United States of America and the Russian Federation on Mutual Legal 
Assistance in Criminal Matters (1999);
    (13) Articles I, IV, IX, XV, and XVI of the Treaty Between the 
Government of the United States of America and the Government of the 
Republic of Venezuela on Mutual Legal Assistance in Criminal Matters 
(1997); and

[[Page 86219]]

    (14) Articles 5, 6, 7, 9, 11, 19, 35, and 45 of the International 
Health Regulations (2005).
    (b) Global health and pandemic preparedness. Subparts C and D of 
this part do not apply to data transactions to the extent they are 
required or authorized by the following:
    (1) The Pandemic Influenza Preparedness and Response Framework;
    (2) The Global Influenza Surveillance and Response System; and
    (3) The Agreement between the Government of the United States of 
America and the Government of the People's Republic of China on 
Cooperation in Science and Technology (1979).
    (c) Compliance with Federal law. Subparts C and D of this part do 
not apply to data transactions to the extent that they are ordinarily 
incident to and part of ensuring compliance with any Federal laws and 
regulations, including the Bank Secrecy Act, 12 U.S.C. 1829b, 1951 
through 1960, 31 U.S.C. 310, 5311 through 5314, 5316 through 5336; the 
Securities Act of 1933, 15 U.S.C. 77a et seq.; the Securities Exchange 
Act of 1934, 15 U.S.C. 78a et seq.; the Investment Company Act of 1940, 
15 U.S.C. 80a-1 et seq.; the Investment Advisers Act of 1940, 15 U.S.C. 
80b-1 et seq.; the International Emergency Economic Powers Act, 50 
U.S.C. 1701 et seq.; the Export Administration Regulations, 15 CFR 730 
et seq.; or any notes, guidance, orders, directives, or additional 
regulations related thereto.
    (d) Examples--(1) Example 1. A U.S. bank or other financial 
institution engages in a covered data transaction with a covered person 
that is ordinarily incident to and part of ensuring compliance with 
U.S. laws and regulations (such as OFAC sanctions and anti-money 
laundering programs required by the Bank Secrecy Act). This is an 
exempt transaction.
    (2) [Reserved]


Sec.  202.508  Investment agreements subject to a CFIUS action.

    (a) Exemption. Subparts C and D of this part do not apply to data 
transactions to the extent that they involve an investment agreement 
that is subject to a CFIUS action.
    (b) Examples--(1) Example 1. A U.S. software provider is acquired 
in a CFIUS covered transaction by a foreign entity in which the 
transaction parties sign a mitigation agreement with CFIUS. The 
agreement has provisions governing the acquirer's ability to access the 
data of the U.S. software provider and their customers. The mitigation 
agreement contains a provision stating that it is a CFIUS action for 
purposes of this part. Before the effective date of the CFIUS 
mitigation agreement, the investment agreement is not subject to a 
CFIUS action and remains subject to these regulations to the extent 
otherwise applicable. Beginning on the effective date of the CFIUS 
mitigation agreement, the investment agreement is subject to a CFIUS 
action and exempt from this part.
    (2) Example 2. Same as Example 1, but CFIUS issues an interim order 
before entering a mitigation agreement. The interim order states that 
it constitutes a CFIUS action for purposes of this part. Before the 
effective date of the interim order, the investment agreement is not 
subject to a CFIUS action and remains subject to these regulations to 
the extent otherwise applicable. Beginning on the effective date of the 
interim order, the investment agreement is subject to a CFIUS action 
and is exempt from this part. The mitigation agreement also states that 
it constitutes a CFIUS action for purposes of this part. After the 
effective date of the mitigation agreement, the investment agreement 
remains subject to a CFIUS action and is exempt from this part.
    (3) Example 3. A U.S. biotechnology company is acquired by a 
foreign multinational corporation. CFIUS reviews this acquisition and 
concludes action without mitigation. This acquisition is not subject to 
a CFIUS action, and the acquisition remains subject to this part to the 
extent otherwise applicable.
    (4) Example 4. A U.S. manufacturer is acquired by a foreign owner 
in which the transaction parties sign a mitigation agreement with 
CFIUS. The mitigation agreement provides for supply assurances and 
physical access restrictions but does not address data security, and it 
does not contain a provision explicitly designating that it is a CFIUS 
action. This acquisition is not subject to a CFIUS action, and the 
acquisition remains subject to this part to the extent otherwise 
applicable.
    (5) Example 5. As a result of CFIUS's review and investigation of a 
U.S. human genomic company's acquisition by a foreign healthcare 
company, CFIUS refers the transaction to the President with a 
recommendation to require the foreign acquirer to divest its interest 
in the U.S. company. The President issues an order prohibiting the 
transaction and requiring divestment of the foreign healthcare 
company's interests and rights in the human genomic company. The 
presidential order itself does not constitute a CFIUS action. Unless 
CFIUS takes action, such as by entering into an agreement or imposing 
conditions to address risk prior to completion of the divestment, the 
transaction remains subject to this part to the extent otherwise 
applicable for as long as the investment agreement remains in existence 
following the presidential order and prior to divestment.
    (6) Example 6. A U.S. healthcare company and foreign acquirer 
announce a transaction that they believe will be subject to CFIUS 
jurisdiction and disclose that they intend to file a joint voluntary 
notice soon. No CFIUS action has occurred yet, and the transaction 
remains subject to this part to the extent otherwise applicable.
    (7) Example 7. Same as Example 6, but the transaction parties file 
a joint voluntary notice with CFIUS. No CFIUS action has occurred yet, 
and the transaction remains subject to this part to the extent 
otherwise applicable.
    (8) Example 8. Company A, a covered person, acquires 100% of the 
equity and voting interest of Company B, a U.S. business that maintains 
bulk U.S. sensitive personal data of U.S. persons. After completing the 
transaction, the parties fail to implement the security requirements 
and other conditions required under this part. Company A and Company B 
later submit a joint voluntary notice to CFIUS with respect to the 
transaction. Upon accepting the notice, CFIUS determines that the 
transaction is a covered transaction and takes measures to mitigate 
interim risk that may arise as a result of the transaction until such 
time that the Committee has completed action, pursuant to 50 U.S.C. 
4565(l)(3)(A)(iii). The interim order states that it constitutes a 
CFIUS action for purposes of this part. Beginning on the effective date 
of these measures imposed by the interim order, the security 
requirements and other applicable conditions under this part no longer 
apply to the transaction. The Department of Justice, however, may take 
enforcement action under this part, in coordination with CFIUS, with 
respect to the violations that occurred before the effective date of 
the interim order issued by CFIUS.
    (9) Example 9. Same as Example 8, but before engaging in the 
investment agreement for the acquisition, Company A and Company B 
submit the joint voluntary notice to CFIUS, CFIUS determines that the 
transaction is a CFIUS covered transaction, CFIUS identifies a risk 
related to data security arising from the transaction, and CFIUS 
negotiates and enters into a mitigation agreement with the parties to 
resolve that risk. The mitigation agreement contains a provision 
stating that it is a CFIUS action for purposes of this part. Because a 
CFIUS action has occurred before the parties engage in the

[[Page 86220]]

investment agreement, the acquisition is exempt from this part.
    (10) Example 10. Same as Example 8, but before engaging in the 
investment agreement for the acquisition, the parties implement the 
security requirements and other conditions required under these 
regulations. Company A and Company B then submit a joint voluntary 
notice to CFIUS, which determines that the transaction is a CFIUS 
covered transaction. CFIUS identifies a risk related to data security 
arising from the transaction but determines that the regulations in 
this part adequately resolve the risk. CFIUS concludes action with 
respect to the transaction without taking any CFIUS action. Because no 
CFIUS action has occurred, the transaction remains subject to this 
part.
    (11) Example 11. Same facts as Example 10, but CFIUS determines 
that the security requirements and other conditions applicable under 
this part are inadequate to resolve the national security risk 
identified by CFIUS. CFIUS negotiates a mitigation agreement with the 
parties to resolve the risk, which contains a provision stating that it 
is a CFIUS action for purposes of this part. The transaction is exempt 
from this part beginning on the effective date of the CFIUS mitigation 
agreement.


Sec.  202.509  Telecommunications services.

    (a) Exemption. Subparts C and D of this part do not apply to data 
transactions, other than those involving data brokerage, to the extent 
that they are ordinarily incident to and part of the provision of 
telecommunications services, including international calling, mobile 
voice, and data roaming.
    (b) Examples--(1) Example 1. A U.S. telecommunications service 
provider collects covered personal identifiers from its U.S. 
subscribers. Some of those subscribers travel to a country of concern 
and use their mobile phone service under an international roaming 
agreement. The local telecommunications service provider in the country 
of concern shares these covered personal identifiers with the U.S. 
service provider for the purposes of either helping provision service 
to the U.S. subscriber or receiving payment for the U.S. subscriber's 
use of the country of concern service provider's network under that 
international roaming agreement. The U.S. service provider provides the 
country of concern service provider with network or device information 
for the purpose of provisioning services and obtaining payment for its 
subscribers' use of the local telecommunications service provider's 
network. Over the course of 12 months, the volume of network or device 
information shared by the U.S. service provider with the country of 
concern service provider for the purpose of provisioning services 
exceeds the applicable bulk threshold. These transfers of bulk U.S. 
sensitive personal data are ordinarily incident to and part of the 
provision of telecommunications services and are thus exempt 
transactions.
    (2) Example 2. A U.S. telecommunications service provider collects 
precise geolocation data on its U.S. subscribers. The U.S. 
telecommunications service provider sells this precise geolocation data 
in bulk to a covered person for the purpose of targeted advertising. 
This sale is not ordinarily incident to and part of the provision of 
telecommunications services and remains a prohibited transaction.


Sec.  202.510  Drug, biological product, and medical device 
authorizations.

    (a) Exemption. Subparts C and D of this part do not apply to a data 
transaction that
    (1) Involves ``regulatory approval data'' as defined in this 
section and
    (2) Is necessary to obtain or maintain regulatory approval to 
market a drug, biological product, device, or a combination product in 
a country of concern, provided that the U.S. person complies with the 
recordkeeping and reporting requirements set forth in Sec. Sec.  
202.1101(a) and 202.1102 with respect to such transaction.
    (b) Regulatory approval data. For purposes of this section, the 
term regulatory approval data means de-identified sensitive personal 
data that is required to be submitted to a country of concern 
regulatory entity to obtain or maintain authorization or approval to 
research or market a drug, biological product, device, or combination 
product, including in relation to post-marketing studies and post-
marketing product surveillance activities, and supplemental product 
applications for additional uses. The term excludes sensitive personal 
data not reasonably necessary for a regulatory entity to assess the 
safety and effectiveness of the drug, biological product, device, or 
combination product.
    (c) Other terms. For purposes of this section, the terms ``drug,'' 
``biological product,'' ``device,'' and ``combination product'' have 
the meanings given to them in 21 U.S.C. 321(g)(1), 42 U.S.C. 262(i)(1), 
21 U.S.C. 321(h)(1), and 21 CFR 3.2(e), respectively.
    (d) Examples--(1) Example 1. A U.S. pharmaceutical company seeks to 
market a new drug in a country of concern. The company submits a 
marketing application to the regulatory entity in the country of 
concern with authority to approve the drug in the country of concern. 
The marketing application includes the safety and effectiveness data 
reasonably necessary to obtain regulatory approval in that country. The 
transfer of data to the country of concern's regulatory entity is 
exempt from the prohibitions in this part.
    (2) Example 2. Same as Example 1, except the regulatory entity in 
the country of concern requires that the data be de-anonymized. The 
transfer of data is not exempt under this section, because the data 
includes sensitive personal data that is identified to an individual.
    (3) Example 3. Same as Example 1, except the U.S. company enters a 
vendor agreement with a covered person located in the country of 
concern to store, organize, and prepare the bulk U.S. sensitive 
personal data for submission to the regulatory agency. The transaction 
is not exempt under this section, because the use of a covered person 
to prepare the regulatory submission is not necessary to obtain 
regulatory approval.


Sec.  202.511  Other clinical investigations and post-marketing 
surveillance data.

    (a) Exemption. Subparts C and D of this part do not apply to data 
transactions to the extent that those transactions are:
    (1) Ordinarily incident to and part of clinical investigations 
regulated by the U.S. Food and Drug Administration (``FDA'') under 
sections 505(i) and 520(g) of the Federal Food, Drug, and Cosmetic Act 
(``FD&C Act'') or clinical investigations that support applications to 
the FDA for research or marketing permits for drugs, biological 
products, devices, combination products, or infant formula; or
    (2) Ordinarily incident to and part of the collection or processing 
of clinical care data indicating real-world performance or safety of 
products, or the collection or processing of post-marketing 
surveillance data (including pharmacovigilance and post-marketing 
safety monitoring), and necessary to support or maintain authorization 
by the FDA, provided the data is deidentified.
    (b) [Reserved]

Subpart F--Determination of Countries of Concern


Sec.  202.601  Determination of countries of concern.

    (a) Countries of concern. Solely for purposes of the Order and this 
part, the

[[Page 86221]]

Attorney General has determined, with the concurrence of the 
Secretaries of State and Commerce, that the following foreign 
governments have engaged in a long-term pattern or serious instances of 
conduct significantly adverse to the national security of the United 
States or security and safety of U.S. persons and pose a significant 
risk of exploiting government-related data or bulk U.S. sensitive 
personal data to the detriment of the national security of the United 
States or security and safety of U.S. persons:
    (1) China;
    (2) Cuba;
    (3) Iran;
    (4) North Korea;
    (5) Russia; and
    (6) Venezuela.
    (b) Effective date of amendments. Any amendment to the list of 
countries of concern will apply to any covered data transaction that is 
initiated, pending, or completed on or after the effective date of the 
amendment.

Subpart G--Covered Persons


Sec.  202.701  Designation of covered persons.

    (a) Designations. The Attorney General may designate any person as 
a covered person for purposes of this part if, after consultation with 
other agencies as the Attorney General deems appropriate, the Attorney 
General determines the person meets any of the criteria set forth in 
Sec.  202.211(a)(5) of this part.
    (b) Information considered. In determining whether to designate a 
person as a covered person, the Attorney General may consider any 
information or material the Attorney General deems relevant and 
appropriate, classified or unclassified, from any Federal department or 
agency or from any other source.
    (c) Covered Persons List. The names of persons designated as a 
covered person for purposes of this part, transactions with whom are 
prohibited or restricted pursuant to this part, are published in the 
Federal Register and incorporated into the National Security Division's 
Covered Persons List. The Covered Persons List is accessible through 
the following page on the National Security Division's website at 
https://www.justice.gov/nsd.
    (d) Non-exhaustive. The list of designated covered persons 
described in this section is not exhaustive of all covered persons and 
supplements the categories in the definition of covered persons in 
Sec.  202.211.
    (e) Effective date; actual and constructive knowledge. (1) 
Designation as a covered person will be effective from the date of any 
public announcement by the Department. Except as otherwise authorized 
in this part, a U.S. person with actual knowledge of a designated 
person's status is prohibited from knowingly engaging in a covered data 
transaction with that person on or after the date of the Department's 
public announcement.
    (2) Publication in the Federal Register is deemed to provide 
constructive knowledge of a person's status as a covered person.


Sec.  202.702  Procedures governing removal from the Covered Persons 
List.

    (a) Requests for removal from the Covered Persons List. A person 
may petition to seek administrative reconsideration of their 
designation, or may assert that the circumstances resulting in the 
designation no longer apply, and thus seek to be removed from the 
Covered Persons List pursuant to the following administrative 
procedures:
    (b) Content of requests. A covered person designated under 
paragraph (a) of this section may submit arguments or evidence that the 
person believes establish that insufficient basis exists for the 
designation. Such a person also may propose remedial steps on the 
person's part, such as corporate reorganization, resignation of persons 
from positions in a listed entity, or similar steps, that the person 
believes would negate the basis for designation.
    (c) Additional content; form and method of submission. Requests for 
removal from the Covered Persons List must be submitted in accordance 
with this section and with subpart L of this part.
    (d) Requests for more information. The information submitted by the 
listed person seeking removal will be reviewed by the Attorney General, 
who may request clarifying, corroborating, or other additional 
information.
    (e) Meetings. A person seeking removal may request a meeting with 
the Attorney General; however, such meetings are not required, and the 
Attorney General may, in the Attorney General's discretion, decline to 
conduct such a meeting prior to completing a review pursuant to this 
section.
    (f) Decisions. After the Attorney General has conducted a review of 
the request for removal, and after consultation with other agencies as 
the Attorney General deems appropriate, the Attorney General will 
provide a written decision to the person seeking removal. A covered 
person's status as a covered person--including its associated 
prohibitions and restrictions under this part--remains in effect during 
the pendency of any request to be removed from the Covered Persons 
List.

Subpart H--Licensing


Sec.  202.801  General licenses.

    (a) General course of procedure. The Department may, as 
appropriate, issue general licenses to authorize, under appropriate 
terms and conditions, transactions that are subject to the prohibitions 
or restrictions in this part. In determining whether to issue a general 
license, the Attorney General may consider any information or material 
the Attorney General deems relevant and appropriate, classified or 
unclassified, from any Federal department or agency or from any other 
source.
    (b) Relationship with specific licenses. It is the policy of the 
Department not to grant applications for specific licenses authorizing 
transactions to which the provisions of a general license are 
applicable.
    (c) Reports. Persons availing themselves of certain general 
licenses may be required to file reports and statements in accordance 
with the instructions specified in those licenses, this part or the 
Order. Failure to file timely all required information in such reports 
or statements may nullify the authorization otherwise provided by the 
general license and result in apparent violations of the applicable 
prohibitions that may be subject to enforcement action.


Sec.  202.802  Specific licenses.

    (a) General course of procedure. Transactions subject to the 
prohibitions or restrictions in this part or the Order, and that are 
not otherwise permitted under this part or a general license, may be 
permitted only under a specific license, under appropriate terms and 
conditions.
    (b) Content of applications for specific licenses. Applications for 
specific licenses shall include, at a minimum, a description of the 
nature of the transaction, including each of the following 
requirements:
    (1) The types and volumes of government-related data or bulk U.S. 
sensitive personal data involved in the transactions;
    (2) The identity of the transaction parties, including any 
ownership of entities or citizenship or primary residence of 
individuals;
    (3) The end-use of the data and the method of data transfer; and
    (4) Any other information that the Attorney General may require.
    (c) Additional content; form and method of submissions. Requests 
for

[[Page 86222]]

specific licenses must be submitted in accordance with this section and 
with subpart L of this part.
    (d) Additional conditions. Applicants should submit only one copy 
of a specific license application to the Department; submitting 
multiple copies may result in processing delays. Any person having an 
interest in a transaction or proposed transaction may file an 
application for a specific license authorizing such a transaction.
    (e) Further information to be supplied. Applicants may be required 
to furnish such further information as the Department deems necessary 
to assist in making a determination. Any applicant or other party-in-
interest desiring to present additional information concerning a 
specific license application may do so at any time before or after the 
Department makes its decision with respect to the application. In 
unique circumstances, the Department may determine, in its discretion, 
that an oral presentation regarding a license application would assist 
in the Department's review of the issues involved. Any requests to make 
such an oral presentation must be submitted electronically by emailing 
the National Security Division at <a href="/cdn-cgi/l/email-protection#7a34293e543c332829541e1b0e1b091f190f08130e033a0f091e1510541d150c"><span class="__cf_email__" data-cfemail="2d637e69036b647f7e03494c594c5e484e585f4459546d585e494247034a425b">[email protected]</span></a> or 
using another official method to make such requests, in accordance with 
any instructions on the National Security Division's website.
    (f) Decisions. In determining whether to issue a specific license, 
the Attorney General may consider any information or material the 
Attorney General deems relevant and appropriate, classified or 
unclassified, from any Federal department or agency or from any other 
source. The Department will advise each applicant of the decision 
respecting the applicant's filed application. The Department's decision 
with respect to a license application shall constitute final agency 
action.
    (g) Time to issuance. The Department shall endeavor to respond to 
any request for a specific license within 45 days after receipt of the 
request and of any requested additional information and documents.
    (h) Scope. (1) Unless otherwise specified in the license, a 
specific license authorizes the transaction:
    (i) Only between the parties identified in the license;
    (ii) Only with respect to the data described in the license; and
    (iii) Only to the extent the conditions specified in the license 
are satisfied. The applicant must inform any other parties identified 
in the license of the license's scope and of the specific conditions 
applicable to them.
    (2) The Department will determine whether to grant specific 
licenses in reliance on representations the applicant made or submitted 
in connection with the license application, letters of explanation, and 
other documents submitted. Any license obtained based on a false or 
misleading representation in the license application, in any document 
submitted in connection with the license application, or during an oral 
presentation under this section shall be deemed void as of the date of 
issuance.
    (i) Reports under specific licenses. As a condition for the 
issuance of any specific license, the licensee may be required to file 
reports or statements with respect to the transaction or transactions 
authorized by the specific license in such form and at such times as 
may be prescribed in the license. Failure to file timely all required 
information in such reports or statements may nullify the authorization 
otherwise provided by the specific license and result in apparent 
violations of the applicable prohibitions that may be subject to 
enforcement action.
    (j) Effect of denial. The denial of a specific license does not 
preclude the reconsideration of an application or the filing of a 
further application. The applicant or any other party-in-interest may 
at any time request, by written correspondence, reconsideration of the 
denial of an application based on new facts or changed circumstances.


Sec.  202.803  General provisions.

    (a) Effect of license. (1) No license issued under this subpart, or 
otherwise issued by the Department, authorizes or validates any 
transaction effected prior to the issuance of such license or other 
authorization, unless specifically provided for in such license or 
authorization.
    (2) No license issued under this subpart authorizes or validates 
any transaction prohibited under or subject to this part unless the 
license is properly issued by the Department and specifically refers to 
this part.
    (3) Any license authorizing or validating any transaction that is 
prohibited under or otherwise subject to this part has the effect of 
removing or amending those prohibitions or other requirements from the 
transaction, but only to the extent specifically stated by the terms of 
the license. Unless the license otherwise specifies, such an 
authorization does not create any right, duty, obligation, claim, or 
interest in, or with respect to, any property that would not otherwise 
exist under ordinary principles of law.
    (4) Nothing contained in this part shall be construed to supersede 
the requirements established under any other provision of law or to 
relieve a person from any requirement to obtain a license or 
authorization from another department or agency of the United States 
Government in compliance with applicable laws and regulations subject 
to the jurisdiction of that department or agency. For example, issuance 
of a specific license authorizing a transaction otherwise prohibited by 
this part does not operate as a license or authorization to conclude 
the transaction that is otherwise required from the U.S. Department of 
Commerce, U.S. Department of State, U.S. Department of the Treasury, or 
any other department or agency of the United States Government.
    (b) Amendment, modification, or rescission. Except as otherwise 
provided by law, any licenses (whether general or specific), 
authorizations, instructions, or forms issued thereunder may be 
amended, modified, or rescinded at any time.
    (c) Consultation. The Department will issue, amend, modify, or 
rescind a general or specific license in concurrence with the 
Departments of State, Commerce, and Homeland Security and in 
consultation with other relevant agencies.
    (d) Exclusion from licenses and other authorizations. The Attorney 
General reserves the right to exclude any person, property, or 
transaction from the operation of any license or from the privileges 
conferred by any license. The Attorney General also reserves the right 
to restrict the applicability of any license to particular persons, 
property, transactions, or classes thereof. Such actions are binding 
upon all persons receiving actual or constructive notice of the 
exclusions or restrictions.

Subpart I--Advisory Opinions


Sec.  202.901  Inquiries concerning application of this part.

    (a) General. Any U.S. person party to a transaction potentially 
regulated under the Order and this part, or an agent of the party to 
such a transaction on the party's behalf, may request from the Attorney 
General a statement of the present enforcement intentions of the 
Department of Justice under the Order with respect to that transaction 
that may be subject to the prohibitions or restrictions in the Order 
and this part (``advisory opinion'').
    (b) Anonymous, hypothetical, non-party and ex post facto review 
requests excluded. The entire transaction that is the subject of the 
advisory opinion

[[Page 86223]]

request must be an actual, as opposed to hypothetical, transaction and 
involve disclosed, as opposed to anonymous, parties to the transaction. 
Advisory opinion requests must be submitted by a U.S. person party to 
the transaction or that party's agent and have no application to a 
party that does not join the request. The transaction need not involve 
only prospective conduct, but an advisory opinion request will not be 
considered unless that portion of the transaction for which an opinion 
is sought involves only prospective conduct.
    (c) Contents. Each advisory opinion request shall be specific and 
must be accompanied by all material information bearing on the conduct 
for which an advisory opinion is requested, and on the circumstances of 
the prospective conduct, including background information, complete 
copies of any and all operative documents, and detailed statements of 
all collateral or oral understandings, if any. Each request must 
include, at a minimum:
    (1) The identities of the transaction parties, including any 
ownership of entities or citizenship or primary residence of 
individuals;
    (2) A description of the nature of the transaction, including the 
types and volumes of government-related data or bulk U.S. sensitive 
personal data involved in the transaction, the end-use of the data, the 
method of data transfer, and any restrictions or requirements related 
to a party's right or ability to control, access, disseminate, or 
dispose of the data; and
    (3) Any potential basis for exempting or excluding the transaction 
from the prohibitions or restrictions imposed in the Order and this 
part.
    (d) Additional contents; format and method of submissions. Requests 
for advisory opinions must be submitted in accordance with this section 
and with subpart L of this part.
    (e) Further information to be supplied. Each party shall provide 
any additional information or documents that the Department of Justice 
may thereafter request in its review of the matter. Any information 
furnished orally shall be confirmed promptly in writing; signed by or 
on behalf of the party that submitted the initial review request; and 
certified to be a true, correct, and complete disclosure of the 
requested information. A request will not be deemed complete until the 
Department of Justice receives such additional information. In 
connection with an advisory opinion request, the Department of Justice 
may conduct any independent investigation it believes appropriate.
    (f) Outcomes. After submission of an advisory opinion request, the 
Department, in its discretion, may state its present enforcement 
intention under the Order and this part with respect to the proposed 
conduct; may decline to state its present enforcement intention; or, if 
circumstances warrant, may take such other position or initiate such 
other action as it considers appropriate. Any requesting party or 
parties may withdraw a request at any time prior to issuance of an 
advisory opinion. The Department remains free, however, to submit such 
comments to the requesting party or parties as it deems appropriate. 
Failure to take action after receipt of a request, documents, or 
information, whether submitted pursuant to this procedure or otherwise, 
shall not in any way limit or stop the Department from taking any 
action at such time thereafter as it deems appropriate. The Department 
reserves the right to retain any advisory opinion request, document, or 
information submitted to it under this procedure or otherwise, to 
disclose any advisory opinion and advisory opinion request, including 
the identities of the requesting party and foreign parties to the 
transaction, the general nature and circumstances of the proposed 
conduct, and the action of the Department in response to any advisory 
opinion request, consistent with applicable law, and to use any such 
request, document, or information for any governmental purpose.
    (g) Time for response. The Department shall endeavor to respond to 
any advisory opinion request within 30 days after receipt of the 
request and of any requested additional information and documents.
    (h) Written decisions only. The requesting party or parties may 
rely only upon a written advisory opinion signed by the Attorney 
General.
    (i) Effect of advisory opinion. Each advisory opinion can be relied 
upon by the requesting party or parties to the extent the disclosures 
made pursuant to this subpart were accurate and complete and to the 
extent the disclosures continue accurately and completely to reflect 
circumstances after the date of the issuance of the advisory opinion. 
An advisory opinion will not restrict enforcement actions by any agency 
other than the Department of Justice. It will not affect a requesting 
party's obligations to any other agency or under any statutory or 
regulatory provision other than those specifically discussed in the 
advisory opinion.
    (j) Amendment or revocation of advisory opinion. An advisory 
opinion may be amended or revoked at any time after it has been issued. 
Notice of such will be given in the same manner as notice of the 
advisory opinion was originally given or in the Federal Register. 
Whenever possible, a notice of amendment or revocation will state when 
the Department will consider a party's reliance on the superseded 
advisory opinion to be unreasonable, and any transition period that may 
be applicable.
    (k) Compliance. Neither the submission of an advisory opinion 
request, nor its pendency, shall in any way alter the responsibility or 
obligation of a requesting party to comply with the Order, this part, 
or any other applicable law.

Subpart J--Due Diligence and Audit Requirements


Sec.  202.1001  Due diligence for restricted transactions.

    (a) Data compliance program. By the effective date of this part, 
U.S. persons engaging in any restricted transactions shall develop and 
implement a data compliance program.
    (b) Requirements. The data compliance program shall include, at a 
minimum, each of the following requirements:
    (1) Risk-based procedures for verifying data flows involved in any 
restricted transaction, including procedures to verify and log, in an 
auditable manner, the following:
    (i) The types and volumes of government-related data or bulk U.S. 
sensitive personal data involved in the transaction;
    (ii) The identity of the transaction parties, including any 
ownership of entities or citizenship or primary residence of 
individuals; and
    (iii) The end-use of the data and the method of data transfer;
    (2) For restricted transactions that involve vendors, risk-based 
procedures for verifying the identity of vendors;
    (3) A written policy that describes the data compliance program and 
that is annually certified by an officer, executive, or other employee 
responsible for compliance;
    (4) A written policy that describes the implementation of the 
security requirements as defined in Sec.  202.248 of this part and that 
is annually certified by an officer, executive, or other employee 
responsible for compliance; and
    (5) Any other information that the Attorney General may require.

[[Page 86224]]

Sec.  202.1002  Audits for restricted transactions.

    (a) Audit required. U.S. persons that engage in any restricted 
transactions under Sec.  202.401 of this part shall conduct an audit 
that complies with the requirements of this section.
    (b) Who may conduct the audit. The auditor:
    (1) Must be qualified and competent to examine, verify, and attest 
to the U.S. person's compliance with and the effectiveness of the 
security requirements, as defined in Sec.  202.248 of this part, and 
all other applicable requirements, as defined in Sec.  202.401 of this 
part, implemented for restricted transactions;
    (2) Must be independent and external; and
    (3) Cannot be a covered person or a country of concern.
    (c) When required. The audit must be performed once for each 
calendar year in which the U.S. person engages in any restricted 
transactions.
    (d) Timeframe. The audit must cover the preceding 12 months.
    (e) Scope. The audit must:
    (1) Examine the U.S. person's data transactions;
    (2) Examine the U.S. person's data compliance program required 
under Sec.  202.1001 of this part and its implementation;
    (3) Examine relevant records required under Sec.  202.1101 of this 
part;
    (4) Examine the U.S. person's security requirements, as defined by 
Sec.  202.248 of this part; and
    (5) Use a reliable methodology to conduct the audit.
    (f) Report. (1) The auditor must prepare and submit a written 
report to the U.S. person within 60 days of the completion of the 
audit.
    (2) The audit report must:
    (i) Describe the nature of any prohibited transactions, restricted 
transactions, and exempt transactions engaged in by the U.S. person;
    (ii) Describe the methodology undertaken, including the policies 
and other documents reviewed, personnel interviewed, and any 
facilities, equipment, networks, or systems examined;
    (iii) Describe the effectiveness of the U.S. person's data 
compliance program and its implementation;
    (iv) Describe any vulnerabilities or deficiencies in the 
implementation of the security requirements that have affected or could 
affect access to government-related data or bulk U.S. sensitive 
personal data by a country of concern or covered person;
    (v) Describe any instances in which the security requirements 
failed or were otherwise not effective in mitigating access to 
government-related data or bulk U.S. sensitive personal data by a 
country of concern or covered person; and
    (vi) Recommend any improvements or changes to policies, practices, 
or other aspects of the U.S. person's business to ensure compliance 
with the security requirements.
    (3) U.S. persons engaged in restricted transactions must retain the 
audit report for a period of at least 10 years, consistent with the 
recordkeeping requirements in Sec.  202.1101.

Subpart K--Reporting and Recordkeeping Requirements


Sec.  202.1101  Records and recordkeeping requirements.

    (a) Records. Except as otherwise provided, U.S. persons engaging in 
any transaction subject to the provisions of this part shall keep a 
full and accurate record of each such transaction engaged in, and such 
record shall be available for examination for at least 10 years after 
the date of such transaction.
    (b) Additional recordkeeping requirements. U.S. persons engaging in 
any restricted transaction shall create and maintain, at a minimum, the 
following records in an auditable manner:
    (1) A written policy that describes the data compliance program and 
that is certified annually by an officer, executive, or other employee 
responsible for compliance;
    (2) A written policy that describes the implementation of any 
applicable security requirements as defined in Sec.  202.248 of this 
part and that is certified annually by an officer, executive, or other 
employee responsible for compliance;
    (3) The results of any annual audits that verify the U.S. person's 
compliance with the security requirements and any conditions on a 
license;
    (4) Documentation of the due diligence conducted to verify the data 
flow involved in any restricted transaction, including:
    (i) The types and volumes of government-related data or bulk U.S. 
sensitive personal data involved in the transaction;
    (ii) The identity of the transaction parties, including any direct 
and indirect ownership of entities or citizenship or primary residence 
of individuals; and
    (iii) A description of the end-use of the data;
    (5) Documentation of the method of data transfer;
    (6) Documentation of the dates the transaction began and ended;
    (7) Copies of any agreements associated with the transaction;
    (8) Copies of any relevant licenses or advisory opinions;
    (9) The document reference number for any original document issued 
by the Attorney General, such as a license or advisory opinion;
    (10) A copy of any relevant documentation received or created in 
connection with the transaction; and
    (11) An annual certification by an officer, executive, or other 
employee responsible for compliance of the completeness and accuracy of 
the records documenting due diligence.


Sec.  202.1102  Reports to be furnished on demand.

    (a) Reports. Every person is required to furnish under oath, in the 
form of reports or otherwise, from time to time and at any time as may 
be required by the Department of Justice, complete information relative 
to any act or transaction or covered data transaction, regardless of 
whether such act, transaction, or covered data transaction is effected 
pursuant to a license or otherwise, subject to the provisions of this 
part. The Department of Justice may require that such reports include 
the production of any books, contracts, letters, papers, or other hard 
copy or electronic documents relating to any such act, transaction, or 
covered data transaction, in the custody or control of the persons 
required to make such reports. Reports may be required either before, 
during, or after such acts, transactions, or covered data transactions. 
The Department of Justice may, through any person or agency, conduct 
investigations, hold hearings, administer oaths, examine witnesses, 
receive evidence, take depositions, and require by subpoena the 
attendance and testimony of witnesses and the production of any books, 
contracts, letters, papers, and other hard copy or electronic documents 
relating to any matter under investigation, regardless of whether any 
report has been required or filed in connection therewith.
    (b) Definition of the term ``document.'' For purposes of paragraph 
(a) of this section, the term document includes any written, recorded, 
or graphic matter or other means of preserving thought or expression 
(including in electronic format), and all tangible things stored in any 
medium from which information can be processed, transcribed, or 
obtained directly or indirectly, including correspondence, memoranda, 
notes, messages, contemporaneous communications such as text and 
instant messages, letters, emails, spreadsheets, metadata, contracts,

[[Page 86225]]

bulletins, diaries, chronological data, minutes, books, reports, 
examinations, charts, ledgers, books of account, invoices, air 
waybills, bills of lading, worksheets, receipts, printouts, papers, 
schedules, affidavits, presentations, transcripts, surveys, graphic 
representations of any kind, drawings, photographs, graphs, video or 
sound recordings, and motion pictures or other film.
    (c) Format. Persons providing documents to the Department of 
Justice pursuant to this section must produce documents in a usable 
format agreed upon by the Department of Justice. For guidance, see the 
Department of Justice's data delivery standards available on the 
National Security Division's website at https://www.justice.gov/nsd.


Sec.  202.1103  Annual reports.

    (a) Who must report. An annual report must be filed by any U.S. 
person that is engaged in a restricted transaction involving cloud-
computing services, and that has 25% or more of the U.S. person's 
equity interests owned (directly or indirectly, through any contract, 
arrangement, understanding, relationship, or otherwise) by a country of 
concern or covered person.
    (b) Primary responsibility to report. A report may be filed on 
behalf of a U.S. person engaging in the data transaction described in 
Sec.  202.1103(a) by an attorney, agent, or other person. Primary 
responsibility for reporting, however, rests with the actual U.S. 
person engaging in the data transaction. No U.S. person is excused from 
filing a report by reason of the fact that another U.S. person has 
submitted a report with regard to the same data transaction, except 
where the U.S. person has actual knowledge that the other U.S. person 
filed the report.
    (c) When reports are due. A report on the data transactions 
described in Sec.  202.1103(a) engaged in as of December 31 of the 
previous year shall be filed annually by March 1 of the subsequent 
year.
    (d) Contents of reports. Annual reports on the data transactions 
described in Sec.  202.1103(a) shall include the following:
    (1) The name and address of the U.S. person engaging in the covered 
data transaction, and the name, telephone number, and email address of 
a contact from whom additional information may be obtained;
    (2) A description of the covered data transaction, including:
    (i) The date of the transaction;
    (ii) The types and volumes of government-related data or bulk U.S. 
sensitive personal data involved in the transaction;
    (iii) The method of data transfer; and
    (iv) Any persons participating in the data transaction and their 
respective locations, including the name and location of each data 
recipient, the ownership of entities or citizenship or primary 
residence of individuals, the name and location of any covered persons 
involved in the transaction, and the name of any countries of concern 
involved in the transaction;
    (3) A copy of any relevant documentation received or created in 
connection with the transaction; and
    (4) Any other information that the Department of Justice may 
require.
    (e) Additional contents; format and method of submission. Reports 
required by this section must be submitted in accordance with this 
section and with subpart L of this part.


Sec.  202.1104  Reports on rejected prohibited transactions.

    (a) Who must report. A report must be filed by any U.S. person that 
has received and affirmatively rejected (including automatically 
rejected using software, technology, or automated tools) an offer from 
another person to engage in a prohibited transaction involving data 
brokerage.
    (b) When reports are due. U.S. persons shall file reports within 14 
days of rejecting a transaction prohibited by this part.
    (c) Contents of reports. Reports on rejected transactions shall 
include the following, to the extent known and available to the person 
filing the report at the time the transaction is rejected:
    (1) The name and address of the U.S. person that rejected the 
prohibited transaction, and the name, telephone number, and email 
address of a contact from whom additional information may be obtained;
    (2) A description of the rejected transaction, including:
    (i) The date the transaction was rejected;
    (ii) The types and volumes of government-related data or bulk U.S. 
sensitive personal data involved in the transaction;
    (iii) The method of data transfer;
    (iv) Any persons attempting to participate in the transaction and 
their respective locations, including the name and location of each 
data recipient, the ownership of entities or citizenship or primary 
residence of individuals, the name and location of any covered persons 
involved in the transaction, and the name of any countries of concern 
involved in the transaction;
    (v) A copy of any relevant documentation received or created in 
connection with the transaction; and
    (vi) Any other information that the Department of Justice may 
require.
    (d) Additional contents; format and method of submission. Reports 
required by this section must be submitted in accordance with this 
section and with subpart L of this part.

Subpart L--Submitting Applications, Requests, Reports, and 
Responses


Sec.  202.1201  Procedures.

    (a) Application of this subpart. This subpart applies to any 
submissions required or permitted by this part, including reports of 
known or suspected violations submitted pursuant to Sec.  202.302, 
requests for removal from the Covered Persons List submitted pursuant 
to subpart G of this part, requests for specific licenses submitted 
pursuant to Sec.  202.802, advisory opinion requests submitted pursuant 
to subpart I of this part, annual reports submitted pursuant to Sec.  
202.1103, reports on rejected prohibited transactions submitted 
pursuant to Sec.  202.1104, and responses to pre-penalty notices and 
findings of violations submitted pursuant to Sec.  202.1306 
(collectively, ``submissions'').
    (b) Form of submissions. Submissions must follow the instructions 
in this part and any instructions on the National Security Division's 
website. With the exception of responses to pre-penalty notices or 
findings of violations submitted pursuant to subpart M of this part, 
submissions must use the forms on the National Security Division's 
website or another official reporting option as specified by the 
National Security Division.
    (c) Method of submissions. Submissions must be made to the National 
Security Division electronically by emailing the National Security 
Division at <a href="/cdn-cgi/l/email-protection#b5fbe6f19bf3fce7e69bd1d4c1d4c6d0d6c0c7dcc1ccf5c0c6d1dadf9bd2dac3"><span class="__cf_email__" data-cfemail="c38d9087ed858a9190eda7a2b7a2b0a6a0b6b1aab7ba83b6b0a7aca9eda4acb5">[email protected]</span></a> or using another official 
electronic reporting option, in accordance with any instructions on the 
National Security Division's website.
    (d) Certification. If the submitting party is an individual, the 
submission must be signed by the individual or the individual's 
attorney. If the submitting party is not an individual, the submission 
must be signed on behalf of each submitting party by an officer, 
director, a person performing the functions of an officer or a director 
of, or an attorney for, the submitting party. Annual reports submitted 
pursuant to Sec.  202.1103, and reports on rejected transactions 
submitted pursuant to

[[Page 86226]]

Sec.  202.1104, must be signed by an officer, a director, a person 
performing the functions of an officer or a director, or an employee 
responsible for compliance. In appropriate cases, the Department of 
Justice may require the chief executive officer of a requesting party 
to sign the request. Each such person signing a submission must certify 
that the submission is true, accurate, and complete.

Subpart M--Penalties and Finding of Violation


Sec.  202.1301  Penalties for violations.

    (a) Civil and criminal penalties. Section 206 of IEEPA, 50 U.S.C. 
1705, is applicable to violations of the provisions of any license, 
ruling, regulation, order, directive, or instruction issued by or 
pursuant to the direction or authorization of the Attorney General 
pursuant to this part or otherwise under IEEPA.
    (1) A civil penalty not to exceed the amount set forth in section 
206 of IEEPA may be imposed on any person who violates, attempts to 
violate, conspires to violate, or causes a violation of any license, 
order, regulation, or prohibition issued under IEEPA.
    (2) IEEPA provides for a maximum civil penalty not to exceed the 
greater of $368,136 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.
    (3) A person who willfully commits, willfully attempts to commit, 
willfully conspires to commit, or aids or abets in the commission of a 
violation of any license, order, regulation, or prohibition issued 
under IEEPA shall, upon conviction, be fined not more than $1,000,000, 
or if a natural person, may be imprisoned for not more than 20 years, 
or both.
    (b) Adjustment of civil penalties. The civil penalties provided in 
IEEPA are subject to adjustment pursuant to the Federal Civil Penalties 
Inflation Adjustment Act of 1990 (Public Law 101-410, as amended, 28 
U.S.C. 2461 note).
    (c) Adjustment of criminal penalties. The criminal penalties 
provided in IEEPA are subject to adjustment pursuant to 18 U.S.C. 3571.
    (d) False statements. Pursuant to 18 U.S.C. 1001, whoever, in any 
matter within the jurisdiction of the executive, legislative, or 
judicial branch of the Government of the United States, knowingly and 
willfully falsifies, conceals, or covers up by any trick, scheme, or 
device a material fact; or makes any materially false, fictitious, or 
fraudulent statement or representation; or makes or uses any false 
writing or document knowing the same to contain any materially false, 
fictitious, or fraudulent statement or entry shall be fined under title 
18, United States Code, imprisoned, or both.
    (e) Other applicable laws. Violations of this part may also be 
subject to other applicable laws.


Sec.  202.1302  Process for pre-penalty notice.

    (a) When and how issued. (1) If the Department of Justice has 
reason to believe that there has occurred a violation of any provision 
of this part or a violation of the provisions of any license, ruling, 
regulation, order, directive, or instruction issued by or pursuant to 
the direction or authorization of the Attorney General pursuant to this 
part or otherwise under IEEPA and determines that a civil monetary 
penalty is warranted, the Department of Justice will issue a pre-
penalty notice informing the alleged violator of the agency's intent to 
impose a monetary penalty.
    (2) The pre-penalty notice shall be in writing.
    (3) The pre-penalty notice may be issued whether or not another 
agency has taken any action with respect to the matter.
    (4) The Department shall provide the alleged violator with the 
relevant information that is not privileged, classified, or otherwise 
protected, and that forms the basis for the pre-penalty notice, 
including a description of the alleged violation and proposed penalty 
amount.
    (b) Opportunity to respond. An alleged violator has the right to 
respond to a pre-penalty notice in accordance with Sec.  202.1306 of 
this part.
    (c) Settlement. Settlement discussion may be initiated by the 
Department of Justice, the alleged violator, or the alleged violator's 
authorized representative.
    (d) Representation. A representative of the alleged violator may 
act on behalf of the alleged violator, but any oral communication with 
the Department of Justice prior to a written submission regarding the 
specific allegations contained in the pre-penalty notice must be 
preceded by a written letter of representation, unless the pre-penalty 
notice was served upon the alleged violator in care of the 
representative.


Sec.  202.1303  Penalty imposition.

    If, after considering any written response to the pre-penalty 
notice and any relevant facts, the Department of Justice determines 
that there was a violation by the alleged violator named in the pre-
penalty notice and that a civil monetary penalty is appropriate, the 
Department of Justice may issue a penalty notice to the violator 
containing a determination of the violation and the imposition of the 
monetary penalty. The Department shall provide the violator with any 
relevant, non-classified information that forms the basis of the 
penalty. The issuance of the penalty notice shall constitute final 
agency action. The violator has the right to seek judicial review of 
that final agency action in Federal district court.


Sec.  202.1304  Administrative collection and litigation.

    In the event that the violator does not pay the penalty imposed 
pursuant to this part or make payment arrangements acceptable to the 
Department of Justice, the Department of Justice may refer the matter 
to the Department of the Treasury for administrative collection 
measures or take appropriate action to recover the penalty in any civil 
suit in Federal district court.


Sec.  202.1305  Finding of violation.

    (a) When and how issued. (1) The Department of Justice may issue an 
initial finding of violation that identifies a violation if the 
Department of Justice:
    (i) Determines that there has occurred a violation of any provision 
of this part, or a violation of the provisions of any license, ruling, 
regulation, order, directive, or instruction issued by or pursuant to 
the direction or authorization of the Attorney General pursuant to this 
part or otherwise under IEEPA;
    (ii) Considers it important to document the occurrence of a 
violation; and
    (iii) Concludes that an administrative response is warranted but 
that a civil monetary penalty is not the most appropriate response.
    (2) An initial finding of violation shall be in writing and may be 
issued whether or not another agency has taken any action with respect 
to the matter.
    (3) The Department shall provide the alleged violator with the 
relevant information that is not privileged, classified, or otherwise 
protected, that forms the basis for the finding of violation, including 
a description of the alleged violation.
    (b) Opportunity to respond. An alleged violator has the right to 
contest an initial finding of violation in accordance with Sec.  
202.1306 of this part.
    (c) Determination--(1) Determination that a finding of violation is 
warranted. If, after considering the response, the Department of 
Justice determines that a final finding of violation should be issued, 
the Department of Justice will

[[Page 86227]]

issue a final finding of violation that will inform the violator of its 
decision. The Department shall provide the violator with the relevant 
information that is not privileged, classified, or otherwise protected, 
that forms the basis for the finding of violation. A final finding of 
violation shall constitute final agency action. The violator has the 
right to seek judicial review of that final agency action in Federal 
district court.
    (2) Determination that a finding of violation is not warranted. If, 
after considering the response, the Department of Justice determines a 
finding of violation is not warranted, then the Department of Justice 
will inform the alleged violator of its decision not to issue a final 
finding of violation. A determination by the Department of Justice that 
a final finding of violation is not warranted does not preclude the 
Department of Justice from pursuing other enforcement actions.
    (d) Representation. A representative of the alleged violator may 
act on behalf of the alleged violator, but any oral communication with 
the Department of Justice prior to a written submission regarding the 
specific alleged violations contained in the initial finding of 
violation must be preceded by a written letter of representation, 
unless the initial finding of violation was served upon the alleged 
violator in care of the representative.


Sec.  202.1306  Opportunity to respond to a pre-penalty notice or 
finding of violation.

    (a) Right to respond. An alleged violator has the right to respond 
to a pre-penalty notice or finding of violation by making a written 
presentation to the Department of Justice.
    (b) Deadline for response. A response to a pre-penalty notice or 
finding of violation must be electronically submitted within 30 days of 
electronic service of the notice or finding. The failure to submit a 
response within 30 days shall be deemed to be a waiver of the right to 
respond.
    (c) Extensions of time for response. Any extensions of time will be 
granted, at the discretion of the Department of Justice, only upon 
specific request to the Department of Justice.
    (d) Contents of response. Any response should set forth in detail 
why the alleged violator either believes that a violation of the 
regulations did not occur or why a finding of violation or penalty is 
otherwise unwarranted under the circumstances. The response should 
include all documentary or other evidence available to the alleged 
violator that supports the arguments set forth in the response. The 
Department of Justice will consider all relevant materials submitted in 
the response.

Subpart N--Government-Related Location Data List


Sec.  202.1401  Government-Related Location Data List.

    For each Area ID listed in this section, each of the latitude/
longitude coordinate pairs forms a corner of the geofenced area.

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Area ID                                            Latitude/longitude coordinates of geofenced area
----------------------------------------------------------------------------------------------------------------
1...................................         38.935624,         38.931674,         38.929289,         38.932939,
                                             -77.207888         -77.199387         -77.203229         -77.209328
2...................................         38.950446,         38.952077,         38.947468,         38.947135,
                                             -77.125592         -77.120947         -77.120060         -77.122809
3...................................         38.953191,         38.953174,         38.951148,         38.951152,
                                             -77.372792         -77.369764         -77.369759         -77.372781
4...................................         39.113546,         39.131086,         39.100086,         39.093304,
                                             -76.777053         -76.758527         -76.749715         -76.760882
5...................................         33.416299,         33.416666,         33.406350,         33.406261,
                                             -82.172772         -82.164366         -82.163645         -82.172947
6...................................         21.525093,         21.525362,         21.518161,         21.518010,
                                            -158.019139        -158.002575        -158.002233        -158.018364
7...................................         21.475012,         21.483357,         21.479226,         21.472695,
                                            -158.061844        -158.057568        -158.049881        -158.052371
8...................................         29.449322,         29.452872,         29.448069,         29.444547,
                                             -98.646174         -98.637623         -98.637303         -98.640607
----------------------------------------------------------------------------------------------------------------


    Dated: October 18, 2024.
Matthew G. Olsen,
Assistant Attorney General for National Security, U.S. Department of 
Justice.
[FR Doc. 2024-24582 Filed 10-22-24; 4:15 pm]
BILLING CODE 4410-PF-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>