Virtual reality can seem like an irresistible option for companies looking to expand their entertainment options and improve engagement with customers says, William D King. VR devices may be used in a wide variety of ways: as immersive platforms for films, television shows or videogames; as platforms for virtual social interaction; tools to educate and train employees; as marketing outlets to deliver advertisements. However, one feature is common throughout all uses of virtual reality: they are highly regulated by the United States Federal Government under the authority of the U.S. Bureau of Industry and Security (BIS).
This article covers some of the risks associated with using virtual reality technology without complying with applicable federal laws.
THE FEDERAL REGULATORY SCHEME IN A NUTSHELL:
Virtual reality devices and supporting hosts (if they originate in/are destined for a country other than the United States) are subject to export controls under the U.S. Export Administration Regulations (“EAR”) administered by BIS, which regulates exports and re-exports of commodities, technology, and software to ensure such transfers do not injure national security and foreign policy interests of the United States. The regulations apply to all items on Commerce Control List (“CCL”). Virtual reality systems use computer hardware and related components that may be designated as EAR99 or classified under Export Control Classification Numbers (“ECCNs”) starting with 5A992 and heading upwards through 5D992.
Some controlled virtual reality equipment is subject to both the U.S. International Traffic in Arms Regulations (“ITAR”) administered by the U.S. State Department and EAR. Virtual reality software is subject to export controls under EAR and may be classified as mass-market encryption software (a.k.a., “EAR99”) or as a defense article, technical data or an item listed on the U.S Munitions List (a.k.a., “EAR99+”).
ERRAND BOARD: WHY IS THE FEDERAL GOVERNMENT REGULATING THIS?
The federal government regulates virtual reality technology because it fears those who might hack our computers and those foreign governments with whom we might trade could access critical design information about products without paying for them through exports of such items, technologies, and software to adversaries, competitors and enemies of the United States say, William D King.
WHOSE FANTASY IS THIS ANYWAY?
Virtual reality is intimately tie to fantasy. In Greek mythology, Pluto was a god of the underworld who kidnapped Persephone and took her to live with him in Hades against her will. In Roman mythology, this kidnapping was use as justification for why the spring always melts into summer but never turns back into winter. Virtual reality devices operate by immersing users in an alternate reality where the laws of physics no longer apply (i.e., water has weight) or new ones can be impose upon them (i.e., gravity works differently on certain surfaces). Therefore, virtual reality technology may potentially violate export laws either because it could enable users to access files or functions without paying for them or it could enable users to circumvent post-sale controls, such as disabling the digital rights management protection built into popular multimedia platforms.
HOW DOES THIS AFFECT YOU?
If you are a U.S. company that designs virtual reality products. Then your products are subject to the EAR and may be subject to ITAR or ECRN. If they contain certain types of encryption software, use certain types of components. Such as an imaging sensor or incorporate materials used in defense applications (“dual-use technology”). If you intend to export your product from the United States. Then you must comply with the BIS Export Administration Regulations (“EAR”). And obtain any necessary licenses from BIS before doing so. On April 15, 2015, BIS published an updated final rule in the Federal Register (i.e., 80 Fed. Reg. 20429) that amends its regulations to add virtual reality technology and software to the EAR.
U.S. companies that design or intend to design virtual reality products. Intended for sale or distribution domestically. Must ensure their respective products comply with all applicable federal laws and regulations governing such products and services.
The unique characteristics of virtual reality technology may make the federal government’s “Fantasy Sports” regulation. Relevant to your business in more ways than one explains William D King. For example, if you are virtual reality hardware or software developer. Then you will need to consider how this might impact your company’s export control obligations and import/export compliance program. Nonetheless, there is still time for you to properly register with FEDERAL TAX WITHHOLDING. So that come April 15th, 2015. You do not get upend by the Fantasy Sports fantasy leagues operate by the NFL and NBA.