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Unlocking Opportunity: Navigating the New Data Center Validated End User Program
Recently, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a significant interim final rule (IFR) that has created both challenges and exciting opportunities for these operators. This IFR revises the Export Administration Regulations (EAR) controls on advanced IC chips and certain artificial intelligence (AI) models and, importantly, revises Data Center Validated End-User (DC VEU) authorizations.
For many data centers, exporting, reexporting, or transferring advanced computing items like circuits and computers generally require specific export licenses. Navigating these licensing requirements can be burdensome, potentially causing delays, uncertainty, and increased costs. Recognizing the critical role data centers play in developing AI, BIS established the Data Center VEU Authorization program as a new pathway. This program is designed to allow easier, faster shipment of advanced computing items to pre-approved overseas data centers that undergo a thorough review and vetting process.
Becoming a Validated End User (VEU) under this new program offers significant advantages for data center operators. For authorized Data Center VEUs, it means the ability to streamline export processes, reducing the need for multiple individual export licenses for eligible items. This enables faster, more efficient access to high-technology items necessary for data center operations, without requiring individual export licenses.
Beyond operational efficiency and speed, achieving VEU certification positions a data center as a trusted and compliant partner in international trade. This can foster stronger relationships with U.S. exporters and significantly boost a data center’s competitive edge in the global market.
However, qualifying for Data Center VEU status is a rigorous undertaking. The application process requires providing detailed information and a commitment to strict compliance. Data centers must demonstrate a credible plan or a proven track record of meeting demanding legal, procedural, and technical assurances. Key areas of focus in the application and ongoing compliance include:
- General Compliance and Proven Track Record: Demonstrating a credible plan or track record of meeting established physical, cyber, and personnel security standards for large-scale data center operations and of complying with U.S. export control laws.
- Baseline Security: Meeting stringent security standards such as NIST 800-53 consistent with FedRAMP High, specific physical security requirements (e.g., DoD UFC compliance, restrictions on windows, specific guard/detection systems), and implementing a defense-in-depth security framework.
- Software and Network Security / AI Security: Implementing specific cybersecurity practices for AI systems, including adhering to best practices outlined by the NSA and CISA, generating usage logs, and complying with requirements for advanced AI model weights.
- Supply Chain Security: Establishing secure transit procedures for controlled items, implementing verifiable sanitization and disposal protocols for end-of-life chips, and demonstrating elimination of supply chain dependencies on certain entities and equipment from restricted locations or vendors.
- Personnel Security: Developing and implementing a personnel vetting model that includes checking against sanctions lists and excluding individuals with certain employment histories related to restricted countries or entities. Establishing and maintaining a comprehensive insider threat program is also required.
- Documentation, Auditing, and Reporting: Maintaining required records, performing ongoing monitoring and end-user due diligence, reporting chip installations and aggregate compute semi-annually to BIS, and cooperating with BIS audits and on-site reviews.
- Ownership Security: Meeting ownership security standards to ensure no Foreign Ownership, Control, or Influence (FOCI) factors related to prohibited destinations, involving assessment of factors like financial viability and counterintelligence concerns.
- Export Control Compliance and Restrictions: Adhering to all VEU requirements and U.S. export control laws, including geographic limitations on AI computing power deployment and restrictions on transfers or prohibited end uses related to restricted countries or entities.
Meeting these detailed and stringent requirements can be a complex undertaking. Navigating these obligations requires a deep understanding of the regulatory landscape as well as expertise in the unique security needs of data center operators to meet these rigorous standards.
Guidepost Solutions’ comprehensive suite of services is specifically tailored to address each requirement of the Data Center VEU program. Guidepost can provide comprehensive security and technology consulting, conduct security assessments to evaluate the current posture against requirements, and develop and implement robust, tailored security policies, procedures, and protocols for all required elements. Our expertise includes developing comprehensive cybersecurity, physical security and personnel security programs for data centers that align with all of the VEU program requirements.
Achieving Data Center VEU status can significantly benefit data center operations, bottom line and global standing. While the path involves meeting detailed security and compliance obligations, operators do not have to navigate it alone. For those considering pursuing VEU certification, understanding the necessary steps and available support is an important first step.
Ken Mendelson AIGP, CISSP, CIPP, CISA
Senior Managing Director
Ken Mendelson has spent more than 30 years at the intersection of law, information technology and public policy. As a member of the National Security Practice, Ken manages governance, risk and compliance projects and investigations, and conducts monitorships and third-party audits in connection with mitigation agreements enforced by the Committee on Foreign Investment in the United States (CFIUS). In addition, he assists established and emerging companies with implementing and maintaining cybersecurity and privacy programs by developing cybersecurity policies, procedures and guidelines, and conducting risk-based cybersecurity assessments.
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