Companies are allowed to transfer personal data outside the European Economic Area (EEA) if they are (1) transferring data to an entity that is within a country that has been recognized by the European Commission as ensuring an adequate level of protection or (2) they have put in place a European Commission-approved mechanism (a “safeguard”) that imposes many of the substantive provisions found within the GDPR.[1]

The United States is not currently recognized as an “adequate” country. As a result, controllers in the EEA are typically required to utilize a safeguard when transferring personal information to the United States. The most common safeguard is referred to as the “Standard Contractual Clauses,” or “SCCs” – a template contract that was approved by the European Commission in June of 2021.[2] The SCCs are comprised of four different “modules” that are designed to be used (separately or in unison) to account for the following different types of transfers:

Despite the fact that the SCCs are designed to be used with relatively little customization (i.e., the material terms of the SCCs cannot be modified without jeopardizing their status as an approved safeguard), significant confusion exists as to when certain modules of the SCC should be utilized, and what types of transfers are permitted.

For example, many attorneys are confused as to whether the SCCs are appropriate to use when a U.S. company receives personal information directly from an individual in the EEA and plans to forward that information to a processor located in a non-U.S. and non-EEA country. As the following visual shows, SCC Module 2 is the most likely safeguard available for such a transfer: 

Data Subject → Controller (US) → Processor (non-EEA)

Visual

The EDPB has taken the position that a data subject “cannot be considered a controller or processor,”[3] and, as a result, the restrictions on cross-border data transfers that apply to controllers and processors do not apply to data subjects.[4] As a result, no mechanism is needed to transfer data from the data subject to Controller B. If Company B is subject to the GDPR (e.g., it markets products or services to individuals in the EEA): Company B is required to comply with the cross-border transfer restrictions in GDPR Chapter V when transferring personal data “to a third country.”[5] The European Commission has suggested that transfers to another company “in the same [non-EEA] country,” should utilize a safeguard mechanism such as the SCCs.[6] The European Commission has made conflicting statements regarding the applicability of the SCCs to exporters that are subject to the GDPR. On the one hand, the European Commission implied in Article 1 of its implementing decision that all exporters subject to the GDPR can use the SCC.[7] That would suggest that Company B could utilize the SCC Module 2 when it exports data to Company D. On the other hand, the European Commission suggested in Recital 7 of the implementing decision that an exporter subject to Art. 3(2) might not be able to utilize the SCCs. The European Commission implied that an importer subject to Art. 3(2) also might not be permitted to use the SCCs.[8] The European Commission has indicated that they are developing a specific set of SCCs to be utilized by companies subject to Art. 3(2).[9] The net result is that SCC Module 2 is the most likely safeguard available for transfers from Company B to Company D unless, or until, the European Commission identifies a more suitable safeguard. If Company B is not subject to the GDPR, then no additional steps need to be taken in order to transfer data to Company D.

[1] Companies are also permitted to transfer personal data outside of the EEA if the transfer is subject to one of the exceptions or “derogations” found within Article 49 of the GDPR.

[2] These are sometimes referred to as the “new SCCs” to distinguish them from the “old SCCs” – previous templates that were approved by the European Commission under the Privacy Directive, and that can no longer be utilized as an approved transfer mechanism in new contracts.

[3] EDPB, Guidelines 05/2021 on the Interplay between the application of Article 3 and the provisions on international transfers as per Chapter V of the GDPR at n.10.

[4] The transfer of data from the EEA to the United States arguably constitutes “processing” by the data subject and, therefore, is not subject to the GDPR at all, as the regulations do not apply to processing done by a “natural person in the course of a purely personal or household activity.  GDPR, Art. 2(2)(c).

[5] EDPB, Guidelines 05/2021 on the Interplay between the application of Article 3 and the provisions on international transfers as per Chapter V of the GDPR at para. 10.

[6] New SCC Module 1 at 8.7 (similar provisions in Module 2 and Module 3).  The position that a transfer between companies in the same non-EEA country requires a safeguard also accords with Article 44 of the GDPR which requires that “any transfer of personal data . . . after transfer to a third country” must take place pursuant to the restrictions in Chapter V of the GDPR.

[7] Commission Implementing Decision of 4.6.2021 at Art. 1 (stating that the clauses can be used by any exporter “subject to” the GDPR).

[8] Commission Implementing Decision of 4.6.2021 at Recital 7.

[9] 54th Plenary Meeting dated 14 Sept. 2021 at § 2.1.