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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 utilized 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 actually comprised of four different “modules,” which are intended to be used (separately or in unison) to account for the following different types of transfers:

Module Exporter Importer
Module 1 Controller Controller
Module 2 Controller Processor
Module 3 Processor Processor
Module 4 Processor Controller

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.  The following provides a visual summary of how a controller in the United States that receives personal data from a controller in the EEA can onward transfer the personal data, using the SCCs, to a processor that is located in a different non-adequate country.

Visual Implications
  • 1st SCC Module 1.  Initial cross-border transfer from Company A to Company B utilizes the SCC Module 1 designed for transfers from a controller to a non-EEA Controller.
  • 2nd SCC Module 2.  Pursuant to Section 8.7 of the 1st SCC, all subsequent onward transfers to non-adequate jurisdictions must also utilize the SCCs (appropriate module).  As a result, Company B’s transfer of data to Company Z should utilize the SCC Module 2.
  • Subsequent Onward Transfers from Company Z.  Note that if Company Z makes any additional onward transfers Company Z should utilize Module 3 of the SCCs.
  • US Transfer Impact Assessment.  Section 14 of the 1st SCC requires Company A and Company B to conduct a transfer impact assessment (“TIA”) of United States law to determine whether either party has reason to believe that the laws and practices of the United States that apply to the personal data transferred prevent Company B from fulfilling its obligations under the SCCs.
  • Country X Transfer Impact Assessment.  Section 14 of the 2nd SCC requires Company B and Company Z to conduct a transfer impact assessment (“TIA”) to determine whether either party has reason to believe that the laws and practices of Country X prevent Company Z from fulfilling its obligations under the SCCs.  Note that as a practical matter this TIA might be shared with Company A upon request, or during an audit.
  • Law enforcement request policy.  Section 15 of the 1st SCC and the 2nd SCC requires that Company B and Company Z take specific steps in the event that they receive a request from a public authority for access to personal data.  As a result, Company B and Company Z might consider creating a written law enforcement request policy.

[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.