Chinese Telecoms Unwelcome in Government Contracts as of Aug. 13

Rule will apply to all contracts, including for off-the-shelf tech
Author:
Publish date:

Huawei, ZTE, Hytera, Hangzhou Hikvision Digital Technology Co., and Dahua Technology Co. are the five Chinese companies named in the Trump Administration's new rule revision implementing Congress' decision to ban Chinese telecoms from government contracts as potential security threats.

white house–Diego Cambiaso.jpg

Related: Reports Have White House Implementing Tech-Blocking Provision

That ban was part of a Defense Department funding bill the President signed Aug. 13, 2018, so the bigger news would have been if the White House wasn't going to implement it. But given that the Administration had signaled it might use Huawei's status as a bargaining chip in trade talks--while at other times acknowledging Chinese telecoms were problematic players in U.S. 5G networks, it was news nonetheless.

Because of the national security issues and the Aug. 13 congressional deadline, the rule is being implemented without public comment and the normal OMB review under the Paperwork Reduction Act, but there will still be an opportunity to comment, the Administration said, which is why it is an interim rule.

The comments will be taken into account for the final rule, but for now, "this rule must take effect immediately to ensure agencies and contractors are implementing the statutory prohibition," the Administration said.

The rule applies to any contract solicitations issued after Aug. 13 or any issued before that date so long as the contract has not been awarded by that date, and excludes telecom or video surveillance equipment from those companies.

That is according to a pre-publication copy of the final version of the interim rule (as it is to be published in the Federal Register) supplied on background by a senior Trump Administration official.

The interim rule revises the Federal Acquisition Regulation (FAR) and "prohibits agencies from procuring or obtaining, or extending or renewing a contract to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as a critical technology as part of any system, on or after Aug. 13, 2019."

The rule, which is actually being issued by the Department of Defense, NASA and the General Services Administration, will be implemented Aug. 13.

There is an opportunity for a one-time waiver for up to a year, determined on a case-by-case basis, as well as for the Director of National Intelligence to issue waivers, though that is one of the agencies that has said Chinese telecoms pose a national security threat due to the influence of the Chinese government.

The prohibition also does not apply to "[a] service that connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements," or "(2) telecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles."

The rule will apply to contracts that usually do not trigger the rule because they are relatively small purchases, and to contracts for off-the-shelf purchases. The Administration has concluded that there is an unacceptable level of risk that is not mitigated by the size of the purchase or the fact that the equipment and/or service "has been sold or offered for sale to the general public, either in the same form or a modified form." 

Related