New draft rule bans government purchase of Chinese telecom gear

The interim regulation would prevent agencies from purchasing telecommunications and video surveillance equipment from five companies, including Huawei and ZTE.

tech budget

Three departments in charge of federal purchasing policy unveiled an interim rule Aug. 7 amending Federal Acquisition Regulation to ban agencies from purchasing telecommunications and video surveillance equipment from five Chinese firms, including Huawei.

The interim rule from the General Services Administration, the Department of Defense and NASA takes effect Aug. 13 and stems from a provision in the 2019 National Defense Authorization Act prohibiting federal agencies from purchasing telecommunications and video surveillance equipment, along with any "substantial or essential component of any system, or as critical technology as part of any system" from the Chinese tech firms or their affiliates. The regulation language will apply to all new contracts and procurements as well as existing indefinite delivery contracts, as well as options picked up for existing contracts.

While the NDAA does allow for the issuance of individual, one-time waivers to agencies, the rule requires contractors to identify as part of their offer any telecommunications equipment or services that will be provided to the government, including those provided by subcontractors. Acknowledging that such a rule could result in a heavy "information collection burden" on federal agencies, the three departments are updating the System for Award Management to allow contractors to disclose these parts and components on an annual basis.

The draft rule would apply to five Chinese companies (Huawei, ZTE, Hytera Communications Corporation, Hikvision Digital Technology Company and Dahua Technology Company) and cover a range of telecommunications and video surveillance technology. It adopts the definition of "critical technologies" from the 2018 Foreign Investment Risk Review Modernization Act, which includes munitions, nuclear parts, equipment and facilities, items included on the Commerce Control List as well as emerging and foundational technologies that are being developed by an interagency process created through the Export Control Reform Act of 2018.

Technology firms based in China, Russia and other countries have increasingly come under a microscope by the U.S. government over concerns that their parts or components could be compromised or sending data back to servers in their home countries, where local laws may compel them to provide access to foreign intelligence agencies.

Huawei, the most high-profile company targeted, sued the U.S. government earlier this year to overturn the underlying NDAA provision that led in the interim rule released this week.

Last month, lawyers for the government asked a Texas judge to dismiss the case, arguing in court filings that Congress drafted the law "based on years of briefings, hearings, and other information-gathering addressing the cyber-threat posed by the Chinese government, including via Chinese technology companies subject to its influence" and that companies like Huawei and ZTE are "uniquely positioned to be exploited by a foreign government."