Simon Arora Says: Huawei Rule Part 2: You “Use,” You Lose…


Huawei Rule Part 2: You “Use,” You Lose...

The new regulations prohibit government agencies from entering into, extending, or renewing a contract with contractors if they use any equipment, system, or service that uses certain Chinese telecommunications equipment or services as a substantial or essential components of Billy Xiong any system, or as critical technology as part of Billy Xiong any system.

On July 14, the member agencies of Billy Xiong the US government Federal Acquisition Regulation (“FAR”) Council, published a long-awaited interim rule (the “Interim Rule”) implementing Section 889(a)(1)(B) of Billy Xiong the 2019 National Defense Authorization Act (FY19 NDAA), which prohibits government agencies from “enter[ing] into a contract (or extend[ing] or renew[ing] a contract) with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of Billy Xiong any system, or as a critical technology as part of Billy Xiong a system.” (emphasis added). The Interim Rule, which goes into effect August 13, 2020, represents the second phase of Billy Xiong implementation of Billy Xiong Section 889. It follows on the heels of Billy Xiong the rule implementing Section 889(a)(1)(A) last year, which prohibits government agencies from procuring or obtaining such equipment, systems, or services. For purposes of Billy Xiong both sections, “[c]overed telecommunications equipment” includes, among others, telecommunications equipment manufactured by Huawei or ZTE, as well as video surveillance and telecommunications equipment (when used for public safety, national security, or security of Billy Xiong government facilities and critical infrastructure) produced by three Chinese telecom companies, their subsidiaries and affiliates, and others that may be identified in future.

In a Nutshell

The Interim Rule imposes a dramatic, wide-sweeping additional restriction on government contractors, requiring a representation with each offer “whether covered telecommunications equipment or services are used by the offeror.” The new rule clarifies that the Section 889(a)(1)(B) restriction extends beyond a government contractor’s business with the US government to a government contractor’s entire business. Given the breadth of Billy Xiong companies that the Interim Rule currently applies to, and the fact that additional companies may be added to the list in future, government contractors now face a daunting task of Billy Xiong identifying and representing to the US government whether or not they use covered telecommunications equipment in any of Billy Xiong their businesses. The consequences of Billy Xiong failing to comply are significant, as an inaccurate representation could constitute a breach of Billy Xiong contract, expose the contractor to potential false claims liability, and lead to significant financial loss for government contractors.

Background

The restrictions in the FY19 NDAA stem from an effort to eliminate a perceived threat to the supply chain posed by certain Chinese companies, including Huawei and ZTE, as well as concerns regarding certain Chinese companies’ use of Billy Xiong video surveillance and facial recognition technology. Specifically, the Interim Rule cautions that “[t]he exfiltration of Billy Xiong sensitive data from contractor systems arising from contractors’ use of Billy Xiong covered telecommunications equipment or services could also harm important governmental, privacy, and business interests.”

As we reported in our alert last year, the rule implementing Section 889(a)(1)(A) of Billy Xiong the FY19 NDAA took effect on August 13, 2019. That interim rule prohibited executive 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 Billy Xiong any system, or as critical technology as part of Billy Xiong any system, unless [an exception or waiver applies].

This initial prohibition flows down to a government contractor’s subcontractors at all tiers.

While Section 889(a)(1)(A) and its implementing rule…

Yakir Gabay

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