U.S. industry is urging lawmakers to delay a looming ban on the government contracting with companies that use certain Chinese products, but it's unclear whether a Congress keen on taking a hard line against China will consider the proposal.
In the Senate, an amendment to the fiscal 2021 defense policy bill filed by Sen. Ron Johnson (R-WI) last week would delay the statutory ban on federal contractors using products and services from Huawei, ZTE and other Chinese technology companies until August 2021. The law is currently scheduled to take effect Aug. 13.
Johnson's amendment would also clarify that the ban only applies to equipment and services used in the performance of a government contract, rather than a company's entire business operations.
The ban is required under Part B of Section 889 of the fiscal 2019 National Defense Authorization Act, which targeted Huawei, ZTE, their affiliates and other Chinese companies due to concerns China could use those companies to target U.S. telecommunications infrastructure and spy on citizens and businesses.
Part A went into effect last year and bans the government from purchasing certain Chinese products and services. However, the contractor ban is expected to be far more wide-sweeping and complex, as it applies to millions of federal contractors and their supply chains, which are often opaque and difficult to audit.
Johnson's proposal is backed by U.S. business groups that say the current deadline is unworkable and could force many businesses to suspend their government operations or leave federal business outright.
The U.S. Chamber of Commerce in a June 30 letter to senators highlighted Johnson's amendment as one of the "key" changes it would like to see in the bill.
"If Part B is not changed, many businesses with international and domestic operations would be forced to halt their work providing key products and services to agencies, including equipment that is needed to fight the coronavirus pandemic," Neil Bradley, the Chamber's chief policy officer, wrote in the letter.
But any changes to Section 889 will face stiff opposition from China hawks. Earlier this month, in response to a story about companies pressing for a delay to the ban, Sen. Tom Cotton (R-AR) tweeted, "Nope."
"Under no circumstances should we weaken or delay implementation of our laws banning the U.S. federal government and government contractors from using Huawei equipment," Cotton continued. "That would be a gift to the Chinese Communist Party."
Senate Armed Services Chairman Jim Inhofe (R-OK) said the Senate will vote on amendments to the NDAA bill after the July Fourth recess, but it remains unclear whether Johnson's amendment will be considered.
It was not included in a package of 62 bipartisan amendments added to the bill on Thursday, nor was it among six amendments the Senate agreed to consider and vote on, according to information provided by Inhofe's office last week. A spokesman for Johnson, who chairs the Senate Homeland Security and Governmental Affairs Committee, did not respond to questions about where the amendment stands in the process.
Industry groups argue some relief is needed before Aug. 13 because the statute is overly broad and does not define "use." They say the ban seemingly applies to a company's entire business operations and its supply chain, and the Trump administration has yet to publish rules defining specifically how it would be implemented.
Pentagon acquisition chief Ellen Lord also supports pushing back the deadline.
"I am concerned that we might have some unintended consequences with shutting down major portions of our defense industrial base because of one infraction of a Hikvision camera in a parking lot somewhere at a level four supplier," Lord told the House Armed Services Committee on June 10. "We are very, very supportive of the intent. I am concerned about unintended consequences. I believe we need more time."
But a general bipartisan consensus has emerged that tougher industrial and national security policies are needed toward China, leaving many lawmakers reticent to relax laws such as the Huawei ban.
"Nobody wants to look like they're being soft on China," Kea Matory, director of legislative policy at the National Defense Industrial Association, told Inside Defense. "No company wants to be soft on China either," she added. "Companies not only have national security concerns, but they also have concerns for their own intellectual property. Nobody wants their data to be taken."
But she said industry is concerned the broad nature of the law will capture every aspect of a company's business operations. For instance, the current statute could apply to a supplier in southeast Asia, where the use of Huawei and ZTE telecommunications equipment is inevitable.
Or, as Lord told House lawmakers earlier this month, it could apply to a lower-tier subcontractor in the United States who uses a security camera made by Hikvision, one of the "covered" Chinese companies banned by the law.
"How do you do that when you don't know where the pieces are out throughout your supply chain?" Matory said of compliance.
Industry has also been urging the Trump administration to issue a proposed rulemaking to allow for comment and revisions before the requirements go into effect Aug. 13. Earlier this year, a Defense Department official told industry a proposed rule was pending approval at the White House.
In a follow-up tweet earlier this month, Cotton agreed that the White House's Office of Management and Budget should release Section 889 regulations so companies understand how to comply, but argued "the law already contains generous wavier provisions for any company attempting to comply in good faith that may need additional time."
The House Armed Services Committee's version of the fiscal 2021 NDAA, approved by the panel Wednesday night, includes a "sense of Congress" provision that the Federal Acquisition Regulatory Council should ensure Section 889 implementation provides "sufficient time for public comment and review of any related rulemaking." But the bill includes no changes to the law and the statutory deadline.
OMB, which coordinates the regulatory council's activities, did not immediately respond to a request for comment.
Meanwhile, with legislative relief unlikely, Matory said NDIA is recommending its members prepare for Section 889 to go into effect Aug. 13. "It's wise for contractors to start planning now for what they're going to do, because it doesn't look like there's going to be a change in time for the implementation of the law," she said. -- Justin Doubleday (jdoubleday@iwpnews.com)