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May 26, 2024

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Stakeholders renew call for pause to Commerce ICT rulemaking, seeking clarity on intertwined supply chain initiatives

By Sara Friedman / April 19, 2021

Stakeholders say they are seeking more clarity on the Biden administration’s supply chain strategy and how it fits in with the rollout of a controversial Commerce Department information and communications technology supply chain rule issued in January, which industry groups have urged the Biden team to set aside.

President Biden issued an executive order in February calling on federal agencies to conduct in-depth reviews called “Sectoral Supply Chain Assessments” on a range of industrial bases including the information and communications technology sector.

Since the order was released, the Commerce Department has continued its efforts on a parallel track despite calls from industry groups to pause on the ICT rule issued at the end of the Trump administration.

Wiley Rein partner Megan Brown said the Commerce rule would be “better informed” by the results of Biden’s reviews and therefore the ongoing supply chain rulemaking “should be paused.”

But Commerce has issued subpoenas to Chinese companies under the auspices of the ICT rule. At the same time, it has delayed the pre-approval process for companies that want to get certainty from the department before entering into ICTS transactions with foreign companies.

The delay of the preapproval process is creating new uncertainty in the tech sector because companies want to get a better idea of how they can prepare for enforcement of the rule, according to the Information Technology Industry Council.

"We remain concerned that the scope of ICTS Transactions covered in the IFR remains too broad to effectively implement the rule,” ITI director of policy Courtney Lang told Inside Cybersecurity. “This will have a major impact on the viability or effectiveness of any voluntary pre-clearance process Commerce seeks to develop, which is essential to providing the clarity and certainty necessary for companies to comply with the IFR.”

Lang said, “We would encourage Commerce to delay the implementation of the rule until a viable and well-understood pre-clearance or licensing process is in place."

On the subpoenas, the Commerce Department provided no details on the Chinese companies that received the notices and what information that the department hopes to obtain.

Efficacy of the information collection will depend on the specificity in the subpoenas, an industry source said. If Commerce is “trying to boil the ocean then they would just potentially get a bunch of information they would not be able to work with much,” the source said, adding it remains to be seen “how compliant the subpoena recipients” will be in providing requested documents.

“The balance Commerce is trying to strike to show that they are taking this seriously to Congress as well as the private sector and that they are not letting up on the gas these national security supply chain issues,” the source said. Commerce’s decision to make a public announcement of the subpoenas could indicate the rule’s importance, the source said, especially “given all of the other supply chain things going on” at the federal level.

At the same time, Biden’s February order is asking agencies to look at the larger picture, which former Federal CISO Grant Schneider sees as important due to the volume of supply chain activities under the last administration that impacted industry.

“We have had a lot on supply chain in the first four years with some executive and legislative actions,” Schneider told Inside Cybersecurity. “We are seeing there are so many different aspects of supply chain. The February EO was on a more fundamental level with lots of different secretaries tasked to look at their particular areas on everything from chips to pharmaceuticals.”

Schneider said parts of the reviews that are “going to tie into technology,” but there is also a “broadening out” to look at other supply chains.

When dealing with the telecom sector, Schneider said there is a “considerable risk of harm if some of the wrong decisions are made in that space.” The administration “needs to take a hard look” at the Commerce supply chain rule currently in effect and “how it will be implemented,” he said, “but my expectation is that it will indeed continue to move forward.” -- Sara Friedman (