On July 10, 2020, the interim rule implementing Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. No. 115-232) was released by the U.S. Government’s Federal Acquisition Regulatory Council. Section 889 prohibits the U.S. Government from buying (as of August 2019)—or contracting with an entity that uses (as of August 2020)—telecommunications equipment or services produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities) or, in certain cases, telecommunications or surveillance equipment or services produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of those entities). The interim rule addresses the new prohibition on “use” of the banned telecommunications equipment and services and clarifies the prohibition on buying such equipment that went into effect in 2019. The rule is not limited to end products produced by those companies; it also covers most telecommunications components from those companies that are incorporated into end products. The prohibition and the interim rule for Section 889(a)(1)(B) become effective on August 13, 2020.
This prohibition on use applies to all U.S. Government prime contractors, domestic and international, spanning a wide array of industries, including the health-care, education, automotive, aviation, and aerospace industries; manufacturers that provide commercially available off-the-shelf (COTS) items; and contractors that provide building management, billing and accounting, and freight services. Comments on the interim rule are due on or before September 14, 2020.
Additional details on the interim rule and its impact on Government contractors are available in a Client Alert that we published on July 13, available here.