Section 889 of the 2019 National Defense Authorization Act (“NDAA”) imposed major new supply chain restrictions on the use of “covered” telecommunications products and services from Huawei Technologies Company Ltd. and several other Chinese entities and their affiliates.
Part A of Section 889 became effective in August 2019 and bans companies from providing covered technology to the Federal Government. Under Part A, a company cannot sell any product or provide any service to the government that uses covered technology. Compliance with Part A requires contractors to flow down the prohibition to subcontractors.
Part B of Section 889
Part B of Section 889 has the potential of going even further into the operations of a company contracting with the government. Part B prohibits contractors from using covered technology. Implementation and compliance with Part B is expected to be extremely challenging given the ban’s breadth and scope.
As written, the ban prevents contractors from using any covered technology, even if such covered technology is not used or related to performance of a federal contract. Numerous questions regarding the scope and application of Part B abound, including: application to a contractor’s overseas operations; application to a contractor’s parent corporation, divisions, affiliates, and/or subsidiaries; scope of vendor/subcontractor certifications; application to employees working on a federal contract from home (i.e., telecommuting); application to mobile phones; scope and availability of extensions and/or waivers; and enforcement.
In March 2020, the government intends to publish proposed rules that hopefully will address the above issues. However, unless the effective date of Part B is extended, which is unlikely, contractors must comply within the next six (6) months.
Prepare Now: Deadline for Compliance Is August 13, 2020
Over the next six months, contractors need to implement internal and external (vendors/subcontractors) plans for Part B compliance. Such plans involve evaluating all applicable company technology—from phones, to laptops, to surveillance systems—to ensure that no items or their components include prohibited technology.
Blank Rome LLP’s Government Contracts Practice
Blank Rome’s Government Contracts practice assists clients with government contracting compliance, including Parts A and B of Section 889. Our Government Contracts attorneys can advise on how to prepare for these regulatory changes and ensure supply chain compliance as this continues to be an evolving area of the law.