For Part B of Section 889, Is Compliance by August 13, 2020, Realistic?

Merle M. DeLancey Jr., Justin A. Chiarodo, and Robyn N. Burrows

On March 10, 2020, the Department of Commerce extended the deadline for U.S. companies to stop doing business with Huawei Technologies Co. Ltd. and its non-U.S. affiliates. The deadline has been extended multiple times and is now May 15, 2020. Under the extension, U.S. businesses can continue to work with Huawei on the operation of existing networks and mobile services, including cybersecurity research considered critical for network reliability.

Huawei was added to the Commerce Department’s Bureau of Industry and Security “Entity List” in May 2019. The Entity List includes foreign entities who have engaged in activities sanctioned by the State Department and activities contrary to U.S. national security and/or foreign policy interests.

In addition to the extension, the Commerce Department is seeking public comments through March 25, 2020, regarding the continuing need for, and scope of, possible future extensions concerning Huawei. The multiple extensions and new request for public comments are intended to allow time for companies and persons to shift from Huawei or its affiliates to alternative sources of equipment, software, and technology.

Currently, the General Services Administration (“GSA”) is drafting an interim rule regarding implementation of Part B of Section 889 of the 2019 National Defense Authorization Act. Part B prohibits government contractors from using covered technology including the telecommunications and surveillance equipment manufactured by Huawei and its affiliates. We previously covered the rule here and here. The plain language of Part B goes beyond the use of banned technology to perform a federal contract and extends to a federal contractor’s use of such equipment in any part of its operations, including commercial and overseas operations. Unless extended, Part B is effective August 13, 2020.

The Office of Management and Budget is reviewing GSA’s interim rule. GSA has previously announced that the interim rule would be published for notice and comment in March 2020. Assuming a notice and comment period of 60 days, a final rule would be published in May 2020 leaving federal contractors three months or less (assuming an effective date of August 13, 2020) to comply with Part B. Given the unknowns associated with the scope of Part B including, but not limited to, its application to a company’s subsidiaries and affiliates, commercial sales, and overseas offices, a federal contractor’s compliance by August 13, 2020, is not realistic. Let’s hope GSA takes a page from the Commerce Department’s more measured approach and gives contractors the necessary guidance and then sufficient time to comply with Part B.