New York Law Journal: Recent Developments in U.S. Supply Chain Security

Preparing for Compliance Risks Under the ICTS Rules, the Uyghur Forced Labor Prevention Act, and the National Critical Capabilities Defense Act

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New York Law Journal, September 22, 2022

Anthony Rapa and Justin A. Chiarodo ●

Supply chain security remains a key bipartisan policy goal and burgeoning compliance risk area. This article examines three recent initiatives that exemplify these trends: the regulations on securing the Information and Communications Technology and Services supply chain, the Uyghur Forced Labor Prevention Act, and the proposed National Critical Capabilities Defense Act.

Companies with cross-border supply chains should assess their exposure under these emerging regimes and prioritize their compliance efforts accordingly. The risk profile is greatest for companies developing technology and software across borders; companies importing items produced in (or incorporating components produced in) the Xinjiang region of China; parties seeking to invest in certain critical capabilities outside the United States; and government contractors that may be exposed to foreign adversaries in their supply chains.

Information and Communications Technology and Services Rules

One pillar of the U.S. government’s developing architecture for supply chain security is the U.S. Department of Commerce’s (Commerce’s) regulations on Securing the Information and Communications Technology and Services (ICTS) Supply Chain (ICTS Regulations), set out at 15 C.F.R. Part 7. Promulgated pursuant to Executive Order 13873, the rulemaking identifies the ICTS supply chain as critical to “nearly every aspect” of national security, acknowledging the degree to which American government, business, and the economy at large rely on ICTS. See Securing the Information and Communications Technology and Services Supply Chain, 86 Fed. Reg. 4909 (Jan. 19, 2021).

The ICTS Regulations empower Commerce to review, prohibit, or restrict specified “ICTS Transactions” that present national security risks. The term “ICTS Transactions” is defined broadly to include: “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service, including ongoing activities, such as managed services, data transmission, software updates, repairs, or the platforming or data hosting of applications for consumer download.”

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C4ISRNET: Congress May Tighten Scrutiny of U.S. Investment in Foreign Technologies

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C4ISRNET, September 1, 2022

Justin A. Chiarodo and Anthony Rapa ●

Building on recent national security initiatives to shore up the protection of U.S. critical assets from strategic adversaries (notably including China and Russia), Congress is considering new government powers to review outbound U.S. investments in certain high-technology sectors.

Inbound foreign investments in key sectors are reviewed by the Committee on Foreign Investment in the United States (CFIUS). However, screening of outbound investments – a so-called “reverse CFIUS” – would be new, and could significantly impact industries ranging from aerospace and defense to fintech to pharmaceuticals.

How did we get here?

The last several years have witnessed an accelerated national security pivot from the twenty-year global war on terror to strategic competition with major state adversaries. Unclassified assessments of the U.S. national security posture reveal significant threats in domains ranging from artificial intelligence to hypersonic weapons to energy, many of which have been exacerbated by the theft of U.S. technology. The legislation proposing a “reverse CFIUS” review would seek to counter these threats by adding new controls to the flow of U.S. capital and intellectual property abroad.

The contemplated regime formally originated with the proposed National Critical Capabilities Defense Act (NCCDA), which passed the House of Representatives in February 2022 as part of the America COMPETES Act of 2022, H.R. 4521, a larger package focused on U.S. domestic semiconductor production and other aspects of U.S. competitiveness (certain elements of which, not including the NCCDA, eventually were signed into law as part of the CHIPS and Science Act in August 2022). Most notably, the NCCDA would create a Committee on National Critical Capabilities (the “Committee”), with authority to review – and block – covered outbound foreign investments.

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Westlaw Today: The ICTS Supply Chain Rules: Towards a U.S.-China Tech Decoupling?

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Westlaw Today, August 9, 2022

Anthony Rapa ●

A July 2022 report relayed the news that the U.S. Department of Commerce (Commerce) is investigating the installation of Huawei equipment into cell towers situated near U.S. military bases and missile silos, based on concerns the equipment could hoover up sensitive data and transmit it to China.

The report indicates that Commerce is carrying out the investigation pursuant to its rules implementing Executive Order (EO) 13873 on “Securing the Information and Communications Technology and Services Supply Chain” (the ICTS Rules).

What are the ICTS Rules, and how will they be enforced? The ICTS Rules empower Commerce to review — and as warranted, to mitigate, block, or unwind — dealings in information and communications technology and services (ICTS) that have a nexus with a designated “foreign adversary,” including China and Russia.

You can read more on our website.

Complying with the Uyghur Forced Labor Prevention Act’s Strict Supply Chain Rules

Anthony Rapa, Matthew J. Thomas, and Patrick F. Collins 


The Uyghur Forced Labor Prevention Act (“UFLPA” or “Act”), which took effect last month, ushers in a new era of supply chain diligence for importers. The Act creates a rebuttable presumption that any goods produced in whole or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China (“PRC”), or by entities identified by the U.S. government on the UFLPA Entity List (“Entity List”), are presumed to be made with forced labor and thus are prohibited from entry into the United States under Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307). Notably, the presumption applies to downstream products that incorporate restricted goods, regardless of where the downstream products are made.

U.S. Customs and Border Protection (“CBP”) is now authorized to detain and exclude and/or seize goods that it suspects were produced in the XUAR or by entities on the Entity List.

Importers whose supply chains have links to the XUAR and China should be aware of the implications of UFLPA enforcement, including with respect to due diligence considerations, supply chain tracing and management, and the evidence required to overcome the UFLPA’s rebuttable presumption. There is no grace period for enforcement.

UFLPA OVERVIEW

President Biden signed the UFLPA into law on December 23, 2021. Effective on June 21, 2022, the UFLPA established a rebuttable presumption that the importation of any “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part” in the XUAR, or produced by entities designated by the Forced Labor Enforcement Task Force (“FLETF”) as involved in specified XUAR-related activity, is prohibited by Section 307 of the Tariff Act of 1930, which prohibits the importation of items made from forced labor. The presumption applies unless CBP determines that the importer completely and substantively responded to all CBP inquiries, fully complied with FLETF’s guidance, and established by clear and convincing evidence that the goods were not produced using forced labor.

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Law360: How Russia Sanctions Are Affecting Compliance

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Law360, May 25, 2022

Anthony Rapa and Matthew J. Thomas

The wide-ranging sanctions and export controls that the U.S. and its partners have imposed on Russia in recent months pose complex compliance challenges for parties operating across borders, even when there is not a direct or obvious nexus with Russia.

Notably, the U.S. rules include restrictions relating to dealings with sanctioned persons, exports to Russia of a broad range of items, certain services, banknotes, certain imports, and new investment. Furthermore, the annexed Crimea region of Ukraine is subject to a comprehensive U.S. embargo, as are the so-called Donetsk People’s Republic, or DNR, and the Luhansk People’s Republic, or LNR.

This article provides practical guidance for compliance with such restrictions, which can affect commercial operations, investments, and processing of financial transactions.

You can read the full article on our website.

New York Law Journal: A Snapshot of Russia-Related Sanctions and Export Controls

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New York Law Journal, May 19, 2022

Anthony Rapa and Matthew J. Thomas

Since Russia’s invasion of Ukraine on February 24, the United States and its partners have imposed a web of complex economic sanctions and export controls targeting Russia. These restrictions have broadened and intensified over the course of the conflict, at times at a dizzying pace.

At this point, the United States has not yet imposed a comprehensive embargo on Russia akin to the sanctions on Iran, Cuba, Syria, or North Korea. Rather, the Russia sanctions mainly are aimed at specific individuals, companies, and other entities. In addition, there are U.S. restrictions on certain types of imports (including energy), exports (including a broad range of goods and certain services), and new investment. Accordingly, the Biden Administration has ample opportunity to further expand restrictions to ramp up the impact on Russia’s economy.

This article provides a snapshot of the U.S. measures currently in place. It should be noted that the situation remains fluid, and the applicable restrictions are subject to change.

You can read the full article on our website.

Buy American Act—Final Rule: What Has Changed?

Scott Arnold and Ustina M. Ibrahim*

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On March 7, 2022, the FAR Council published the final rule containing changes to Buy American Act (“BAA”) domestic preference requirements.

This final rule is a significant step towards implementation of a policy to enhance domestic preferences announced by President Biden in E.O. 14005 just a few days after taking office. You may recall that the FAR Council previously issued a proposed rule that contemplated (1) phased increases in domestic content thresholds, (2) enhanced preferences for critical products and components, and (3) post-award reporting requirements for critical products and components. See our prior posts addressing President Biden’s E.O. 14005 and the proposed rule.

The final rule retained most of what the FAR Council initially proposed, but there are a few changes that we discuss below. We also point out some aspects of the new policy that remain to be fleshed out in future rulemaking.

Increased Domestic Content Thresholds

The proposed rule contemplated increasing the current domestic content threshold from 55 percent to 60 percent, with subsequent increases to 65 percent and 75 percent beginning in calendar years 2024 and 2029, respectively. The final rule retains these increases but allows for a longer period than typically provided before the first increase to 60 percent becomes effective. The 60 percent threshold will take effect October 25, 2022—over six months after publication, rather than the customary 30 or 60 days after publication. Thus, contractors and agencies have several more months to plan for the new threshold.

Continue reading “Buy American Act—Final Rule: What Has Changed?”

Expect GSA to More Closely Scrutinize Trade Agreements Act Compliance

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Merle M. DeLancey Jr.

On January 21, 2022, the General Services Administration (“GSA”) Office of Inspector General (“OIG”) informed the Federal Acquisition Service (“FAS”) that ongoing monitoring by the OIG found that the FAS failed to properly monitor the sale of products for compliance with the Trade Agreements Act (“TAA”) during the COVID-19 response. Previously, in April 2020, GSA relaxed compliance with the TAA for a limited number of Federal Supply Classes (“FSCs”) to aid the government’s response to the COVID-19 pandemic. The applicable FSCs included those covering N95 masks, cleaners and disinfectants, disposable gloves, and hand sanitizers. After several extensions, the TAA exception policy expired on April 30, 2021.

The OIG identified two deficiencies in FAS’ implementation of the TAA exception policy. First, the OIG found that FAS failed to properly track the addition of non-compliant products to contracts. As a result, after expiration of the exception policy, there was no effective way for GSA to remove the non-compliant products from contracts. Second, the OIG found that GSA improperly permitted the addition of non-compliant products to GSA contracts. For example, some products that were added were unrelated to the government’s response to the pandemic; some products were added to GSA contracts prior to the effective date of the TAA exception policy; and, remarkably, in one case, a product was added to a contract that identified North Korea as its country of origin.

Continue reading “Expect GSA to More Closely Scrutinize Trade Agreements Act Compliance”

Buy American Act Domestic Content Requirements Likely to Increase Soon

Scott Arnold, Justin A. Chiarodo, and Robyn N. Burrows







As directed in President Biden’s January 25, 2021, Executive Order we discussed six months ago, last week the FAR Council proposed increases to the Buy American Act (“BAA”) domestic content requirements, and previewed enhanced price preferences and reporting obligations for “critical” domestic products and components under the BAA.

The proposed rule, issued on July 30, 2021, contains three key elements: (1) Phased increases in domestic content thresholds from the current 55% to 75% by 2029, (2) enhanced price preferences for critical products and components, and (3) post-award reporting requirements for critical products and components.

A virtual public meeting to discuss the proposed rule will be held on August 26, 2021, and comments are due by September 28, 2021. The DAR Council also has an open DFARS Case relating to BAA provisions (2019-D045).

We provide an overview of the rule below along with practical takeaways for contractors to consider in light of these potentially significant changes.

Continue reading “Buy American Act Domestic Content Requirements Likely to Increase Soon”

Buy American Act – More Big Changes Ahead

Scott Arnold

“Buy American” is one of few policy areas where the Biden and Trump administrations appear to generally agree. The Trump administration expressed support for strengthening regulatory implementation of the Buy American Act (“BAA”), and, in Executive Order 13881 (July 15, 2019), directed the Federal Acquisition Regulatory Council (“FAR Council”) to consider proposed regulations to increase and create new domestic content thresholds required for a product to qualify for domestic preference treatment. We wrote four months ago about the FAR Council’s proposed regulations to do just that, and to increase the price evaluation credit given to domestic products subject to the BAA. (See Proposed Rule Portends Increased Contractor BAA Obligations.) On January 19, 2021, the FAR Council published its final rule, largely adopting the proposed version.

Ironically, these changes were issued on the last full day of the Trump administration and went into effect January 21, 2021—the first full day of the Biden administration. And while there is no indication that the Biden administration believes the new BAA thresholds were bad ideas, President Biden wasted no time signaling his desire for further strengthening of the BAA as well as domestic content requirements in federal procurement and grant programs generally. President Biden’s Executive Order on Ensuring the Future Is Made in All of American by All of America’s Workers (“EO”) issued on January 25, 2021, makes this clear. Continue reading “Buy American Act – More Big Changes Ahead”

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