United States: Interim Rule Bans Use Of Huawei, ZTE And Other Chinese Companies Effective Immediately

Last week, the Department of Defense (DoD), General Services Administration (GSA) and National Aeronautics and Space Administration (NASA) issued an interim rule prohibiting federal agencies from procuring telecommunications and video surveillance equipment and services from five Chinese companies (with the potential for additional companies to be added to the list of proscribed suppliers): Huawei Technologies Company (Huawei), ZTE Corporation (ZTE), Dahua Technology Company, Hytera Communications Corporation, and Hangzhou Hikvision Digital Technology Company.

This interim rule revises the Federal Acquisition Regulation (FAR) to implement Section 889(a)(1)(A) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (FY 2019 NDAA), and reflects the culmination of numerous efforts by the US government to eliminate a perceived threat to the supply chain and national security by the named companies.

The interim rule, which went into effect on August 13, 2019, and without prior opportunity to comment due to what the government described as "urgent and compelling reasons," articulates important definitions for two terms in the FAR prohibition and imposes significant requirements on industry, including that offerors affirmatively represent whether any of the covered equipment or services will be used in providing goods or services to the government, even if the use of such equipment is not prohibited by the rule.

Procurement Prohibition

The prohibition implemented in the interim rule was first articulated in Section 889(a)(1)(A) of the FY 2019 NDAA, which banned federal agencies from procuring "covered telecommunications equipment or services" as a "substantial or essential component" of any system, or as "critical technology" as part of any system. Congress defined "covered telecommunications equipment or services" to include telecommunications equipment or services provided by Huawei and ZTE (including their subsidiaries and affiliates) as well as certain video surveillance equipment and services provided by three other Chinese companies.

To interpret the scope of the prohibition, the interim rule defines two terms that are used in the relevant FAR provision.

First, the rule adopts the definition of "critical technology" set forth in a Committee on Foreign Investment in the United States amendment that was also passed in the FY 2019 NDAA as the Foreign Investment Risk Review Modernization Act (FIRRMA). The FIRRMA definition generally includes the following: (1) defense articles or defense services included on the US Munitions List; (2) items included on the Commerce Control List; (3) specially designed and prepared nuclear equipment, parts, components, materials, software, and technology related to foreign atomic energy activities; (4) nuclear facilities, equipment or material; (5) select agents or toxins; (6) and emerging and foundational technologies pursuant to the Export Control Reform Act of 2018. DoD, GSA and NASA recognized that this definition is likely overbroad to include, for instance, select agents or toxins. Nevertheless, the agencies reasoned that adopting the FIRRMA definition will ensure consistency of application across provisions related to national security.

The interim rule then defines a "substantial or essential component" as "any component necessary for the proper function or performance of a piece of equipment, system, or service." Given the lack of guidance on what constitutes a component "necessary" for "proper function or performance," the government will likely read this definition broadly—characterizing most, if not all, covered equipment or services as a "substantial or essential component" of the system at issue and thereby subject to the prohibition, without reaching the question of whether it constitutes a "critical technology" as defined in the FIRRMA.

Application of the Ban

The interim rule effectuates the Section 889(a)(1)(A) prohibition by requiring that federal agencies include FAR 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment, and FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, in solicitations and contracts issued on or after August 13, 2019. Contractors, in turn, are required to flow down certain requirements to their subcontractors.

Notably, the interim rule extends application of the prohibition to procurements at or below the simplified acquisition threshold and acquisitions of commercial items, including commercially available off-the-shelf items, because of what DoD, GSA and NASA characterized as an "unacceptable level of risk for the Government." Pending procurements and certain existing contracts will also be impacted. A contract awarded after August 13, 2019 must include the relevant FAR provision, even if the solicitation (and proposals in response to that solicitation) did not contemplate the ban. Existing indefinite delivery contracts must also be revised to include the prohibition prior to the award of any future task or delivery orders.

Offeror Representation

The interim rule imposes several requirements on contractors. First, an offeror must submit the following representation with each proposal:

The Offeror represents that—It [ ] will, [ ] will not provide covered telecommunications equipment or services to the Government in the performance of any contract, subcontract or other contractual instrument resulting from this solicitation.

Importantly, this representation is broader than the prohibition itself. It is not limited to use of "covered telecommunications equipment or services" that qualify as a "substantial or essential component" of any system, or as "critical technology" as part of any system. The offeror must identify any use of covered equipment or services during contract performance, and then explain why its reported use "would be permissible under the prohibition." This expansive requirement affords the government insight into the contractor's judgment as to whether the definitions set forth in the interim rule are met, and thereby puts the government in the position of ultimately determining whether the contractor's use of covered equipment or services is or is not prohibited.

In an effort to reduce the information collection burden, DoD, GSA and NASA are updating the System for Award Management to allow offerors to represent annually whether they sell "covered telecommunications equipment or services" to the government. Offerors who answer affirmatively on the annual assessment will be required to provide offer-by-offer representations for contracts and task or delivery orders under indefinite delivery contracts.

Reporting Requirement

The interim rule also imposes a reporting requirement on contractors throughout performance. Contractors are required to report any prohibited equipment, systems, or services discovered during contract performance "[w]ithin one business day from the date of such identification or notification" and "[w]ithin 10 business days of submitting the information," must provide any information available regarding the contractor's mitigation actions. The contractor must also "describe the efforts it undertook to prevent use or submission of covered telecommunications equipment or services" in the first place as well as how those efforts will be augmented in the future. The contractor must flow down this reporting requirement to its subcontractors as well.

Exceptions and Waiver

There are only two stated exceptions to the prohibition on use of "covered telecommunications equipment and services." The FAR prohibition does not apply to contractors providing (1) "[a] service that connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements" and (2) "[t]elecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles." As noted above, even if a contractor believes that its use of covered equipment or services falls under one of these exceptions, the contractor is still required by the FAR to report the use and explain why it meets one of these exceptions.

The interim rule also authorizes the head of an executive agency to grant a one-time waiver through August 13, 2021 to a "Government entity," e.g., a requirements or contracting office, that demonstrates a "compelling justification for the additional time to implement the requirements." The Director of National Intelligence may also provide a waiver "if the Director determines the waiver is in the national security interests of the United States."

More Forthcoming

In addition to the prohibition in Section 889(a)(1)(A), the FY 2019 NDAA set forth additional requirements further expanding the scope of the ban on "covered telecommunications equipment or services."

First, the prohibition in Section 889(b)(1) expands the Section 889(a)(1)(A) prohibition to loan and grant funds. Section 889(a)(1)(B) then prohibits federal agencies from entering into a contract (or extending or renewing an existing contract) with any entity that "uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as a critical technology as part of any system." It remains to be seen whether the latter prohibition will require contractors that wish to continue working with the US government to eliminate use of covered equipment or services provided by named companies like Huawei and ZTE, beyond that which supports their performance of government contracts.

These additional prohibitions require separate rulemakings and will likely take effect on August 13, 2020. In the meantime, interested parties may submit comments regarding the Section 889(a)(1)(A) interim rule on or before October 15, 2019, to be considered during formation of the final iteration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions