United States: Department Of Defense Amends Section 889 Reporting Requirements In Final Rule

As we have written previously, the FAR Council has issued a number of interim rules designed to align the Federal Acquisition Regulation (FAR) with the prohibitions contained at Part A and Part B of Section 889 of the FY19 National Defense Authorization Act. Those who have been following these developments know that Section 889 Part A prohibits the federal government from purchasing, and contractors from providing, covered telecommunications equipment and services offered by certain Chinese technology firms, such as Huawei and ZTE Corporation. Part B prohibits contractors from using covered telecommunications equipment or services, regardless of whether that use is in support of a federal contract. The purpose of these prohibitions is to protect the federal supply chain from the threat of espionage posed by firms the government deems to be owned or controlled by the Chinese government.

On Jan. 15, 2020, the Department of Defense (DoD) issued a final rule to partially implement Part A of Section 889. The final Defense Federal Acquisition Regulation Supplement (DFARS) rule introduces two changes from the previous DFARS interim rule. First, it amends DFARS clause 252.204-7018, Prohibition on the Acquisition of Covered Defense Telecommunications Equipment or Services, by extending the timeframe for contractors to report the discovery of covered telecommunications equipment or services being used as a substantial or essential component of any system, or as critical technology as part of any system, during contract performance from one day to three days. Second, it amends DFARS 252.204-7018 to extend the timeframe for contractors to provide mitigation actions to eliminate the submission or use of covered technology from 10 days to 30 days. All other aspects of the interim DFARS rule have been carried forward to the final rule.

Importantly, this DFARS final rule does not affect the requirements set forth in the interim FAR rules for non-DoD procurements. If you have a federal contract with a non-DOD agency, you are still expected to comply with the one-day and 10-day notification requirements in FAR clause 52.204-25. We expect the interim FAR rules to be finalized sometime this year.

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