The Commerce Department is charged with developing regulations for implementing President Trump’s new executive order aimed at banning U.S. imports of information and communications technology (ICT) from companies that are controlled or subject to the direction of governments’ of foreign adversaries, with a governing interim rule forthcoming followed by a final rule 150 days from the date of the directive, a senior administration official said on Wednesday.
The interim regulations will provide the guidance and rationale to entities in the U.S. for the Commerce Department’s actions and there will also be an opportunity for industry feedback before the final regulations are posted, the official said during a media background call late Wednesday afternoon following the release of the president’s new directive.
The executive order went into effect on Wednesday, and so “What will be determined in the future is how it will be implemented, and that’s what the interim regulations, as well as the later regulations that will build from public comment and feedback, will aim at outlining,” the official said.
The Securing the Information and Communications Technology and Services Supply Chain directive appears to be squarely aimed at China, which maintains controls over the country’s private sector. U.S. and officials from allied governments are concerned that China will use its technology sector companies, such as ICT powerhouses Huawei and ZTE, to conduct espionage and potentially other bad behaviors through backdoor channels in the products they sell.
These companies, and others in Finland, South Korea and Sweden are at the forefront of developing and providing 5G networking technology that will enable economic growth through an expected wave of innovation in autonomous vehicles, the Internet of Things, and a host of other products and applications.
One “reason that 5G matters in U.S.-China competition is the need to protect our communications networks,” Peter Harrell, an adjunct senior fellow with the Center for New American Security, told the Senate Judiciary Committee on May 14 during a hearing to examine national security concerns and intellectual property theft related to 5G technology. “The U.S. has an enormous strategic interest in reducing the vulnerabilities of communications networks in the United States and allied countries to cyber espionage by China and other competitor nations.”
Harrell pointed out that the fiscal year 2019 National Defense Authorization Act prohibits companies that contract with the U.S. government from using equipment from Huawei and ZTE.
“However, I should note that while this effectively ensures that large U.S. telecommunications companies can no longer use Huawei and ZTE equipment in their networks, some smaller U.S. wireless networks, particularly in rural areas, still use Chinese equipment,” he said. “A December 2018 regulatory filing by the Rural Wireless Association estimated that 25 percent of its membership of rural wireless carriers use at least some Chinese equipment.”
Asked by a reporter on the background call how the executive order applies to ICT equipment from foreign adversary nations that is already installed, the senior administration official said that the forthcoming Commerce regulation “applies to any transaction initiated, pending or completed, after the date of the executive order.”
Simultaneously with the release of the executive order, which the administration official said is “country agnostic,” the Commerce Department said it is adding Huawei to its Entity List, which means sales and transfers of U.S. technology to companies and persons on this list requires a license from the department’s Bureau of Industry and Security. It said the license can be denied if sale of the technology could harm U.S. national security.
“This will prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” Commerce Secretary Wilbur Ross said in a statement.