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New Defense Department Rules Restrict Purchases from Mainland China

The U.S. Defense Department recently issued two rules that amend the Defense Federal Acquisition Regulation Supplement – which applies to contractors doing business with the Defense Department – to restrict the purchase of certain sensitive products from mainland China.

The first of these rules prohibits the procurement of video surveillance and other telecommunications equipment or services from Huawei or ZTE, or any subsidiary or affiliate. The secretary of defence will also consult with the director of national intelligence and the director of the Federal Bureau of Investigations to determine whether any other telecommunications suppliers are owned or controlled by, or otherwise connected to, the governments of mainland China or Russia, in order to ban purchases from such entities.

The regulation prohibits the purchase of telecom products and services as a “substantial or essential” component in nuclear deterrence systems (including nuclear command, control and communications, integrated tactical warning and attack assessment, as well as continuity of the U.S. government) and homeland defence systems (including ballistic missile defence). It also prohibits procurement of these products as “critical technology” in any other system. The standard for waiver of this restriction is very limited, requiring a one-time decision by the secretary of defence with notification to congressional committees.

A separate rule prohibits the acquisition of samarium-cobalt magnets, neodymium-iron-boron magnets, tungsten metal powder, and tungsten heavy alloy (containing 90 percent or more tungsten) or any finished or semi-finished components containing tungsten heavy alloy that are melted or produced in mainland China, North Korea, Russia or Iran. These products are subject to potential exception procedures in the event of non-availability from the United States or another supplier.

Content provided by Picture: HKTDC Research
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