New regulations took effect on Thursday barring the U.S. government from buying goods or services from any company that uses products from five Chinese companies including Huawei Technologies, Hikvision and Dahua, a U.S. official said.
The rule, which was prompted by a 2019 law, could have far-ranging implications for companies that sell goods and services to the U.S. government, since they will now need to certify they do not use products from Zhejiang Dahua Technology Co Ltd (002236.SZ) or Hangzhou Hikvision Digital Technology Co Ltd (002415.SZ), even though both are among the top sellers of surveillance equipment and cameras worldwide.
The same goes for two-way radios from Hytera Communications Corp Ltd (002583.SZ) and telecommunications equipment or mobile devices like smartphones from Huawei Technologies Co or ZTE Corp (000063.SZ).
Reuters first reported in July that the rule would take effect Aug. 13.
Ellen Lord, the under secretary of defense for acquisition and sustainment, said Thursday the Defense Department “fully supports” the intent of the changes “but recognizes the implementation challenges facing industry partners.”
Her staff was working with Congress to help “draft revisions to (the law) to facilitate effective implementation and to preclude untended consequences,” Lord said.
Any company using equipment or services in day-to-day operations from these five companies will no longer be able to sell to the U.S. government without obtaining a government waiver.
The U.S. government annually awards more than $500 billion in contracts, according to the Government Accountability Office.
Last year, the United States placed Huawei, Hikvision and other firms on its economic blacklist, barring the firms from buying components from U.S. companies without U.S. government approval. The U.S. added the Chinese firms after concluding they were engaged in activities contrary to the interests of U.S. national security or foreign policy.
The Information Technology Industry Council (ITI) noted Thursday the regulations were only published a month ago even though the law requiring the changes was passed in 2019.
“Because of the extended time it took to roll out rules for these far-reaching requirements, contractors may not be able to consistently meet the law’s objectives.”
Federal contractors had to examine company records to ensure the absence of the named Chinese equipment and services companies. Reuters