NEWS

New Rule Prohibits U.S. Government Agencies From Acquiring Telecommunications Equipment or Services From Huawei, ZTE, Certain Other Chinese Companies
08.14.2019
In an interim rule published on August 13, 2019, the U.S. government revised the Federal Acquisition Regulation (FAR) to prohibit federal agencies from acquiring telecommunications equipment or services produced or provided by Huawei Technologies Company, ZTE Corporation and certain other Chinese companies. The new rule applies to “covered telecommunications equipment or services,” which include the following:

any telecommunications equipment or services produced or provided by Huawei, ZTE, or their subsidiaries or affiliates;
video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, Dahua Technology Company, or their subsidiaries or affiliates if such equipment is used for public safety or national security purposes;
video surveillance or telecommunications services provided by such entities for any purpose; and
telecommunications or video surveillance equipment or services produced or provided by an entity owned or controlled by, or otherwise connected to, the government of the People’s Republic of China.

The same rule prohibits federal agencies from acquiring any equipment, system or service that uses covered telecommunications equipment or services as a substantial or essential component of any system. The rule, which implements Section 889(a)(1)(A) of the FY2019 National Defense Authorization Act (NDAA), became effective August 13, 2019. Interested parties may submit comments on the interim rule until October 15, 2019.

New Rule Details
Contracting officers now must insert a new provision, FAR 52.204-24 (Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment), in all solicitations for contracts and all notices of intent to place an order under indefinite delivery contracts (including GSA Schedule contracts). That provision requires each offeror to represent that it will, or will not, provide to the government equipment or services covered by this rule in the performance of any contract, subcontract or other contractual instrument resulting from the solicitation. If the offeror responds affirmatively in the representation, it must disclose significant detail about the identity, operation, proposed use and manufacturer or producer of the equipment, and any factors relevant to determining whether the proposed use of the equipment would be permissible because, for example, the equipment cannot route or redirect user data traffic or permit visibility into any user data or packets that the equipment handles.

Contracting officers also must insert a new clause, FAR 52.204-25 (Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment), in all contracts and orders under existing contracts—including contracts for commercial items and commercial off-the-shelf (COTS) items—that implements the prohibition against delivering to government customers equipment or services covered by the new rule, and imposes strict reporting requirements on contractors that discover such equipment or services during contract performance. Basic information about the discovered equipment or services, and any readily available information about mitigation actions undertaken or recommended, must be reported to the contracting officer (or, for Department of Defense contracts, to https://dibnet.dod.mil) within one business day of identification. Within 10 business days, the contractor must report additional information about mitigation efforts, the efforts it took to prevent the use of the discovered equipment in the first instance and any additional efforts that will be implemented to prevent future occurrences. Contractors must include the new clause in all subcontracts, including subcontracts for commercial items.

Implications for Contractors
Sellers of telecommunications equipment and services to government customers must account for and implement this prohibition, and the related reporting requirements, in both their sourcing operations (including through amendments to subcontracts and other supply agreements) and in their related strategic decision-making. Failure to do so can lead to various adverse consequences, including, for example, allegations of civil or criminal violations of the false claims and false statements statutes.

Although not implemented by the current rulemaking, a related aspect of the FY2019 NDAA (at Section 889(a)(1)(B)) has implications for government contractors generally. As of August 13, 2020, U.S. government agencies may not enter into, extend or renew a contract with an entity that uses telecommunications equipment or services of the sort described above. This related prohibition will be implemented in future rulemaking, but contractors in all industries should review their existing telecommunications equipment and services and consider changes that may be necessary to comply with the prohibition that takes effect next year.

2019 Perkins Coie LLP

Huawei agrees to UK security steps to avoid 5G ban
Britain’s National Cyber Security Centre says it has ‘concerns around a range of technical issues, and has set out improvements Huawei must make
PUBLISHED December 7, 2018

Embattled Chinese telecommunications giant Huawei Technologies has agreed to British intelligence demands to address risks in its equipment and software, as the company seeks to be part of the United Kingdom’s 5G mobile network plans, according to a Financial Times report on Friday.

Huawei executives met with senior officials from Britain’s National Cyber Security Centre (NCSC), where they accepted a range of technical requirements to ease security fears, according to sources cited by the report.

The NCSC said in a statement that it was “committed to the security of UK networks, and we have a regular dialogue with Huawei about the criteria expected of their products.”

“The NCSC has concerns around a range of technical issues and has set out improvements the company must make,” it said.

Shenzhen-based Huawei, the world’s largest telecoms equipment supplier, has come under heightened scrutiny after its chief financial officer was arrested in Canada last Friday on a US extradition request, raising fears of an escalation in the trade war between China and the US.

Beijing called the arrest of Sabrina Meng Wanzhou, who is also the daughter of Huawei founder Ren Zhengfei, as a “despicable rogue’s approach” and part of a campaign to stymie China’s hi-tech ambitions.

Over the summer, Australia barred Huawei from providing 5G technology for wireless networks over espionage fears.

Embattled Chinese telecommunications giant Huawei Technologies has agreed to British intelligence demands to address risks in its equipment and software, as the company seeks to be part of the United Kingdom’s 5G mobile network plans, according to a Financial Times report on Friday.

China races ahead of West in pursuit of 5G
Standards and prices work in country’s favor as launch of new tech nears
TAKASHI KAWAKAMI, Nikkei staff writer
November 29, 2018

GUANGZHOU – As the advent of fifth-generation wireless technology approaches, Chinese companies look to leverage their technological and price advantages to come out on top, even as Washington works to shut them out of the U.S. and other markets.

At the World Internet Conference held in November in Wuzhen, Zhejiang Province, Xiaomi CEO Lei Jun said excitedly that this company hopes to announce a 5G-compatible smartphone next March or April.

With the smartphone market in a slump, Xiaomi is among the many Chinese companies pinning their hopes on 5G technology, which boasts transfer speeds up to 100 times faster than 4G. 2019 is expected to be the first year of the 5G era, with Huawei Technologies planning to roll out a 5G phone in June and ZTE aiming to do so between July and September.

These companies are keeping a close eye on the U.S., where rivals appear to be a step ahead. Motorola is slated to release a 5G-capable smartphone early next year in partnership with wireless carrier Verizon Communications, while South Korea’s LG Electronics and rival carrier Sprint plan to launch their own in the first half of the year.

This may appear as though China is playing catch-up, but the country enjoys advantages over the U.S. in certain key respects.

One is telecommunications infrastructure. As smartphone makers prepare 5G-compatible devices, wireless carriers are rushing to build the necessary networks. Chinese carriers plan a total of $400 billion in 5G-related investment over the five years through 2020.

China already has 350,000 5G cell sites, more than 10 times the U.S. total, according to Deloitte. The Asian country is expected to be the world’s largest 5G market in 2025 with 430 million subscribers — well over double the estimated U.S. figure.

Chinese players are also gaining momentum overseas. Huawei has shipped parts for more than 10,000 base stations in 66 countries. ZTE has partnered with Dutch carrier KPN on 5G testing, and is using ultralow prices to make inroads into European markets.

China’s choice of wireless technology has also given it an edge.

High-speed wireless transmission systems can be broadly divided into two types: TDD (time division duplex) and FDD (frequency division duplex). China has focused on developing TDD technology as a matter of national policy since the 3G era, while U.S. and European players have generally opted for FDD. The two perform much the same when it comes to 4G, but TDD is expected to be the main choice for 5G, as FDD cannot manage the necessary transfer speeds.

Washington is watching China’s advances with alarm, owing partly to worries about Chinese-built networks enabling large-scale spying by Beijing. The U.S. and Australia have both barred Chinese players from their 5G markets, citing security concerns, and Washington has recently begun pressing major allies to do the same.

But critics argue that this is not a realistic option. Countries that shut out Chinese companies and their know-how could find their own 5G infrastructure lagging behind.

This situation prompted a ZTE executive to declare recently that his company is years ahead of European competitors in terms of 5G technology.

“It will probably take American and European businesses more than a year to catch up with Chinese companies,” a former executive at a Japanese wireless carrier said.

Huawei Claims 2-Gig Speeds in London 5G Trial
Chinese tech company teams with British wireless operator Three UK for test using 100MHz C-Band spectrum
-Daniel Frankel, Nov 21, 2018

Chinese tech company Huawei said it has achieved 2 Gbps download speeds during 5G fixed wireless download trials being jointly conducted with British wireless operator Three UK. Huawei said the trials utilized the 100MHz C-Band spectrum and that speeds actually averaged around 1 Gbps over time. With cable operators vested in DOCSIS 3.1-powered HFC networks, the speed boast will undoubtedly raise interest. Verizon has deployed 5G fixed wireless in a number of U.S. markets, but speeds average around 300 Mbps, topping out at just under 1 Gbps. In the UK, Three recently committed to spending more than $2.5 billion to deliver 5G services. Network technology vendor Huawei, of course, faces steep hurdles in markets including Australia and the U.S.m which believe its products provide the means for Chinese operatives to conduct espionage.

“Huawei will continue to work with Three UK to bring customers more market-leading commercial applications of 5G,” Huawei 5G product line president Yang Chaobin said in a statement.

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