The U.S. Commerce Department on Tuesday laid out plans to take a case-by-case approach in determining which business transactions must be barred in order to protect against related supply chain threats and national security risks to the country’s telecommunications networks.
Secretary of Commerce Wilbur Ross and federal officials will evaluate and have the authority to bar or unwind any deals for information and communications technology that is created or supplied by companies controlled or directed by “foreign adversaries” and that pose security risks.
“These actions will safeguard the Information and Communications Technology Supply Chain,” Ross said in a statement. “These rules demonstrate our commitment to securing the digital economy, while also delivering on President Trump’s commitment to our digital infrastructure.”
The proposed rule implements President Trump’s May 15 Executive Order. Trump issued the executive order over concerns of security threats to U.S. telecom networks and said: “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services.”
As it relates to the Commerce Department rule, “foreign adversaries” are determined at the discretion of Secretary Ross, in consultation with heads of other federal executive departments and agencies.
Notably, the rule does not expressly single out any supplier or company, including Chinese vendor Huawei, which has also been at the center of ongoing U.S.-China trade talks. That’s unlike a Federal Communications Commission decision last week to adopt rules that specifically prohibit carriers from using federal Universal Service Fund (USF) dollars to purchase telecom equipment and services from Huawei and ZTE, over concerns they could be used by the Chinese government for malicious acts against the U.S.
“While many talk of security issues surrounding ‘back doors,’ I have said many times that the untrustworthy equipment from these companies could readily serve as a ‘front door’ for Chinese intelligence gathering, at the expense of our privacy and national security,” said FCC Commissioner Geoffrey Starks in his prepared remarks last week.
Huawei has continually denied allegations that it would engage in espionage or other activities for China’s purposes.
The Commerce Department said the selected case-by case approach would allow Ross to target and prohibit business deals “without unintentionally prohibiting other transactions involving similar ICTS that may not rise to the level of presenting an undue risk to critical infrastructure or the digital economy in the United States or an unacceptable risk to national security or the safety of U.S. persons. This approach would also ensure that the Department does not inadvertently preclude innovation or access to technology in the United States.”
The Telecommunications Industry Association (TIA) trade group praised the move, touting a public-private approach to managing supply chain risk.
“TIA supports the Commerce Department’s new rules implementing the President’s May Executive Order to safeguard the nation’s communications infrastructure from foreign adversaries,” said TIA CEO David Stehlin in a statement. “TIA has long maintained that supply chain risk management is best addressed by public-private partnerships and consensus-based, industry-driven standards, but there is a place for targeted and careful government intervention. Today’s rules exemplify this approach and, through the invitation of comments from industry, represent a clear step forward towards a public-private effort for ensuring a secure communications supply chain.”
In evaluating transactions, if Ross makes a preliminary determination to prohibit a certain deal, the parties will be notified and have an opportunity to submit their position, including proposals of how to mitigate the issue, before a final decision is made.
The proposed rule is open to public comment for 30 days.