In this episode of All Things Investigations, we’re tackling a rule that every business executive and compliance officer needs to be aware of. It’s the IT Supply Chain Security Rule, and it authorizes the US Department of Commerce to review transactions involving property or services subject to US jurisdiction from foreign countries deemed as foreign adversaries, such as China and Russia. Joining me are Tyler Grove and John Hannon, who co-wrote a paper on this rule and discussed the implications of the rule, its impact on trade with See more +

In this episode of All Things Investigations, we’re tackling a rule that every business executive and compliance officer needs to be aware of. It’s the IT Supply Chain Security Rule, and it authorizes the US Department of Commerce to review transactions involving property or services subject to US jurisdiction from foreign countries deemed as foreign adversaries, such as China and Russia. Joining me are Tyler Grove and John Hannon, who co-wrote a paper on this rule and discussed the implications of the rule, its impact on trade with China and other countries, and what businesses need to know to stay compliant.

Tyler Grove is a partner at Hughes, Hubbard, and Reed, specializing in sanctions, export controls, and foreign direct investment review. John Hannon is an associate at the same firm and works with Tyler in the International Trade Group, focusing on export controls, sanctions, and commercial litigation.

Some of the ideas discussed in this episode include:

The IT Supply Chain Security Rule gives the US Department of Commerce powers similar to CFIUS to review transactions and requires mitigating action up to and including certain unwinding transactions if national security concerns are identified.

The rule applies to a broad range of products, including internet-connected software, data hosting and cloud services, networking equipment, internet-connected cameras, and drones.

While it’s still early in the enforcement process, there could be indirect impacts on trade with China and other countries due to third-party partners refusing to engage in transactions for reputational reasons.

Commerce has requested approximately $36 million to hire 114 positions dedicated to ICTS administration and enforcement, indicating that there will be more reviews and enforcement in the near future.

The ICTS rule targets companies headquartered or sending products from foreign adversary jurisdictions and aims to prevent these companies from acquiring US technology that could be used for national security purposes.

Companies that fall within the scope of the ICTS rule should conduct a risk assessment to identify any potential national security concerns that Commerce may have and form a response plan for internal stakeholders in the event of an enforcement matter. See less -