The Perils Of Section 889 Part B Execution: The DoD Waiver

McCarter & English Blog: Government Contracts & Export Controls

When last we left the Federal Government, agency buyers were staring down the Interim Rule prohibiting them from contracting with entities that use “covered telecommunications equipment” under Section 889(a)(1)(B) (“Section B”) of the National Defense Authorization Act for Fiscal Year 2019 after August 13, 2020. But then August 13 came and went. Did federal agencies do all they needed to follow the requirement? Did modifications go out to industry yet? Were amendments made? Was FAR 52.204-24 (2019) appropriately corrected to FAR 52.204-24 (2020)? What of 52.204-25 or 52.204-26? Can federal agencies act in time?

No. Definitely not. Accordingly, pursuant to the procedures set forth in the Interim Rule, the Department of Defense (“DoD”) sought and was granted a waiver from the Office of the Director of National Intelligence permitting the DoD until September 30, 2020, to comply with the prohibitions against covered telecommunications and video surveillance equipment. A copy of that waiver can be found here. That’s good news, right? This means that contractors have more time to comply with the Interim Rule, right?

No. Definitely not. First off, while the waiver provides some breathing room for the DoD, it is not applicable to other federal agencies that are required to follow the Interim Rule. If you have contracts with any other federal agency, they are still on the hook to have complied by August 13, meaning that they will still require/demand that you comply and properly certify that compliance. Second, for DoD contractors, this just means that the DoD has more room to make all the proper corrections to its records. To the extent modifications and amendments haven’t already been seen, defense contractors should expect to see a host of them coming their way over the course of the next several weeks, demanding the new certification and any necessary disclosures. Finally, the waiver serves to highlight the importance of this regulation to the DoD and the Federal Government. This is clearly not something that the Government will be taking lightly. Does that mean contractors should get around to compliance when convenient?

No. Definitely not. All federal contractors should be deep into or, depending on the size of the company, nearing completion of the “reasonable inquiry” required by the Interim Rule. For large companies or companies with an international presence, this is no easy undertaking and one that should be afforded the considerable attention that is being demanded. “Telecommunications equipment” covers a broad swath of technological parts and peripheries, and the video surveillance camera market is a virtual sea of Chinese technology “white labeled” as originating from other manufacturers. The type of inquiry expected will need to involve serious digging to ensure even rudimentary compliance with the new rule. Is this the end of the hunt for prohibited equipment? Is this the last we’ll see of targeted trade clauses in federal contracts? Can we assume that this is all contractors will need to do to address covered telecommunications and video surveillance equipment?

No. Definitely not.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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