The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration has published an interim final rule implementing section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115-232, the 2019 NDAA).¹ ²  This interim final rule is effective August 13, 2020 and interested parties may submit comments per the instructions in the Federal Register notice by September 14, 2020.

Section 889(a)(1)(B) of the 2019 NDAA prohibits executive agencies from entering into, or extending or renewing, a contract with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system. The statute covers certain telecommunications equipment and services produced or provided by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of those entities) and certain video surveillance products or telecommunications equipment and services produced or provided by Hytera Communications Corporation, Hangzhou
Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of those entities).

The statute applies to any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system. It is not limited to end products produced by the five above named companies.

The Federal Acquisition Regulations (FAR) Council is currently working to update the System for Award Management (SAM) in order to require offerors to represent whether they use covered telecommunications equipment or services, or use any equipment, system, or service that uses covered
telecommunications equipment or services.

The FAR Council explains that it is important for contractors to develop a compliance plan in order to be able to submit accurate representations to the Government. The FAR Council explains that developing a compliance plan will assist contractors to be compliant and it expects contractors to develop a compliance plan within the first year that Section 889(a)(1)(B) is in effect.

According to the FAR Council, a contractor should take the following steps to implement a comprehensive compliance plan:

1. Regulatory Familiarization. Familiarize itself with the rule and required actions.

2. Corporate Enterprise Tracking. Determine if it utilized covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.

3. Education. Educate the entity’s appropriate professionals to ensure they are familiar and comfortable with the compliance plan.

4. Cost of Removal. Once use of covered telecommunications equipment or services is identified, if the entity decides to replace these equipment or services, ensure new equipment and services are acquired.

5. Representation. Provide representation to the Government regarding whether the entity is utilizing covered telecommunications equipment or services and alert the Government if use is discovered during contract performance.

6. Cost to Develop a Phase-out Plan and Submit Waiver Information. As explained in the Federal Register Notice, there are limited opportunities for contractors to request waivers. Therefore, if a contractor plans to request a waiver, it should develop a phase-out plan and provide this plan along with other required waiver information to the Government.³

As explained above, even though the interim final rule is effective August 13, 2020, the FAR Council is accepting comments on or before September 14, 2020.

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_{1. 85 Fed. Reg. 42665 (Jul. 14, 2020), available at https://www.federalregister.gov/documents/2020/07/14/2020-15293/federal-acquisition-regulation-prohibi-tion-on-contracting-with-entities-using-certain.}

_{2. Section 889(a)(1)(A) went into effect on August 13, 2019. See 84 Fed. Reg. 40216 (Aug. 13, 2019).}

_{3. See 85 Fed. Reg. 42665, 42667.}