While the Trump administration has published a long-awaited rule to ban contractors from using certain Chinese equipment, industry groups are still seeking an extension to the looming deadline, as they argue there's not enough time for businesses to digest the sweeping regulation and that it will add billions in compliance costs to a struggling U.S. economy.
On Monday, the government published an interim rule to implement Section 889 of the Fiscal Year 2019 National Defense Authorization Act, "Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment." The covered Chinese companies include Huawei, ZTE, Hytera Communications Corp., Hangzhou Hikvision Digital Technology and Dahua Technology.
The interim rule is set to take effect Aug. 13.
The rule's publication is a welcome development in industry, which has been pressing the administration to provide more details on the law's implementation. But with less than 30 days to comment on the regulation and get the word out to small businesses, industry says a delay to the looming deadline is needed.
In a July 15 letter to lawmakers, a coalition of groups led by the U.S. Chamber of Commerce urge Congress to include language in the next COVID-19 relief package delaying the Huawei ban. The letter's signatories also include the Aerospace Industries Association, the National Defense Industrial Association, and the Professional Services Council.
"Publication of the rulemaking is a step forward, yet it is unreasonable to expect industry to digest the rule's multiple mandates in a month, much less comply with them," the letter states. "Further, the interim rule raises as many questions as it answers, including the future scope of the program and definitions of certain words and phrases.
"Congress should continue to consider substantive changes to Section 889," it adds.
According to federal government estimates, the interim rule will cost the public $12 billion and industry $11 billion in compliance expenses within the first year of implementation. The industry groups cite those estimates in their call to delay the prohibition.
"Our groups support the supply chain risk management goals of part B," the letter states. "However, at a time when the U.S. is facing a surge in new coronavirus cases, it is imprudent to add this regulatory headwind to a struggling economy."
The industry letter cites Pentagon acquisition chief Ellen Lord's support for an extension to the deadline. They also point to a June 2019 letter to Congress written by the director of the White House Office of Management and Budget advocating for a delay.
But efforts to delay the rule face strong opposition from China hawks, who want to take a hardline against the Chinese Community Party and companies alleged to be closely affiliated with the CCP.
"Under no circumstances should we weaken or delay implementation of our laws banning the U.S. federal government and government contractors from using Huawei equipment," Sen. Tom Cotton (R-AR) tweeted last month. "That would be a gift to the Chinese Communist Party."
Sen. Ron Johnson (R-WI) has proposed an amendment to the Senate's fiscal year 2021 defense authorization bill that would delay the contracting ban until August 2021. His amendment also includes industry-backed language to clarify that the ban only applies to equipment and services used in the performance of a government contract, rather than a company's entire business operations.
But Johnson's amendment is not among those expected to be considered when the Senate returns to Washington to debate the FY-21 policy bill next week.
Meanwhile, in the House, Rep. Virginia Foxx (R-NC) has submitted an amendment to the House's FY-21 authorization bill that would delay the prohibition until Jan. 1, 2022.
However, a final bill is not expected to reach President Trump's desk until sometime in the fall, after the Huawei ban goes into effect Aug. 13, meaning the next COVID-19 relief package may be industry's only hope for securing a delay.
"Policymakers and businesses have a mutual interest in modifying the starting date of part B to avoid a federal contracting crisis," the industry letter states. "Left unaddressed, part B would jeopardize the federal government's ability to procure the essential goods and services it needs to promote our nation's well-being, while simultaneously placing added financial pressure on many industries that are struggling to rebound economically and keep the pandemic in check."