Capitol Hill

Proposed rule banning Chinese tech needs to consider small contractors, senators warn

Two U.S. senators called on the Office of Management and Budget to ensure that federal regulation banning the government’s use of Chinese telecommunications technology include “explicit processes” to help small businesses with compliance.

In a May 4 letter sent to acting OMB Director Russ Vought, Sens. Marco Rubio, R-Fla., and Ben Cardin, D-Md., asked Vought to carefully consider to the needs of small businesses while the agency reviews a proposed rule.

The senators’ concern is in response to a proposed rule under review by OMB implementing Section 889(a)(1)(B) of the fiscal 2019 defense policy law — a provision that bans federal agencies from procuring or doing business with companies using “covered telecommunications equipment or services" in an effort to block Chinese tech companies like Huawei and ZTE from entering the U.S. government’s supply chain.

Rubio and Cardin are the top two senators on the Senate Committee on Small Business and Entrepreneurship.

According to the letter, OMB is currently reviewing the draft proposed rule, statutorily required to be implemented Aug. 13. Because smaller companies don’t have access to the same resources as larger suppliers, they may need “more assistance and time,” the senators wrote. The pair called the guidance for small businesses “vita,l” given that small businesses make up about one-quarter of federal procurement, worth $120 billion.

“By providing these small firms with a clear path toward compliance and a reasonable time frame, we believe that the goal of securing the United States supply chain will be better achieved,” Rubio and Cardin wrote.

Outside interest groups representing federal contractors have also pushed Congress to delay the implementation of Part B of Section 889. In a joint letter in late March, the National Defense Industrial Association and the Professional Services Council asked Congress to delay the Aug. 13 date to February 2021. They also cited the ongoing coronavirus pandemic as reason for a delay.

“Part B will impose significant financial and operational costs on medium and small-sized firms at a moment of substantial uncertainty and hardship. While we agree that Part B addresses a significant problem in defense supply chains, and that additional measures are needed to protect [Department of Defense] information assets from covered equipment, COVID-19 has made the current implementation timeline infeasible,” the groups wrote.

The United States government alleges that Huawei’s 5G technology allows for Chinese government espionage and poses a threat to national security. Senior U.S. officials have traveled the globe, urging allies not to include Huawei’s technology in their 5G networks. But the effort has been largely unsuccessful, particularly after the United Kingdom announced in January it would allow Huawei to build noncritical pieces of its 5G network. That decision was met with scorn by lawmakers on Capitol Hill.

Still, Rubio and Cardin warned that OMB needs to produce the regulation cautiously and carefully.

“We are concerned that if the regulatory implementation language fails to adequately consider small businesses, this process could not only result in an ineffective implementation of the prohibition, but also be both harmful and costly to thousands of small federal contractors,” they wrote.

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