The US Department of Commerce (Commerce) released a highly anticipated proposed rule with proposed regulations (Draft Regulations) to enforce Executive Order 13873, “Securing the Supply Chain of Information and Communications Technology and Services” (Executive Order 13873) on 26 November 2019.
Executive Order 13873 gives the Secretary of Commerce (Secretary) sweeping, unprecedented authority to prevent or modify transactions involving information and communications technology and services (ICTS) originating in countries designated as “foreign adversaries” which pose an undue risk to critical infrastructure or the digital economy in the United States, or an unacceptable risk to US national security or the safety of United States persons. All industries are potentially affected by the Proposed Regulations, whether directly or indirectly, which allow for case-by-case reviews of transactions at the Secretary’s discretion. Any transaction that is ongoing as of, or was initiated on or after, 15 May 2019, can be reviewed and there is no mechanism by which a company may seek to clear transactions in advance.
The following is a description of the context and the proposed regulation: I. Covered transactions On May 15, 2019, President Trump issued Executive Order 13873 granting authority to the Secretary to prevent or require certain transactions involving ICTS planned, produced, manufactured or supplied by individuals owned, regulated or controlled by a foreign opponent. You can read our previous blog post about the Executive Order 13873 here.
Foreign adversary means any foreign government or foreign non-governmental entity determined by the Secretary to have committed, for the purposes of Executive Order 13783, to a long-term trend or serious activity that is seriously adverse to the national security of the United States or to the security and safety of United States persons. The proposed regulations do not define the parties are “international enemies,” but state that this is a matter reserved for the discretion of the executive branch.
ICTS means any hardware, software or other product or service intended primarily to fulfil or allow the purpose of data processing, storage, retrieval or electronic communication, including by transmission, storage or display. This is a broad definition that tends to include nearly all the telecommunications and communications-related hardware/commodities, software, technology, or services.
Transfer means the purchase, importation, transfer, deployment, transfer or use of any device or service for information and communication. In this section, the use of the word “transaction” requires a transaction class.