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China dominates the rare earth industry, accounting for approximately 60 percent of rare earth metal mining and approximately 90 percent of rare earth metal processing in 2023. In order to combat this near-monopoly and to limit supply chain vulnerabilities and risk to the US defense industry, a final Defense Federal Acquisition Regulation Supplement (DFARS) rule, published May 30, 2024, applies broader sourcing prohibitions to the language of DFARS 225.7018 and operative clause DFARS 252.225-7052 to prohibit the use and acquisition of magnets mined in China as of January 1, 2027.Continue Reading DOD Releases Final Rule Prohibiting the Acquisition of Certain Magnets from Nonaligned Foreign Nations

On June 2, 2023, the FAR Council issued an Interim Rule to implement the prohibition on having or using TikTok or any successor application or service developed or provided by ByteDance Limited (covered application). Importantly, the prohibition applies not only to Government-issued devices but encompasses contractor and contractor employee-owned devices (e.g., employee devices used as part of a bring-your-own-device program) as well. The Interim Rule took immediate effect and requires new FAR clause FAR 52.204-27, Prohibition on a ByteDance Covered Application, to be included in solicitations issued on or after June 2, 2023. In addition, solicitations issued before the effective date were required to be amended by July 3, 2023, provided that award of the resulting contract(s) occurs on or after the effective date. Existing indefinite-delivery, indefinite-quantity contracts were required to be modified to include the new clause by July 3, 2023, to apply to future orders. Finally, if exercising an option or modifying an existing contract to extend the period of performance, contracting officers must include the clause. In short, this clause will soon be in most if not all Federal government contracts. Contractors should take action now to ensure that they are prepared to comply with these requirements and that employees are familiar with and trained regarding the prohibition.Continue Reading TikTok Dances Off of Contractor IT Devices—Interim Rule Prohibits ByteDance Limited Applications

Act Seeks to Cut Strings Between U.S. Small Businesses and China, Russia, and Other Countries of Concern

Small businesses that rely on the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs to fund their research and development projects were left on the edge of their seats this September as the reauthorization of those programs hung in the balance. Fortunately, on September 30, 2022—the date on which the programs were set to expire—President Biden signed the SBIR and STTR Extension Act of 2022 (the Act). The Act, which reauthorizes the SBIR and STTR programs until September 30, 2025, is the result of several months of protracted negotiations in which Congress questioned whether the programs provide enough protection against ties between China and other foreign countries of concern and program awardees. These concerns were amplified following reports that state-sponsored Chinese firms were targeting companies funded by the programs and, in some cases, that China was the true beneficiary of the awards, not the United States. This prompted intense scrutiny of the programs, which are intended to fund US startups and small businesses to stimulate technological innovation and meet federal research and development needs, and placed the reauthorization of these programs in jeopardy. Ultimately, however, Congress was able to reach an agreement to reauthorize the programs, but not without some major national security reforms to ensure that American intellectual property remains protected from foreign influence.Continue Reading SBIR/STTR Extension Act Preserves Innovation Programs, But Comes With a Bite

For several years, we have witnessed the emergence of a statutory and regulatory framework to tighten controls on the export of emerging and critical technology, as well as the review of inward foreign investment into said technology. As was evident in the listing of Huawei and other Chinese technology giants, the United States has demonstrated a willingness to use alternative punitive measures against China. Whether the desired impact of this approach has been achieved is difficult to determine. We have, nevertheless, no reason to believe that the tide will ebb in 2020.
Continue Reading Export Controls and Global Trade: A Forecast and the Year in Review

In a rule published and effective October 9, 2019, China’s key manufacturers of video surveillance products have been added to the Bureau of Industry and Security (BIS) Entity List by an interagency End-User Review Committee (ERC) comprised of representatives of the Departments of Commerce State, Defense, Energy and, where appropriate, Treasury. The Entity List (15 CFR, Subchapter C, part 744, Supplement No. 4) identifies entities believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.
Continue Reading Hikvision, Dahua Technology Among 28 Added to Entity List, Resulting in Broad Impact on Chinese Surveillance, Artificial Intelligence and Facial Recognition Firms

As we stated last month, further restrictions are afoot on the use of Chinese technology in federal acquisitions. An Interim Rule issued by the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) (collectively, the “FAR Council”) implements the first phase of Section 889 of the FY2019 National Defense Authorization Act (NDAA). The Interim Rule, effective August 13, 2019, broadly prohibits federal agencies, federal contractors, and grant or loan recipients from procuring “covered telecommunications equipment or services” produced by Huawei Technologies Company and ZTE Corporation and, with respect to certain public safety or surveillance applications, Hytera Communications Corporation, Dahua Technology Company, and Hangzhou Hikvision Digital Technology Company. In particular, federal suppliers are prohibited from sourcing “substantial or essential component of any system, or as critical technology as part of any system” from the foregoing companies.
Continue Reading Know Your Supplier: Effective August 13, 2019, Certain Chinese Telecoms Banned From Federal Procurement

Effective Date of Increase and Customs Reporting Guidance

On May 9, 2019, the Office of the U.S. Trade Representative (USTR) announced an increase in duties pursuant to Section 301(b) of the Trade Act of 1974, as amended (Section 301), from 10% to 25%, on over 5,700 Harmonized Tariff Schedule of the United States (HTSUS) products imported from China. The increase, covering $200 billion in products that were subject to 10% additional duties since September 24, 2018, was set to rise to 25% at the beginning of this year, only having to be postponed twice to allow U.S.–China trade negotiations to bear fruit. They did not.Continue Reading International Trade Update: U.S. Heightens Tariffs on Chinese Goods; China Reciprocates