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Supply Chain Risk

Commerce Department issues proposed rule to secure communications supply chain

The Commerce Department on Tuesday issued a proposed rule aimed at securing the nation’s information and communications supply chain from foreign threats.

The proposed rule lays out the procedures for the Secretary of Commerce to follow in evaluating potential security threats posed by foreign-owned or operated companies seeking to do business with U.S. companies that involve the information and communications technology and services (ICTS) supply chain.

The rule would allow the Secretary of Commerce to identify and assess “transactions” that pose national security risks to the ICTS supply chain, to the nation’s digital economy, and to those living in the U.S. 

According to the Commerce Department, Secretary Wilbur RossWilbur Louis RossFCC votes to bar use of its funds to purchase Huawei, ZTE equipment Hillicon Valley: Senators ask Trump to halt Huawei licenses | Warren criticizes Zuckerberg over secret dinner with Trump | Senior DHS cyber official to leave | Dems offer bill on Libra oversight Senators urge Trump to suspend Huawei license approvals MORE has already chosen to adopt a “case-by-case, fact-specific approach” to evaluating which transactions should be prohibited.

Under the proposed rule, if the Secretary of Commerce decides to ban transactions with a specific foreign company, that company will be notified and allowed to defend themselves before a final decision is made. 

The rule resulted from an executive order signed by President TrumpDonald John TrumpTrump puts Kushner in charge of overseeing border wall construction: report Trump 2020 national spokesperson gives birth to daughter New McCarthy ad praising Trump includes Russian stock footage MORE in May. The order, much like the proposed rule, gave the Secretary of Commerce the authority, in consultation with several other federal agencies, to ban U.S. companies from doing business with specific foreign-owned companies deemed to be national security threats to the ICTS supply chain. 

Ross said in a statement on Tuesday that the rules, “demonstrate our commitment to securing the digital economy, while also delivering on President Trump’s commitment to our digital infrastructure.”

The agency requested public comment on the proposed rule, and it is open to such commentary for 30 days. 

The proposed rule was rolled out the week after the Commerce Department issued a 90-day extension on a temporary license that allows U.S. companies to do business with the Chinese telecommunications group Huawei. 

If the extension had not been issued, companies would have been barred from doing business with the group, following its addition to the Commerce Department’s “entity list” in May in conjunction with Trump’s executive order. 

The Commerce Department last week also began issuing individual licenses that would allow U.S. companies to do business with Huawei. Ross stated during an interview on Fox Business Network that the agency had received 290 applications for these licenses. 

Huawei has been at the center of concerns about threats to the ICTS supply chain, with federal officials and members of Congress on both sides of the aisle arguing the Chinese company poses a national security threat. In 2017, established Chinese intelligence law required any Chinese-based company to “support, assist and cooperate with the state intelligence work.”

The company has strongly denied claims that it poses a national security risk. 

Last week, the Federal Communications Commission voted to ban U.S. telecom companies from using money from its $8.5 billion Universal Service Fund to buy equipment from companies deemed national security threats, and classified both Huawei and Chinese telecom group ZTE as threats.

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