US agencies banned from doing business with Huawei and other Chinese tech companies, as Trump administration cites security concerns

Date: Thursday, August 8, 2019
Source: South China Morning Post

  • Crackdown by the White House Office of Management and Budget also targets ZTE, Hytera, Hikvision and Dahua
  • US government fears the companies could divulge US trade secrets and other information to Beijing

The Trump administration announced on Wednesday a ban on US federal agencies buying equipment and services from Chinese companies such as telecoms giant Huawei Technologies, citing national security concerns.

The White House Office of Management and Budget (OMB) said that federal purchases of telecommunications equipment, video surveillance gear and other products from Huawei, its rival ZTE, radio systems provider Hytera, camera maker Hangzhou Hikvision Digital Technology and video surveillance products maker Dahua Technology would be prohibited out of fear the companies could divulge US trade secrets and other information to the Chinese government.

The new rule, which will take effect next Tuesday, is a significant step in the US government’s ongoing effort to crack down on Chinese technology it regards as a potential national security threat.

The announcement comes a year before Congress’ mandated deadline of August 2020 for all federal contractors to stop doing business with these companies.

Jacob Wood, a spokesman for the Office of Management and Budget, said in a statement on Wednesday the OMB “has a strong commitment to defending our nation from foreign adversaries”.

The office “will fully comply with Congress on the implementation of the prohibition of Chinese telecom and video surveillance equipment, including Huawei”, the statement said.

The legislation, approved by Congress and aimed at Chinese tech companies, was part of a defence spending bill passed last year.

By August of next year, the administration will be required to comply with a broader and separate ban that prohibits the government from procuring services and products from any company that uses equipment from Huawei, the world's largest telecoms network gear maker and a leader in 5G technology.

The company – which has repeatedly denied it is controlled by the Chinese government – has been in the cross hairs of the escalating trade war between Beijing and Washington.

The US has accused it of espionage and stealing intellectual property. Huawei has filed a lawsuit against the US government over the restrictions.

“The news today was not unexpected, as it is the continued promulgation of the rules laid out” by the national defence bill passed last year, a Huawei spokesman said. “However, Huawei continues to challenge the constitutionality of the ban in federal court.”

The ban “will do nothing to ensure the protection of US telecoms networks and systems and rather is trade barrier-based on country of origin, invoking punitive action without any evidence of wrongdoing,” the spokesman said.

“Ultimately, it will be rural citizens across the US that will be most negatively impacted as the networks they use for digital connectivity rely on Huawei,” he said.

A Hikvision spokesman said in a statement on Wednesday that the company “is committed to complying with the laws and regulations in all countries and regions where we operate and has made efforts to ensure the security of our products adhere to what is mandated by the US government”.

Only about 1 per cent of Hikvision's US revenue comes from its government clients, according to a person with knowledge of the matter who asked not to be named because of a lack of authority to discuss the company's finances publicly.

Spokesmen for ZTE, Hytera and Dahua did not immediately respond to requests seeking comment.

The government agencies are authorised to grant waivers to contractors deemed to pose no security threat, until August 13, 2021.


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