While the industry is gearing up to prepare to comply with Section 889 (a)(1)(B) of the National Defense Authorization Act of the FY 2019, industry should also pay close attention to the DoD list of Communist Chinese Military entities. In addition to industry, universities and individuals need do the same.
First a brief reminder on Section 889(a)(1)(B) of the FY2019 of the NDAA: Part B prohibits the U.S. government from entering into a contract with "an entity that uses any equipment, system, or services that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system.” (emphasis added). The rule is expected to become effective on August 13, 2020. It is a rule with very broad implications and doubtful the industry will be ready by August 13, 2020 to implement its requirements. More on this as updates become available.
As of June, the Department of Defense has identified twenty companies as Chinese Communist Military Companies. The list of entities identified by is included here .
As defined in section 1237 of the FY1999 of the NDAA, a Communist Chinese Military Company is :
any person identified in the Defense Intelligence Agency publication numbered VP-1920-271-90, dated September 1990, or PC-1921-57-95, dated October 1995, and any update of those publications for the purposes of this section; and
any other person that: (i) is owned or controlled by the People’s Liberation Army; and (ii) is engaged in providing commercial services, manufacturing, producing, or exporting. Sec. 1237(b)(4). (emphasis added)
For industry, universities and individuals alike this means higher due diligence when conducting business in China. Specifically for defense contractors this mean assessing supply chain risk. To be sure, this is not a sanctions list, however, it could lead to U.S. sanctions. Industry should proceed on the side of caution and not neglect due diligence.
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