Blacklisted Chinese tech continues to spread in the US as lawmakers scramble to close loopholes

The blacklisting of Chinese companies has not stopped their technology and products from entering the US, leaving lawmakers in search of a solution.

The US government has banned federal agencies from using certain products, but video surveillance research company IPVM said it found that municipalities, local government facilities and schools continue to buy those products.

According to IPVM, more than 300 US government organizations purchased video and thermal imaging technology from Hikvision and Dahua despite Washington’s warning about national security and public safety risks. IPVM’s chief operating officer Donald Maye said his company relied on procurement officers to track and map the purchase and use of blacklisted technology, so there was “probably a ton more” out there.

He described the banned Chinese technology they found as the “tip of the iceberg.”

He pointed to the city of Modesto, California, placing Hikvision tablets capable of taking people’s temperatures on buses as an example of how taxpayer money was being spent on supposedly dangerous technology.

“These products are banned at the federal level for a reason,” Maye said. “The fact that they continue to be used at the local and state level is concerning.”

The federal government blacklisted and restricted the acquisition and use of the companies’ products in various ways, including through legislation, the Department of Commerce Entity List, and the Federal Communications Commission covered list.

For example, a defense bill passed by Congress in 2018 prohibited the purchase and use of Hikvision and Dahua products for public safety and surveillance purposes. In 2019, the Commerce Department added that technology to its Entity List, which includes foreign individuals and companies facing stringent requirements to do business in the US due to national security concerns.

The FCC then added the technology in March 2021 to its covered list, which details equipment and services that the US government determines to be an unacceptable risk to national security and public safety.

Hikvision and Dahua are far from the only China-based companies affected by restrictions and blacklisted. The 2018 defense bill also blocked the federal government’s use of Huawei and ZTE equipment. The FCC’s covered list added five technologies in March 2021, including Huawei, ZTE, and Hytera.

When the Commerce Department added Hikvision and Dahua to its list of entities in 2019, it added a total of 28 entities, including one that had 18 subordinate offices that were also listed.

Various business transactions involving foreign investment that successfully navigate blacklists and other regulations may also face scrutiny from the Committee on Foreign Investment in the United States (CFIUS). The committee includes the leadership of seven federal departments and several White House officials who screen business transactions for potential national security issues, and its scope was expanded with the Foreign Investment Risk Review Modernization Act of 2018. .

When the Trump administration tried to ban the video-based social platform TikTok, it was CFIUS that initially ordered China-based parent company ByteDance to divest TikTok’s operations in the US, according to ByteDance.

Keeping up with regulations has presented challenges for consumers trying to understand the requirements, and that knowledge gap in the supply chain has produced a vulnerability that China can exploit.

Lawmakers are now trying to close perceived loopholes and prevent the use of blacklisted technology by people outside the federal government. Senators Marco Rubio, Republican of Florida, and Ed Markey, Democrat of Massachusetts, introduced the Safe Equipment Act of 2021 this week. Rubio’s office said it would block the sale and use of Hikvision and Dahua regardless of whether there are federal spending. involved.

Rubio’s office said the bill would also block the integration of Huawei, ZTE and Hytera, which according to his office were all companies run or supported by the Chinese state.

“The Chinese Communist Party subsidizes these companies and takes advantage of loopholes in our laws to allow malicious actors to sell compromised equipment and services in the United States,” Rubio said in a statement announcing the proposal. “The status quo is dangerous and we must act now to strengthen our national security and protect our critical infrastructure.”

IPVM released a new investigation on Tuesday saying that Hikvision partnered with the Chinese military, citing statements from Hikvision’s parent company and the People’s Liberation Army in China. Hikvision contested the IPVM claim.

“Neither now nor ever has Hikvision conducted research and development for Chinese military applications,” a Hikvision spokesperson said in a statement. “Any case of this type by any of our employees was done in a personal capacity and not under the direction of the company.”

Dahua said he is closely reviewing the senators’ proposal and insisted that it is not a state-run or endorsed company.

“Our company poses no threat to US national security, and our more than 100 US-based employees proudly support our partners across the country,” Dahua said in an email. “We look forward to working with Congress and other stakeholders in the US to clarify these issues, address their concerns, and at the same time we are fully committed to the US market by providing industry-leading products and solutions for our valued customers. and partners. “

Existing US government regulations and sanctions are producing mixed results compared to desired effects. Many U.S. entities are unaware of the restrictions or other regulations in the 2018 defense bill, said Lawrence Ward, a partner at the Dorsey & Whitney law firm, which specializes in national security law and international trade compliance.

“When you talk about local governments and others that may not have the same level of sophistication as a Fortune 500 company or a US government contractor like Lockheed Martin or Boeing, you can certainly see how easy it would be for them to go through High these restrictions, ”Mr. Ward said.

He said the discovery of blacklisted technology in use across the country was not surprising. He noted that his company had a client who was a subcontractor to a US government contractor and was not aware of the restrictions.

People involved in international trade and compliance hope that in the coming months Biden’s Commerce Department will take steps to shut down as much of the Chinese supply chain as possible to various industries. However, it is unclear how long it would take before the restrictions are widely enforced.

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