Pursuant to a May 15 executive order aimed at securing the U.S. information and communications technology and services supply chain, the Department of Commerce has issued a proposed rule laying out the process and procedures that the agency intends to use to identify, assess, and address certain ICTS transactions that pose an undue risk to critical infrastructure or the digital economy in the U.S., or an unacceptable risk to U.S. national security or the safety of U.S. persons. Interested parties may submit input on this proposal by Dec. 27.

The EO authorizes the DOC to prohibit imports and other transactions that involve ICTS designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary and:

- pose an undue risk of sabotage to or subversion of ICTS in the U.S.;

- pose an undue risk of catastrophic effects on the security or resiliency of U.S. critical infrastructure or the digital economy of the U.S.; or

- otherwise pose an unacceptable risk to U.S. national security.

Foreign adversaries are defined in the EO as any foreign government or non-government entity engaged in a long-term pattern or serious instances of conduct significantly adverse to U.S. national security or to the security and safety of U.S. persons. 

The DOC states in a press release that it intends to adopt a case-by-case, fact-specific approach to determine which transactions must be prohibited, or which can be mitigated, according to the requirements of the EO. Among other things, the DOC will use assessments developed by the Department of Homeland Security and the Director of National Intelligence pursuant to the EO to inform its evaluation of ICTS transactions.

Under the proposed rule, if the DOC makes a preliminary determination in consultation with other federal agencies to prohibit or mitigate a transaction, it will provide notice to the parties engaged in the transaction. Notified parties will have an opportunity to submit a position, which may include proposed measures for mitigation, prior to any final DOC determination. The DOC will then provide an unclassified written final determination to the parties that explains, to the extent possible, how the decision is consistent with the terms of the EO. A summary of the final determination will also be made publicly available, as appropriate. A more expedited process may be pursued in instances where the risk of public harm or national security interests so require it.

While the DOC will accept input on all aspects of the proposal, it indicates that the determination of a “foreign adversary” is a matter of executive branch discretion that will be made by the DOC in consultation with other relevant U.S. government agencies.

For more information, please contact export compliance attorney Kristine Pirnia.

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