On October 5, 2022, the Department of Defense (DOD), in compliance with Section 889 of the National Defense Authorization Act for Fiscal Year 2019, released an updated list (Blacklist) of banned People’s Republic of China (China) military companies. PilieroMazza recently wrote about Part B of Section 889 taking full effect for DOD contractors on October 1, 2022. Section 889 is a broad prohibition to the use of any covered Chinese technology posing a threat to U.S. cybersecurity and national security. Section 889 is comprised of two parts: Part A prohibits the government from procuring telecommunications equipment or services where a substantial or essential component of those goods or services are sourced from a blacklisted Chinese entity, and Part B prohibits agencies from contracting with firms that use prohibited equipment or services during business, even if that use is unrelated to the company’s federal contract. Contractors are encouraged to review the Blacklist regularly to avoid doing business with these companies and potentially losing contract awards and facing False Claims Act liability.
The Blacklist adds 13 companies, including Shenzhen-based DJI Technology (DJI). DJI is one of the world’s largest drone manufacturers and is estimated to control more than half of the global market for commercial drones. Some of the more ‘notable’ additions to the Blacklist include: BGI Genomics Co, a genetic testing company with a massive gene databank and DNA-sequencing contracts worldwide; CRRC Corp, which manufactures rail transit gear; and Zhejiang Dahua Technology, a Hangzhou-based surveillance equipment maker.
Below are the Section 889 banned entities according to the most recent Blacklist, with new additions italicized:
31. China National Nuclear Corporation (CNNC)
The updated Blacklist reflects the United States’ efforts to preserve the nation’s cybersecurity and national security, all while safeguarding the nation’s ability to compete with China’s technological advancements. It is important to keep abreast of updates to the Blacklist as new companies are regularly being added. In the meantime, reviewing internal systems and supplies suspected to be derived from any of the Blacklisted entities is highly recommended. Using any component in any telecommunications of video surveillance equipment that comes from one of the restricted companies can lead to ineligibility for contract award, while failure to disclose the use of such banned items could result in potential liability under the False Claims Act.
If you have questions about Section 889 compliance, its impact on your business, or the Blacklist, please contact Cy Alba, the author of this blog, or another member of PilieroMazza’s Government Contracts or Cybersecurity & Data Privacy practice groups. Special thanks to Ustina Ibrahim and Daniel Figuenick for their assistance with this blog.