On March 29, 2021, the Commerce Department published an advance notice of proposed rulemaking (ANPRM) seeking public comment on potential licensing or other pre-clearance processes for transactions under the regulations that took effect on March 22, 2021 to implement Executive Order 13873, “Securing the Information and Communications Technology and Services Supply Chain” (Executive Order 13873). Executive Order 13873 authorizes the Commerce Department to block or impose conditions on transactions involving information and communications technology and services (ICTS) originating in countries designated as “foreign adversaries,” to address threats to US national security. Our blog post on the Executive Order 13873 regulations is available here.

The Biden Administration’s decision not to delay the implementation of the Executive Order 13873 regulations, the Commerce Department’s recent announcement that it had issued subpoenas to Chinese ICTS providers under Executive Order 13873 (see here), and publication of this ANPRM show that these supply chain issues are a policy concern that will continue from the Trump Administration. In that regard, the Biden Administration has taken other steps to consider how US supply chains should be strengthened, as discussed in posts on the Baker McKenzie Global Supply Chain Compliance blog here and here.

The ANPRM indicates that the Commerce Department does not expect to have a license process for ICTS transactions in place by May 19, 2021 (which was the anticipated and announced date when the Executive Order 13873 regulations were published in January) and that additional public input is needed on several aspects of a potential ICTS voluntary licensing or pre-clearance process. The ANPRM does not indicate when the Commerce Department expects further regulations to be published. The Commerce Department is accepting comments to the ANPRM by email and via the Federal eRulemaking Portal until April 28, 2021. US companies that procure ICTS equipment identified in the Executive Oder 13873 regulations from identified “foreign adversaries” such as China or Russia should consider submitting comments.

In order to assist the Commerce Department in this process, the ANPRM seeks public comment on:

  • Whether licensing processes and notifications to the Committee on Foreign Investment in the United States (CFIUS) and to the Bureau of Industry and Security (BIS) present useful models for an ICTS transaction licensing or pre-clearance process;
  • The best form for the ICTS transaction licensing or pre-clearance process (e.g., a regime requiring prior authorization to engage in ICTS transactions, or a regime allowing parties to seek confirmation that a potential ICTS transaction would not be prohibited);
  • Whether special considerations should be provided to small entities in the licensing or pre-clearance process;
  • Whether certain types of ICTS transactions should not be eligible for licensing or pre-clearance, or should be prioritized for licensing or pre-clearance;
  • Whether the licensing or pre-clearance process should apply to multiple ICTS transactions by the same entity;
  • The types of information that should be required as part of the licensing or pre-clearance process;
  • Whether industry would prefer a shorter review timeframe that could result in fewer licenses or pre-clearances being granted, versus a longer review timeframe that could result in a greater number of licenses or pre-clearances being issued;
  • How the potential for mitigation of an ICTS transaction should be assessed during the licensing or pre-clearance process;
  • Processes to avoid invalidation of a granted license or pre-clearance when the subject ICTS transaction is modified; and
  • Whether holders of an ICTS transaction license or pre-clearance should have the opportunity to renew the license or pre-clearance rather than reapplying, and if so, how the renewal process should be structured.

If you wish to submit a comment on the ANPRM or have any questions, please contact any member of our Outbound Trade Compliance team.

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