September 14, 2020

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Industry groups oppose Congress' circuit board crackdown

Ten industry groups are pushing leaders of the House and Senate Armed Services Committees to scale back provisions in annual defense policy legislation aimed at restricting the use of Chinese-produced circuit boards.

The groups, including the U.S. Chamber of Commerce, TechNet and the Aerospace Industries Association, argued in a letter sent on Sept. 8 that the measures included the fiscal 2021 National Defense Authorization Act would be overly restrictive, hamper the Pentagon procurement process and drive up costs.

"If enacted, these provisions will harm DoD’s ability to procure products that use [printed circuit boards], leading to significant cost increases for these products with no benefit to national security, and undermining U.S. businesses," the groups argued.

"Despite the stated intent of the provision’s proponents to remove PCBs sourced from China from the defense supply chain, the amendment excludes key non-Chinese providers which would result in a significant cost increase to the DoD thereby forcing companies to procure said products elsewhere," they wrote.

What Congress proposed: Both the House, H.R. 6395 (116), and Senate, S. 4049 (116), defense bills mandate similar restrictions, including requiring the Pentagon to source certain percentages of printed circuit boards from the U.S. or certain countries that have struck agreements with the U.S. under the Arms Export Control Act.

The Senate provision — which was offered as an amendment in the Armed Services Committee by Sen. Josh Hawley (R-Mo.), a vocal China hawk — also would permit the Defense secretary to instead allow the procurement of printed circuit boards from countries determined to not pose a significant national security risk except for China, Russia, Iran or North Korea.

AIA, which represents numerous defense contractors, argued in a separate memo for NDAA negotiators to reject the provisions in both bills or narrow the language to exclude commercial products and commercial-off-the-shelf items procured by the Pentagon and name specific countries where the circuit boards cannot be sourced.

TechNet President and CEO Linda Moore also warned in a July 30 letter following passage of both defense bills that the added requirements would result in the exclusion of printed circuit board-producing nations such as Mexico, Malaysia, Vietnam, South Korea and Taiwan.

Context: The provision is the latest salvo from lawmakers who in recent years have raised national security concerns over the prevalence of Chinese technology and telecommunications infrastructure in the U.S. The NDAA, one of the few major bills that reliably passes each year, has been a clearinghouse for many of those efforts

House lawmakers also voted to bar federal employees from downloading the video-sharing app TikTok on government-issued devices as part of their version of the NDAA. The Senate defense bill didn't include its own ban, but similar legislation sponsored by Hawley passed the chamber in early August.

And Congress in 2018 adopted a government-wide ban on procuring equipment and services from Huawei and ZTA as well as several other Chinese telecommunications firms — also as part of the NDAA.

What's next: The House and Senate must still vote to formally kick off the process and appoint negotiators to smooth over differences in the competing defense bills.

Though both bills passed their respective chambers with overwhelming bipartisan margins, lawmakers are unlikely to hammer out a compromise defense bill until after the November election.

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