On
Semiconductor Manufacturing International Corporation (SMIC).- ChangXin Memory Technologies (CXMT).
Yangtze Memory Technologies (YMTC).-
Any entity that the Secretaries of Defense and Commerce, in consultation with the Director of National Intelligence or the Director of the
Federal Bureau of Investigation (FBI ), determine to be an entity owned or controlled by, or otherwise connected to, the government of a foreign country of concern. Such determination must be announced via publication in theFederal Register .
Effective Date. The prohibition will take effect in
Required Certifications. Once effective, federal contractors and subcontractors at all tiers of the supply chain will be required to certify that products for federal government end-use do not contain covered semiconductor products and services.
Reliance on Lower Tier Certifications. The statute allows federal contractors and subcontractors to rely upon certifications from lower tier suppliers that products they procure do not contain covered semiconductor products or services and need not conduct an independent third party audit or formal reviews.
Liability for Rework/Corrective Action. An entity that sells products containing covered semiconductor products or services will bear the financial liability for any rework or corrective action necessary to remedy the use of covered semiconductor products or services in their products.
Reporting Requirements. Any federal contractor or subcontractor who becomes aware of or suspects the use of covered semiconductor products or services in any end item purchased by the federal government for a critical system must report such information to the appropriate federal authorities within 60 days, with federal agencies required to provide notification to
Excluded. The prohibition does not apply to grants or other federal financial assistance awards that are not contracts and will not apply to grants made under the CHIPS Act.
Waivers. The following federal officials are granted the authority to provide a waiver on the effective date of this provision, granted that it is in the critical national security interests of
- Secretary of Defense
- Director of National Intelligence
- Secretary of Commerce1
- Secretary of Homeland Security*
- Secretary of Energy*.
Additionally, all executive agencies are granted waiver authority for a renewable period of two years, if:
- In consultation with the Secretary of Commerce, the agency head determines that no similar product is available to be procured when needed at U.S. market prices or a price not considered prohibitively expensive.
- In consultation with the Secretary of Defense or the Director of National Intelligence, the agency head determines the waiver would not compromise critical national security interests.
The granting of any waiver must be accompanied by a report to
Potential Broadening. The NDAA contains a second prohibition that appears to have been an effort to prohibit federal agencies from purchasing electronic parts or products that use electronic parts for a “critical system” from an entity that uses covered semiconductor products or services. However, awkward statutory drafting appears to have failed to require such a prohibition. The second prohibition states that federal agencies cannot enter “into a contract (or extend or renew a contract) with an entity to procure or obtain electronic parts or products that use any electronic parts or products that include covered semiconductor products or services.” As written, the second prohibition appears to be subsumed within the first general prohibition on federal purchases.
Notably, the statutory text for this second prohibition appears to be different than
As the
Footnote
1. In consultation with the Secretary of Defense or the Director of National Intelligence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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