Blacklisted Chinese tech still spreading in U.S. as lawmakers scramble to close loopholes

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The blacklisting of Chinese companies has not stopped their tech and products from entering the U.S., leaving lawmakers searching for a solution.

The U.S. government banned federal agencies from using certain products, but video-surveillance research company IPVM said it uncovered municipalities, local government facilities and schools continuing to purchase those products.

A defense bill passed by Congress in 2018 prohibited the purchase and use of Hikvision and Dahua products for public safety, security and surveillance purposes. The Commerce Department then added that technology to its Entity List, which includes foreign people and enterprises that face strict requirements to do business in the U.S. because of national security concerns.

According to IPVM, more than 300 American government organizations continued to purchase thermal imaging and video technology from Hikvision and Dahua despite the defense bill’s warning.

“These products are banned at the federal level for a reason,” said IPVM head of operations Donald Maye. “The fact that they continue to be used at the local and state level is concerning.”

He pointed to Modesto City, California, placing Hikvision tablets capable of taking people’s temperatures on buses as an example of how taxpayer money was spent on the allegedly dangerous tech.

Congressional lawmakers are trying to close perceived loopholes and prevent the usage of such blacklisted technology by those outside the federal government. Sens. Marco Rubio, Florida Republican, and Ed Markey, Massachusetts Democrat, this week introduced the Secure Equipment Act of 2021. Mr. Rubio’s office said it would block the sale and usage of Hikvision and Dahua regardless of whether federal spending is involved.

Mr. Rubio’s office said the bill would also block the integration of Huawei, ZTE and Hytera, which his office said were all Chinese state-backed or directed firms.

“The Chinese Communist Party subsidizes these companies and exploits loopholes in our laws to allow malicious actors to sell compromised equipment and services in the U.S.,” Mr. Rubio said in a statement announcing the proposal. “The status quo is dangerous, and we need to act now to strengthen our national security and protect our critical infrastructure.”

IPVM published new research on Tuesday claiming that Hikvision partnered with China’s military, citing statements from Hikvision’s parent company and the People’s Liberation Army in China. Hikvision disputed IPVM’s claim.

“Not now, and not ever, has Hikvision conducted research and development work for Chinese military applications,” a Hikvision spokesperson said in a statement. “Any instances of such by any of our employees were done so in a personal capacity and not at the direction of the company.”

Dahua did not respond to a request for comment.

Existing regulations and sanctions from the U.S. government are producing mixed results compared to their desired effects. Many American entities are not aware of the 2018 defense bill’s restrictions or other regulations, according to Lawrence Ward, partner at law firm Dorsey & Whitney who specializes in national security law and international trade compliance.

“When you talk about local governments and others that may not have the same level of sophistication as a Fortune 500 company or a U.S. government contractor like Lockheed Martin or Boeing, you could certainly see how it would be easy for them to miss these restrictions,” Mr. Ward said.

Mr. Ward said the discovery of continued use of blacklisted technology was not surprising and he noted that his firm had a client that was a subcontractor to a U.S. government contractor and was not aware of relevant restrictions involving their business.

The knowledge gap in the supply chain for American industry has produced a vulnerability for China to exploit. Mr. Maye said his company relied on procurement officers to track and map the purchase and usage of blacklisted technology, and he said there was “probably a heck of a ton more” out there and described IPVM’s recent findings as the “tip of the iceberg.”

People involved in international trade and compliance expect the Biden Commerce Department to take action in the coming months to shut off as much of the Chinese supply chain to various industries as possible. However, it is unclear how long it will be before new restrictions are widely enforced.

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