U.S. updates Xinjiang supply chain alert and raises big money to compensate U.S. companies that remove Huawei ZTE equipment

U.S. Treasury Secretary John Yellen called on the United States and Europe to form a “united front” against China’s “unfair economic measures” and human rights abuses in Brussels on 13 March. These remarks sparked strong dissatisfaction and opposition from Chinese Foreign Ministry spokesman Zhao Lijian. But on the 13th day in the United States, at least two other important decisions were made against China: an updated warning about the Xinjiang supply chain, and a final decision to remove equipment from Chinese companies such as Huawei and ZTE from the U.S. network.

U.S. Updates to Xinjiang Supply Chain Alert

The U.S. Department of State, Department of Treasury, Department of Commerce, Department of Homeland Security, Trade Representative’s Office (USTR) and Department of Labor jointly issued an updated Xinjiang Supply Chain Commercial Alert on March 13, reminding companies of the risks they may face involving Xinjiang supply chains and investments, including violating U.S. laws.

The updated alert includes the word “genocide” for the first time after former Secretary Pompeo and current Secretary Blinken concluded that the Chinese Communist Party has committed genocide against the Uighur and other ethnic minorities in Xinjiang. This is the first major change from the first version of the alert issued last July.

The updated Business Alert states that the Chinese government continues to commit genocide against the Uyghur and other ethnic minorities in Xinjiang and commits crimes against humanity such as imprisonment, abuse, sexual assault, forced birth control and persecution, including through forced labor and draconian restrictions on people’s freedom of religion, expression and movement.

The new business alert emphasizes that businesses and individuals with potential contact or connections to operations, supply chains or labor in the Xinjiang region should be aware of the significant goodwill, economic and legal risks associated with dealing with entities or individuals involved in human rights abuses in Xinjiang. Relevant human rights abuses include, but are not limited to, forced labor and intrusive surveillance.

Given the severity and scope of local human rights abuses in Xinjiang, Business Alert cautions U.S. businesses and individuals that there is a high risk of violating U.S. law if they do not exit Xinjiang-related supply chains, ventures or investment projects. For example, potential legal risks include violating laws prohibiting forced labor, such as participating in and profiting from a venture capital project knowing or disregarding that it involves forced labor. There is also the possibility of violating the law by dealing with sanctioned persons, or violating export controls or import bans.

The alert lists the top 20 industries that are believed to use forced labor, including agriculture, cell phone industry, cotton products, sugar, textiles, construction, electronics assembly, wigs and hairpieces, and others. However, the alert cautions that the list is not exhaustive, and that being on the list does not mean that all goods in the industry are involved in forced labor.

Updated Alert: To counter China’s actions in Xinjiang, the U.S. has taken a number of actions, such as placing 12 Chinese companies on the WRO list, 65 Chinese entities or companies on the Entity List for export control, and two Chinese government agencies and eight former and current Xinjiang officials on economic sanctions.

In a statement issued on March 13, Secretary of State John Blinken emphasized that the United States will continue to promote accountability for China’s atrocities and other human rights abuses through the overall efforts of the government and by working closely with the private sector and allies.

FCC raises huge sums to compensate U.S. companies for removing Huawei’s ZTE equipment

In a major decision by the Federal Communications Commission (FCC) on July 13, the agency voted unanimously to approve a $1.9 billion plan to eventually remove equipment from Chinese companies such as Huawei and ZTE from U.S. networks. U.S. carriers that remove equipment from Huawei and ZTE, Chinese companies whose products are considered a national security threat, could apply for federal compensation.

Last year, the Federal Communications Commission already classified Huawei and ZTE as national security threats to communications networks, barring U.S. companies from using $8.3 billion in government funds to buy equipment from these Chinese companies. An agency rule adopted last December also requires carriers that own ZTE or Huawei equipment to “remove and replace” that equipment.

“There is a serious risk that these devices could be manipulated, compromised or controlled by foreign participants,” said Jessica Rosenworcel, acting chairwoman of the Federal Communications Commission. “We will evaluate network after network, base station after base station, router after router, until we eradicate devices that could undermine national security. It’s a daunting task.”

This final FCC order expands the companies eligible for reimbursement from those with 2 million or fewer customers to those with 10 million or fewer customers. The FCC estimated in September 2020 that it would cost $1.837 billion to remove and replace Huawei and ZTE equipment from the network.

Congress and the White House have been working to ensure that Huawei and ZTE equipment is not used in U.S. networks, citing the companies’ risk of cyber espionage. in 2018, Congress voted to block federal agencies from buying equipment from five Chinese companies included in the FCC’s latest ban. In March, the FCC listed five Chinese companies as posing a threat to national security under the 2019 law aimed at protecting U.S. communications networks, including Huawei and ZTE, as well as Henergy Communications, Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. In June, the FCC voted to ban the use of Huawei, ZTE and five other Chinese companies whose equipment is considered a national security threat from U.S. telecommunications networks. The FCC can also revoke equipment licenses previously issued to these Chinese companies.

Former Defense Department official Alan Estevez expected to be nominated by the Commerce Department’s Undersecretary for Industry and Security

According to several U.S. media reports, former Defense Department official Alan Estevez is expected to be nominated as the Commerce Department’s undersecretary for industrial and security affairs. “According to the Wall Street Journal, Estevez will oversee the 450-member Bureau of Industry and Security. The importance of this position has grown as the United States seeks to prevent China from acquiring advanced U.S. technology. The Bureau of Industry and Security has a large say in determining which technologies the U.S. can export to China, which should be blocked, and which Chinese companies will be blacklisted by the Commerce Department.

According to the introduction: Estevez in the U.S. Department of Defense has 36 years of experience, served in the Obama administration as the U.S. Foreign Investment Review Board (CFIUS) of the Department of Defense representative, is now Deloitte Consulting LP (Deloitte Consulting LP) director.