The Biden administration plans to let sweeping Trump-era regulations aimed at countering the Chinese Communist Party‘s technology threat go into effect this month despite opposition from the U.S. business community, the Wall Street Journal reported, citing sources familiar with the matter.
The rules, originally proposed last November, would give the Commerce Department the authority to ban technology-related business transactions that it determines pose a threat to national security, thus protecting the U.S. supply chain, the report said. Technology, telecommunications, financial and other industries say such a rule could stifle innovation and hurt competitiveness. The companies had expected the rule to be delayed as the Biden Administration conducted a broad assessment of U.S. technology policy toward China.
The Biden administration now plans to push the rule through, people familiar with the matter told The Wall Street Journal. Administration officials fear that blocking or watering down the rule would give a false impression of Biden’s attitude toward Chinese Communist Party officials and draw criticism of the new administration’s weak approach, people familiar with the matter said.
Sources close to the matter told the Wall Street Journal that government officials have hinted to the industry that they will not actively run the rule. That may soften the impact of the rule, but business representatives said it will still expose companies, especially smaller ones, to huge new compliance costs and uncertainty. Another person familiar with the matter said the Biden administration had not indicated it would have reservations about running the rule.
In comments to the Commerce Department in January, the Business Roundtable said the rule “is not feasible for U.S. businesses in its current form and should not be considered for final publication without significant changes.” The U.S. Business Roundtable, a group of chief executives of major U.S. companies including Amazon, Citigroup and Wal-Mart, said IBM said the current version of the rule is “too flimsy” and hurts the U.S. economy and does not enhance U.S. national security.
A Commerce Department spokeswoman said it will continue to accept public comments on the rule until March 22, when it will become final.
According to Commerce Department estimates, the rule could affect as many as 4.5 million U.S. businesses of all sizes and could require them to obtain government permission for purchases and transactions involving sophisticated technology with what the regulation calls “foreign counterparties” or face potential revocation of the deal or other specific actions.
According to the draft of this provision, the new government regulation applies to technology transactions that include U.S. critical infrastructure, network and satellite operations, large data hosting operations, commonly used Internet-connected software, and technologies used in advanced computing, Drones, automated systems or advanced robotics. This provision may affect the sale and in some cases the use of related technologies.
The telecommunications and financial services industries are particularly affected because of their heavy use of IT services and their handling of sensitive consumer data, but many other consumer-targeted businesses are also at significant risk.
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