Section 889: US Chinese telecoms clause causing chaos for NGOs

A United States national security regulation that bans government funding recipients from using Chinese telecom providers is creating chaos for international NGOs and costing the sector millions of dollars, according to a senior NGO adviser. Some government agencies, including the U.S. Agency for International Development, have secured waivers that protect some of their partners from the requirements. But Cynthia Smith, director of government affairs and advocacy at Humentum, a body that helps NGOs address legal and financial issues, said the waivers are limited and complex to navigate. She urged the government to simplify the system and help NGOs understand what they need to do to comply. Section 889 of the National Defense Authorization Act, which came into effect last year, says that U.S. government agencies cannot give grants or contracts to anyone who uses technology from Chinese telecom providers, such as Huawei or ZTE, or any “affiliate or subsidiary” of these companies. The Chinese providers have been deemed a national security threat by the U.S. government, and Section 889 is one of a string of measures to target them. For domestic organizations, the clause has been potentially problematic but navigable. Switching telecom providers might be expensive and technically difficult, but it has been easy to identify alternatives, according to Smith. For international organizations, the position is different. “There are some parts of the world where there are no realistic alternatives to Huawei or ZTE,” she said. In other places, it is extremely difficult to work out the ultimate provenance of every piece of communications technology, making it almost impossible for organizations to state with certainty that they are not doing business with any affiliate or subsidiary. The result is a “legal morass” in which NGOs are unable to work out whether or not they are complying with the law, Smith said. Humentum estimates that the cost of trying to comply with the law across the sector will run into tens of millions of dollars. “Organizations have had to seek legal counsel,” Smith said. “They’ve had to research alternatives. They’ve had to investigate their supply chain. They’ve had to buy expensive new equipment. But when I’ve talked to compliance officers in some organizations, they say it’s not as simple as spending money. They say they just can’t be confident they’re in compliance.” Smith said that the government must find practical ways to help organizations comply. “No one is saying they are against the sentiments behind the prohibition,” she said. “But if you have a law that people can’t figure out how to comply with, that renders it kind of meaningless.” ‘A patchwork quilt of different requirements’ Organizations operating internationally may be able to get a waiver, meaning they do not have to comply with the law, Smith said. But these waivers are limited in scope, and the rules around them are complex. For one, there are different rules covering different types of funding. While the law allows federal agencies to grant a waiver to recipients of acquisition funding, which covers contracts, on a case by case basis, no similar provision exists for assistance funding, which covers grants and cooperative agreements and the majority of which is implemented by NGOs. Instead, U.S. government agencies have had to seek a limited blanket waiver from the Office of the Director of National Intelligence for assistance funding, which they can pass down to their implementing partners. USAID and the Department of State currently have such waivers that expire in September 2022. But even those waivers differ in scope, and other agencies that provide foreign assistance, such as the Department of Health and Human Services, have no such waiver at all. “No one is saying they are against the sentiments behind the prohibition. But if you have a law that people can’t figure out how to comply with, that renders it kind of meaningless.” --— Cynthia Smith, director of government affairs and advocacy, Humentum Another major issue is that the legislation is not project-specific. If an organization takes any acquisition funding from any agency that is not covered by a waiver, then all its activities, everywhere in the world, must be in compliance. The fact that a lot of funding goes through consortia or sub-recipients complicates the matter further. In addition, each U.S. government agency is responsible for enforcing the rules with regard to its own funding, so NGOs may face different compliance regimes — not all of which are clear. “All of this means our organizations have had to deal with a patchwork quilt of different requirements,” Smith said. “Each agency is supposed to have a plan of action to enforce the law. But it’s not clear that all of the agencies have done their own due diligence. It’s not clear they even know how to comply with the law themselves. It’s like we’re building the train tracks as the train goes along.” Solutions could be found at three levels, Smith said. “The law itself could be changed in Congress,” she said. “There’s no sign that’s going to happen. Or the regulations that govern how the law is enforced could be changed. Or it could be fixed by agreeing to a manageable compliance regime at the federal government-wide level.” “Right now it is not clear how solutions might work,” she added. “It’s an opaque process. We’re regularly assured there are ongoing interagency conversations about how it might be addressed. But the problem is happening now. There are hundreds of NGOs affected. So the need for a solution is fairly urgent.”