Amid escalating trade war tensions with China and a lengthy dispute over Huawei Technologies over espionage allegations, President Trump declared a national emergency that bans U.S. telecommunications companies from using equipment from foreign firms that could threaten national security.
The Commerce Department followed up immediately by placing Huawei Technologies and 70 affiliates on the Bureau of Industry and Security (BIS) Entity List to “prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” Commerce Secretary Wilbur Ross said in a statement.
Finding "that foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people," Trump's order prohibits "any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service...where the transaction involves any property in which any foreign country or a national thereof has any interest" and has been determined to be detrimental to the U.S.
The executive order will allow Ross to put the screws to information technology transactions that present “an unacceptable risk to the national security of the United States” and is widely seen as an effort to discourage the use of Huaweii technology in the rollout of next-generation 5G networks.
Calling the move “a needed step, and reflects the reality that Huawei and ZTE represent a threat to the security of U.S. and allied communications networks,” Sen. Mark Warner, D-Va., vice chairman of the Senate Select Committee on Intelligence, explained that “under current Chinese security laws, these and other companies based in China are required to provide assistance to the Chinese state.”
The executive order, Warner said in a statement, “places a great deal of authority in the Department of Commerce, which must ensure that it is implemented in a fair and responsible fashion as to not harm or stifle legitimate business activities.”
The U.S. intelligence community had grown increasingly concerned over the security of Huawei products, prompting the government to ask ISPs and telecom companies in other countries, particularly those where the U.S. has military bases, to spurn them.
The IC and some members of Congress have long feared that products from Huawei and Chinese firm ZTE Corporation could be leveraged by the Chinese government to spy on American targets.
Previously, the Defense Department instructed its procurers and contractors to stop buying software that may have Chinese or Russian connections to help defend these institutions against a possible cyberattack.
The CFO, and daughter of the founder, of Huawei, whose equipment has raised security concerns in the U.S. government, was arrested in Canada December 1 where she is still awaiting extradition to the United States.
While the U.S. did not initially give a reason for Meng Wanzhou’s arrest, early reports speculated it may have more to do with potential violations of sanctions against Iran.
In January Huawei fired Director of Sales Weijing Wang, who had been arrested in Poland on charges of spying for China. The company said he was fired for bringing disrespect to Huawei. By the end of that month U.S. federal prosecutors had filed criminal charges against Huawei, alleging the company stole intellectual property from T-Mobile and violated U.S. sanction orders.
The 10-count indictment charged the firm with conspiracy to steal trade secrets, wire fraud and obstruction of justice as the result of employees trying to steal trade secrets about a robot known as “Tappy,” that was used to test phones, including parts of the device itself, according to court documents.
More recently, Europe’s Vodafone said it found backdoors in the software contained in Huawei home routers and optical service nodes. Such backdoors could allow Huawei to gain access to Vodafone’s fixed-line network in Italy, according to Vodafone security documents dating from 2009 to 2011.
The administration had taken a softer approach to ZTE, last summer and lifted its ban on the company just three months after imposing it for violations of sanctions on North Korea and Iran.
The company paid a $1.4 billion fine, $400 million of which went into escrow at a U.S. bank, and changed its management and board to meet terms laid out by the U.S.
ZTE had seen its stocks tumble after the U.S. forbade domestic companies from buying ZTE equipment after the sanctions violations and amid concern that the company had engaged in cyberespionage, charges it denied.
Lifting the ban drew the ire of lawmakers on both sides of the aisle.
“ZTE should be put out of business. There is no ‘deal’ with a state-directed company that the Chinese government and Communist Party uses to spy and steal from us where Americans come out winning,” said Sen. Marco Rubio, R-Fla., who had pushed for the Senate and House Armed Services committee chairmen to include the Cotton-Van Hollen-Schumer-Rubio amendment reinstating penalties against the company in their NDAA FY2019 Conference Report.
“We must put American jobs and national security first, which is why I have urged NDAA conferees to ensure the bipartisan provision to reinstate penalties against ZTE is included in the final bill,” Rubio said at the time.
Warner called for the Trump administration to step up efforts to protect 5G as China takes the lead in its rollout and to bolster U.S. infrastructure.
“It should also be noted that we have yet to see a compelling strategy from this Administration on 5G, including how the Administration intends to work cooperatively with our allies and like-minded nations to ensure that international standards set for 5G reflect Western values and standards for security and privacy,” Warner said. “Nor do we have a stated plan for replacing this equipment from existing commercial networks – a potentially multi-billion dollar effort that, if done ineptly, could have a major impact on broadband access in rural areas.”
The senator called for “a coherent coordinated and global approach,” which he said “is critically needed as nations and telecom providers move to implement 5G.”