According to a recent draught, U.S. senators have backed down from a proposal that would have imposed new restrictions on the use of Chinese chips by the U.S. administration and its contractors in response to opposition from trade associations like the U.S. Chamber of Commerce.
The action is the most recent illustration of the industry’s attempts to discredit ideas meant to choke off China’s booming IT sector by highlighting how such regulations will increase expenses.
YMTC and CXMT, two of the top manufacturers of memory chips in China, as well as top-ranking Senate Democrats Chuck Schumer & John Cornyn, a well-known China hawk, unveiled a proposal in September which would have made it illegal for U.S. federal agencies as well as their contractors to continue purchasing semiconductors from SMIC in China.
The measure’s text was updated on December 1 to remove the prohibition against contractors “using” the specified chips and to move the compliance deadline from the earlier version’s instant or 2-year implementation dates to 5 years later.
When requested to read passages from the revised draught, federal contracting attorney Robyn Burrows said that there is no explicit prohibition against contractors using protected semiconductor devices for their own purposes.
SMIC chips can be found in a variety of items, including cell phones and automobiles, and are ordered by businesses all over the world.
Chips are often not labelled with the identities of the corporations that create them, making them difficult to identify.
The Chamber of Commerce and other trade groups criticised the proposal, which was presented as a revision to the National Defense Authorization Act (NDAA), stating in a letter last month that it would be expensive and challenging for businesses to ascertain whether SMIC manufactured the chips found in a wide range of electronics.
In a letter signed by organisations from the defence and telecommunications industries, the influential U.S. business group argued that removing such chips from everyday items like toasters or requiring federal contractors like decent paper suppliers to undertake such a difficult task would not protect American national security.
Politico had been the first to report to the public on the letter.
Later this week, lawmakers are anticipated to release the final text of the package, which might include the amended provision.
Schumer’s team did not reply to repeated queries, while Cornyn’s office refused to do so. Requests for a response from SMIC, YMTC, CXMT, the Chinese Embassy in Washington, and the Chamber of Commerce were not answered.
The clause was based on the 2019 National Defense Authorization Act, which forbade the use of telecom or video surveillance hardware made by Chinese companies Huawei, ZTE, Dahua, Hytera, or Hikvision by the U.S. administration and its contractors.
Since regulators have not yet finalised rules defining the curbs, businesses are still finding it difficult to comply with the law, as noted by the Chamber of Commerce in its statement.
The most recent draught also reduces the limits’ reach by stating that they only apply to goods going to the government’s “vital infrastructure,” which include, among other things, telecom or information networks used for intelligence operations or the management of armed forces or weapons.
SMIC was placed on a sanctions list by the Trump administration due to suspicions that it supports the Chinese military.
The Commerce Department is looking into whether YMTC sold chips to Huawei Technologies Co Ltd, a blacklisted Chinese telecommunications corporation, in violation of export laws and it may soon be blacklisted.
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