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February 12, 2021
The Information and Communications Technology and Services
(ICTS) Rule and Review Process
On January 19, 2021, the Department of Commerce
(Commerce) issued an interim final rule (86 FR 4909)
implementing Executive Order 13873, which created a new
process for the Secretary to review transactions involving
information and communications technology and services
(ICTS) and determine whether those transactions present
certain national security and economic risks. When a
transaction in ICTS involves foreign persons or
governments designated as foreign adversaries and
presents certain undue or unacceptable risks to the United
States, the new rule (ICTS Rule) allows Commerce to either
block the transaction or negotiate risk-mitigation measures.
The ICTS review process regulates individual ICTS
transactions-broadly defined as any acquisition,
importation, transfer, installation, dealing in, or use of any
[ICTS]. As such, it could subject a wide range of
commercial interactions to a new federal approval process.
What Is ICTS?
ICTS is defined as any hardware, software, or other
product or service . . . primarily intended to fulfill or enable
the function of information or data processing, storage,
retrieval, or communication by electronic means .... The
term includes a broad array of technologies and services,
such as internet systems, wireless networks, cellular
phones, computers, satellite systems, artificial intelligence,
quantum computing, and cloud computing services.
Executive Order 13873
The ICTS Rule implements Executive Order 13873, titled
Securing the Information and Communications Technology
and Services Supply Chain. Invoking National Emergencies
Act (50 U.S.C. § 1601) and citing the International
Emergency Economic Powers Act (50 U.S.C. § 1701)
(IEEPA), President Trump declared that a national
emergency exists because of the threat of foreign
adversaries exploiting vulnerabilities in ICTS. In response
to this threat, Executive Order 13873 prohibits transactions
involving foreign-owned ICTS that present: (1) an undue
risk of sabotage or subversion to ICTS in the United States;
(2) an undue risk of catastrophic effects on the security or
resiliency of critical infrastructure or the digital economy in
the United States; or (3) an unacceptable risk to U.S.
national security or the security and safety of U.S. persons.
The order delegates implementation to Commerce.
What Is a Foreign Adversary?
Executive Order 13873 references risks posed by foreign
adversaries, which the order defines as any foreign
government or foreign person engaged in a long-term
pattern or serious instances of conduct significantly
adverse to U.S. security or the safety of U.S. persons. The
executive order does not identify entities that meet the
definition, but Commerce elaborated on the term in the
ICTS Rule. Commerce identified China (including Hong
Kong), Cuba, Iran, North Korea, Russia, and the Nicolas
Maduro regime in Venezuela as foreign adversaries.
Commerce based its determination on several sources,
including the U.S. National Security Strategy, the U.S.
Intelligence Community's Worldwide Threat Assessment,
the 2018 U.S. Cyber Strategy, and other reports and
assessments from U.S. agencies. Commerce is to
periodically review the list of foreign adversaries.
Determining Foreign Adversary
Involvement
To be subject to the ICTS review process, a transaction
must involve ICTS designed, developed, manufactured, or
supplied by persons or entities owned by, controlled by, or
subject to the jurisdiction of a foreign adversary. In
determining whether the foreign adversary element is met,
Commerce may consider: (1) whether the party to the
transaction or its suppliers have headquarters or other
facilities in a foreign country controlled by a foreign
adversary; (2) personal and professional ties between the
party and a foreign adversary; (3) laws and regulations of
the foreign adversary in which a party is headquartered or
conducts operations; and (4) other factors that the Secretary
of Commerce deems appropriate.
What Transactions Will Be Reviewed?
In addition to the foreign adversary requirement, a
transaction must meet several criteria to be subject to the
ICTS review process. First, the transaction must involve
property subject to U.S. jurisdiction or be conducted by an
individual or entity subject to U.S. jurisdiction. Second, the
transaction must involve property in which a foreign
country or foreign national has an interest. Third, the
transaction must be initiated, pending, or completed after
January 19, 2021. Finally, the transaction must involve one
of six categories of technology:
1. Critical infrastructure: ICTS that will be
used in one of 16 critical infrastructure sectors
designated in Presidential Policy Directive 21
(PPD 21);
2. Network infrastructure and satellites: ICTS
integral to wireless local area networks,
mobile networks, satellite payloads, satellite
operations and control, cable access points,
wireline access points, core networking
systems, or long- and short-haul systems;
3. Sensitive personal data processing: ICTS
integral to data hosting or computing services
that process (or are expected to process)
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