Following our recent overview of key topics to watch in the National Defense Authorization Act (“NDAA”) for Fiscal Year (“FY”) 2024, available here, we continue our coverage with a “deep dive” into NDAA provisions related to the People’s Republic of China (“China” or “PRC”) in each of the House and Senate bills. DoD’s focus on strengthening U.S. deterrence and competitive positioning vis-à-vis China features prominently in the 2022 National Defense Strategy (“NDS”) and in recent national security discourse. This focus is shared by the Select Committee on Strategic Competition Between the United States and the Chinese Communist Party (“Select Committee”), led by Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL).
It is no surprise, then, that House and Senate versions of the NDAA include hundreds of provisions—leveraging all elements of national power—intended to address what the NDS brands as China’s “pacing” challenge, including many grounded in Select Committee policy recommendations. Because the NDAA is viewed as “must-pass” legislation, it has served in past years as a vehicle through which other bills not directly related to DoD are enacted in law. In one respect, this year is no different—the Senate version of the NDAA incorporates both the Department of State and Intelligence 2024 Authorization bills, each of which includes provisions related to China.
To get a flavor of the approach to China in this year’s NDAA, look no further than the “Ending China’s Developing Nation Status Act” in Section 1399L of the Senate bill, which would require U.S. opposition to granting China “developing nation” status in treaties under negotiation and by international organizations of which the U.S. and China are members, such as the World Trade Organization. Classification as a “developing nation” affords China access to preferential loans and other economic benefits intended to increase trading opportunities, notwithstanding its current status as an upper-middle income country (as determined by the World Bank), and the world’s second largest economy, trailing only the U.S. Not to be outdone, Section 155 of the House bill contains a provision mandating expedited deployment of advanced radars to track high-altitude balloons and other potential threats to the U.S., in direct response to the incident earlier this year in which a Chinese balloon flew across the U.S. before being shot down by the Air Force.
Given these provisions, and many more (some we discuss below), this year’s NDAA strikes us as different. It incorporates many more China-related provisions and many of these would impose greater obligations on government contractors to limit their interactions with the PRC and entities affiliated with the PRC Government. Whether the laundry list of China-related provisions in the current NDAA survive, and in what form, will be determined by the conference process currently underway. But these provisions have the potential to impose significant near-term burdens on contractors—requiring them to assess their obligations and make adjustments to ensure compliance. Indeed, these provisions may be far more disruptive than requirements imposed by prior year NDAA China provisions that contractors have navigated by reassessing supply chains and increasing due diligence. All government contractors and suppliers to government contractors with any connection to China would be well advised to monitor how the NDAA conference approaches resolution of this legislation over the coming months.