On May 1, 2020, President Trump issued Executive Order No. 13920 (“Executive Order”) prohibiting Federal agencies and U.S. persons from engaging in certain “transactions” defined thereunder—specifically, acquiring, importing, transferring, or installing certain items defined in the Executive Order as “bulk-power system electric equipment”—with “foreign adversaries.” Such equipment classifications and types are specified in the order and include “items used in bulk-power substations, control rooms, or power generating stations.” The prohibitions apply to transactions involving such equipment if such items are (i) designed, developed, manufactured, or supplied by a foreign adversary, or by persons under the control, direction, or jurisdiction of such adversaries and where (ii) such equipment pose an unacceptable risk to national security and America’s safety.
The Executive Order also authorizes the Secretary of the U.S. Department of Energy (“DOE”), in consultation with other Executive Branch agencies, to (i) establish a “pre-qualified” list of vendors to ensure that future equipment transactions are not in violation of the order; (ii) develop recommendations to identify, isolate, monitor, or replace existing bulk-power system electric equipment presenting a security risk from foreign adversaries; and (iii) oversee a Task Force to update the Federal government’s acquisition regulations and to develop policy recommendations and issue reports.
Authority and Declaration of National Emergency
In the Executive Order, the President declared a national emergency with respect to the U.S. bulk-power system, citing the authority granted to him pursuant to the U.S. Constitution, the International Emergency Economic Powers Act (“IEEPA”), National Emergencies Act (“NEA”), and Section 301 of United States Code Title 3. The IEEPA authorizes the President to investigate, regulate, or prohibit certain foreign transactions “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” A Congressional resolution terminating the national emergency is required to revoke the authorities granted to the President by the IEEPA.
In prefatory findings, the Executive Order describes increasing concerns regarding involvement in the bulk-power system by “foreign adversaries,” which are defined as any foreign government or non-government person “engaged in a long-term pattern or serious instance of conduct significantly adverse” to the national security of the United States or its allies. In particular, the Executive Order determines that the “unrestricted foreign supply of bulk-power system electric equipment constitutes an unusual and extraordinary threat” to national security and the U.S. economy.
Prohibited Transactions and Implementation of Executive Order
In relevant part, the Executive Order prohibits federal agencies and U.S. persons from acquiring, importing, transferring, or installing bulk-power system electric equipment that poses an “undue” or “unacceptable” risk to the U.S. and over which a “foreign adversary” or a national thereof has an interest.
- Importantly, the Executive Order defines bulk-power system electric equipment to include “items used in bulk-power system substations, control rooms, or power generating stations, including, reactors, capacitors, substation transformers, current coupling capacitors, large generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high voltage circuit breakers, generation turbines, industrial control systems, distributed control systems, and safety instrumented systems.”
- Bulk-power system electric equipment does not include local distribution facilities or items “that have broader application of use beyond the bulk-power system . . . .”
- The transaction prohibitions apply “except to the extent provided by statute, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order.” (emphasis added)
The Executive Order also authorizes and empowers the Secretary of Energy, in consultation with the heads of a number of other executive departments and agencies, to:
- Take actions regarding the “timing and manner of the cessation” of pending and future prohibited transactions;
- Take necessary steps to implement the Executive Order, such as determining what particular countries or persons are considered “foreign adversaries” for purposes of the prohibited actions;
- Establish criteria for recognizing particular equipment and vendors as “pre-qualified” for future transactions;
- “[I]dentify, isolate, monitor, or replace” any now-prohibited equipment already in use as soon as practicable, taking into consideration risks to the overall “bulk-power system” (as defined in the Executive Order); and
- Publish rules and regulations within 150 days implementing the authorities delegated to the Secretary of Energy by the Executive Order.
Finally, the Secretary of Energy is tasked with overseeing a “Task Force on Federal Energy Infrastructure Procurement Policies Related to National Security,” to be chaired by the Secretary. The Task Force is required to, among other things, conduct studies and issue periodic reports to the President and Congress, engage with “distribution system industry groups,” and develop a recommended set of energy infrastructure procurement policies for submission to the Federal Acquisition Regulatory Council (“FAR Council”). The FAR Council is in turn required to consider proposing amendments to federal agency procurement regulations for notice and public comment within 180 days of receiving any such recommendations.
The Executive Order defines terms that are key to identifying its scope and breadth. These terms are not capitalized, but can be found in Section 4 of the Executive Order. The full text of the Executive Order can be found here.