Suspect Chinese Surveillance Gear Offered For Sale To U.S. Government (#GotBitcoin?)

An online store run by the U.S. government offers equipment for sale that has sparked security concerns despite rules banning purchases. Suspect Chinese Surveillance Gear Offered For Sale To U.S. Government (#GotBitcoin?)

Thousands of pieces of Chinese video surveillance equipment that have provoked national security concerns have been listed for sale on an online superstore catering to U.S. government agencies, despite a ban that went into effect this week.

The listings are for cameras and recording equipment made by Hangzhou Hikvision Digital Technology Co., 42%-owned by the Chinese government, and Dahua Technology Co., a privately owned Chinese surveillance-equipment maker, The Wall Street Journal found.

Hikvision and Dahua don’t directly sell their wares via the online store, but their equipment is available via independent U.S. resellers that act as middlemen. Listings of Chinese equipment by these resellers claim that the gear has been made in the U.S. and Switzerland. Hikvision and Dahua say they don’t manufacture equipment in those countries.

The use of equipment made by Hikvision on U.S. military installations, police departments and embassies has sparked concern about security vulnerabilities in the equipment that the Chinese government might exploit. China has relied heavily on Hikvision, in particular, to watch over its 1.4 billion citizens, including ethnic minority Uighur Muslims.

Congress last year passed legislation that prohibits federal government agencies from buying equipment from Chinese companies including Hikvision, Dahua and communications equipment provider Huawei Technologies Co. The ban took effect Aug. 13. Even before the explicit ban on purchases from those companies, such government buying wouldn’t have been allowed because China isn’t on a list of countries from which agencies are allowed to buy items.

However, their equipment finds its way onto the online superstore through resellers authorized to list goods there. After agencies place orders, distributors that work with the resellers fulfill them.

Hikvision is the world’s largest surveillance camera maker. The U.S. is the company’s second largest market, after China, representing about 8% of sales, according to FactSet, likely to private buyers and others not covered by federal bans.

Three days after the ban took effect, around 1,350 Dahua products remained for sale on the portal, investigators found. However, a similar number from Hikvision appeared to have been taken down Thursday, including surveillance cameras of all types and network recorders to store surveillance video, the Journal found. A few dozen Dahua products disappeared from the site between Tuesday and Wednesday.

The General Services Administration, the federal agency that oversees $66 billion of government purchases ranging from basic office supplies to cloud-computing services, runs the online marketplace, called GSA Advantage, where the items remain for sale.

“Chinese-made items, including surveillance systems manufactured by Hikvision and Dahua, should not be on GSA Advantage, as there is no trade act agreement with China,” a GSA spokeswoman said.

The Hikvision products were described as made in the U.S., while the Dahua equipment was listed as manufactured in Switzerland or the U.S. Such country-of-origin descriptions, which those companies say are false, could have allowed the equipment to avoid the GSA’s filters.

The GSA marketplace lists millions of products for sale to the federal government. The GSA spokeswoman said the agency has an automated process that removes items that should not be for sale. The GSA was working to identify Hikvision and Dahua equipment listings after the new ban took effect, she said, and resellers had been notified of items targeted for review and removal.

A Hikvision executive this year repeatedly asked the GSA to remove the company’s products from the GSA Advantage platform, according to emails reviewed by The Wall Street Journal. He told GSA the equipment had been listed with false country-of-origin data four or five times in recent years. GSA officials responded by saying they removed some of the items and that an automated solution was on the way, according to the emails.

Hikvision sends cease-and-desist orders to resellers who list their products on the GSA site, a person close to the company said.

A Dahua spokesman said the company was investigating the issue.

The GSA spokeswoman said the agency tries to prevent Chinese equipment from appearing on the site, but said the onus of making sure that products listed for sale complied with government rules lay with resellers.

The resellers offering the equipment for sale are often small businesses that act as middlemen between the government agencies buying the equipment and distributors that fulfill the orders.

Tera Consulting Inc., one of the vendors listing suspect surveillance gear on the GSA site, relied on its distributors to provide accurate information about products and put that data on the GSA Advantage site, according to a company official. The company worked with distributors to ensure compliance, but some products could have been mislabeled, the person said. The company had asked the GSA to remove such items after inquiries from The Wall Street Journal, the person said.

Jim Wrigglesworth, the vice president of Wrigglesworth Enterprises in Wilmington, N.C., another company that offered such Chinese equipment for sale, said it lists more than 1 million products on the GSA site, so some errors were possible. “We do our own spot checks, but every so often one gets up there,” he said. The Chinese cameras the company had offered for sale were in a “delete file” and slated for removal, he said. They had disappeared from the site by Friday.

The GSA spokeswoman said no transactions involving Hikvision or Dahua products were made within the past year.

Updated: 6-17-2021

FCC Proposes Ban On Chinese Surveillance Cameras, Other Products

U.S. regulators proposed a ban on products from Huawei Technologies Co. and four other Chinese electronics companies, including surveillance cameras widely used by schools but linked to oppression in western China, stepping up pressure on tech suppliers alleged to be security risks.

Hangzhou Hikvision Digital Technology Co. and Dahua Technology Co., whose cameras can be found in U.S. schools and local government facilities, were targeted in an order the Federal Communications Commission adopted in a 4-0 vote on Thursday.

Also named in the order were telecom giant ZTE Corp. and two-way radio maker Hytera Communications Corp.

The order would forbid U.S. sales of specified telecommunications and surveillance equipment from the companies. The action begins a period of review before a final vote on the matter.

“We are taking direct action to exclude untrusted equipment and vendors from communications networks,” said FCC Acting Chairwoman Jessica Rosenworcel.

In the proposal, the FCC said it also may revoke its previous authorization for equipment from the companies, a step that could force schools and other U.S. customers to replace the camera systems.

The FCC action represents another step after “years of Huawei warnings,” said Derek Scissors, a resident scholar at the American Enterprise Institute whose focus includes U.S. economic relations with Asia. “Any recent purchasers of Chinese telecom equipment who have been expecting years of use and now must exchange equipment should have known better.”

In its draft order, the FCC didn’t say how quickly affected gear would need to be removed, and it asked for comments on the “appropriate and reasonable transition period.”

“This could include a transition period for non-conforming equipment,” according to the order.

The FCC, Congress and the White House have pushed to ensure Huawei and ZTE gear isn’t used in U.S. networks, citing risks of cyber-espionage that the companies deny. In 2018 Congress voted to stop federal agencies from buying gear from the five companies now subject to FCC pressure. Last year the agency put the companies on a list of providers whose products are deemed a national security threat.

“The FCC must do all it can within its legal authority to address national security threats,” Rosenworcel, a Democrat, said in a statement before the vote. The move begins a period of review and possible revision before a final vote. There is no date set for that.

Congressional Action

Huawei, which markets phones in the U.S., said in a statement that the proposed FCC steps were “misguided and unnecessarily punitive.”

Hikvision in an email said its designation as a threat isn’t substantiated, and it “strongly opposes” the FCC measure. Dahua said it “does not and never has represented any type of threat to U.S. national security.” It called the FCC’s proceeding “unwarranted.”

Hytera said its products “don’t impose any threats to any country’s national security” and called the FCC’s approach inconsistent with the U.S. government’s standard practice for evaluating and mitigating risk.

President Joe Biden has continued to pressure China following tense relations with that country under his predecessor, Donald Trump. In recent weeks Biden has urged allies to confront China on alleged human rights abuses, including at the recently concluded Group of Seven summit in the U.K.

Congress may weigh in, too. The FCC would be prohibited from reviewing or issuing new equipment licenses to companies on the agency’s list of suspect equipment or services under a bill announced June 15 by Representative Anna Eshoo, a California Democrat, and Representative Steve Scalise, a Louisiana Republican.

The proposed legislation “adds an extra layer of security that slams the door on Chinese actors from having a presence in the U.S. telecommunications network,” the lawmakers said in a news release.

Hikvision and Dahua have been accused by U.S. officials of involvement in China’s crackdown in far western Xinjiang, where as many as a million Uyghur Muslims have been placed in mass detention camps. China has repeatedly denied any accusations of human rights abuses against its Uyghur minority.

Still, the two companies remain leading suppliers of surveillance gear in the U.S., and together may sell about 1 million cameras this year, according to Conor Healy, government director for the surveillance research group IPVM.

“It’s still very widely sold to state and local governments” as well as school districts, Healy said in an interview. IPVM, based in Bethlehem, Pennsylvania, works to expose unethical surveillance. It draws its information from securities filings and purchasing records, Healy said.

School districts have been buying cameras in recent years in a bid to boost physical security following school shootings, said Keith Krueger, chief executive officer of CoSN, the Consortium for School Networking, an association for school technology officials.

Equipment from the targeted companies “is cheap and it’s good, and so people buy it,” said James Lewis, director of the strategic technologies program at the Center for Strategic & International Studies in Washington. “If you don’t know about the risk, it looks like a good deal.”

”If it’s connected over the internet and it goes back to China, you’d have no way to tell if the Chinese government was looking at it,” Lewis said.

Hikvision and Dahua account for about one-fifth of U.S. surveillance camera sales, placing each among the top 10 providers, said Jake Parker, senior director of government relations at the Security Industry Association, a trade group.

Parker called it “unprecedented” for the FCC to deny authorizations on grounds not related to technical details, or faults in applications.

The Consumer Technology Association told FCC officials the proposed changes “could be disruptive and impose substantial burdens on manufacturers well beyond the few covered entities,” according to a filing by the technology trade association.

6-18-2021

U.S. Ban On Chinese Spy Cameras Will Ultimately Backfire

Mainland companies aren’t standing still. They’re developing even more futuristic technologies that will leave American competitors scrambling.

U.S. regulators are toughening their stance on Chinese makers of surveillance cameras and other hardware. By turning to an old playbook, though, Washington is diverting focus from the future and diminishing America’s ability to remain a global technology leader.

The Federal Communications Commission on Thursday proposed a ban on use of certain telecommunications products and other electronics made by Chinese companies, including one of the world’s largest makers of surveillance cameras, Hangzhou Hikvision Digital Technology Co., and Dahua Technology Co.

The order, which cites alleged national security risks, also seeks to forbid future U.S. sales and could revoke prior authorizations for the equipment. Hikvision said it “strongly opposes” the FCC’s measure while Dahua called it “unwarranted.”

Attempting to rid the U.S. of existing equipment and electronic cameras — on street corners, in schoolyards and at local government facilities — will be more disruptive than proactive.

For one thing, there aren’t many better alternatives, and looking for new products or phasing out old ones will be a long process that wouldn’t necessarily undo any alleged damage to privacy or security — if there’s been any at all.

In some cases, such technology has been seen as a benefit. In 2018, the Memphis Police Department, which had bought hundreds of Hikvision cameras in the preceding decade, said the devices helped it make up to 100 arrests a year, according to a Wall Street Journal report at the time.

Over the past few years, various U.S. government departments have tried to shut out Chinese companies through similar restrictions. Rather than waiting around for narrow paths of overseas revenue to open up, these firms have simply moved on.

Now, they’re progressing in other areas like robotics, intelligent vehicle systems and detector technologies, and widely implementing their so-called multidimensional perception technologies, which would improve artificial intelligence capabilities for industrial and other uses.

Hikvision has found support domestically, and has beefed up its research and development efforts. In its latest annual report, it noted that R&D spending was 6.38 billion yuan (around $1 billion), or 10.04% of its total operating income, with expenses up 16%.

The company also noted it had over 20,000 personnel focused on this area and other technical services. Operating income from innovative businesses grew almost 40% last year, compared with around 8% for older technologies and equipment.

Meanwhile, Huawei Technologies Co. is bolstering its dominant position and expanding in other parts of the world, such as Africa. It has made cloud services a strategic priority and last year, amid the pandemic, revenue from this line grew 168%.

At this point, sinking time, money and effort into unraveling the past, or any anxieties it may harbor, is all but futile. While the U.S. sets the global technology standard, it’s still catching up in areas like fifth-generation networks and equipment.

Meanwhile, China’s state planners are well on their way to creating wide 5G infrastructure, importing machines from Japan and constructing tens of thousands of base stations — the nuts and bolts of building out the next generation in telecommunication.

It has now become a central part of China’s industrial policy for the next five years.

The real risk for the U.S. is that Chinese companies develop yet another new technology at massive scale that American manufacturers will have to chase. Looking in the rear-view mirror won’t help the U.S. get ahead.

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