UPDATE: New Arkansas Law Prohibiting Contracts with China Is Progress, But Loopholes Need Closed

[Updated] On April 12, Arkansas Governor Sarah Huckabee Sanders signed into law  HB 1789, a bill to prohibit contracts with the People’s Republic of China (PRC). Introduced by Representative Mindy McAlindon and State Senator Gary Stubblefield, the bill demonstrates a commitment by Arkansas leaders to protect sensitive data from PRC intrusion and advances a growing trend of new state laws in 2023 (joining Idaho and South Dakota).

However, one significant loophole presented during the legislative process renders the new law powerless and must be corrected when the state legislature reconvenes in 2024.

When introducing the bill, Rep. Mindy McAlindon said “HB1789 is designed to protect Arkansas and Arkansans from the undue influence of the Communist Party of China. Arkansas has amazing technology and resources and we must continue to protect them.”  As introduced, the bill would have been a powerful tool to protect residents, infrastructure and government offices and agencies. Unfortunately, an amendment changed the definition from any vendor-company with partial RPC ownership to instead one owned in whole or with a majority ownership by the government of the PRC.

While bills in many other states, like Georgia law SB 346, broadly define scrutinized companies as those “owned or operated by the Government of China,” Arkansas’ new law will fail to curb virtually all companies that pose a threat since few if any of the companies restricted by U.S. defense and intelligence agencies are majority-owned by the PRC.

For example, CTT’s February research paper provides brief dossiers on four such companies (Lenovo, Lexmark, DJI, and Hikvision), none of which would qualify under Arkansas’ new law. Even Huawei – the posterchild for suspect PRC technology – could sell unimpeded to the state. [President Trump said “we convinced many countries – I did this myself – not to use Huawei because we think this is an unsafe security risk.” President Biden agreed when he signed legislation to further tighten restrictions on Huawei. Yet it is impossible to determine who owns Huawei.]

CTT applauds Rep. McAlindon, Sen. Stubblefield and Governor Sanders for joining the nearly 20 other states taking action, but urges Arkansas lawmakers to revisit this law in the next session to close this loophole.

CTT’s recent research uncovered Arkansas spent $7,090,199 on dangerous Chinese technology from Lexmark and Lenovo between 2015 and 2023 and is being used by the Legislative Auditor’s Office, the State Police, and the Administrative Office of the Courts, among many others as detailed in our fact sheet. These two Chinese government-owned companies have been restricted by the federal government and U.S. military and intelligence agencies, but would not be restricted by what Arkansas just signed into law.  Our February research paper urged state lawmakers to be vigilant against corporate lobbying to weaken their bills as both Chinese companies and American resellers of Chinese equipment are looking to water down legislation. CTT renews that call for vigilance.