Legal Analysis of the U.S. BIOSECURE Act: Implications for Taiwanese Biotechnology Companies

Legal Analysis of the U.S. BIOSECURE Act: Implications for Taiwanese Biotechnology Companies

2024/11/15

I.Introduction

The U.S. BIOSECURE Act (H.R.8333)[1](hereunder, "BIOSECURE Act" or "Act") is a strategic legislative measure designed to protect U.S. biotechnology technologies and data from potential exploitation by foreign entities deemed to be threats to national security. Passed by the House of Representatives on September 9, 2024, with a vote of 306-81[2], the Act demonstrates robust bipartisan support to limit foreign influence in critical U.S. sectors. Passed during the legislative session known as "China Week[3]," the Act imposes restrictions on government contracts, funding, and technological cooperation with entities classified as "Biotechnology Companies of Concern" (hereunder, "BCCs") that are affiliated with adversarial governments. Given Taiwan's prominent role in biotechnology and its strong trade ties with the U.S., Taiwanese companies must examine the implications of the BIOSECURE Act, specifically in regard to technology acquisition from restricted foreign companies and compliance obligations for joint projects with U.S. partners.

This analysis will delve into three core aspects of the BIOSECURE Act: (1) the designation and evaluation of BCCs, (2) prohibitions on transactions involving BCCs, and (3) enforcement mechanisms. Each section will evaluate potential impacts on Taiwanese companies, focusing on how the Act might influence technology transfers, compliance obligations, and partnership opportunities within the U.S. biotechnology supply chain.

II.Designation and Evaluation of Biotechnology Companies of Concern

A central element of the BIOSECURE Act is the process of identifying and evaluating foreign biotechnology companies considered potential threats to U.S. national security.[4] Under Section 2(f)(2) of the Act, a "Biotechnology Company of Concern" is defined as any entity associated with adversarial governments—specifically, China, Russia, North Korea, and Iran[5]—that engages in activities or partnerships posing risks to U.S. security[6]. These risks may include collaboration with foreign military or intelligence agencies, involvement in dual-use research, or access to sensitive personal or genetic information of U.S. citizens. Companies already designated as BCCs include BGI, MGI, Complete Genomics, WuXi AppTec, and WuXi Biologics, all of which have substantial ties to China and the Chinese government or military[7]. Under Section 2(f)(4) of the Act, the Office of Management and Budget (OMB) is required to continuously evaluate and update the BCC list in consultation with agencies such as the Department of Defense, Department of Commerce, and the National Intelligence Community to reflect evolving security concerns[8].

The designation process presents significant challenges for Taiwanese companies, particularly those that have connections with BCCs or rely on BCC technologies for their products, diagnostics, or research initiatives. For instance, if a Taiwanese company uses gene sequencing technology or multiomics tools sourced from one of the designated BCCs, it may face restrictions when pursuing contracts with U.S. entities or seeking federal funding. To proactively address these challenges, Taiwanese companies should establish compliance protocols that verify the origin of their technology and data sources. Moreover, developing new supply chain relationships with U.S. or European suppliers may not only reduce reliance on BCC-affiliated technology but also enhance Taiwanese companies' reputation as secure and reliable partners in the biotechnology industry.

By adapting proactively to the BCC designation process, Taiwanese companies can anticipate and respond to future regulatory shifts more effectively. Diversifying their technology base away from BCCs positions these companies to better align with U.S. biosecurity standards, thereby becoming more attractive collaborators for U.S.-based biotechnology and life sciences companies. Given the rapid pace of regulatory and security developments, staying informed about changes in BCC designations will enable Taiwanese companies to operate with greater agility, adjusting suppliers and adopting new compliance measures as needed. Such proactive alignment can strengthen their resilience and reinforce their status as stable and secure participants in the global biotechnology landscape.

III.Prohibition on Government Contracts and Funding

A core component of the BIOSECURE Act is its stringent restrictions on contracting and funding involving entities linked to BCCs, as detailed in Section 2(a) of the act[9]. These restrictions extend beyond direct federal interactions to include any recipients of federal funds, prohibiting them from using such funds to procure biotechnology products or services from BCCs[10]. By curtailing federal support and preventing indirect financial benefits to these companies, the U.S. aims to mitigate national security risks posed by adversarial governments. The wide-reaching scope of these prohibitions makes the BIOSECURE Act one of the most comprehensive legislative efforts to secure the biotechnology sector and address concerns over foreign technologies potentially compromising U.S. security interests.

For Taiwanese biotechnology companies, these prohibitions introduce substantial compliance demands, particularly for companies that utilize BCC technology within their supply chains. For example, a Taiwanese company engaged in a joint research project with a U.S. government contractor may be required to demonstrate that none of its technology or data sources originate from BCCs. Compliance could necessitate rigorous supply chain audits and operational adjustments, potentially increasing short-term costs. However, aligning with U.S. regulatory standards preemptively can position Taiwanese companies as more desirable partners for U.S. entities that are increasingly prioritizing security and regulatory adherence.

The BIOSECURE Act also incentivizes Taiwanese companies to explore alternative technology providers that meet U.S. biosecurity criteria, including secure data management practices, compliance with federal regulations, and the absence of connections to adversarial governments. By sourcing technology from approved U.S. or European biotechnology companies, Taiwanese companies can enhance their market access and collaborative prospects in the U.S. biotechnology and life sciences sectors. This strategy may also foster long-term stability in partnerships and mitigate risks associated with supply chain disruptions, particularly if more companies are designated as BCCs in the future[11]. Establishing partnerships with U.S.-aligned suppliers can also provide Taiwanese companies with a competitive edge in securing government contracts and research funding, as U.S.-based entities increasingly prefer suppliers that comply with national biosecurity requirements.

IV.Enforcement Mechanisms, Transition Periods, and Taiwanese Considerations

The BIOSECURE Act outlines key enforcement mechanisms and transitional provisions designed to facilitate the adjustment process for companies affected by its restrictions. Specifically, Section 2(c) of the Act provides an eight-year grandfathering period for contracts established prior to the Act’s effective date involving existing BCCs, allowing these agreements to continue until January 1, 2032[12]. This provision is intended to provide companies that are dependent on BCC-supplied biotechnology ample time to transition to compliant suppliers. In addition, the Act includes a "safe harbor" provision[13], which clarifies that equipment previously produced by a BCC but now sourced from a non-BCC entity will not be restricted. This allows companies to re-source components without the risk of penalties for past procurement decisions.

For Taiwanese companies, this transition period presents a critical opportunity to adapt to the new regulatory environment without facing immediate disruptions to business operations. Companies dependent on BCC technology for essential biotechnological functions can leverage the eight-year window to gradually phase out such suppliers, thereby minimizing the impact on operations while ensuring future compliance. For example, a Taiwanese company that relies on a BCC’s sequencing technology for genomic research can use this period to forge partnerships with compliant technology suppliers, thereby avoiding sudden disruptions in research or production. Additionally, the Act includes a waiver provision[14] that allows case-by-case exemptions under specific conditions, particularly when compliance is infeasible, such as in instances where critical healthcare services abroad are at risk[15].

By making strategic use of the phased enforcement and waiver provisions, Taiwanese companies can restructure their supply chains to align fully with U.S. requirements. Those that plan these transitions carefully not only ensure regulatory compliance but also enhance their appeal as resilient and trustworthy partners in the U.S. market. Exploring new collaborations with U.S.-approved biotechnology suppliers can further bolster supply chain resilience against future geopolitical or regulatory uncertainties. The transition period[16] and waiver options[17] reflect the BIOSECURE Act's balanced approach between immediate security needs and pragmatic implementation, which Taiwanese companies can capitalize on to build robust, compliant biotechnological operations.

V.Conclusion

The U.S. BIOSECURE Act[18] presents both significant challenges and strategic opportunities for Taiwanese biotechnology companies. The Act’s restrictions on contracts with designated BCCs and funding constraints necessitate a reassessment of technology acquisition strategies and a reinforcement of compliance practices. Taiwanese companies seeking deeper integration into U.S. and global biotechnology markets will benefit from aligning their procurement approaches with non-BCC suppliers, particularly those in the U.S. or allied countries. This proactive alignment will not only mitigate potential compliance risks but also enhance Taiwanese companies’ reputations as reliable global partners in biotechnology.

The phased enforcement and waiver provisions of the BIOSECURE Act[19] provide Taiwanese companies with a clear pathway to navigate the evolving regulatory landscape, allowing them to establish stronger, more resilient supply chains that meet U.S. standards. Such alignment positions these companies as competitive players in the biotechnology sector, contributing to secure and innovative progress in an increasingly interconnected world. By actively engaging with the BIOSECURE Act’s compliance demands, Taiwanese biotechnology companies can leverage the Act's phased implementation to ensure sustained, secure access to the U.S. market and foster strategic biotechnology partnerships.

Reference:

[1] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024).

[2] OFFICE OF THE CLERK, U.S. HOUSE OF REPRESENTATIVES, Roll Call Vote No. 402 on H.R. 8333 (Sept. 9, 2024), https://clerk.house.gov/Votes?RollCallNum=402&BillNum=H.R.8333 (last visited Nov. 1, 2024).

[3] JANINE LITTLE, U.S. House Of Representatives Passes The BIOSECURE Act During “China Week”, Global Supply Chain Law Blog (Sept. 13, 2024), https://www.globalsupplychainlawblog.com/supply-chain/u-s-house-of-representatives-passes-the-biosecure-act-during-china-week/ (last visited Nov. 1, 2024).

[4] SABINE NAUGÈS & SARAH L. ENGLE, BIOSECURE Act: US Target on Chinese Biotechnology Companies, NAT'L L. REV. (Sept. 13, 2024), https://natlawreview.com/article/biosecure-act-us-target-chinese-biotechnology-companies (last visited Nov. 1, 2024).

[5] 10 U.S.C. § 4872(d) (2024), https://www.law.cornell.edu/uscode/text/10/4872 (last visited Nov. 1, 2024).

[6] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024).

[7] id.

[8] id.

[9] id.

[10] id.

[11] JANINE LITTLE, U.S. House Of Representatives Passes The BIOSECURE Act During “China Week”, Global Supply Chain Law Blog (Sept. 13, 2024), https://www.globalsupplychainlawblog.com/supply-chain/u-s-house-of-representatives-passes-the-biosecure-act-during-china-week/ (last visited Nov. 1, 2024).

[12] U.S. CONGRESS, H.R. 8333 – U.S. BIOSECURE Act (2024), https://www.congress.gov/bill/118th-congress/house-bill/8333 (last visited Nov. 1, 2024).

[13] id.

[14] id.

[15] id.

[16] id.

[17] id.

[18] id.

[19] id.