After receiving a number of requests for clarification, this was referred directly to FEMA.
From the FEMA Grants Directorate:
There is currently no prohibition against using Federal Emergency Management Agency (FEMA) funding from preparedness grant programs where this is an allowable expense to purchase small Unmanned Aircraft Systems (sUAS) manufactured -- regardless of the manufacturer. However, FEMA advises that there is a general privacy concern related to the use of this equipment if the data the devices collect is transmitted to servers not under the control of the operator. It has been reported that some manufacturers of sUASs encrypt data and send that data to servers outside the United States. The U.S. Department of Homeland Security’s Privacy Office suggests the recipient fully explore data transmission and storage issues with vendors to reduce the possibility of data breaches. In addition, we also draw the recipient’s attention to section 889(b) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (FY 2019 NDAA), Pub. L. No. 115-232 (2018), as implemented through 2 C.F.R. § 200.216 and FEMA Policy #405-143-1, Prohibitions on Expending FEMA Award Funds for Covered Telecommunications Equipment or Services (Interim). Effective August 13, 2020, the statute and regulation prohibit the use of any federal grant funds from purchasing covered telecommunications equipment or services, discussed further in FEMA Policy #405-143-1 and Office of Management and Budget (OMB) Frequently Asked Questions.
From the Commonwealth of Virginia Department of Emergency Management for additional clarification:
The federal government included some language in their procurement requirements for grants that puts a preference on purchasing products produced in the United States. If you decide to purchase a product from another country with federal grant funds, you will need to be able to justify why it was purchased rather than a product produced in the United States - referencing your procurement processes and procedures.
Federal reference is below:
§ 200.322 Domestic preferences for procurements.
(a) As appropriate and to the extent consistent with law, the non-Federal entity should, to the greatest extent practicable under a Federal award, provide a preference for the purchase, acquisition, or use of goods, products, or materials produced in the United States (including but not limited to iron, aluminum, steel, cement, and other manufactured products). The requirements of this section must be included in all subawards including all contracts and purchase orders for work or products under this award.
(b) For purposes of this section:
(1) “Produced in the United States” means, for iron and steel products, that all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.
(2) “Manufactured products” means items and construction materials composed in whole or in part of non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.