No CMMC for Hard Copy CUI?

A recent webinar from the US Army Corps of Engineers told suppliers that if they only handle paper CUI, then CMMC requirements don't apply to them. That's a significant concession to industry on par with COTS exemption and POAMs. But is this USACE flexing their discretion or are they setting up a conflict by setting policy around CMMC applicability? Pathfinder 101: https://www.summit7.us/pathfinder Pathfinder Demo: https://youtu.be/JiDTCchfCa0?si=JJFplxSfvkaRVhRo