The Department of Commerce, Bureau of Industry and Security (BIS) placed Huawei Technologies Co., Ltd. and 68 non-US affiliates (collectively, Huawei) on the Entity List on May 16, 2019. On May 20, 2019, BIS issued a Temporary General License authorizing transactions with Huawei in four specific areas through August 19, 2019. As of today, companies may not export, reexport, or transfer any items subject to Export Administration Regulations (the EAR) to Huawei except in these areas, or if BIS grants a specific license, which at this time appears unlikely.
The May 16, 2019 final rule by the Department of Commerce placed Huawei on the BIS Entity list. This list identifies entities reasonably believed to be involved, or pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. Practically, companies, wherever located, are prohibited from exporting, reexporting, or transferring (in-country) items "subject to the EAR" to any listed entity without authorization through a general license or a specific license, unless the Entity List specifies otherwise. Items subject to the EAR include:
- Any item being exported from the US, regardless of the item's origin
- Any US-origin item wherever located
- Foreign-made items containing more than 25 percent US-origin content or 10 percent US-origin content for countries subject to antiterrorism controls and
- Foreign-made items directly produced using certain controlled US-origin software, technology, or major plant or equipment located abroad
The various license exceptions found in the EAR cannot be used for companies on the Entity List and, in the case of Huawei, specific license applications are subject to a presumption of denial.
However, on May 20, 2019, BIS offered a reprieve, issuing a Temporary General License authorizing enumerated transactions through August 19, 2019. Temporarily authorized transactions include those relating to:
- Continued operations of existing networks and equipment: transactions necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches, subject to legally binding contracts and agreements executed between Huawei and/or its 68 non-US affiliates and third parties on or before May 16, 2019.
- Support to existing handsets: transactions necessary to provide service and support, including software updates or patches, to existing Huawei handsets that were available to the public on or before May 16, 2019.
- Cybersecurity research and vulnerability disclosure: the disclosure to Huawei and/or the 68 non-US affiliates of information regarding security vulnerabilities in items owned, possessed, or controlled by Huawei or any of the 68 non-US affiliates when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently fully operational networks and equipment, as well as handsets.
- Engagement as necessary for development of 5G standards by a duly recognized standards body: transactions necessary for the development of 5G standards as part of a duly recognized international standards body (eg, IEEE – Institute of Electrical and Electronics Engineers; IETF – Internet Engineering Task Force; ISO – International Organization for Standards; ITU – International Telecommunications Union; ETSI- European Telecommunications Standards Institute; 3GPP - 3rd Generation Partnership Project; TIA- Telecommunications Industry Association; and GSMA, a/k/a, GSM Association, Global System for Mobile Communications).
Both BIS actions were taken shortly after President Trump signed the "Executive Order on Securing the Information and Communications Technology and Services Supply Chain." Issued on May 15, 2019, the Order directed the Commerce Department to adopt rules within 150 days prohibiting telecommunications transactions with foreign entities posing a national security threat. The Order further directs other US government agencies to take appropriate measures within their authority. To date, no other Federal departments or agencies have issued additional measures.
In the meantime, because of the Temporary General License, companies are free to distribute items subject to the EAR in the above General License categories to or for Huawei until August 19, 2019, and should incorporate these updates into their screening practices and adjust their international transactions accordingly. For any questions regarding Huawei's listing, or international trade matters more generally, DLA Piper stands ready to assist.
For further information, please contact:
Thomas M. deButts