Yesterday, the Secretary of Commerce announced that the Bureau of Industry and Security (BIS) will be adding Huawei Technologies Co. Ltd. and 70 of its affiliates to the Entity List. If the addition of Huawei and its affiliates to the Entity List follows the normal procedures, all commodities, technology, and software covered by Export Administration Regulations (EAR) will now require a license to Huawei and the listed affiliates. As a result, US companies and non-US companies would need to apply for a license to export, reexport, or transfer (in-country) covered US items to Huawei and the listed affiliates. License applications would then be reviewed on a case-by-case basis or under a presumption of denial. Based on the press release, it appears that the review will be on a case-by-case basis and would “be denied if the sale or transfer would harm US national security or foreign policy interests.” However, considering that Huawei and its affiliates are being added to the Entity List for being engaged in activities contrary to US national security or foreign policy interests, obtaining approval for such licenses will be very difficult. This will make it nearly impossible for US companies to continue supplying Huawei and its affiliates and for Huawei to continue to produce any products reliant on US origin components, technology, or software.

The timing for when these additions will be published in the Federal Register is unclear. Under normal circumstances the Federal Register notice is issued the same day or following day after additions are publicly announced. However, so far, there is no indication on the Federal Register website of when the notice will be published. Once it is published, companies will need to review the exact parameters of the covered items and the license review criteria to determine the exact impact and whether or not to apply for licenses.

Courtesy of Larkin Trade International for the US-China Business Council

Posted by Ian Hutchinson