Citing Huawei efforts to circumvent its plans to shut off the Chinese communications technology vendor from its supply of U.S.-produced communications semiconductors, the U.S. Department of Commerce has imposed new restrictions on the company as well as added 38 of its incarnations to the Entity List. Presence on the Entity List mandates that U.S. companies or firms using U.S technology that wish to do business with Huawei must first apply for a special license – an application not likely to be approved.
The Commerce Department also announced that its most recent and final Temporary General License that enabled certain firms to continue to do business with Huawei has expired.
The department, through its Bureau of Industry and Security (BIS), issued a directive this past May using the foreign-produced direct product (FDP) rule that third parties could not use U.S. sourced technology (hardware or software) to produce semiconductors for Huawei (see “U.S. tightens screws on Huawei”). The action was intended to limit Huawei’s abilities to have foundries such as TSMC build chips for them. However, Huawei apparently had found ways to circumvent the order’s intentions, according to the Commerce Department.
“Huawei and its foreign affiliates have extended their efforts to obtain advanced semiconductors developed or produced from U.S. software and technology in order to fulfill the policy objectives of the Chinese Communist Party,” commented Commerce Secretary Wilbur Ross. “As we have restricted its access to U.S. technology, Huawei and its affiliates have worked through third parties to harness U.S. technology in a manner that undermines U.S. national security and foreign policy interests. This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so.”
The first item among the new actions applies the FDP rule to transactions where U.S. software or technology is the basis for a foreign-produced item that will be incorporated into, or will be used in the production or development of any part, component, or equipment produced, purchased, or ordered by any Huawei entity on the Entity List; or when any such Huawei entity is a party to such a transaction, such as a purchaser, intermediate consignee, ultimate consignee, or end-user. In a second move, which complements the first, BIS revised the Entity List to require a license when a party on the Entity List acts as a purchaser, intermediate consignee, ultimate consignee, or end user to a transaction subject to Entity List restrictions.
The third action saw BIS add 38 Huawei affiliates to the Entity List, limiting Huawei’s ability to gain access to semiconductors via these subsidiaries. They include Huawei Cloud Computing Technology; Huawei Cloud Beijing; Huawei Cloud Dalian; Huawei Cloud Guangzhou; Huawei Cloud Guiyang; Huawei Cloud Hong Kong; Huawei Cloud Shanghai; Huawei Cloud Shenzhen; Huawei OpenLab Suzhou; Wulanchabu Huawei Cloud Computing Technology; Huawei Cloud Argentina; Huawei Cloud Brazil; Huawei Cloud Chile; Huawei OpenLab Cairo; Huawei Cloud France; Huawei OpenLab Paris; Huawei Cloud Berlin; Huawei OpenLab Munich; Huawei Technologies Dusseldorf GmbH; Huawei OpenLab Delhi; Toga Networks; Huawei Cloud Mexico; Huawei OpenLab Mexico City; Huawei Technologies Morocco; Huawei Cloud Netherlands; Huawei Cloud Peru; Huawei Cloud Russia; Huawei OpenLab Moscow; Huawei Cloud Singapore; Huawei OpenLab Singapore; Huawei Cloud South Africa; Huawei OpenLab Johannesburg; Huawei Cloud Switzerland; Huawei Cloud Thailand; Huawei OpenLab Bangkok; Huawei OpenLab Istanbul; Huawei OpenLab Dubai; and Huawei Technologies R&D UK.
Secretary of State Michael Pompeo weighed in with support of the moves. “We will not tolerate efforts by the [Chinese Communist Party] to undermine the privacy of our citizens, our businesses’ intellectual property, or the integrity of next-generation networks worldwide. We are backing up our words with actions across the U.S. Government,” he said via a press statement. “The Department of Justice has indicted Huawei for stealing U.S. technology, conspiracy, wire fraud, bank fraud, racketeering, and helping Iran to evade sanctions, amongst other charges. The Department of Commerce placed Huawei on the Entity List in 2019. The Department of State has engaged in vigorous diplomacy for more than a year to share what we know about Huawei and other untrustworthy vendors with allies and partners around the world.
“The United States will continue to restrict most U.S. exports to Huawei and its affiliates on the Entity List for activities that threaten U.S. national security and international stability. We urge our allies and partners to join us,” Secretary Pompeo concluded.
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