Citing national security concerns, the Department of Commerce announced that it added Chinese telecom giant Huawei Technologies and its affiliates to the Entity List on May 15, 2019.
The move came on the same day as President Trump’s Executive Order declaring that “threats to the information and communications technology and services supply chain by foreign adversaries are a national emergency.”
Not Business as Usual
While being added to the Entity List doesn’t completely prevent U.S. companies from conducting business with Huawei, it does place significant restrictions around it. Moving forward, the sale or transfer of U.S. technology to Huawei and its affiliates will now require a license from the Bureau or Industry and Security (BIS). These licenses are also “subject to a license review policy of presumption of denial,” and the Department of Commerce’s release made a point of specifying that these applications may be denied if “the sale or transfer would harm U.S. national security or foreign policy interests.”
While the restrictions went into effect upon the publication of updates to the Federal Register, BIS announced on May 20, 2019 that they would issue a Temporary General License “to authorize specific, limited engagement in transactions involving the export, reexport, and transfer of items—subject to the EAR—to Huawei Technologies Co. Ltd. and its sixty-eight non-U.S. affiliates.” This temporary license would provide 90 days for U.S.-based organizations to make arrangements to find alternatives to any Huawei technologies that they currently use.
The newly imposed trade restrictions have already had an impact. Many major technology companies, including Google, Intel, and Qualcomm, have announced that they would either cease doing business with Huawei immediately, or as soon as the temporary license expired.
In the meantime, Huawei has downplayed the impact being placed on the Entity List will have on their ability to do business. At a press conference on May 18, Huawei founder and CEO Ren Zhengfei suggested that the company would be “fine” and that they “have already been preparing” to operate under trade restrictions.
As always, in light of the ongoing trade negotiations with China, the situation is fluid, and could change quickly. However, one thing remains true—when considering deals with Chinese businesses, especially in the tech sector, caution is recommended.