License Required for Exports, Reexports, and Transfers of U.S.-Origin Items to Huawei Technologies and 68 Affiliates
May 17, 2019
As of May 16, 2019, Huawei Technologies Co. Ltd. of China and 68 of its non-U.S affiliates located in 26 destinations (collectively known as Huawei) were added to the Entity List maintained by the U.S. Department of Commerce, Bureau of Industry and Security (BIS). As a result of this listing, a license from BIS is now required for exports, reexports, and in-country transfers of U.S.-origin items, including technology, software, and commodities, as well as any other items subject to the Export Administration Regulations (EAR), including certain foreign-produced items, to Huawei or one of its named affiliates. The license requirement is triggered by the involvement of Huawei in a transaction, not the sensitivity (or lack thereof) of the item being shipped, directly or indirectly, to Huawei. The items that cannot be exported include, but are not limited to, U.S.-origin hardware, chips, software, and technology, even if located aboard, as well as software updates, bug fixes, and/or other updates to items that had previously been exported to Huawei or one of the listed affiliates.
Importantly, as noted above, the licensing requirements went into effect on May 16, even though the notice will not be published officially in the Federal Register until on or about Tuesday, May 21. BIS has confirmed that the restrictions were effective as of May 16, 2019—the date the notice was made available for public inspection. A copy can be viewed at: https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-10616.pdf.
The sanctions on Huawei are levied based upon the U.S. government's belief that Huawei has been engaging in activities contrary to U.S. national security and foreign policy such as providing financial services to Iran. Further, the listing appears to be part of an overall U.S. government policy of restricting business transactions with China as evidenced by the increased tariffs on Chinese origin goods and the issuance on May 15, 2019, of Executive Order 13873 "Securing the Information and Communications Technology and Services Supply Chain." While the scope of future prohibitions under this Executive Order is potentially extremely broad and is not limited to China or any set of countries, we understand that the likely focus of the actions and regulations to be implemented pursuant to the Executive Order will center on banning American telecommunications firms from installing foreign-made equipment that could pose a threat to national security, and from supporting "foreign adversaries" that provide information and communications technologies and services, as evidenced by the inclusion of Huawei and 68 of its affiliates to the Entity List.
If you would like to discuss this matter, please contact Josephine Aiello LeBeau, 202-973-8813, firstname.lastname@example.org; Melissa Mannino, 202-973-8856, email@example.com; Anne Seymour, 202-973-8874, firstname.lastname@example.org; or any member of the export control and economic sanctions practice at Wilson Sonsini Goodrich & Rosati.