More Huawei Affiliates Added
Effective August 19, 2019, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) added 46 more non-U.S. affiliates of Huawei Technologies Co. Ltd. of China (collectively known as Huawei affiliates) to its Entity List.1 As a result, the Huawei affiliates are subject to the same strict BIS license requirement as Huawei Technologies Co. Ltd. (Huawei) and the 68 affiliated entities that were added to the Entity List on May 16, 2019. Accordingly, a license from BIS is now required for exports, reexports, and in-country transfers, directly or indirectly, to these Huawei affiliates 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. The license requirement is triggered by the involvement of a Huawei affiliate in a transaction—not the sensitivity of the item going to the Huawei affiliate.
BIS added these Huawei affiliates to the Entity List as BIS believes that Huawei may attempt to circumvent the EAR's license requirements by using non-listed Huawei entities to obtain items subject to the EAR without prior BIS approval. The 46 Huawei affiliates are in 25 countries.2
When doing business, directly or indirectly, with any non-listed Huawei entity, it is important to verify whether the technology, commodity, or software is subject to the EAR. If so, assurances should be requested so that the non-listed entity will not transfer the item to a listed Huawei entity, and the non-listed entity is not acquiring the item for a listed entity's benefit.
Extension of Authorization for Certain Limited Activity
BIS also extended in part the limited authorization, being referred to as a General License, through November 18, 2019, and clarified the scope of the authorization.3 As a high-level overview, this General License will continue to authorize limited exports for:
- Transactions that are in direct support of and necessary to maintain and support currently fully operational networks and equipment that are covered by agreements in place prior to May 16, 2019.
- This authorization is further limited to transactions that are for items to patch "networks and network infrastructure equipment."
- General purpose computing devices or items in support of general business activities such as semiconductor production equipment are not authorized.
- Transactions that would improve or enhance the capabilities of the network or equipment are not authorized.
- Transactions necessary to provide service and support to existing Huawei 'personal consumer electronic devices' that were available before May 16, 2019. The authorization is also limited to transactions that do not enhance the functional capacities of the original software or equipment. Under the May 22 General License, this authorization was limited to handsets. BIS has now clarified that the authorization covers "personal consumer electronic devices" and personal use of telecommunications hardware known as customer premises equipment (CPE), such as network switches, residential internet gateways, set-top boxes, home networking adapters, and other personally-owned equipment that enable consumers to access network communications services which was intended to be included in the original authorization.
- Release to listed Huawei entities of information on security vulnerabilities in items subject to the EAR owned by or in the possession or control of the Huawei entities but only when necessary to maintain existing and currently fully operational networks and equipment.
BIS removed the authorization for engagement for development of 5G standards by a duly recognized standards body collaboration and stated that the exchange of publicly available information would be permissible, because it is not subject to the EAR. Disclosure of non-publicly available technology and software that is subject to the EAR would not be permissible.
The General License is very narrow and includes a number of requirements, including certification requirements. Prior to using the General License, a company should consult legal counsel or take other appropriate steps to ensure compliance with the EAR.
Huawei License Review
License applications submitted to BIS for transactions involving a listed Huawei entity are subject to a presumption of denial. In July, BIS stated that it would approve license applications involving a listed Huawei entity when the application does not raise national security concerns. Then, on or about August 19, Secretary Ross stated that BIS has not issued any specific license for transactions involving a listed Huawei entity. Thus, it appears to be unclear whether any license application involving a Huawei entity would be viewed as not raising national security concerns and be approved by BIS.
If you would like to discuss this matter, please contact Josephine Aiello LeBeau, 202-973-8813, jalebeau@wsgr.com; Anne Seymour, 202-973-8874, aseymour@wsgr.com; or any member of the export control and sanctions practice at Wilson Sonsini.
