The U.S. Department of Commerce, through its Bureau of Industry and Security (BIS), has placed Chinese communications technology supplier Huawei on its Entity List. U.S. companies seeking to do business with companies on the list must apply for a special license, due to national security concerns, before selling such companies any products. As such licenses are difficult to receive, the move effectively shuts off Huawei’s supply of U.S. derived component, subsystem, and software technology.
BIS placed Huawei on the list because of “information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest,” according to the announcement of the action. The bureau cited as its rationale the ongoing legal charges against Huawei and CFO Meng Wanzhou regarding alleged provision of forbidden technology to Iran as well as obstruction of justice charges for allegedly attempting to cover up such activity.
“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” explained Secretary of Commerce Wilbur Ross.
Huawei is the second Chinese communications technology supplier to find itself on the Entity List. BIS placed ZTE on the list in 2016 for selling systems with U.S. components to Iran and North Korea in violation of U.S. export restrictions to those two companies. The Department of Commerce eventually provided a series of provisional licenses that enabled ZTE to access U.S. technology on a controlled basis as the two parties negotiated a long-term settlement. A year later, ZTE admitted guilt and was removed from the list under an agreement with numerous provisions regarding the company’s future behavior. BIS found in March 2018 that ZTE had violated some of these provisions and slapped what was supposed to be a seven-year ban on access to U.S. technology (see "ZTE halts major operations after ban on access to U.S. components"). Thanks to intervention from China’s Government with the White House, the Department of Commerce eventually removed the ban, in an agreement that again contained provisions regarding expectations for future behavior.
The Trump Administration, through the Commerce Department, appears to be playing the same hand with Huawei as it did with ZTE as it pursues the company and Meng through the court system. However, Huawei is more self-sufficient than ZTE and would seem to be better positioned to withstand the ban.
Huawei protested the move. “Huawei is against the decision made by the Bureau of Industry Security (BIS) of the U.S. Department of Commerce,” the company said in an unattributed statement released Friday. “This decision is in no one’s interest. It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain.
“Huawei will seek remedies immediately and find a resolution to this matter. We will also proactively endeavor to mitigate the impacts of this incident,” the statement concluded.
The Chinese Government also came to Huawei’s defense. "China has taken note of this decision,” said Chinese Foreign Ministry Spokesperson Lu Kang in response to a question posed during the ministry’s daily press briefing May 16. “We ask our companies to follow the laws and regulations on export control and fulfill our due international obligations. We ask our companies to observe local laws and policies when doing business overseas.
“But at the same time, we oppose the act of any country to impose unilateral sanctions on Chinese entities based on its domestic laws, and to abuse export control measures while making ‘national security’ a catch-all phrase,” he continued. “We urge the U.S. to stop its wrong practices, create conditions for Chinese and American companies to carry out normal trade and cooperation, and avoid causing more damage to bilateral economic and trade ties. The Chinese side will take necessary measures to safeguard the legitimate rights and interests of our companies.”