So, you operate in a foreign country where you want to ship Huawei products incorporating controlled US technology to a foreign buyer? You wish to sell such technology or products to a Huawei affiliate from the United States or abroad? Watch out, its illegal. Accused of corporate espionage and illicit sales to Iran under U.S. embargo, Huawei, Ltd. (Huawei) is a PRC owned firm that is anathema to the Administration and much of the U.S. trade community. The U.S. Commerce Department, Bureau of Industry and Security (”BIS”) has responded by placing Huawei and 38 of its foreign affiliated businesses on the “Entity List” of the U.S. Prohibited Parties. The latter action brings to 153 the number of Huawei related entities that are so listed. Americans cannot trade with the listed parties even in EAR 99 classified products in the absence of receiving an export license from BIS which ordinarily will not be granted. A final BIS rule now substantially extends this export limitation to transactions where (1) controlled U.S. software or technology will be incorporated into, any part, component, or equipment produced, purchased, or ordered by any of the listed Huawei entities (the product does not have to have been specially designed for Huawei); or (2) any Huawei entity designated on the Entity List is a party to such a transaction. Parties in the supply chain subject to the rule (and possible penalties) include the purchaser, intermediate consignee, ultimate consignee, and/or end-user. See 15 CFR §§ 744.11, 744.16. In the main, this is an attempt by BIS to further restrict Huawei from obtaining foreign-made chips developed with US technology or manufactured using US-origin facilities.
Under a prior but temporary general license, Huawei and its foreign affiliates were granted the ability to receive certain items from US exporters that supported existing networks and equipment; the new rule de-lists a temporary general license (“TGL”) for Huawei and its non-US business affiliates.
What do you do as a current or prospective US exporter when faced with such complexity? Subscribe to an electronic database that incorporates the several lists of US Prohibited Parties, including Huawei and its affiliates and that will screen your customers against the list on a continuing basis (Note that these lists change on a daily basis and must be constantly updated). Second, prepare sales and purchase agreements to include clauses authorizing contract termination in the event that a buyer transships your products or technology to a Huawei entity. Third, if you are an exporter of software or technical information that can be used in chip production, ensure that your end user is fully aware of the limitations on the export of products made with your technology. Remember – it’s not Huawei or the highway!
Robin W. Grover