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Limited Export License for Huawei Extended but More Affiliates Subject to Restrictions

Wednesday, August 21, 2019
Sandler, Travis & Rosenberg Trade Report

The Trump administration is allowing limited exports to Huawei Technologies Co. Ltd. and its affiliates for another 90 days but has expanded export restrictions on Huawei to an additional 46 affiliates.

In May the Bureau of Industry and Security added Huawei and 68 of its affiliates to the Entity List due to Huawei’s alleged involvement in unlicensed exports from the U.S. to Iran and BIS’ determination that the affiliates presented a significant risk of acting on Huawei’s behalf to engage in such activities. This action imposes a license requirement for exports to these entities of all items subject to the Export Administration Regulations and a license review policy of presumption of denial. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to these entities.

Effective Aug. 19 a new BIS final rule adds to the Entity List another 46 Huawei affiliates that will now be subject to the same export restrictions. These affiliates are located in Argentina, Australia, Bahrain, Belarus, China, Costa Rica, Cuba, Denmark, France, India, Indonesia, Italy, Kazakhstan, Mexico, New Zealand, Panama, Portugal, Romania, Russia, South Africa, Sweden, Thailand, and the United Kingdom.

However, shipments of items removed from eligibility for a license exception or for export or reexport without a license (NLR) as a result of this rule that were en route aboard a carrier to a port of export or reexport on Aug. 19 pursuant to actual orders for export or reexport to a foreign destination may proceed to that destination under the previous eligibility or NLR.

BIS has also issued a separate final rule extending for 90 days, through Nov. 18, a temporary general license authorizing specific, limited engagements in transactions involving the export, reexport, and transfer of items subject to the EAR to Huawei and its affiliates listed on the Entity List. This rule also (a) makes clarifying changes to the authorized transactions and (b) requires that the exporter, reexporter, or transferor obtain a certification statement from the pertinent Huawei listed entity prior to using the license.

The Department of Commerce has previously said this TGL covers certain activities necessary to the continued operations of existing networks and to support existing mobile services, including cybersecurity research critical to maintaining the integrity and reliability of existing and fully operational networks and equipment. The DOC states that the extension of the TGL “is intended to afford consumers across America the necessary time to transition away from Huawei equipment.”

Given the extent of Huawei’s supply chain in the U.S., companies should be screening or re-screening their customer, vendor, and other third-party data against the expanded list of Huawei affiliates to identify any potential ongoing or pending transactions with these parties and set up appropriate controls to ensure compliance with U.S. export control laws. Violations can result in significant financial penalties, denial of export privileges, and reputational damage.

ST&R’s export controls and sanctions team is positioned to support companies in their screening efforts and help them mitigate the risks of doing business in this ever-evolving geopolitical climate. Please contact export attorney Kristine Pirnia for more information.

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