Washington may soon scale back Huawei restrictions

Blacklisting means it's nearly impossible for China firm to service existing clients in US

WASHINGTON • The US Commerce Department said on Friday it may soon scale back restrictions on Huawei Technologies after last week's blacklisting would have made it nearly impossible for the Chinese company to service its existing clients.

The Commerce Department, which had effectively halted Huawei's ability to buy American-made parts and components, is considering issuing a temporary general licence to "prevent the interruption of existing network operations and equipment", a spokesman said.

Potential beneficiaries of the general licence could, for example, include Internet access and mobile phone service providers in thinly populated places in the United States, such as Wyoming and eastern Oregon, that have bought network equipment from Huawei in recent years.

In effect, the Commerce Department would allow Huawei to purchase US goods so it can help existing customers maintain the reliability of networks and equipment, but the Chinese firm still would not be allowed to buy American parts and components to manufacture new products.

The potential rule rollback suggests changes to Huawei's supply chain may have immediate, far-reaching and unintended consequences.

The blacklisting, officially known as placing Huawei on the Commerce Department's entity list, was part of efforts by the Trump administration apparently made in an attempt to thwart national security risks. In an executive order, President Donald Trump also effectively barred the use of Huawei equipment in US telecom networks.

Even if the Commerce Department issues the general licence, US suppliers would still need separate licences to conduct new business with Huawei, which would be extremely difficult to obtain, the spokesman said.

 
 
 
 

The US believes Huawei's smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied.

The latest Commerce Department move comes as China has struck a more aggressive tone in its trade tussle with the US, suggesting a resumption of talks between the world's two largest economies would be meaningless unless Washington changed course.

Out of US$70 billion (S$96 billion) Huawei spent to buy components last year, some US$11 billion went to US firms including Qualcomm, Intel Corp and Micron Technology.

Even if the Commerce Department issues the general licence, US suppliers would still need separate licences to conduct new business with Huawei, which would be extremely difficult to obtain, the spokesman said.

The temporary general licence would last for 90 days, she said, and would be posted in the Federal Register, just as the rule adding Huawei to the entity list will be published in the government publication on Tuesday.

"The goal is to prevent collateral harm on non-Huawei entities that use their equipment," said Washington lawyer Kevin Wolf, a former Commerce Department official.

The entity list bans Huawei and 68 affiliates in 26 countries from buying American-made goods and technology without licences that would likely be denied.

The entity list identifies companies believed to be involved in activities contrary to the national security or foreign policy interests of the US.

In a final rule posted last Thursday, the US government tied Huawei's entity listing to a criminal case pending against the company in Brooklyn, New York.

US prosecutors unsealed the indictment in January, accusing the company of engaging in bank fraud to obtain embargoed American goods and services in Iran and to move money out of that country via the international banking system.

Huawei chief financial officer Meng Wanzhou, daughter of the company's founder, was arrested in Canada in December in connection with the indictment, a move that has led to a three-way diplomatic crisis involving the US, China and Canada.

Meng, who was released on bail, remains in Vancouver and is fighting extradition. She has maintained her innocence, and Huawei has entered a plea of not guilty in New York.

REUTERS

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A version of this article appeared in the print edition of The Sunday Times on May 19, 2019, with the headline 'Washington may soon scale back Huawei restrictions'. Print Edition | Subscribe