Huawei Targeted By Entity List Designation And Executive Order

Husch Blackwell LLP

On Wednesday, May 15, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced in a press release that it would add Huawei Technologies Co. Ltd. (“Huawei”) and additional Huawei affiliates to BIS’s Entity List.  The Entity List designation will become effective when it is published in the Federal Register on May 21, 2019.  BIS explained that it is taking this action because it determined that “[T]here is reasonable cause to believe that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States.”  Among other reasons, BIS specifically cited Huawei’s Superseding Indictment in the US District Court for the Eastern District of New York for violating US sanctions against Iran.

This Entity List designation will generally require a license from BIS in order for anyone, anywhere in the world to export, re-export or make an in-country transfer of US-origin commodities, software or technology to Huawei and sixty-eight specifically identified non-US Huawei affiliate companies located in twenty-six different countries.  Exports, re-exports and in-country transfers to Huawei and its listed affiliates will also require a BIS license if the items involved are physically present in the US, are moving in transit through the US or are produced outside the US but contain qualifying amounts of controlled US-origin content.  BIS will apply a general presumption of denial when reviewing any license applications concerning Huawei and the other listed Huawei affiliates, however the Federal Register notice does contain a Savings Clause permitting the completion of certain shipments that were en route to any of the Huawei Entity List designees on or prior to May 21, 2019, subject to certain eligibility requirements.

Separately, on May 17, 2019, President Donald Trump issued Executive Order 13873 which directs the Secretary of Commerce, in consultation with other federal agencies, to implement rules in order to prohibit  persons subject to US jurisdiction from purchasing information and communications technology or services from “foreign adversaries” in transactions that threaten US national security, the US digital economy or US information and communications technology or services.  Although the Executive Order did not specifically identify Huawei by name, it is widely expected that the US Department of Commerce intends to identify Huawei as a “foreign adversary” and impose restrictions on transactions between US persons and Huawei when it publishes rules and regulations to formally implement Executive Order 13873 within the next 150 days.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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