In May of 2019, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) added Chinese telecommunications giant Huawei Technologies Co. Ltd. (“Huawei”) and sixty-eight of its affiliated companies to BIS’s Entity List. These designations prohibit anyone, anywhere in the world from exporting, re-exporting or making an in-country transfer of “items subject to the EAR” to the listed Huawei Companies (“Items subject to the EAR” generally consist of US-origin commodities, software or technology, items produced outside the US which include qualifying US-origin content and items that are physically present in or transiting through the US). Shortly after making these designations, BIS issued a Temporary General License which authorized limited ongoing transactions with Huawei to support existing networks and Huawei equipment and handsets.
The Temporary General License was scheduled to expire on August 19, 2019, however on August 21, 2019 BIS amended the Temporary General License in order to extend it for another ninety days and make several additional changes. These amendments retroactively took effect on August 19, 2019 to avoid an expiration of the original Temporary General License. As amended, the Temporary General License is now extended through November 18, 2019.
The additional changes to the Temporary General License include (but are not limited to):
- A revision excluding any transactions that would “enhance the functional capacities” of any existing Huawei software or equipment. The original Temporary General License authorized exports and re-exports of “updates and patches,” but the amended Temporary General License now authorizes only “bug fixes, security vulnerability patches and other changes to existing versions of the software.”
- The amended Temporary General License now prohibits any transfers of equipment to a Huawei listed company “for general business purposes” and instead authorizes only equipment transfer transactions that support equipment “directly related to the support and maintenance” of a network that existed in a fully operational state on or before May 16, 2019.
- The support transactions which were previously authorized for existing Huawei “handsets” are now authorized for existing Huawei “personal consumer electronic devices” and existing “Consumer Premises Equipment”. The amended Temporary General License defines “personal consumer electronic devices” as including “phones and other personally-owned equipment, such as a tablets, smart watches, and mobile hotspots such as MiFi devices.” It defines “Consumer Premises Equipment” as telecommunications hardware “such as network switches, residential internet gateways, set-top boxes, home networking adapters and other personally-owned equipment that enables consumers to access network communications services and distribute them within their residence or small business.” To qualify for the amended Temporary General License, the personal consumer electric devices and Consumer Premises Equipment must have been available to the public on or before May 16, 2019 and the amended Temporary General License prohibits any transactions that would enhance such existing equipment’s functional capacity.
- Persons performing any transaction with a Huawei listed company under the amended Temporary General License must now obtain a written certification statement from their Huawei listed company counterparty. This is a significant change from the original Temporary General License, which allowed exporters, re-exporters and in-country transferors using the Temporary General License to create their own written certification statement. The amended Temporary General License provides the required format for this certification statement.
In a separate action which also took place effective August 19, 2019, BIS added forty-six additional Huawei affiliate companies to the Entity List. As a result, the Entity List now contains a total of 115 Huawei companies. The newly listed Huawei companies include Huawei subsidiaries 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. Transactions with these newly listed Huawei companies are potentially eligible for the amended Temporary General License.
In its Federal Register notice amending the Temporary General License, BIS clarified that the Huawei Entity List designations: (i) do not require U.S. persons to obtain BIS licenses in order to import equipment into the US from the Huawei Entity List companies, and (ii) do not restrict any furnishing of services to the Huawei Entity List companies (provided that those services do not involve the export, re-export or in-country transfer of “Items subject to the EAR”). BIS’s Federal Register notice also indicated that BIS will be adding additional Huawei FAQ guidance to its website.
Husch Blackwell’s Export Controls & Economic Sanctions Team continues to monitor the developing Huawei situation. Please contact Cortney Morgan or Grant Leach should you have any questions concerning transactions with Huawei under the amended Temporary General License or the Huawei companies added to the Entity List.