On May 21, 2019 the US Commerce Department, Bureau of Industry and Security (BIS) is expected to publish in the Federal Register a Final Rule designating Huawei Technologies Co., Ltd. (Huawei) and 68 affiliated Huawei entities located in 26 countries (collectively, the “Huawei Listed Companies”) to the Entity List.
Effective Date. BIS intends that the Final Rule will apply retroactively to all transactions as of May 16, 2019 at 4:15 p.m. (EST), the time that the unpublished notice was displayed “on the Public Inspection List” maintained by the Office of the Federal Register. This retroactive application of a Final Rule may have been deemed necessary by BIS because of concerns that parties would rush to fill orders prior to the official publication of the Final Rule in the Federal Register, but it raises questions as to whether the Final Rule can be enforced retroactively against companies that engaged in export transactions with the Huawei Listed Companies prior to official publication of the Final Rule.
Savings Clause. Shipments of items that were en route aboard a carrier to a port of export or reexport, as of the effective date of the Final Rule, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR).
Impact of Designation on the Entity List. Designation of an organization on the Entity List does not block all dealings with the organization, as would occur for an organization designated as a Specially Designated National by the Office of Foreign Assets Control. The Entity List is more targeted in its application. Section 744.16(a) of the Export Administration Regulations (EAR) provides that no person may “export, reexport, or transfer (in-country) items specified on the Entity List to listed entities without a license from BIS.” In the case of the Huawei Listed Entities, the “items specified” are all items subject to the EAR. Therefore, the designation prohibits all exports, reexports or transfers to the Huawei Listed Companies of any item subject to the EAR by any person – both US persons and non-US persons.
Exports from the US. The designation prohibits all exports from the US to the Huawei Listed Companies. Every item in the US (and not under the jurisdiction of another agency) is subject to the EAR. This includes items of foreign origin in the US temporarily. For example, the designation would prohibit the return of non-US origin equipment to a Huawei Listed Company.
Foreign-made Items. While the designation applies to all items in the US, it does not apply to all foreign-made items. Only foreign-made items that are “subject to the EAR” are restricted by the designation. If the foreign-made item is not subject to the EAR, it can be delivered from a third country to the Huawei Listed Companies by US persons or non-US persons. Importantly, Entity List restrictions apply only to items subject to the EAR.
Subject to the EAR. All items in the US and foreign-made items containing more than a de minimis amount of controlled US content are subject to the EAR, but if the controlled US content is de minimis, the foreign-made item is not subject to the EAR. The de minimis calculation involves a comparison of the value of the controlled US content in relation to the value of the product to be delivered to a Huawei Listed Company. Generally, a foreign-made product is not subject to the EAR if the controlled US content is equal to or less than 25% of the value of the foreign-made product. A US item is controlled content if it would require a license for export to the destination for the foreign-made product. EAR99 content is not controlled content for China or other locations of the Huawei Listed Companies. As a result, many foreign-made products supplied to the Huawei Listed Companies are not restricted by the Entity List designation, even if they do contain US content. Even a substantial amount of EAR99 content from the US would not cause the foreign-made product to be subject to the EAR when the end destination is a Huawei Listed Company.
Continuation of Services and Support. In addition to prohibiting exports, reexports and transfers of new products to the Huawei Listed Companies, the Entity List designation prohibits supplying replacement parts that are subject to the EAR and providing services that would amount to a deemed export or reexport of technology subject to the EAR.
Payment for Items Delivered. The EAR does not prohibit suppliers from being paid for items previously delivered to the Huawei Listed Companies.
Possibility of Obtaining a License. While the EAR does contemplate that a license could be obtained to export, reexport or transfer items subject to the EAR to the Huawei Listed Companies, the Entity List establishes a policy of a presumption of denial for the license application.
Huawei Listed Companies
- Huawei Technologies Research & Development Belgium NV
- Huawei Technologies (Bolivia) S.R.L.
- Huawei do Brasil Telecomunicacões Ltda
- Huawei Technologies (Yangon) Co., Ltd.
- Huawei Technologies Canada Co., Ltd.
- Huawei Chile S.A.
- Huawei Technologies Co., Ltd.
- Beijing Huawei Digital Technologies Co., Ltd.
- Chengdu Huawei High-Tech Investment Co., Ltd.
- Chengdu Huawei Technologies Co., Ltd.
- Dongguan Huawei Service Co., Ltd.
- Dongguan Lvyuan Industry Investment Co., Ltd.
- Gui’an New District Huawei Investment Co., Ltd.
- Hangzhou Huawei Digital Technology Co., Ltd.
- HiSilicon Optoelectronics Co., Ltd.
- HiSilicon Technologies Co., Ltd (HiSilicon)
- HiSilicon Tech (Suzhou) Co., Ltd.
- Huawei Device Co., Ltd.
- Huawei Device (Dongguan) Co., Ltd.
- Huawei Device (Shenzhen) Co., Ltd.
- Huawei Digital Technologies (Suzhou) Co., Ltd.
- Huawei Machine Co., Ltd.
- Huawei Software Technologies Co., Ltd.
- Huawei Technical Service Co., Ltd.
- Huawei Technologies Service Co., Ltd.
- Huawei Training (Dongguan) Co., Ltd.
- Huayi Internet Information Service Co., Ltd.
- North Huawei Communication Technology Co., Ltd.
- Shanghai Haisi Technology Co., Ltd.
- Shanghai Huawei Technologies Co. Ltd.
- Shanghai Mossel Trade Co., Ltd.
- Shenzhen Huawei Technical Services Co., Ltd.
- Shenzhen Huawei Terminal Commercial Co., Ltd.
- Shenzhen Huawei Training School Co., Ltd.
- Shenzhen Huayi Loan Small Loan Co., Ltd.
- Shenzhen Legrit Technology Co., Ltd.
- Shenzhen Smartcom Business Co., Ltd.
- Suzhou Huawei Investment Co., Ltd.
- Wuhan Huawei Investment Co., Ltd.
- Xi’an Huawei Technologies Co., Ltd.
- Xi’an Ruixin Investment Co., Ltd.
- Zhejiang Huawei Communications Technology Co., Ltd.
- Huawei Technology
- Huawei Technologies Deutschland GmbH
- Hong Kong
- Huawei Device (Hong Kong) Co., Limited
- Huawei International Co., Limited
- Huawei Tech. Investment Co., Limited
- Huawei Technologies Co. Ltd.
- Hua Ying Management Co. Limited
- Smartcom (Hong Kong) Co., Limited
- Huawei Technologies Jamaica Company Limited
- Huawei Technologies Japan K.K.
- Huawei Technologies Investment Co. Ltd.
- Huawei Technologies Lebanon
- Huawei Technologies Madagascar Sarl
- Huawei Technologies Coöperatief U.A.
- Huawei Tech Investment Oman LLC
- Huawei Technologies Pakistan (Private) Limited
- Huawei Technologies Paraguay S.A.
- Huawei Tech Investment Limited
- Huawei International Pte. Ltd.
- Sri Lanka
- Huawei Technologies Lanka Company (Private) Limited
- Huawei Technologies Switzerland AG
- Xunwei Technologies Co., Ltd.
- United Kingdom
- Huawei Global Finance (UK) Limited
- Proven Glory
- Proven Honour
- Huawei Technologies (Vietnam) Company Limited
- Huawei Technology Co. Ltd.