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Client Alert: US Issues Huawei Export Restriction and Executive Order to Secure IT Supply Chain

Contact: Randall H. Cook, Waqas Shahid

May 28, 2019

The United States Government recently announced two national security-driven changes with far-reaching impact on trade and technology.

Huawei Restrictions

On May 21, 2019, the US Department of Commerce, Bureau of Industry and Security (BIS) published a final rule amending the Export Administration Regulations (EAR) to add Chinese telecommunications equipment producer Huawei Technologies Co., Ltd. (Huawei) and 68 of its non-U.S. affiliates (the “Huawei Entities”) to the Entity List (Supplement No. 4 to Part 744), retroactively effective to May 16, 2019. This designation prohibits providing the Huawei Entities with “items subject to the EAR” (i.e., effectively, all commodities, goods, and software with more than de minimis US-origin content) without a BIS-issued license.

BIS is offering some temporary relief, as it announced a 90-day general license, which temporarily eases the restrictions by authorizing certain exports, reexports, and transfers of EAR-controlled items to Huawei Entities. This temporary license is limited in scope to four types of transactions: (1) maintaining and supporting existing networks and equipment; (2) providing support for existing Huawei handsets; (3) conducting cybersecurity research and disclosing security vulnerabilities in relation to Huawei products; and (4) developing 5G standards as part of a duly recognized international standards body.

IT Supply Chain Security

In a related action, President Trump issued Executive Order 13873, Securing the Information and Communications Technology and Services Supply Chain, on May 15, 2019, directing the US Department of Commerce to implement regulations to prohibit US companies from purchasing foreign-made/foreign-provided information and communications products, technologies, and services if the Government determines the transaction poses a risk to the national security, foreign policy, or the economy of the US.  While the order is widely believed to target Huawei, it does not specify countries or entities of particular concern, leaving this determination to agency discretion—a task that must be completed within 150 days of the order.

How Ankura can help companies and counsel:

  • Jurisdictional assessment – The Ankura team has subject matter expertise in conducting technology/commodity classifications and de minimis analyses and can provide advice regarding interpretation and application of the EAR and entity list restrictions.
  • Licensing – Ankura advises and assists clients to engage with BIS to obtain reexport or transfer licenses, and also helps in interpreting and applying the 90-day temporary general license.
  • Distribution and supply chain diligence – Ankura has a deep, practical perspective on how to identify and mitigate third-party trade compliance risks and challenges.
  • Network security diligence – Ankura integrates expertise in export controls, data analytics, cybersecurity, and national security to help clients assess and mitigate risks.
  • Compliance risk mitigation – Ankura has deep experience assisting companies adapt to changing regulatory environments with smart, managed application of business-integrated controls.
  • Crisis response – Ankura helps clients navigate dynamic regulatory environments, by drawing on our unique blend of substantive expertise and experience as in-house, Government, and professional services leaders.
  • Chinese language capability – Ankura’s team integrates US persons with fluency in Mandarin.